2021 (12) TMI 67 - HC - SEBI

High Court Upholds SEBI's Order, Denies Jurisdiction

The High Court allowed the condonation of delay in filing the appeal, upheld SEBI's order of attachment and freezing of bank accounts, and declined ... Principles of natural justice - Action under SEBI Act - Attachment and freezing the bank accounts both, savings and term deposits - appellant would contend that no notice was issued to the appellant before issuing the order of attachment of the bank accounts - availability of alternative remedy of appeal to petitioner - HELD THAT:- The appellant seeks to bring his case within the ambit of the exception which has been drawn by the Hon'ble Supreme Court in WHIRLPOOL CORPORATION VERSUS REGISTRAR OF TRADE MARKS, MUMBAI & ORS. [1998 (10) TMI 510 - SUPREME COURT] to show that the order of attachment is in violation of principles of natural justice and this argument is sought to be buttressed by referring to Section 226(3)(iii) of the IT Act. Be it noted that Section 226 of the IT Act deals with other modes of recovery. Sub-Section (1) of Section 226 states that where no certificate has been drawn up under Section 222, the assessing officer may recover the tax by one mode or modes provided in Section 226. From the recovery certificate placed before us by the learned counsel appearing for the appellant, we find that the certificate has been issued under Section 28A of the SEBI Act of 1992 read with Section 222 of the IT Act. Therefore, the provisions of Section 226 of the IT Act cannot be resorted to by the appellant as it deals with cases where no certificate has been drawn under Section 222 of the IT Act. In any event, the certificate of recovery and the consequential attachment and freezing of the bank account and the term deposits is in exercise of the powers conferred under the SEBI Act of 1992. The said enactment is a special statute and it is a self-contained code as that of the IT Act. Therefore, on the facts set out by the appellant, we are not inclined to exercise our jurisdiction under Article 226 of the Constitution of India and we agree with the conclusion arrived at by the learned Single Bench. The order impugned does not call for interference and the appeal stands dismissed. Issues:1. Condonation of delay in filing an appeal.2. Legality of the order of attachment and freezing of bank accounts by SEBI.3. Jurisdiction of High Court under Article 226 of the Constitution of India.4. Application for lifting the order of attachment and de-freezing the bank account.5. Dismissal of the appeal and stay application.Analysis:1. Condonation of delay in filing an appeal:The High Court heard arguments from both parties regarding the delay of 129 days in filing the appeal. After reviewing the reasons provided in the affidavit, the Court was satisfied and decided to condone the delay in filing the instant appeal. Consequently, the application for condonation of delay was allowed.2. Legality of the order of attachment and freezing of bank accounts by SEBI:The appellant, a retired officer, challenged the order of attachment and freezing of his bank accounts by SEBI, alleging fraudulent actions and lack of notice before the attachment. The Court examined the circumstances, including the absence of the appellant's name in the certificate issued by SEBI. It was noted that the certificate was issued under specific provisions of the SEBI Act of 1992, not the IT Act. The Court concluded that the SEBI Act is a self-contained code, and the jurisdiction under Article 226 of the Constitution of India was not applicable in this case. The Court upheld the Single Bench's decision to dismiss the writ petition.3. Jurisdiction of High Court under Article 226 of the Constitution of India:The appellant argued that the High Court could exercise jurisdiction under Article 226 despite the existence of alternative remedies. The Court acknowledged the exceptions where alternative remedies do not bar a writ petition, such as enforcement of fundamental rights or violation of natural justice. However, in this case, the Court found that the SEBI's actions were within its statutory powers, and the appellant's case did not fall within the exceptions. Therefore, the Court declined to interfere with the Single Bench's decision.4. Application for lifting the order of attachment and de-freezing the bank account:The Court permitted the appellant to file an appropriate application before the competent authority to lift the order of attachment and de-freeze the bank accounts. The authority was directed to consider the application on its merits, excluding the period during which the writ petition was pending before the Court, and until the certified copy of the judgment was received, while computing limitation.5. Dismissal of the appeal and stay application:The Court dismissed the appeal, upholding the Single Bench's decision, and consequently dismissed the stay application as well. The appellant was granted liberty to file the application for lifting the order of attachment and de-freezing the bank accounts under the relevant statute.In conclusion, the High Court dismissed the appeal, upheld the order of attachment by SEBI, and provided the appellant with the opportunity to seek relief through the appropriate application process.