SEBI must decide jurisdictional validity before proceeding with show-cause notice under sections 11(1), 11(2)(b), 11(4), 11(B)

The Bombay HC disposed of a petition challenging a SEBI show-cause notice issued under sections 11(1), 11(2)(b), 11(4) and 11(B) of the SEBI Act. The petitioner contended the notice was jurisdictionally invalid and identical to an earlier notice from which they were discharged. The HC directed SEBI to decide the jurisdictional issue as a preliminary matter before proceeding with the show-cause notice adjudication. The court clarified that until jurisdiction is determined, SEBI cannot adjudicate the notice on merits or record evidence, keeping all contentions open for the parties.

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Issues involved:
The issues involved in the case include challenging a show-cause notice issued by SEBI under Sections 11(1), 11(2)(b), 11(4), and 11(B) of the Securities Exchange Board of India Act, 1992, on the grounds of jurisdiction and maintainability.

Details of the Judgment:

Issue 1: Challenge to Show Cause Notice
The Petitioner was previously discharged and exonerated from charges under a show-cause notice dated 03.07.2018. However, a fresh show-cause notice dated 17.05.2023, identical to the previous one, was issued by SEBI. The Petitioner contended that the current notice is without jurisdiction and not maintainable due to the previous exoneration.

Issue 2: Tribunal Proceedings
The Petitioner approached the Tribunal seeking to quash the show-cause notice and stay the proceedings. The Tribunal directed SEBI to provide an opportunity for cross-examination and personal hearing to the Petitioner. It was noted that the issue of jurisdiction could be raised during the hearing before the Whole Time Member.

Issue 3: Jurisdiction Contention
The Petitioner argued that the impugned show-cause notice lacked jurisdiction and should be decided as a preliminary issue before adjudication. SEBI opposed this, stating that the notice was appropriately issued within its jurisdiction and the previous notice's outcome was irrelevant.

Judgment Summary:
The High Court directed SEBI to decide the jurisdictional issue raised by the Petitioner as a preliminary matter before proceeding with the show-cause notice. The Court emphasized that the Petitioner had not abandoned the jurisdictional challenge, as observed by the Tribunal. SEBI was instructed not to adjudicate on the merits of the notice until the jurisdictional issue was resolved. The Petitioner was to be informed of the hearing date for the jurisdictional matter, with the option to challenge any adverse decision. The Court clarified that its decision only applied to the current case and did not affect other proceedings. The Petition was disposed of accordingly, with no costs imposed.

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