2024 (12) TMI 538 - HC - SEBI

SEBI show cause notice challenge fails as petitioners cannot prove grounds for quashing regulatory proceedings

Nalwa Sons Investments Limited, Mahender Kumar Goel, Rakesh Kumar Garg, Rajinder Parkash Jindal, Bhartendu Harit, Prithavi Raj Jindal, Arti Jindal, Siddeshwari Tradex Private Limited, Sahyog Holdings Private Limited, Sajjan Jindal, Virtuous Tradecorp Private Limited, Ratan Jindal, OPJ Trading Private Limited, Naveen Jindal, Shallu Jindal, Versus Securities and Exchange Board of India, Mumbai.

Nalwa Sons Investments Limited, Mahender Kumar Goel, Rakesh Kumar Garg, Rajinder Parkash Jindal, Bhartendu Harit, Prithavi Raj Jindal, Arti Jindal, ... Issues Involved:1. Delay and laches in the issuance of the show cause notice.2. Review or revisiting of earlier decisions by SEBI, potentially amounting to double jeopardy or res judicata.3. Non-application of mind and non-furnishing of relevant documents by SEBI.Detailed Analysis:1. Delay and Laches:The Petitioners argued that the show cause notice issued by SEBI in August 2024, regarding a reorganisation from 2014, was delayed by almost ten years, invoking the doctrine of laches. They contended that such a delay rendered the notice without jurisdiction and should be quashed. However, the court held that the argument of delay involves factual inquiries and considerations of prejudice, which are not purely about the passage of time. The court emphasized that the Petitioners could raise this issue in their response to the notice, and SEBI would have to consider it according to the law. Therefore, the delay did not warrant quashing the notice at this stage.2. Review/Res Judicata:The Petitioners claimed that SEBI's issuance of the show cause notice amounted to a review or revisit of a previously closed complaint from 2014, which could lead to double jeopardy or res judicata. They argued that SEBI had already examined and closed the complaint, and reopening it was unjust. The court noted that the principles of double jeopardy or res judicata might not strictly apply in such regulatory matters. It was highlighted that the current notice was based on a new complaint from 2022, followed by an investigation. The court found no basis to quash the notice on these grounds, allowing the Petitioners to raise these defenses during the adjudication process.3. Non-Application of Mind and Non-Furnishing of Documents:The Petitioners argued that SEBI failed to consider relevant materials before issuing the show cause notice and did not provide necessary documents, breaching principles of natural justice. The court found that SEBI had conducted an investigation based on a new complaint and issued the notice after considering the investigation report. The court held that the scope of judicial review of a show cause notice is limited and that SEBI had applied its mind based on the available materials. Regarding the non-furnishing of documents, the court acknowledged SEBI's willingness to provide certain documents related to the 2014 complaint and directed SEBI to furnish them within two weeks. The court emphasized that the Petitioners should not delay responding to the notice after receiving these documents.Conclusion:The court dismissed the Petition, refusing to interfere with the show cause notice. It recorded SEBI's statement about providing specific documents and granted the Petitioners additional time to respond to the notice. The court underscored the importance of expeditious proceedings and cooperation from the Petitioners, noting that fairness is a two-way street. The Rule was disposed of without any cost order, and all parties were directed to act on an authenticated copy of the order.