Statutory show-cause notice invalidated for lack of jurisdiction, predetermination, and denial of relied upon material.

A statutory show-cause notice under securities law was liable to be set aside where it was issued by an authority below the competent rank prescribed by the framework, thereby giving rise to a jurisdictional defect. The notices were also vitiated because their language contained concluded assertions of violation rather than a neutral invitation to explain, showing predetermination and making the process an empty formality. In addition, failure to supply relied upon material, including the investigation report, denied an effective opportunity to respond and breached natural justice. On all three grounds, the impugned notices could not be sustained and were set aside.

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Issues: (i) whether the impugned notices were liable to be quashed for want of jurisdiction because they were issued by an incompetent authority; (ii) whether the notices disclosed a pre-determined and concluded mind, rendering the show-cause process an empty formality; (iii) whether non-supply of relied upon documents, including the investigation report, vitiated the proceedings for breach of natural justice.

Issue (i): whether the impugned notices were liable to be quashed for want of jurisdiction because they were issued by an incompetent authority.

Analysis: The notice-making power and the adjudicatory scheme under the securities law were read together with the delegation provision. The Court held that the statutory framework required the competent authority to act within the rank and manner prescribed, and that delegation could not be used to dilute the clear statutory arrangement. On the facts, the notices were issued by a Deputy General Manager, which the Court held to be below the competent rank contemplated for the action undertaken.

Conclusion: The notices were invalid for want of jurisdiction and the finding is in favour of the petitioners.

Issue (ii): whether the notices disclosed a pre-determined and concluded mind, rendering the show-cause process an empty formality.

Analysis: The wording of the notices went beyond calling for an explanation and stated that the noticees had communicated unpublished price sensitive information and traded on that basis. The Court treated this as a concluded assertion of violation rather than a neutral invitation to respond, and held that a person receiving such a notice would reasonably apprehend that the authority had already made up its mind.

Conclusion: The notices were held to be vitiated by predetermination and the finding is in favour of the petitioners.

Issue (iii): whether non-supply of relied upon documents, including the investigation report, vitiated the proceedings for breach of natural justice.

Analysis: The notices themselves stated that the relied upon documents were annexed, yet the petitioners were not furnished the material in a meaningful way and were instead asked only to inspect documents at the office. The Court held that the investigation report and other relied upon material formed part of the basis of the allegations and had to be disclosed so that an effective reply could be made. Non-disclosure was treated as a violation of fair procedure and reasonable opportunity.

Conclusion: The proceedings were vitiated for breach of natural justice and the finding is in favour of the petitioners.

Final Conclusion: The common result was that the impugned notices could not be sustained and were set aside in all the writ petitions.

Ratio Decidendi: A statutory show-cause notice is liable to be quashed when it is issued by an incompetent authority, contains concluded findings indicating predetermination, and withholds relied upon material necessary for an effective response.

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