2026 (3) TMI 856 - SC - SEBI

Evidentiary Power: regulator and appellate forum may take and conduct evidence, but external enquiry reports not on record are inadmissible.

Section 11C empowers the securities regulator to record and take evidence in relation to disputes, and the appellate forum may conduct its own proceedings ... Jurisdiction to determine disputes - Scope of SEBI's and the Securities Appellate Tribunal's powers to receive and conduct evidence in proceedings - evidence based adjudication. Power of Securities and Exchange Board of India to take evidence under Section 11C - HELD THAT:- The Court clarified that SEBI is specifically empowered to take evidence for determining disputes under Section 11C of the SEBI Act, 1992, and that the Securities Appellate Tribunal, while exercising appellate jurisdiction, is empowered to effectively conduct its proceedings under Section 15U of the Act. The observation affirms that both statutory bodies possess procedural powers to receive and evaluate evidence in the course of their adjudicatory functions. [Paras 3] SEBI may take evidence under Section 11C and the Tribunal may conduct proceedings under Section 15U; their determinations must proceed within those statutory powers. The Court held that decisions by the Board or the Tribunal must be based on evidence that has been brought on record through the statutory investigative and adjudicatory processes; external enquiry reports which do not form part of the Board's investigation or enquiry should not be relied upon by either statutory authority. [Paras 4] External Enquiry Reports not forming part of SEBI's investigation or enquiry should not be relied upon by SEBI or the Tribunal. Having reviewed the matter and in the facts and circumstances of the case, the Court found that the imposition of costs on the appellant was not justified and therefore that aspect of the Tribunal's order could not be sustained. [Paras 6] The Tribunal's order insofar as it imposed costs on the appellant is set aside. Final Conclusion: The appeal was disposed of with clarifications that SEBI may take evidence under Section 11C and the Tribunal may conduct proceedings under Section 15U, that adjudicatory decisions must be based on evidence on record and not on external enquiry reports, and that the Tribunal's imposition of costs on the appellant is set aside. Issues: (i) Whether the Securities and Exchange Board of India is empowered to take evidence under Section 11C of the SEBI Act, 1992 and whether the Securities Appellate Tribunal may conduct proceedings under Section 15U of the SEBI Act, 1992; (ii) Whether external enquiry reports that do not form part of the Board's investigation/enquiry can be relied upon by the Board or the Appellate Tribunal; (iii) Whether the imposition of costs of Rs.5,00,000 on the appellant was justified.Issue (i): Whether the Securities and Exchange Board of India is empowered to take evidence under Section 11C of the SEBI Act, 1992 and whether the Securities Appellate Tribunal may conduct proceedings under Section 15U of the SEBI Act, 1992.Analysis: The Court examined statutory powers conferred by the SEBI Act and observed that the Board is specifically empowered to take evidence for determining disputes, and that the Appellate Tribunal, while exercising appellate jurisdiction, is empowered to effectively conduct its proceedings under the cited provision.Conclusion: The Securities and Exchange Board of India is empowered to take evidence under Section 11C of the Securities and Exchange Board of India Act, 1992 and the Securities Appellate Tribunal is empowered to conduct proceedings under Section 15U of the Securities and Exchange Board of India Act, 1992.Issue (ii): Whether external enquiry reports that do not form part of the Board's investigation/enquiry can be relied upon by the Board or the Appellate Tribunal.Analysis: The Court considered the evidentiary basis required for decisions by the Board and the Appellate Tribunal and emphasised that decisions must be founded on evidence brought on record; external enquiry reports which are not part of the Board's own investigation/enquiry lack the necessary evidentiary foundation for reliance by the statutory authorities.Conclusion: External enquiry reports that do not form part of the Board's investigation/enquiry should not be relied upon by the Securities and Exchange Board of India or the Securities Appellate Tribunal.Issue (iii): Whether the imposition of costs of Rs.5,00,000 on the appellant was justified.Analysis: Applying the facts and circumstances of the case to the Court's assessment of costs, the Court reviewed the Tribunal's order imposing costs and found the imposition not justified.Conclusion: The imposition of costs of Rs.5,00,000 on the appellant is set aside in favour of the appellant.Final Conclusion: The appeal is disposed of with the clarifications on the Board's and the Appellate Tribunal's powers and with the costs order against the appellant set aside.Ratio Decidendi: The Board and the Appellate Tribunal must decide disputes on the basis of evidence brought on record; Section 11C of the Securities and Exchange Board of India Act, 1992 empowers the Board to take evidence and Section 15U of the Securities and Exchange Board of India Act, 1992 empowers the Appellate Tribunal to conduct its proceedings, and external enquiry reports not part of the Board's investigation are inadmissible for reliance by those authorities.