TaxTMI 
TaxTMI 
2015 (6) TMI 904
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....nced, SEBI in exercise of powers conferred by Section 15JB of SEBI Act, 1992 and Section 23JA of Securities Contracts (Regulation) Act, 1956 and Section 19IA of the Depositories Act, 1996, framed SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2014 with retrospective effect from April 20, 2007 ("2014 Regulations" for short). In view of 2014 Regulations issued on January 9, 2014 with retrospective effect from April 20, 2007, present appeal was placed on Board for directions/ hearing from time to time to consider effect of newly introduced provisions to facts of present case. 3. In written submissions filed on June 20, 2014, SEBI has submitted that apart from fact that dispute raised in show cause notice dated December 16, 2010 is not consentable under consent circulars issued by SEBI, present appeal itself is not maintainable in view of Section 15JB(4), inserted to SEBI Act, 1992 under Ordinances promulgated from time to time. As on date, Section 15JB (4) inserted to SEBI Act by Securities Laws (Amendment) Ordinance No. 2 of 2014 and also 2014 Regulations, framed thereunder are in force. 4. Question, therefore, to be considered in this appeal filed prior to ....
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....ound that reinvestigating the matter without hearing the appellant was bad in law and that the new show cause notice replaces previous show cause notice in its entirety and raises new issues which were not part of previous show cause notice. By that letter dated December 28, 2010 appellant sought inspection of all the documents that were referred to in show cause notice dated December 16, 2010. 8. During the course of hearing of show cause notice dated December 16, 2010, SEBI addressed a letter to the appellant on April 15, 2011 stating therein that even though the show cause notice dated December 16, 2010 does not state anything about the consent proceedings, appellant had a right to seek settlement through the consent procedure as per consent circular issued by SEBI. 9. Thereupon, appellant filed consent application on April 26, 2011 seeking settlement of dispute raised in show cause notice dated December 16, 2010 as per SEBI circular dated April 20, 2007 as amended by circular dated May 25, 2012. 10. Before discussing consent proposal by and between appellant and SEBI at the Internal Committee ("IC" for short) meetings, appellant insisted on seeking inspection of documents re....
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....ordingly, vide impugned order dated January 2, 2013 appellant was informed that in view of recommendation of HPAC being accepted by SEBI, the consent application cannot be entertained. In the impugned order dated January 2, 2013 it is also stated that HPAC has noted that adequate opportunity has been provided to the appellant to attend the IC meetings. Challenging order dated January 2, 2013 present appeal has been filed. 13. To complete narration of facts, it may be noted that Appeal No. 224 of 2012 filed by the appellant was disposed of on December 20, 2013 on the basis of statement made by counsel for SEBI that even though inspection of some of the documents have already been given, without prejudice, SEBI would furnish copies of eight documents demanded by the appellant in its note dated December 3, 2013. 14. Mr. Dwarkadas, learned Senior Advocate appearing on behalf of appellant submitted that the process of consent order under SEBI circular involves exercise of due caution and the said circular contains three levels of proceedings which are carried out separately at different stages and even persons conducting such proceedings are different. First stage involves processing ....
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....in India. In support of aforesaid contentions reliance is placed on decisions of the Apex Court in the case of B.P. Singhal vs Union of India & Anr. reported in (2010) 6 Supreme Court Cases 331 and State of Orissa vs Dr. (Miss) Binapani Dei & Ors reported in AIR (1967) Supreme Court 1269. 17. Mr. Khambata, learned Advocate General appearing on behalf of SEBI submitted that the consent procedure framed by SEBI does not contemplate any appeal from the decision of competent authority on the consent application. Appellant has specifically given an undertaking in the consent application to waive its right of appeal/review before Securities Appellate Tribunal/ Courts. Therefore, appellant is not justified in filing the present appeal in breach of undertaking given by it. Consent process is availed by an entity without the admission and/or denial of guilt with respect to matter sought to be settled and hence the consent process does not contemplate any adjudication and/or conclusion as to the guilt or innocence of an applicant. Therefore, rejection of consent application has not affected any substantive right of the appellant and the appellant is at liberty to argue its case at length in....
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....g that there is violation of the principles of natural justice, since the appellant has failed to establish that it has suffered real and significant prejudice as a result of such violation, the appellant is not entitled to any relief in the present appeal. In support of above contention reliance is placed on decisions of the Apex Court in the case of Syndicate Bank vs Venkatesh G. Kurati reported in (2006) 3 SCC 150 and Haryana Financial Corporation vs Kailash Ahuja reported in (2008) 9 SCC 31. 21. Counsel for SEBI further submitted that all documents relied upon or referred to in the show cause notice dated December 16, 2010 were either provided to the appellant alongwith the said show cause notice or thereafter during the course of inspection of documents. Since appellant insisted on copies of irrelevant documents, with a view to avoid delay, copies of those irrelevant documents were also provided to the appellant. Fact that the appellant has been seeking irrelevant documents is evident from the fact that initially appellant in Appeal No. 224 of 2012 claimed inspection of 27 documents. During the course of hearing of Appeal No. 224 of 2012, demand for inspection was restricted ....
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....ow cause notice to the appellant on April 29, 2009. On November 5, 2009 consent application was filed by the appellant seeking settlement of dispute raised in the above show cause notice, but same was rejected on March 8, 2010. Thereafter, instead of adjudicating the show cause notice, SEBI reinvestigated the matter and issued fresh show cause notice on December 16, 2010 by superseding earlier show cause notice dated April 29, 2009. 26. Thereupon, as suggested by SEBI in its letter dated April 15, 2011, appellant filed consent application before SEBI on April 26, 2011 seeking settlement of the dispute raised in show cause notice dated December 16, 2010 as per the consent mechanism. In the said application it was stated that the consent application has been filed strictly without prejudice to the appellant's right to seek further information/documents/ material. After seven and half months SEBI sent an e-mail dated December 7, 2011 informing appellant that demand for inspection in consent proceedings was untenable. However, instead of proceeding with consent application, SEBI went on postponing the meetings scheduled before the IC from time to time on ground that appellant was not ....
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....evident that SEBI on one hand rejected inspection of documents as irrelevant and on other hand furnished copies of documents running into 1300 pages in the last week of November 2012. In other words, appellant was made to run around for nearly two years and substantial inspection was given voluntarily only after appellant filed Appeal No. 224 of 2012 before this Tribunal. In these circumstances, having postponed meeting before IC from time to time, even after rejecting claim for inspection and having given substantial inspection of documents in the last week of November 2012, SEBI was not justified in passing ex-parte order on January 2, 2013 inspite of specific request from appellant on December 3, 2012 seeking postponement of meeting scheduled on December 7, 2013 on three grounds namely, inspection of some more documents are yet to be given, it would take time to go through documents running into 1300 pages inspection of which was given in the last week of November 2012 and lastly counsel for appellant would not be available in the last week of December 2012 and first week of January 2013 due to Christmas Vacation. 29. Having taken nearly two years to furnish inspection of docum....
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....tion of the appellant. Therefore, in the facts of present case, SEBI in fact has stalled the proceedings by taking more than two years to give inspection of documents and appellant cannot be said to have stalled the proceedings by seeking inspection of documents. 31. Argument of SEBI that the consent application had to be disposed of because appellant had failed to attend IC meetings inspite of given repeated opportunities is without any merit, because, appellant did not attend meetings on ground that attending the IC meetings would be futile until inspection was given by SEBI. Inspection was given after two years and in the mean time consent application was disposed of without giving an opportunity to the appellant to attend meetings before IC which is highly improper and totally unreasonable. 32. Argument of SEBI that rejection of consent application has not caused any prejudice to appellant and that appellant is entitled to raise its grievances in the regular proceedings is without any merit. Gravity of the dispute in the present case involving in excess of Rs. 500 crores is such that even SEBI had to disregard its investigation and consequential show cause notice dated April ....
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....nstrate as to why the dispute deserves to be settled. By rejecting the consent application even before giving full inspection, SEBI has deprived the appellant from demonstrating that in the facts of present case, the dispute needs to be settled by consent mechanism. 35. We make it clear, that we are not expressing any opinion on merits of consent application filed by the appellant. Whether the terms offered by the appellant deserve to be accepted or not is a question left entirely to the discretion of SEBI. We are only finding fault with SEBI in keeping the consent application pending for years even after holding that request for inspection of documents is untenable and thereafter giving inspection in installments but disposing of the consent application before giving full inspection thereby not giving reasonable time to the appellant to go through the voluminous documents furnished by SEBI belatedly. 36. Strong reliance was placed by the counsel for SEBI on decision of Bombay High Court in the case of Shilpa Stock Broker Pvt. Ltd. (supra). In our opinion, that decision has no bearing on the present case. In that case decision of SEBI in suspending the certificate of registration....
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....13 and later on by Ordinance No. 2 of 2014, this Tribunal can entertain appeal against an order passed in consent proceedings. Although Ordinance No. 8 of 2013 and Ordinance No. 9 of 2013 have lapsed, since Ordinance No. 2 of 2014 promulgated on March 28, 2014 is in operation and is yet to be approved by Parliament, it cannot be disputed that an Ordinance promulgated under the Constitution of India has same force and effect of an Act of Parliament. Therefore, effect of insertion of Section 15JB to SEBI Act with retrospective effect from April 20, 2007 as also insertion of Section 30A to SEBI Act by Ordinance No. 2 of 2014 to the present appeal would have to be seen. 38. Section 15T(2) of SEBI Act (as it then stood) provided that no appeal shall lie to this Tribunal from an order made by SEBI with the consent of parties. Obviously, appeal against an order made without the consent of parties was maintainable before this Tribunal. However, by Ordinance No. 8 of 2013 and thereafter by Ordinance No. 9 of 2013 and finally by Ordinance No. 2 of 2014, Section 15T(2) of SEBI Act has been omitted and Section 15JB is inserted to SEBI Act with retrospective effect from April 20, 2007. Section....
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....ate of Orissa (supra). In our opinion those decisions are distinguishable on facts as in none of those cases, Apex Court was called upon to pronounce its decision on validity of an Ordinance which expressly bars appeals against any order in any particular proceedings. Therefore, it would not be proper on part of this Tribunal constituted under the SEBI Act, 1992 to dissect the expression any order in Section 15JB(4) of the SEBI Act and hold that the impugned order is a nullity and hence bar contained in Section 15JB(4) is not applicable to the present appeal. 40. Accordingly, we hold that appeal filed by appellant under Section 15T(1) of SEBI Act against order of SEBI dated January 2, 2013 was maintainable and the bar contained in Section 15T(2) of SEBI Act was not applicable to the present case, because, the bar under Section 15T(2) was restricted to an order passed by SEBI in consent proceedings after discussing the consent proposal submitted by the applicant during the discussion before the IC of SEBI. In the present case, since consent application of appellant dated April 26, 2011 was disposed of on January 2, 2013 without giving an opportunity to the appellant to present cons....