TaxTMI 
TaxTMI 
2022 (3) TMI 1226
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.... further restraining the promoter directors from buying, selling or otherwise dealing with securities for India. While dismissing the appeal, we have explained that the jurisdiction of the Supreme Court under Section 15Z is confined to question of law. 2. M/s Mega Corporation Limited, listed in the Bombay Stock Exchange in 1996, is engaged in the business of radio taxi service, coupled with trading of shares in a small measure till 2004. The attention of the share market regulator, SEBI, was drawn to the unusual price movement of the scrip of the Company between January 2005 to September 2005. The Company's shares traded between Rs. 4.25/- to Rs. 43.85/-. This upward spurt resulted in an increase in the average monthly volume of shares to 1,56,22,583 shares. Having observed this activity, the SEBI directed investigation while passing an ex parte ad interim order under Section 11B, 11(4) (b) and 11(D) of the Act against 56 entities, being the Company, its promoter-directors, some of its clients, stockbrokers and depositors. After hearing the objections, the interim orders were confirmed, and a show-cause notice for violation of Regulations 3(a), (b), (c)&(d) and 4(1), 4(2)(k) &....
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....halani (PAN-ACI-PC2863-K) Directors of the company are hereby restrained from buying, selling or otherwise dealing in securities, in any manner, for a period of one year (1 year)." 5. The Company filed an appeal under Section 15T of the Act being Appeal No. 60 of 2008 before the Tribunal. The Tribunal re-examined the three circumstances which became the basis of SEBI decision and finally allowed the appeal, by its judgment dated 15.10.2008. The Tribunal held: 5.1 The unusual profits, if any, made during the year 2004-05 by itself cannot constitute any transgression of law. The powers vested in the Board are only to ensure that investors are not misled in making investments based on fraud and allurement and that there is nothing unusual about investors being attracted when the Company comes with positive annual reports. The Tribunal held that extraordinary profits in itself cannot be the basis for concluding that the Company's accounts are manipulated with a specific objective to mislead the investors. 5.2 On the issue of public statements in the form of advertisements and notifications dated 07.04.2005 and 20.04.2005, the Tribunal concluded that there is nothing wrong in the....
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....amination, he submitted that such an approach would virtually disable SEBI from performing its functions. Reliance was placed on the judgments of this Court in K.L Tripathi K.L. Tripathi v. State Bank of India and Ors. (1984) 1 SCC 43, Tara Chand Vyas Tara Chand Vyas v. Chairman & Disciplinary Authority and Ors. (1997) 4 SCC 565 and Jah Developers State Bank of India v. Jah Developers Private Limited and Ors. (2019) 6 SCC 787. 8. Shri Vaibhav Gaggar, in his reply, submitted that: 8.1 The appeal has to be dismissed as there is no question of law involved in the case. 8.2 The approach adopted by SEBI in focusing on the sudden spurt in profit of the Company, is itself, is wrong approach. He sought to demonstrate that there is no unusual income in the profit of the Company. 8.3 On the issuance of advertisements, Shri Gaggar showed us the factual background leading to the advertisements and stated that there is no indication of any intention to mislead the public or lure the investors on the statements made therein. He submitted that the findings of the Tribunal that the advertisements were not in violation of the Regulations are based on the correct facts as evidenced by the materi....
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....hich is against the interest of the company? 11. Before we consider the rival contentions based on the issues, as formulated above, it is necessary to take note of certain statutory provisions. Section 11 of the Act enumerates the functions of the SEBI and empowers it to take measures for protecting the interests of investors in securities. Section 11B empowers SEBI to issue necessary directions. In exercise of its powers under Section 30 the SEBI made the PFUTP Regulations, of which, we are concerned with Regulations 3(a), (b), (c), (d) and Regulations 4(1), 4(2)(k) and 4(2)(r). ISSUE 1: What is the scope and ambit of statutory appeal to the Supreme Court under Section 15Z of the Act against an order passed by the Securities Appellate Tribunal? 12. The power and jurisdiction of the Supreme Court to consider the decisions of the Tribunal is provided in Section 15Z of the Act. The said provision is as under: 15Z. Appeal to Supreme Court. Any person aggrieved by any decision or order of the Securities Appellate Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the Securities Appellate Tribunal to him on ....
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....e and not the jury" Black's Law Dictionary, 10th Edition p. 1442 15. Reference to Law Dictionary for the meaning of the expression 'question of law' is not to overlook the difficulty in drawing boundaries between questions of law and fact. Under the subject, the malleable boundaries between law and fact, H.W.R Wade has commented: "Much of the discussions of this chapter proceeds on the basis that the distinction between a question of law and a question of fact is self-evident. But this is not so; the boundary is often elusive." H.R.W. Wade & C.F Forsyth, Administrative Law, Chapter 8 (Oxford University Publication, United Kingdom, 11th Edn, 2014) 16. Phrases such as, 'question of law', are open textual expressions, used in statutes to convey a certain meaning which the legislature would not have intended to be read in a pedantic manner. When words of the Sections allow narrow as well as wide interpretations, courts of law have developed the art and technique of finding the correct meaning by looking at the words in their context. In Reserve Bank of India v. Peerless General Finance Investment Company Ltd. & Ors. Reserve Bank of India vs. Peerless General Finance Investment Comp....
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.... sectorial laws. 18. It is in the above-referred context that the Supreme Court while exercising appellate jurisdiction under Section 15Z of the Act would be measured in its approach while entertaining any appeal from the decision of the Tribunal. This freedom to evolve and interpret laws must belong to the Tribunals to subserve the regulatory regime for clarity and consistency and it is with this perspective that the Supreme Court will consider appeals against judgment of the Tribunals on questions of law arising from its orders. 19. It is in this very context that the UK Supreme Court in the case of Jones v. First Tier Tribunal, Jones v. First Tier Tribunal [2013] UKSC 19. Para 16; followed in Regina (Privacy International) v. Investigatory Powers Tribunal [2019] UKSC 22, para 134; See also, Administrative Law by Paul Craig (8th Ed. 2016 at p.492 and H.R.W. Wade & C.F Forsyth, Administrative Law, Chapter 8 (Oxford University Publication, United Kingdom, 11th Edn, 2014) formulated certain principles for appellate courts to interfere against the orders of Tribunals on the ground of existence of questions of law. The Court held as under: "16 ... It is primarily for the tribunals....
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....wo instances as Shri C.U. Singh has made detailed submissions before us. 23. As per the first advertisement dated 07.04.2005, it was alleged by SEBI that in violation of Regulation 4 (2) (k) and 4 (r) of the PFUTP Regulations, the Company proceeded to announce on 07.04.2005 the launch of the worldwide outbound package tour services. These services were intended to operate across 25 cities in India and were expected to achieve a revenue of Rs. 1000 million with a net profit of Rs. 200 million in its first year. SEBI alleges that this announcement was made for the sole purpose of misleading the investors. This finding is reversed by the Tribunal based on an agreement between the Company and M/s Gem Tours and Travels Private Limited to establish a subsidiary company called 'Mega Holidays Ltd.' to handle the tour services. The Tribunal also noted the bank statement supporting the Company's transaction with M/s Gem Tours and Travels Private Limited. 24. We are mentioning these facts only to indicate that the Tribunal has reversed the findings of SEBI on the basis of its own inferences drawn from the documents on record. The decision of the Tribunal is fact-based and does not give ....
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.... such 'off-market' transactions and the connectivity of the 'outside entitles' with the Company. 28. The Tribunal in its appellate jurisdiction came to the conclusion that the connectivity could not be established and that the conclusions drawn by the Board were insufficient. On the basis of the inferences drawn from the facts, the Tribunal rendered the following findings: "There is no evidence in support of any definite sustainable link between the appellant company and any of the traders who allegedly traded in the appellant company's scrip with the purpose of generating volumes and thereby raising its price. The charge of manipulative trading in its own shares by the appellant company, therefore, fails. .... But it is another matter to say that a company has manipulated its accounts with that specific object in view because there can be a multitude of reasons why an unscrupulous management may want to show inflated financial results in its accounts. In the present case, no material has been produced by the Respondent to establish that the manipulation is the annual accounts of the appellant for the year 2004-05, if any, had been resorted to with the objective of lurin....
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....ight to cross-examine the author of a letter while SEBI is performing its regulatory role and deciding upon the allegation of manipulation under Regulations 3 and 4 of the PFUTP Regulations. 32. Shri C.U Singh arguing for the Board has denied any right to cross-examine while SEBI exercises its jurisdiction. In support of his submissions, he has referred to the cases as indicated earlier. He has also argued that there is no prejudice caused to the Company as an opportunity was given by handing over the material relied on by the Board against which the Company gave its reply. He also referred to judgments of this Court in Aligarh Muslim University Aligarh Muslim University v. Mansoon Ali Khan (2000) 7 SCC 529 and A.S Motors A.S Motors Private Limited v. Union of India (2013) 10 SCC 114 to press the point that the Court will not insist on examination of witnesses merely as an empty formality. 33. On the other hand, Shri Gaggar submitted that the ground that principles of natural justice would clearly be violated if opportunity to cross-examine is not granted. 34. Immediately after the parties were heard, and the judgment was reserved on 17.02.2022, on the very next day, another Ben....
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....hird-party interests and the stability and orderly functioning of the securities market. The respondent should prima facie establish that the disclosure of the report would affect third-party rights and the stability and orderly functioning of the securities market. The onus then shifts to the appellant to prove that the information is necessary to defend his case appropriately; and (vi) Where some portions of the enquiry report involve information on third-parties or confidential information on the securities market, the respondent cannot for that reason assert a privilege against disclosing any part of the report. The respondents can withhold disclosure of those sections of the report which deal with third-party personal information and strategic information bearing upon the stable and orderly functioning of the securities market." 35. As per the principles laid down in the above referred case, there is a right of disclosure of the relevant material. However, such a right is not absolute and is subject to other considerations as indicated under paragraph 62(v) of the judgment above referred. In this judgment, there is no specific discussion on the issue of a right to cross-exa....