TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1674
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.... of certain documents including the Investigation Report, which formed the basis of the Complaint, but were not supplied to him along with the summons. 3. Briefly stated, the Respondent/SEBI, instituted a Complaint (C.C. No. 49/2016) on 09.12.2015, against M/s Kassa Finvest Pvt. Ltd. and its Directors, including the Siddharth Shankar/Petitioner (arraigned as Accused No. 5), alleging offences under Section 24 SEBI Act read with Section 23M of the Securities Contracts (Regulation) Act, 1956. 4. The Petitioner was summoned vide Order dated 04.01.2016. 5. On 19.05.2017, the Petitioner moved an Application under Section 208 CrPC seeking the supply of documents relied and those forming the basis of the Complaint. Specifically, the Petitioner sought the "Investigation Report" mentioned in Annexure C-5 of the Complaint, the material constituting the "grounds" for SEBI's satisfaction to initiate proceedings, Investor complaints and the statements recorded by the Investigating Officer. 6. The Counsel for SEBI stated on 25.08.2017, before the Ld. Trial Court that "whatever documents have been placed on record, shall be provided to the Accused Persons whereas the documents which ar....
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....ing of the Investigation Report and related file Notings, prejudices the Petitioner's ability to counter the basis of SEBI's "satisfaction" to launch the criminal case. 12. While a procedural irregularity may not automatically vitiate proceedings, the non-supply of relevant documents amounts to a breach of the principles of natural justice, as prejudice is demonstrated. In this regard reliance is placed on ECIL vs. B. Karunakar, (1993) 4 SCC 727 and K.L. Tripathi vs. State Bank of India, (1984) 1 SCC 43. 13. The Petitioner's tenure as a Director of Accused No. 1 was recorded as being from 12.07.1994 to 10.05.2005. He, having resigned as a Director in 2005, requires the Investigation Report and recorded statements so as to ascertain his alleged role during the investigation period; determine the specific allegations he is liable for vis-à-vis his tenure; seek discharge and effectively cross-examine witnesses. The Petitioner claims material prejudice by denial of supply the documents sought by him. 14. Furthermore, the Impugned Order is a non-speaking order, failing to record a finding on the specific relevance of the documents sought or the claim of prejudice. Th....
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....as mentioned in the Complaint, was not open to challenge or disclosure before the framing of charge. 21. The Respondent contended that the Petitioner's Application was a mere attempt to conduct a "roving and fishing inquiry" into the internal working of the Regulatory body, which is impermissible in law, for which reliance is placed on Natwar Singh vs. Director of Enforcement, (2010) 13 SCC 255. 22. The relevance of any document for the defence of the accused only arises once the charges are framed and the accused is called upon to enter his defence. The Application was premature as this stage and documents necessary for the defence, typically arises only after the court proceeds to record the defence evidence and not at the pre-charge stage. 23. The burden was on the Petitioner, to clearly demonstrate how the not supplied documents were not only relevant but how their non-supply specifically caused prejudice to his case, as noted in the case of State of U.P. vs. Ramesh Chandra Mangalik, (2002) 3 SCC 443 and State of T.N. vs. Thiru K.V. Perumal, (1996) 5 SCC 474. The Respondent submits that the Petitioner failed to meet this high threshold. 24. The concession made by SE....
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....ost decisional hearing to the persons concerned as expeditiously as possible." 30. Rule 11 of the Regulation reads as under:- "11. (1) The Board may, without prejudice to the provisions contained in subsections (1), (2), (2A) and (3) of section 11 and section 11B of the Act, by an order, for reasons to be recorded in writing, in the interests of investors and securities market, issue or take any of the following actions or directions, either pending investigation or enquiry or on completion of such investigation or enquiry, namely:- (a) suspend the trading of the security found to be or prima facie found to be involved in fraudulent and unfair trade practice in a recognized stock exchange; (b) restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities; (c) suspend any office-bearer of any stock exchange or self-regulatory organization from holding such position; (d) impound and retain the proceeds or securities in respect of any transaction which is in violation or prima facie in violation of these regulations; (e) direct and intermediary ....
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.... that Board "after consideration of the report referred to in Regulation 9, if satisfied that there is a violation of the Regulations and after giving reasonable opportunity of hearing to the person concerned", takes action under Regulations 11 and 12. Therefore, the consideration of the Report of the Investigating Authority submitted under Regulation 9, is an intrinsic component of the Board's satisfaction for determining whether there is any violation of the Regulations. 34. In the case of T. Takano (supra), the identification of a purpose of disclosure of the relevant material is connected to three key purposes, which are: (i) Reliability i.e. the information available with both the parties can aid the Courts in determining the truth of the contentions. The role of the Court is not in restricted to interpreting the provisions of law, but also to determine the veracity and truth of the allegations made thereunder. This function can be performed accurately only if both the parties have access to the information and are given an opportunity to address arguments relating to the information. (ii) Fair Trial: Since the verdict of the Court has far-reaching repercu....
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....o;the FEMA Rules, 2000"), is entitled to demand all the documents in the possession of the Adjudicating Authority including those documents upon which no reliance has been placed, while issuing a Show Cause Notice as to why an enquiry should not be initiated against him. 38. In this Case, the Apex Court distinguished the stage of adjudication as distinct from the initial stage under Rule 4(1). At the stage of adjudication, all documents useful or relevant to the subject-matter have to be disclosed to the Noticee. However, it was noted that the Rules do not empower the Adjudicating Authority to straight away make any enquiry into the allegations of contravention against any person against whom the Complaint has been filed. Rule 4 contemplates giving a Show Cause Notice as to why an enquiry should not be held. It is evident from the bare reading of this Rule, that the Show Cause Notice is to be issued not for the purpose of making any adjudication into alleged contravention, but for the purpose of deciding whether the enquiry should be held or not. Even every such Notice is required to indicate the nature of controversy alleged to have been committed by such person. 39. It was ....
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....was drawn between the stage of enquiry under Rule 4(1) and the final adjudication and it was observed that at the stage of Show Cause Notice, it is sufficient that only documents that are relied upon are disclosed. 44. The logic behind such disclosure is the likelihood of being influenced by the documents referred in the enquiry whether relied or not. It was observed in the case of Khudiram Das vs. State of West Bengal (supra) in the context of preventive detection, that it can hardly be disputed that if there was before the District Magistrate material against the detenu, which is of a highly damaging character and has nexus and relevancy with the object of detention, and proximity with the time when the subjective satisfaction forming part of the detention order was arrived at, it would be legitimate for the Court to infer that such material must have influenced the District Magistrate in arriving at the subjective satisfaction and the Court would refuse to accept the bald statement of the District Magistrate that he did not take any material into account and excluded it from consideration. The human mind does not function in compartments. 45. When it receives impressions f....
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.... and therefore, the same must be made available to the employee. 50. In the case of T. Takano (supra) while referring to the aforesaid Judgments, it was concluded that a quasi-judicial authority, has to disclose the material that is to be relied upon, at the stage of adjudication. Mere assertions of the Authority that it has not relied on certain material, would not exempt it of its liability to disclose such material, if it is relevant and has nexus to the action taken by the Authority. The actual test is whether the material is relevant for the purpose of adjudication. It also has to be considered that whether non-disclosure of such documents as resulted in prejudice to the person. 51. It was further held in T. Takano (supra) in respect of the Regulation 9 of PFUTP Regulations, that it required the Investigating Authority to submit the Report, after completion of investigations, to the Adjudicating Authority for it to decide whether there is a prima facie ground to initiate enforcement proceedings. The Investigation Report between the Officers investigating the matter and Authority is in the nature of inter-departmental communication. 52. However, since it is the basis o....