Summary
The Court sustained the need for a fresh regulatory adjudication because the respondents had inadequate time and supporting documents to answer serious allegations. It rejected a requirement for fresh notices: the 2011 notice was to cover both the company and its managing director. SEBI was directed to supply outstanding documents, receive replies and conduct a day-to-day hearing. Consequential proceedings were held in abeyance pending that decision, without requiring them to restart automatically.
Issues
- Whether the original regulatory process afforded adequate disclosure and time for a fair hearing.
- Whether a fresh company notice was necessary and whether the earlier remittal excluded natural-justice objections.
- How SEBI’s reconsideration and consequential proceedings should proceed.
Held
- A meaningful hearing required provision of supporting documents and reasonable response time. Requiring the noticee to find roughly 4,000 pages in its own records, then closing proceedings within two weeks of disclosure, did not afford adequate opportunity given a 150-page notice and serious consequences. (¶¶ 31, 32, 33, 34)
- The company and its managing director had understood and acted on the original notice as applying to both, including through their communications and litigation. In these circumstances insisting on a newly addressed company notice was hypertechnical; the 21 June 2011 notice was to be treated as notice to both. (¶¶ 35, 39)
- The earlier direction that SAT decide the appeal on merits did not exclude legal objections concerning lack of hearing. Setting aside the High Court’s order in that earlier round redirected the challenge to the specialist appellate forum; it did not finally reject natural-justice grounds. (¶¶ 36, 37)
- The respondents were to identify outstanding requested documents within two weeks, SEBI supply them within the following two weeks, and the respondents reply within four weeks after receipt. SEBI would then hear both personally on a day-to-day basis without adjournments and decide all factual and legal pleas, including jurisdiction, subject to appeal to SAT. (¶ 39)
- The FMC order of 23 July 2011 stood set aside. Proceedings initiated pursuant to it were to remain in abeyance pending SEBI’s fresh decision and abide by that decision or ensuing appeal; if the respondents failed, those proceedings could resume from their existing stage subject to the fresh directions, rather than automatically beginning de novo. (¶¶ 40, 41)
Result
Appeals disposed of by modifying SAT’s order: fresh adjudication before SEBI on the existing notice, with document-supply, reply and hearing directions. Consequential proceedings kept in abeyance; parties to bear their own costs.