Summary
The petitioner, former Managing Director and CEO of Religare Finvest, was one of 13 noticees in SEBI adjudication proceedings over the alleged diversion of about Rs. 2,315 crore to benefit the Religare promoters. He sought certain enclosures to the forensic auditor's report, which SEBI withheld as confidential and the full opinion formed by the Board under Rule 3 of the SEBI Adjudication Rules, 1995 to appoint an adjudicating officer. The Bombay High Court and the Supreme Court refused relief. Under Natwar Singh and T. Takano, documents relied on must be disclosed, but documents not relied on need not be. The Rule 3 opinion is a preliminary internal decision to start adjudication, and no rule requires it to be supplied in full. SEBI had undertaken not to rely on documents not supplied, and the petitioner could seek relief if prejudiced.
Issues
- Whether SEBI must supply the noticee with documents it does not rely on in adjudication proceedings, including enclosures to a forensic audit report withheld as confidential
- Whether the Board's opinion under Rule 3 of the SEBI Adjudication Rules, 1995 to appoint an adjudicating officer must be furnished to the noticee in full
- Whether the High Court should have interfered at the show cause notice stage
Provisions considered
- Rule 3, SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995The Board's opinion that there are grounds for adjudication is a prima facie internal decision to initiate proceedings, without participation of the noticee, and it need not be disclosed in full. (¶¶ 44, 45, 50)
- Rule 4(1) to (5), SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995After a show cause notice and reply, the adjudicating officer decides on the reply whether to hold an inquiry, and only then is a personal hearing mandatory. There was no procedural irregularity up to the notice fixing the hearing. (¶¶ 44, 46, 47)
Held
- Natural justice requires disclosure of the materials relied on to set the law in motion and in adjudication. The authority cannot exercise unfettered discretion to redact documents needed for the defence. But there is no duty to disclose documents not relied on (Natwar Singh, T. Takano). (¶¶ 28, 34, 35, 36, 49)
- At the Rule 3 stage the Board only decides whether to initiate adjudication, on prima facie material, and the opinion has nothing to do with the outcome of the inquiry. No rule requires the opinion to be furnished in full, and documents considered in forming it need not be disclosed unless relied on in the inquiry. (¶¶ 45, 50)
- SEBI undertook not to rely on any document not supplied to the petitioner, and the Court's interim order permitting the inquiry on that basis governs it. The High Court rightly declined to interfere at the show cause notice stage, leaving the petitioner free to approach the appropriate forum if prejudiced by any adverse order. (¶¶ 47, 48, 50, 51, 52)
Result
Special leave petition dismissed. The inquiry is to proceed without reliance on documents not supplied to the petitioner, as directed by the interim order.