Anant R. Sathe vs Sebi

India (hereinafter referred to as 'SEBI') dated 27th 2

February, 2020 refusing to provide documents asked for by

the Appellant vide its letter dated 12th February, 2020.

2. The facts leading to the filing of the appeal is, that

certain complaints were received by SEBI regarding insider

trading and bad corporate governance practices in Kirloskar

Brothers Limited (hereinafter referred to as 'KBL'), based on

which investigation was conducted by SEBI in the scrip of

the company for the period 1st February, 2010 to 30th April,

2011. Based on the investigation report a show cause notice

dated 11th December, 2019 was issued against the Appellant

and other Promoters and Directors alleging that the Appellant

had induced and conspired with other Promoters and

Directors in order to dump the shares of KBL to Kirloskar

Industries Ltd. (hereinafter referred to as 'KIL') and thereby

committed a fraud violating Section 12A of the Securities

and Exchange Board of India Act, 1992 (hereinafter referred

to as 'SEBI Act') read with Regulations 3 and 4 of the

Securities and Exchange Board of India (Prohibition of

Fraudulent and Unfair Trade Practices relating to Securities

Market) Regulations, 2003 (hereinafter referred to as

'PFUTP Regulations').

3

3. Upon receiving the show cause notice, the Appellant

vide letter dated 16th January, 2020 intimated that the

Appellant had retired as the Director of the Company in the

year 2014 and has no access to the documents and, therefore,

requested the Respondent to supply the documents as prayed

for in the letter. The Respondent vide letter dated 24th

January, 2020 supplied certain documents and also allowed

the Appellant to inspect the documents. Notwithstanding the

aforesaid, the Appellant vide letter dated 12th February, 2020

requested the Respondent to supply further documents

,namely, the show cause notice issued to the other noticees

and the investigation report. The Respondent vide letter dated

27th February, 2020 communicated the Appellant that the

said documents cannot be supplied and that all the relevant

documents relied upon by the Respondent had been duly

supplied. The Appellant was therefore directed to file the

reply to the show cause notice within the stipulated period.

The Appellant being aggrieved by the non-supply of the

aforesaid documents has filed the present appeal.

4. We have heard Ms. Sabeena Mahadik, Advocate with

Mr. KRCV Seshachalam, Mr. Pankaj Uttaradhi, Mr. Sagar

Hate and Mr. Aayush Kothari, Advocates for the Appellant 4

and Mr. Shyam Mehta, Senior Advocate with Mr. Mihir

Mody and Mr. Shehaab Roshan, Advocates for the

Respondent through video conference.

5. The learned counsel for the Appellant contended that the

show cause notice alleges inducement and conspiracy on his

part with other Promoters and Directors of the Company for

the purpose of dumping the shares of KBL to KIL and that

the show cause notice further alleges fraud being played by

the Appellant. It was also contended that a bare perusal of

the show cause notice would reveal that the Respondent

heavily relied on the investigation report. It was thus urged

that a duty was therefore cast upon the Respondent to supply

copies of all the documents which the Respondents have

gathered during the investigation so that an efficacious reply

could be filed. It was also urged that the show cause notice

issued to the other Respondents is also essential so that the

Appellant may get to know of his role that SEBI has alleged

against the other noticees. The learned counsel thus

submitted that since the Appellant is facing an enquiry, an

efficacious reply can only be given when he has the

documents that he had prayed for.

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6. On the other hand, Shri Shyam Mehta, learned Senior

Counsel for the Respondent strenuously contended that the

appeal has been filed only to delay the proceedings. It was

contended that the request of the Appellant is neither

bonafide nor justified. It was contended that the entire

documents which the Respondent has relied upon has been

duly supplied to and, therefore the documents which are not

relevant are not supplied and also not required to be supplied.

In support of his contention, the learned Senior Counsel has

relied upon the decision of this Tribunal in Appeal Lodging

No.28 of 2020 in Shruti Vora vs. SEBI decided on 12th

February, 2020.

7. Having heard the learned counsel for the parties, we are

of the opinion that the controversy involved in the present

appeal is squarely covered by the decision of this Tribunal in

Shruti Vora's (supra) wherein the Tribunal held that:

"In the light of the aforesaid, we are of the opinion that concept of fairness and principles of natural justice are in-built in Rule 4 of the Rules of 1995 and that the AO is required to supply the documents relied upon while serving the show cause notice. This is essential for the person to file an efficacious reply in his defence."

8. The said principle elucidated in Shruti Vora's judgement

is squarely applicable in the instant case. The authority is

required to supply the documents that they rely upon while 6

serving the show cause notice which in the instant case has

been done and which is sufficient for the purpose of filing an

efficacious reply in his defence.

9. In Natwar Singh vs Director of Enforcement and

Another (2010) 13 SCC 255 the Supreme Court held that the

fundamental principle remains that nothing should be used

against the person which has not been brought to his notice.

If relevant material is not disclosed to a party, there is prima-

facie unfairness irrespective of whether the material in

question arose before, during or after the hearing. The

Supreme Court further held that the law is fairly well settled,

namely that if prejudicial allegations are to be made against a

person, he must be given particulars of that before hearing so

that he could prepare his defence.

10. In the light of the aforesaid, the request of the

Appellant for supply of documents which are in possession of

the authority is misconceived and cannot be accepted. We

are further of the opinion that the Appellant should take all

grounds which are available to him while filing his reply,

including the ground of non-supply of essential documents.

Such grounds taken and raised at the time of hearing will be

duly considered by the authority. We are further of the 7

opinion that if the authority while passing the final order

relies on any document which was not supplied, in which

case, it would be open to the Appellant to challenge that

finding by filing an appeal and taking it as a ground with

regard to non-supply of an essential document. Such ground

taken would be in consonance with the principles laid down

in Section 105 of the Civil Procedure Code which provides

that where a decree is appealed from, any error, defect or

irregularity in any order, affecting the decision of the case,

may be set forth as ground of objection in the memorandum

of appeal.

11. In the light of the aforesaid, we do not find any merit in

the appeal and is dismissed at the admission stage without

calling for a reply. In the circumstances of the case, there

shall be no order as to costs.

12. We find that the Respondent issued an email dated 30 th

June, 2020 intimating the Appellant to file a reply to the

show cause notice by 14th July, 2020 and further intimating

that 22nd July, 20202 has been fixed for hearing. While

reserving the judgment we had directed the Respondent not

to proceed in the matter till the delivery of the judgment.

Thus, while dismissing the present appeal we grant further 8

opportunity to the Appellant to file a reply to the show cause

notice on or before 15th August, 2020. If a reply is filed the

Respondent shall intimate a date for hearing to the appelant

and conduct the hearing either through physical hearing or

through video conference as convenient to the parties.

13. The present matter was heard through video conference

due to Covid-19 pandemic. At this stage it is not possible to

sign a copy of this order nor a certified copy of this order

could be issued by the registry. In these circumstances, this

order will be digitally signed by the Presiding Officer on

behalf of the bench and all concerned parties are directed to

act on the digitally signed copy of this order. Parties will act

on production of a digitally signed copy sent by fax and/or

email.

TARUN Justice Tarun Agarwala Digitally signed by TARUN AGARWAL DN: c=IN, o=PUBLIC WORKS DEPARTMENT UTTAR PRADESH, postalCode=221505, st=Uttar Presiding Officer AGARW Pradesh, 2.5.4.20=30fcf68685192bbc53e6ff160 8a83fb3881de7ac2ab7954d509c85ed 6e0f7c41, serialNumber=095f8b286bb0b1cd07f

AL f676611f4f5e7999727d404aa38ca422 f9d3529bdb8a3, cn=TARUN AGARWAL Date: 2020.07.17 15:00:41 +05'30'

Dr. C. K. G. Nair Member

Justice M.T. Joshi Judicial Member 17.7.2020 RHN