Anil Kumar & Ors. vs Sebi

3. Rama Anil Gupta Associates Private Ltd. 1, Crooked Lane, 2nd Floor, Room No. 210, Kolkata - 700 069. ..... Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

Mr. Ravi Prakash, Advocate with Ms. Nikita Vijay, Mr. Varun Litoriya and Mr. Paras Taneja, Advocates for the Appellants.

Mr. Sumit Rai, Advocate with Mr. Ravishekhar Pandey, Ms. Shefali Shankar and Mr. Amarpal Singh Dua, Advocates i/b. MDP & Partners for the Respondent. 2

CORAM : Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member

Per : Justice Tarun Agarwala, Presiding Officer (Oral)

1. There is a delay in the filing of the appeal. For the

reasons stated in the application, the delay is condoned. The

application is allowed.

2. The appellants have challenged the order dated

November 29, 2022 passed by the Adjudicating Officer ('AO'

for short) of the Securities and Exchange Board of India

('SEBI' for short) imposing a penalty of Rs. 15,00,000/- to be

paid jointly and severally by Noticee nos. 1 to 3 for violating

Regulations 3 and 4 of the SEBI (Prohibition of Fraudulent

and Unfair Trade Practices) Regulations, 2003 ('PFUTP

Regulations' for short).

3. We have heard Shri Ravi Prakash, the learned counsel

with Ms. Nikita Vijay, Shri Varun Litoriya and Shri Paras

Taneja, the learned counsel for the appellants and Shri Sumit

Rai, the learned counsel with Shri Ravishekhar Pandey, Ms.

Shefali Shankar and Shri Amarpal Singh Dua, the learned

counsel for the Respondent.

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4. We find that the alleged trades in question was executed

by the appellants between June 21, 2011 to December 30,

2011. The show cause notice was issued on April 4, 2022

after 11 years. In our view there is an inordinate delay in the

issuance of the show cause notice. We find that the

investigation started in March 2018. Nothing has been

brought on record to show as to why the investigation could

not be initiated earlier when the trades executed by the

appellants was in the public domain.

5. In Ashlesh Gunvantbhai Shah vs SEBI (Appeal No.

169 of 2019) decided on January 31, 2020 this Tribunal

held:-

"12. Having considered the matter we are of the view that there has been an inordinate delay on the part of the respondent in initiating proceedings against the appellants for the alleged violations. The controversy in this regard is squarely covered by a decision of this Tribunal in Mr. Rakesh Kathotia & Ors. vs SEBI in Appeal No. 7 of 2016 decided by this Tribunal on May 27, 2019. The relevant paragraph is extracted herein below:-

"23. It is no doubt true that no period of limitation is prescribed in the Act or the Regulations for issuance of a show cause notice or for completion of the adjudication proceedings. The Supreme Court in Government of India vs, Citedal Fine Pharmaceuticals, Madras and Others, [AIR (1989) SC 1771] held that in the absence of any period of limitation, the authority is required to exercise its powers within a reasonable period. What would be the reasonable period would depend on the facts of 4

each case and that no hard and fast rule can be laid down in this regard as the determination of this question would depend on the facts of each case. This proposition of law has been consistently reiterated by the Supreme Court in Bhavnagar University v. Palitana Sugar Mill (2004) Vol.12 SCC 670, State of Punjab vs. Bhatinda District Coop. Milk P. Union Ltd (2007) Vol.11 SCC 363 and Joint Collector Ranga Reddy Dist. & Anr. vs. D. Narsing Rao & Ors. (2015) Vol. 3 SCC 695. The Supreme Court recently in the case of Adjudicating Officer, SEBI vs. Bhavesh Pabari (2019) SCC Online SC 294 held:

"There are judgments which hold that when the period of limitation is not prescribed, such power must be exercised within a reasonable time. What would be reasonable time, would depend upon the facts and circumstances of the case, nature of the default/statute, prejudice caused, whether the third-party rights had been created etc."

13. Similar view was again relied in Ashok Shivlal Rupani & Ors. vs. SEBI (Appeal No. 417 of 2018 along with other connected appeals decided on August 22, 2019) and again in Sanjay Jethalal Soni & Ors. vs SEBI in Appeal No. 102 of 2019 and other connected appeals decided on November 14 2019.

14. We also find that in the case of Ashok Shivlal Rupani (supra) the period of investigation was January 4, 2010 to January 10, 2011 in the scrip of M/s. Oregon Commercial Ltd. and the show cause notice issued on November 20, 2017 which this Tribunal held that there was an inordinate delay. In the instant case, the same scrip was investigated for the same period and there is a delay of 7 years in issuing the show cause notice. To this extent, the facts are common. Further, Civil Appeal No. 8444 - 8445 of 2019 Securities and Exchange Board of India vs. Ashok Shivlal Rupani & Anr, etc was dismissed by the Supreme Court on November 15, 2019 thus affirming the decision of this Tribunal.

15. In the light of the aforesaid, we are of the opinion that there has been an inordinate delay in the issuance of the show cause notice. Even though there is no period of limitation prescribed in the Act and Regulations in the issuance of a show cause notice or for completion of the adjudication proceedings the authority is required to 5

exercise its powers within a reasonable period as held recently in Adjudicating Officer, Securities and Exchange Board of India vs. Bhavesh Pabari (2019) SCC OnLine SC 294. In the instant case, we are of the opinion that the power to adjudicate has not been exercised within a reasonable period and therefore no penalty could be imposed."

6. In Sanjay Jethalal Soni and Ors. vs. SEBI (Appeal No.

102 of 2019 decided on November 14, 2019 this Tribunal

held:-

"11. Having heard the learned counsel for the parties at some length we find that the respondent had investigated the scrips of Shree Global Tradefin Ltd. for the period March 1, 2009 to January 10, 2011 in September 2011. Pursuant thereto, a show cause notice dated April 20, 2012 was issued for the violation found during the investigated period March 1, 2009 to November 30, 2009. The respondents thereafter waited for another five years to issue a second show cause notice dated July 20, 2017 for the investigated period April 1, 2010 to January 10, 2011 which had been investigated in September 2011. We find that the respondents were aware of the alleged violation and thus there is no justification for waiting for more than five years to issue the second show cause notice dated July 20 2017. In our view there is an inordinate delay in initiating the proceedings."

7. In view of the aforesaid, we are of the opinion that there

has been an inordinate delay of 11 years in the issuance of the

show cause notice. On this short ground the impugned order

cannot be sustained and is quashed. The appeal is allowed.

The miscellaneous application is disposed of. 6

8. This order will be digitally signed by the Private

Secretary on behalf of the bench and all concerned parties are

directed to act on the digitally signed copy of this order.

Certified copy of this order is also available from the Registry

on payment of usual charges.

Justice Tarun Agarwala Presiding Officer

Ms. Meera Swarup Technical Member

27.07.2023 MADHUKAR Digitally signed by MADHUKAR SHAMRAO BHALBAR SHAMRAO BHALBAR msb Date: 2023.07.28 14:57:21 +05'30'