Chanda Kochhar vs Sebi

Securities Appellate Tribunal2 May 2025

CitationAppeal No.147 of 2025

Ratio decidendi

The rule this decision rests on

Where a quasi-judicial authority proceeds against a noticee on the same facts and cause of action as a co-noticee, and the adjudicating officer is the same for both, the noticee is entitled to inspect and take notes from the materials submitted by the co-noticee that bear on the allegations against him, since material not brought to a party's notice cannot be used against him and the common adjudicator's exposure to material from the other proceeding gives rise to a real risk of bias. A fair hearing requires that a person facing adjudication be made aware of the evidence to be used against him; disclosure need not always mean supply of copies and may be satisfied by inspection and note-taking, and if relevant material is withheld, prima facie unfairness arises whether the material came into existence before, during or after the hearing. Where the same adjudicator has access to material submitted by a co-noticee in parallel proceedings, his findings against the other noticee are exposed to the risk of bias, because the human mind does not compartmentalise impressions received from different sources and the totality of those impressions goes into the decision.

Written by Miss Lucy from the judgment below, not taken from a headnote.

Judgment

As delivered

IN THE SECURITIES APPELLATE TRIBUNALAT MUMBAIDATED THIS THE 2ND DAY OF MAY, 2025CORAM: Justice P. S. Dinesh Kumar, Presiding OfficerMs. Meera Swarup, Technical MemberDr. Dheeraj Bhatnagar, Technical MemberAppeal No.147 of 2025Chanda Kochhar,45, CCI Chambers,Dinshaw Vachha Road,Churchgate, Mumbai - 400 020. .....Appellant(BY Mr. Pesi Modi, Senior Advocate with Mr. KyrusModi, Mr. Vishesh Malviya, Ms. Deepa Shetty, Ms.Taniya Dsouza and Mr. Athrarva Patvardhan, Advocatesi/b. Rashmikant and Partners for the Appellant.)Securities and Exchange Board of IndiaSEBI Bhavan, Plot No.C4-A,'G' Block, Bandra - Kurla Complex,Mumbai - 400 051. ..... Respondent(BY Mr. Gaurav Joshi, Senior Advocate with Mr. NitinJain, Mr. Ravishekar Pandey, Mr. Ankit Ujjwal,Advocates i/b. Agama Law Associates for theRespondent).2THIS APPEAL IS FILED UNDER SECTION 15-T OF THE SEBI ACT, 1992 TO SET ASIDE THEHEARING NOTICE DATED MARCH 12, 2025PASSED BY THE SEBI.THIS APPEAL HAVING BEEN HEARD ANDRESERVED FOR ORDERS ON MARCH 25, 2025COMING ON FOR PRONOUNCEMENT OFORDER THIS DAY, THE TRIBUNAL MADE THEFOLLOWING:ORDERPer : Justice P. S. Dinesh Kumar, Presiding OfficerThis appeal is directed against hearing notice dated March12, 2025 issued to the appellant by the AO1, SEBI2 underSection 15 I of the SEBI Act read with Rule 4 (3) of theSEBI (Procedure for Holding Inquiry and ImposingPenalties) Rules, 1995.2. Brief facts of the case as per pleadings are:(i) The appellant is the former Managing Director andChief Executive Officer of ICICI Bank Limited. SEBIissued a Show Cause Notice (SCN) dated May 23, 20181Adjudicating officer2Securities and Exchange Board of India3to the appellant (Noticee No.1) and the ICICI BankLimited (Noticee No.2). Appellant filed a detailedresponse and written submissions. A personal hearing wasprovided, however, no orders were passed.(ii) After two years, on November 19, 2020, SEBI sent anemail enclosing an 'Amended Show Cause Notice'without its enclosures/annexures, wherein appellant wasthe sole noticee. The amended SCN superseded theearlier SCN. Thereafter, a series of communication wereexchanged for inspection and supply of documentsbetween the appellant and SEBI. Meanwhile, appellantfiled her preliminary reply on February 24, 2021 toamended SCN indicating about non-supply of documentsand seeking inspection.(iii) SEBI scheduled a personal hearing on May 4, 2021without considering appellant's repeated requests forinspection and supply of documents. The appellantapproached this Tribunal in appeal No.312 of 2021. ThisTribunal vide order dated June 14, 2022 directed the AO4to consider appellant's application for inspection/supplyof requested documents and to pass a reasoned order. OnAugust 17, 2022, SEBI provided selective inspection ofsome of the documents and denied inspection of theremaining documents without any valid reason.(iv) The appellant again approached this Tribunal inAppeal No. 751 of 2022. This Tribunal granted partialrelief directing SEBI to furnish some of the requesteddocuments. Thereafter, a series of communication wereexchanged between the appellant and respondent.(v) On February 21, 2025, SEBI sent an email stating thatall documents pertaining to amended SCN had beensupplied and called upon the appellant to submit aresponse to the amended SCN by March 7, 2025. OnMarch 7, 2025 appellant requested for the copies of thesubmissions made by ICICI Bank in the ongoing parallelproceedings and also to provide data from ICICI Bank'sSecretarial portal and electronic data stored on ICICI5Bank's servers. Final personal hearing was scheduled onMarch 26, 2025.(vi) Appellant has approached this Tribunal with theprayers inter alia, to set aside the hearing notice datedMarch 12, 2025; to direct the SEBI to grant inspection; toprovide copies of SCN/amended SCN issued to ICICIBank, all replies, written submissions, documents filed byICICI Bank under the SCN/amended SCN and data onICICI Bank's Secretarial Portal, servers and deviceswhich form the basis of amended SCN.3. We have heard Shri Pesi Modi, learned SeniorAdvocate for the appellant and Shri Gaurav Joshi, learnedSenior Advocate for the SEBI.4. Shri Pesi Modi submitted that: The principles of natural justice require full and fairdisclosure of all relevant material to enable theappellant to effectively defend herself.6 The appellant should be provided with the submissionsand documents made by the ICICI Bank because all theallegations against the appellant are in respect of herconduct as MD and CEO of ICICI Bank. Initially acommon SCN was issued because the case of theappellant and ICICI Bank are interwoven. SEBI isrelying on material conveniently procured, provided byICICI Bank to proceed against the appellant. Thecontention of SEBI that the stand taken by the ICICIBank is not relevant to the defence of the appellant isuntenable. The same AO is conducting the proceedings against theappellant and the ICICI Bank. Yet he is refusing todisclose SCN, replies and submissions made by theICICI Bank. SEBI's refusal to provide relevantinformation/data on the ICICI Bank's Secretarial portal,servers and devices amounts to violation of principlesof natural justice since the very same material was used7in the CR Report3 which formed the basis of ProjectIndus Report, based on which, the amended SCN hasbeen issued. Though this Tribunal is not bound by CPC, 1908, itshall be guided by principles of natural justice and hasall powers of a Civil Court under CPC, inter alia inrespect of discovery and production of documentsunder Rule 1,3 and 5 of Order 11 of CPC, 1908 and thatany party can seek directions from the Hon'ble Court atany stage for inspection or production of documents byany other party who has refused to provide the sameand exemplary costs may be imposed upon him forsuch refusal. SEBI's suppression of the relevant documents andinformation is in violation of law laid down in T.Takano v. SEBI4, Milind Patel v. Union Bank ofIndia5. He also placed reliance on Madhyam Agrivet

3 Credit Rating Report 4 Paras 44, 50,51 & 62 of T.Takano v. SEBI, 2022 SCC Online SC 210, decided on February 18,2022 by Hon'ble Supreme Court of India. 5 Paras 25 & 26 of Milind Patel v. Union Bank of India, 2024 SCC Online Bom 745, decided on March 11, 2024 by Hon'ble Bombay High Court. 8

Industries Limited v. SEBI6 and urged that inspection

of SCN issued to the other parties in the same matter

must be given.

 With these submissions, the appellant prayed to set

aside the hearing notice date March 12, 2025 and direct

SEBI to grant inspection to provide copies of

SCN/amended SCN issued to ICICI Bank, all replies,

written submissions, documents filed by ICICI Bank

under the SCN/amended SCN in respect of which

proceedings are pending and also the data on ICICI

Bank's Secretarial Portal, servers and devices which

form the basis for the amended SCN.

5. Shri Gaurav Joshi, for SEBI raised a preliminary

objection with regard to maintainability of this appeal,

according to him a hearing notice is not an order appealable

under Section 15T of SEBI Act, 19927.

6 Paras 11 to 14 of Madhyam Agrivet Industries Limited v. Securities and Exchange Board of India, 2024 SCC Online SAT 296, decided on May 22, 2024 by Securities Appellate Tribunal, Mumbai.

7 Securities and Exchange Board of India, 1992. 9

6. He submitted that the proceedings before a quasi-

judicial authority are inherently different from a trial court

and each noticee is adjudicated on its independent

case/merit before respondent. The reply and written

submissions by co-noticees are not provided except in

exceptional circumstances and the appellant has failed to

establish any such 'exceptional circumstances'. As a matter

of established principle and practice, the respondent cannot

grant access to the documents submitted by ICICI Bank.

The information provided by ICICI Bank includes

confidential details which cannot be disclosed without the

consent of ICICI Bank.

 ICICI Bank is not a party to amended SCN and the

respondent affirms that none of the content submitted by

ICICI Bank shall be relied upon by the respondent

against the appellant. The charges and legal provisions

under which ICICI Bank was charged are totally

different from that of the appellant.

10  That the data available on ICICI Bank's Secretarial

Portal and servers is the property which belongs to the

ICICI Bank and not within the possession of the

respondent. Respondent is unable to provide access to

the information that it does not possess.

 That documents not relied upon by the authority are not

required to be furnished. To support this submission, he

relied on Kavi Arora v. SEBI8. He submitted that the

reliance placed by the appellant on Madhyam Agrivet

Industries and Ors v. SEBI is entirely misconceived, as

in that case this Tribunal has granted inspection of SCNs

issued to the officers and independent directors whereas

in this case the appellant is seeking access to documents

submitted by ICICI Bank.

 That the present appeal is the third round of litigation by

the appellant since issuance of amended SCN dated

November 19, 2020. Appellant till date has not filed

reply on merits to the allegations in the amended SCN.

8 Paras 48 to 52 of Kavi Arora v Securities and Exchange Board of India, 2022 SCC OnLine SC 1217, decided on September 14, 2022 by Hon'ble Supreme Court of India. 11

7. We have carefully considered the rival contentions

and perused the records.

8. The allegations levelled against the appellant in the

amended show cause notice pertain to appellant's acts and

omissions committed whilst she was the MD and CEO of

ICICI Bank. The proceedings against the appellant and

ICICI Bank emanate from the same set of facts and cause

of action pertaining to the ICICI Bank. After her removal

from the Bank, obviously, the appellant shall not have any

access to the materials/documents pertaining to the ICICI

Bank. Every person has a right to defend his/her case. In

the present case, respondent is independently proceeding

against the appellant on the same cause of action/facts in

which both the appellant and the Bank are facing enquiry.

The respondents have initiated parallel proceedings against

ICICI Bank as well as the appellant.

9. There should be absolute fair practice on part of the

quasi-judicial authority while conducting an enquiry. The

fundamental principle is that any material which has not 12

been brought to his notice, cannot be used against a

delinquent. In Kanwar Natwar Singh v. Director of

Enforcement9, the Hon'ble Supreme Court held:

"The right to fair hearing is a guaranteed right. Every person before an Authority exercising the adjudicatory powers has a right to know the evidence to be used against him. This principle is firmly established and recognized by this Court in Dhakeswari Cotton Mills Ltd. Vs. Commissioner of Income Tax, West Bengal. However, disclosure not necessarily involves supply of the material. A person may be allowed to inspect the file and take notes. Whatever mode is used, the fundamental principle remains that nothing should be used against the person which has not 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."

10. Further, the adjudicating officer in both the

proceedings against ICICI Bank as also the appellant are

one and the same. Admittedly, he is privy to the documents

submitted by the ICICI Bank. Therefore, his findings qua

the appellant may be biased or exposed to the risk of bias.

9 Paragraph No.23 of Kanwar Natwar Singh v. Director of Enforcement, (2010) 13 SCC 255 decided on October 5, 2010 13

(See Ranjit Thakur v. Union of India and Ors10). It is

elementary that the human mind does not function in

compartments. When it receives impressions from different

sources, it is the totality of the impressions which goes into

the making of the decision and it is not possible to analyse

and dissect the impressions and predicate which

impressions went into the making of the decision and which

did not. (See Khudiram Das v. State of West Bengal11).

11. In view of the above discussion, the following:

ORDER

1. Appeal is allowed.

2. SEBI is directed to furnish a copy of SCNs issued to

the ICICI Bank and allow the appellant to inspect

and take notes from all replies, written

submissions/annexures/exhibits/documents filed by

ICICI Bank with the respondent and also with

respect to the ICICI Bank's Secretarial Portal and

data stored in Bank's server and devices in respect 10 Ranjit Thakur v. Union of India and Ors. decided on October 15, 1987, (1987) AIR 2386 11 Khudiram Das v. State of West Bengal, decided on November 26, 1974, (1975) 2 SCC 81 14

of ICICI Bank-Videocon Group saga and thereafter

fix a date of hearing.

3. Pending interlocutory applications, if any, stand

disposed of.

4. No costs.

Justice P.S. Dinesh Kumar Presiding Officer

Ms. Meera Swarup Technical Member

Dr. Dheeraj Bhatnagar Technical Member

RAJALA 02.05.2025 KSHMI Digitally signed by RAJALAKSHMI H NAIR Date: 2025.05.02 RHN 13:28:13 +05'30'

H NAIR

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