Gautam Thapar & Ors. vs Sebi

Order Reserved On: 27.09.2019 Date of Decision : 01.10.2019

Appeal No. 413 of 2019

1.

Gautam Thapar First India Place, Tower C, Mehrauli Gurgaon Road, Gurgaon- 122 022

2. V. R. Venkatesh Flat No. 103, Tower II, Ratnashree Towers, Hari Om Nagar, Mulund (West), Mumbai- 400 081

3. Madhav Acharya A- 2606, Oberoi Woods, Off Western Express Highway, Goregaon East, Mumbai- 400 063

4. B. Hariharan First India Place, Tower C, Mehrauli Gurgaon Road, Gurgaon- 122 022

5. Avantha Holdings Limited First India Place, Tower C, Mehrauli Gurgaon Road, Gurgaon- 122 022 ...Appellants

Versus

1. Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051 2

2. C.G. Power and Industrial Solutions Limited CG House, 6th Floor, Dr. Annie Besant Road, Worli, Mumbai- 400 030 ...Respondents

Mr. Janak Dwarkadas, Senior Advocate with Mr. Soli Cooper, Senior Advocate, Mr. Somasekhar Sundaresan, Mr. Nihar Mody, Mr. M.P. Bharucha, Mr. Ajai Achuthan Ms. Sneha Jaisingh, Mr. Chirag Chhabra, Mr. Sumit Agarwal and Mr. Amit Agarwal, Advocates i/b Bharucha & Partners for Appellants.

Mr. Iqbal Chagla, Senior Advocate with Mr. Mihir Mody, Mr. Jehaan Mehta and Mr. Sushant Yadav, Advocates i/b K. Ashar & Co. for Respondent No. 1

Mr. Amit Desai, Senior Advocate with Mr. Zal Andhyarujina, Ms. Shruti Rajan, Ms. Anchal Dhir, Ms. Rutu Gandhi, Mr. Rushin Kapadia, Mr. Pratham Masurekar and Mr. Shubham Rastogi, Advocates i/b Cyril Amarchand Mangaldas for Respondent No. 2

CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M. T. Joshi, Judicial Member

Per: Justice Tarun Agarwala

1. The present appeal has been filed against the ex-parte ad-

interim order dated September 17, 2019 passed by the Whole

Time Member ("WTM" for convenience) of the Securities and

Exchange Board of India ("SEBI" for convenience) wherein the

following directions under Section 19 read with Sections 11(1),

11(4) and 11B of the SEBI Act, 1992 has been issued, namely: 3

"i) Noticees no. 2-5 i.e. Gautam Thapar, V. R. Venkatesh, Madhav Acharya and B. Hariharan are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities in any manner whatsoever, either directly or indirectly, till further orders.

(ii) Noticees no. 2-5 are restrained from being associated with any intermediary registered with SEBI or any listed entity or its material unlisted subsidiary, till further orders.

(iii) The concerned stock exchanges are permitted to allow the aforementioned persons/entities at paragraph 6.1(i) to square off their existing open positions in the Futures and Options segment, if any, immediately. The aforementioned persons/entities shall not be allowed to take fresh positions or increase their open positions or execute trades. Further, the concerned stock exchanges shall ensure that no fresh positions are created for the aforementioned persons/entities.

(iv) Noticees no. 6-8 i.e. Avantha Holdings Limited, Acton Global Private Limited and Solaris Industrial Chemicals Limited are directed to retain funds/other assets to the extent of receivables shown as outstanding to CG Power and Industrial Solutions Limited, as per Table X at paragraph 4.4. B. To the extent of their liability, the aforesaid Noticees are restrained from disposing, selling or alienating, in any other manner, their assets or divert funds, till further orders.

(v) Noticee no. 1 i.e. CG Power and Industrial Solutions Limited, is directed to take all necessary steps to recover the amounts due to the Company, which were extended, either directly or indirectly, to the Noticees/entities mentioned at paragraph 4

5.5 A. along with due interest expeditiously and take necessary action, including legal actions, to safeguard the interest of the investors of the Company.

vi) BSE shall appoint an independent Auditor/Audit Firm for conducting a detailed forensic audit of the books of accounts of CG Power from the Financial Year 2015-16 onwards till date. The expenses for the aforementioned forensic audit shall be borne by the Company. The independent Auditor/Audit Firm so appointed shall verify inter alia the following-

a. Manipulation of Books of Accounts;

b. Misrepresentation including of financials and/or business operations;

c. Wrongful diversion/siphoning of company funds;

d. Any other related matter.

(vii) Noticees no. 1-8 shall extend necessary co-

operation to the independent Auditor/Audit Firms appointed as per this Order and shall furnish all information/documents sought from them from time to time.

(viii) The independent Auditor/Audit Firm so appointed as per this Order shall submit a Report to SEBI within six months from the date of this Order."

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

the Appellant No. 1 was the Chairman and non-executive

Director of the Company known as CG Power and Industrial

Solutions Limited (hereinafter referred to as the "Company"). 5

The Appellant No. 1 was removed as Chairman of the said

Company by a resolution of the Board of Directors dated

August 29, 2019. The Appellant No. 2 was the Chief Financial

Officer of the Company and his services were terminated by the

Company on August 30, 2019. Appellant No. 3 was the

Executive Director, Finance and Chief Financial Officer of the

Company. Appellant No. 4 was the Non-Executive Director of

the Company till March 2019 and Appellant No. 5 is an unlisted

holding Company and a promoter of the Company in which

87% of the shares are held by Appellant No. 1.

3. The immediate cause of action which instigated the chain

of events was the outcome of the Board Meeting held on August

19, 2019 which started at 3:00 P.M. and ended at 4:00 A.M on

the next day. In this meeting the Appellant No. 1 as a Chairman

of the Company was present. On the basis of the minutes of the

Board, the Company made a corporate announcement on

August 20, 2019 disclosing the following namely:

"A. The Board of Directors ("Board") as well as Risk and Audit Committee ("RAC") of CG Power held a meeting to inter alia consider and discuss the status of annual financial statements of the Company as well other related matters.

B. The Operations Committee was made aware of some unauthorised transactions by 6

certain employees of the Company and was also made aware of a letter received by the Company from a financing company (subsequently revealed as Aditya Birla Finance Limited) regarding a certain interest payment failure which the Operations Committee was unable to trace or ascertain from the financials of the Company. To make further assessments in this regard, an Independent Law Firm- M/s Vaish Associates ("Legal Firm") was appointed to conduct an investigation on certain transactions by the Company.

C. The total liabilities of the Company and the Group may have been potentially understated by approximately ` 1053.54 Crore and ` 1,608.17 Crore respectively, as on March 31, 2018 and by ` 601.83 Crore and ` 401.83 Crore, respectively as on April 1, 2017. Moreover, advances to related and unrelated parties of the Company and the Group may have been potentially understated by ` 1,990.36 Crore and ` 2,806.63 Crore respectively, as on March 31, 2018 and by ` 1,479.34 Crore and ` 1,331.47 Crore respectively, as on April 1, 2017.

D. Certain assets of the Company were purportedly provided as collateral without due authority and the Company was made a co-borrower and/or guarantor for enabling ostensibly unrelated third parties to obtain loans without due authorisation. The moneys so obtained were immediately and without due authorisation routed out of the Company, either by itself or from its subsidiaries or ostensibly unrelated parties to certain related parties. These subject transactions are prima facie prejudicial to the interests of the Company. These were purportedly carried out by identified company personnel (both current and past) including certain Non-Executive Directors, certain KMPs and others identified 7

employees ("CIP") in breach of the Rules of Procedure of the Company ("ROP"), and/or without proper information to or authorization of either the RAC or the Board, and/or in breach of the Companies Act 2013, applicable SEBI Regulations and other applicable laws. The Company plans to conduct a detailed forensic investigation to establish wrongdoing, accountability and other residual implications."

4. Based on the aforesaid resolution of the Board of

Directors, the Appellant No. 1 was removed from the post of

Chairman on August 29, 2019 and the services of the Appellant

No. 2 was terminated on August 30, 2019. The purported fraud

indicated in the disclosure was reported in various national

newspapers. SEBI taking suo moto notice of the suspected

fraud met the officials of the Company on August 22, 2019.

The Company thereafter submitted a Preliminary Investigation

Report based on which SEBI sought responses from the

appellants. Replies were filed by the Appellant No. 1 on August

29, 2019 and August 30, 2019. SEBI after considering the

Preliminary Investigation Report given by the Company and

further considering the Audit Report, prima facie found that

there was a serious misstatement of accounts and diversion of

funds from the Company and its subsidiaries in violation of the

SEBI Act, SEBI (Prohibition of Fraudulent and Unfair Trade

Practice relating to Securities Market) Regulations, 2003 8

("PFUTP Regulations" for convenience) and the SEBI (Listing

Obligations and Disclosure Requirements) Regulations, 2015

("LODR Regulations, 2015 for convenience). SEBI upon

examining the evidence, prima facie found that the appellants

had perpetrated certain irregularities which included:

"i. The use of certain assets of the Company as collateral including being Co-Borrower and/or Guarantor for enabling third parties to obtain loans without due authorisation from the Board of CG Power.

ii. Routing transactions through subsidiaries, Promoter-affiliated Companies and other connected parties for the ultimate benefit of companies related to Promoter Group.

iii. Inappropriate netting-off the liabilities with the receivables from different entities.

iv. The use of different accounting heads for concealing payments made by CG Power.

v. Interest free advances to Promoter-affiliated Companies.

vi. Entering into dubious transactions for reducing the liability of the Promoter-

affiliated Companies towards CG Power/Group Companies."

5. SEBI also noted from the Audit Report that certain

unauthorized banking transactions in the nature of loans taken

from banks were not disclosed in the Standalone Financial

Results of prior years against related and unrelated party 9

balances. Various other irregularities have also been recorded

in the ex-parte ad-interim order against each of the appellants.

6. Based on the Preliminary Investigation Report, the Audit

Report and upon the examination of the documents the WTM

prima facie found:

"I. Gautam Thapar, V. R. Venkatesh, Madhav Acharya, B. Hariharan along with the Promoter Company and entities related/connected with the Company, viz. Avantha Holdings Limited, Acton Global Private Limited and Solaris Industrial Chemicals Limited have prima facie violated Sections 12A(a), (b) and (c) of the SEBI Act and Regulations 3(b), (c) and (d), 4(1) and 4(2)(f) and (r) of the PFUTP Regulations, 2003.

II. Gautam Thapar, Madhav Acharya and B. Hariharan have prima facie violated Regulations 4(2)(f)(i)-(ii), 4(2)(f)(iii)(3) and (6) of the LODR Regulations 2015.

III. Gautam Thapar, Madhav Acharya and B. Hariharan have prima facie violated Regulation 26(3) of the LODR Regulations 2015 on account of having violated the provisions of the Code of Conduct for employees of CG Power.

IV. V. R. Venkatesh has prima facie violated Regulation 4(2)(f)(i)(2) and Regulation 26(3) of the LODR Regulations 2015. V. V. R. Venkatesh and Madhav Acharya have prima facie violated Regulation 33(2)(a) of the LODR Regulations 2015."

10

7. The WTM of SEBI on the basis of the various transactions

that was recorded in the Preliminary Investigation Report and

Audit Report came to prima facie opinion that the interests of

the shareholders of the Company was adversely affected and if

immediate action was not taken the interests of the shareholders

would be severely affected as the transactions prima facie was

designed to divert/ siphon off the money from the Company

which rightly belonged to the shareholders. The WTM further

found that the action on the part of the appellants amounted to a

fraud on its public investors for which a detailed forensic audit

was required to bring out the complete picture and the extent of

the misappropriation/ misstatement. In order to prevent further

diversion/ siphoning of the funds the WTM found it necessary

to pass an ex-parte ad-interim order, which have already been

extracted earlier.

8. We have heard the learned senior counsel Shri Janak

Dwarkadas for the Appellants and the learned senior counsel

Shri Iqbal Chagla for Respondent No. 1 and the learned senior

counsel Shri Amit Desai for Respondent No. 2 at some length.

9. Shri Dwarkadas the learned senior counsel contended that

by passing the ex-parte ad-interim order the respondent has 11

already placed the appellant guilty without trial. Without

considering the reputation of the appellants, SEBI has

proceeded in haste in holding that the appellants have siphoned

off the money as petty thieves. It was contended that there was

no urgency in the matter and, if an opportunity of hearing was

given, the appellants would have placed the material and would

have proved that all the alleged transactions as has been

indicated in the impugned order was duly authorised and

approved by the Risk Audit Committee ("RAC" for

convenience) as well as approved by a resolution of the Board

of Directors. It was contended that without waiting for the

appellants to furnish appropriate evidence, the debarment order

was passed which is prejudicial to the interests of the appellants.

It was submitted that the said ex-parte ad-interim order amounts

to attachment before judgement which cannot be done in a

casual or routine manner and that an ex-parte ad-interim order

can only be passed under Sections 11 & 11B in extreme urgent

cases and, that too, the power could only be exercised sparingly

and not in a routine and casual manner as has been done in the

instant case. The learned senior counsel contended that all the

alleged transactions were duly approved by the RAC and all the

transactions were thus authorized and therefore the question of

siphoning of the funds of the Company did not arise. It was 12

contended that when these transactions were authorized by the

RAC, SEBI in its wisdom had not issued any notice to members

of the RAC but has only confined the debarment order on the

appellants which again shows the arbitrary action on the part of

the appellants in only picking certain entities. The learned

senior counsel further contended that SEBI, while passing the

impugned order, has not conducted any independent

investigation and has not applied its mind and has not made any

self assessment after taking independent evidence but has

mechanically relied upon the Preliminary Investigation Report

of the Company and the Audit Report which by itself was

insufficient and could not be made the basis for the purpose of

issuing an ex-parte ad-interim order. In the end, the learned

senior counsel contended that in order to file an appropriate

reply to the ex-parte ad-interim order cum show cause notice,

the appellant has to rely upon certain documents, resolutions of

the Board of Directors and of the RAC, etc. which are in the

custody of the Company. It was urged that the Appellant No. 1

has now been removed and has no access to those documents.

The learned senior counsel further urged that the appellants had

made a request to the Company to provide certain documents

which either has been refused or provided hedged with certain

conditions, namely, that the said documents will not be used 13

before any authority if it is detrimental to the interests of the

Company. It was thus contended that the denial of the

documents by the Company was in gross violation of the

principles of natural justice. In view of the aforesaid, the

learned senior counsel contended that in the absence of any

urgency, there was no reason for this ex-parte ad-interim order

to continue any further. It was contended that the appellants

shall file their appropriate replies after receiving the relevant

documents and would participate in the proceedings but prayed

that the ex-parte ad-interim order should not be allowed to

operate.

10. On the other hand, Shri Chagla the learned senior counsel

for SEBI contended that, SEBI has the power to pass ex-parte

ad-interim orders pending investigation under Sections 11 &

11B of the SEBI Act in order to protect the interest of the

investors. The learned senior counsel contended that during the

preliminary inquiry and upon examination of the evidence that

came before SEBI it was prima facie found that the appellants

were indulging in diversion/siphoning of the funds of the

Company which was against the interests of the shareholders of

the Company and therefore it was necessary that action was

taken immediately to stop further diversion/siphoning of the 14

funds. Shri Chagla the learned senior counsel further contended

that upon examination of the evidence a prima facie opinion

was found based on objective facts indicating

diversion/siphoning of funds by the appellants and, therefore,

there was a need and necessity to immediate pass an ex-parte

ad-interim order. The learned senior counsel fairly conceded

that the supply of document is necessary for the purpose of

filing an efficacious reply and is an essential limb of the

principles of natural justice as embodied in Article 14 of the

Constitution of India and thus contended that suitable directions

may be issued by the Tribunal to the Company for supply of the

documents as required by the appellants.

11. Shri Amit Desai the learned senior counsel for the

Company (Respondent No. 2) submitted that Appellant No. 1

being Chairman, participated in the meeting of the Board of

Directors held on August 19, 2019 which recorded various

irregularities committed by the appellants and other entities in

which he is a signatory to the said minutes and thus cannot run

away from the fact that he was not aware of such resolution

being passed by the Board of Directors. The learned senior

counsel contended that based on the disclosure made by the

Company and the Preliminary Investigation Report submitted 15

by a Chartered Accountant as well as the Audit Report there

was a prima facie case of defalcation of the funds by the

appellants and others. It was contended that the SEBI was

perfectly justified in passing the ex-parte ad-interim order in

order to protect not only the Company but also its shareholders.

The learned counsel further contended that Appellant No. 1 had

requested for certain documents which were duly supplied and it

was incorrect for the appellants to contend that no documents

were supplied. The learned senior counsel contended that there

are certain documents which are confidential and would be

prejudicial to the interests of the Company and therefore such

documents cannot be supplied to the appellants but submitted

that such documents would be forwarded along with the entire

record to SEBI from where appellants if they so desire could

make an appropriate inspection.

12. Having heard the learned senior counsels for the parties,

we find that SEBI has power to pass ex-parte ad-interim order

pending investigation under Sections 11 & 11B of the SEBI

Act. What has been disputed is, that considering the facts and

circumstances in the instant case, there was no urgency to pass

an ex-parte ad-interim order. The appellants in support of their

submission have relied upon a decision of this Tribunal in 16 North End Foods Marketing Pvt. Ltd. & Anr. vs. SEBI

(Appeal No. 80 of 2019 decided on March 12, 2019) where in

this Tribunal held as under:

"17. In our opinion, the impugned order is harsh and unwarranted. We are of the opinion that there was no real urgency at this late stage in passing an ex-parte restraint order which virtually amounts to passing a final order. The period of trades is 2017-2018. At the time when the impugned order was passed the future contracts had been executed. The lean season was over. There is nothing on record to indicate that the sales made by the appellants was on a higher side indicating manipulation in the price nor there is any prima-facie, finding that by accumulating large stocks of Mentha Oil, the appellant had dominated the market without making any comparison with the total volume of trades in the physical market. In our opinion, the basis of urgency was purely on account of presumption and was not based on any piece of evidence. There should be some shred of evidence to come to a prima- facie conclusion that the appellants are indulging in unfair trade practices in cornering the market with a manipulative intent to manipulate the price. Passing a restraint order which virtually puts a stoppage on the appellants right to trade based on a needle of suspicion, in our opinion, is harsh and unwarranted.

18. In the absence of in depth analysis based on evidence, we are of the opinion that in the facts and circumstances of the present case, it was not such an urgent case where the WTM should have exercised its powers. In our opinion, the respondent is empowered to pass an ex-parte interim order only in extreme urgent cases and that such power should be exercised sparingly. In the instant 17

case, we do not find that any extreme urgent situation existed which warranted the respondent to pass an ex-parte interim order. We are, thus, of the opinion that the impugned order is not sustainable in the eyes of law as it has been passed in gross violation of the principles of natural justice as embodied in Article 14 of the Constitution of India. Accordingly, the appellants are entitled to the reliefs claimed"

13. Reliance was also placed on a decision of this Tribunal in

Pancard Clubs Limited vs. SEBI in Appeal No.254 of 2014

along with connected appeals decided on 17.09.2014 wherein

the Tribunal held:

"30. One of the issues before us today is whether there were any emergent circumstances justifying an ex parte interim order against the Appellant by invocation of process under Sections 11(1), 11(4) and 11B of the SEBI Act, 1992. Before analysing the nature of powers conferred by the statute on the Respondent by Scheme of Section 11 of the SEBI Act, 1992, we deem it fit to deal with certain undisputed facts which have come to light during the course of the matter. Firstly, on February 27, 2001, the Appellant itself approached SEBI to seek clarification regarding the applicability of CIS Regulations to the Appellant's membership scheme. Then again on June 20, 2002, the Appellant, after providing SEBI with details of its business asked for SEBI's advice on whether or not its activities fell within the purview of a CIS. It is also a matter of record that SEBI did not clarify the situation in any manner whatsoever for shocking period of around 8 years. SEBI in its letter dated October 21, 2013 wrote to MP Mr. Patil that the Appellant's activities did 18

not satisfy the conditions of Section 11AA of the SEBI Act and therefore, none of the schemes time sharing business fell within the ambit of a CIS. A perusal of the original files produced by SEBI as well as that of Reply-Affidavit filed by it undoubtedly points out that the Respondent had taken a view on file that the time sharing business does not fall within the definition of CIS. This view was nurtured by the Respondent till it was changed as a result of either the judgment in the case of PGF Ltd. by the Hon'ble Supreme Court on 12th March, 2013 and/or the intervention of MP Mr. Patil by a letter dated 2nd July 2013 calling upon SEBI to investigate the case of Appellant regarding applicability of CIS to the time sharing business.

31. We have examined Sections 11(1), 11(4) and 11B read with Sections 11AA(1), 11AA(2) of the SEBI Act along with Regulation 65 of the CIS Regulations of 1999, under which the Respondent has passed the Impugned Order to protect the interest of investors.

32. An analysis of the precise legal nature of the discretion conferred by these provisions would reveal that it is not boundaryless. It cannot be resorted to indiscriminately without clearly spelling out the urgency in a given case which is to be determined in each case on its own facts and circumstances. The Appellant who is directly and adversely affected by the ex-parte interim impugned order has atleast a legitimate expectation of being treated reasonably by getting an opportunity of being heard before such findings and directions are issued against him in the peculiar facts and circumstances of the case. Such an unjust action of the Respondent is liable to be struck down simply on the ground of unfairness and not due to any innuendo of malice or bad-faith although records clearly reveal that it 19

mainly emanated from a letter written by a Member of Parliament and also in the wake of Hon'ble Supreme Court's ruling in the case PGF Ltd. Therefore such a sudden use of extreme regulatory measure in the form of an ex-parte interim order can hardly be countenanced in the case in hand where the Appellant had, on its own, approached the Respondent for guidance, advice and clarity a decade ago. Exercise of discretion in an unruly manner is not envisaged in the scheme of SEBI Act, particularly sections 11(1), 11(4) and 11B thereof. Invocation of discretion under these provisions therefore, has to be rational and be guided by sound principles of natural justice and fair play in action. The Impugned Order is based more on speculative inferences rather than legal conclusions drawn after analysing questions of law and disputed facts after affording an opportunity of being heard to the Appellant.

33. Power of the kind that the Respondent possesses begets a monumental responsibility and needs to be exercised with great care and caution so that no one might question the acts of the sole regulator of the Indian securities market purely on the basis of non-observance of the principles of natural justice. Giving every party an opportunity of being heard is one of the most significant limbs of natural justice. Although, SEBI does have the power to pass ex-parte interim orders in certain cases, it must do so only upon showing the existence of circumstances which warrant such a drastic measure. It is a settled position of law that a decision, be it judicial, quasi- judicial or administrative, on a question, without offering an opportunity of a hearing will suffer from the vice of unfairness. It is well settled that if there is authority to decide and determine to the prejudice of another person, the duty to give a fair 20

hearing is implicit in the exercise of such power.

34. It is indeed accepted that the necessity for speed may call for immediate action in a given case and the need for promptitude may exclude the duty of giving a pre- decisional hearing to the person affected. At the same time, in such situations, there is an inherent need to show that the danger to be averted or the act to be prevented is so imminent that the pre-decisional hearing must be dispensed with. In the present matter, no such urgency has been brought to our notice. In fact, we feel that by asking the Appellant to stop all its activities, the customers who wish to avail of the schemes of the Appellant by going on holiday or vacation, are being put to loss."

14. There is no doubt that an ex-parte ad-interim order can be

passed only when there is an urgency. In Liberty Oil Mills &

Ors. vs. Union of India & Ors. AIR (1984) SC 1271, the

Supreme Court held that the urgency must be infused by a host

of circumstances and further held that the regulatory agency

must move quickly in order to curb further mischief and take

action immediately in order to instill and restore confidence in

the capital market. There is no doubt that only under emergent

circumstances and spelling out a case of urgency that an ad-

interim ex-parte orders can be passed. Such exercise of

regulatory measures in the form of ad-interim ex-parte orders 21

can only be done upon the existence of circumstances

warranting such a drastic measure.

15. Applying the aforesaid test, we find that considering the

allegations spelled out in the ex-parte ad-interim order which we

need not refer on merits at this stage, we find that upon the

examination of the evidence, a prima facie opinion was

correctly arrived at by the WTM based on objective facts

indicating diversion of funds from a listed Company which was

not in the interest of its shareholders. It was thus extremely

necessary that an action on urgent basis was required to stop

further defalcation/ diversion/ siphoning of the funds of the

Company and to protect the interest of the investors and its

shareholders and to instill confidence in the securities market.

Such measures if not taken while the iron was hot would defeat

the regulatory measures that has been provided to SEBI under

the SEBI Act. We are of the opinion that, in the instant case,

there was ample evidence to show urgency and, considering the

material that has been brought on record, the matter being

serious, warranted an inference by the regulator. Whether such

transactions indicated in the ex-parte ad-interim order was dully

authorized or not by the RAC or whether such transactions were

approved by a resolution of the Board of Directors is a matter to 22

be considered on merit by the appropriate authority and it is not

appropriate for this Tribunal to consider such documents at this

stage as consideration of these documents may prejudice not

only the investigation but also the parties.

16. In view of the aforesaid, we are of the opinion that the

contention of the appellants that no case was made out for grant

of an ad-interim ex-parte order is misconceived and cannot be

accepted.

17. We are however of the view that the appellants are entitled

for supply of documents from the Company so that they may

file an appropriate reply before SEBI. Denial of such

documents by the Company or by SEBI would be in violation of

principles of natural justice as embodied in Article 14 of the

Constitution of India. Without going into the controversy as to

whether requisite documents were supplied or not, we are of the

opinion that, if any, document is requested by the appellants

either from the Company or from SEBI the same would be

supplied in accordance with law.

18. We therefore, find no merit in the appeal and is dismissed

with the following directions:

23

a) The appellants shall file a reply before the

WTM of SEBI on or before October 15, 2019.

In the event the appellants want further time

then appropriate application will be filed before

the WTM of SEBI which will be considered

and appropriate orders would be passed.

b) In the event any document is required by the

appellants either from Company or from SEBI

a formal request to that effect shall be made by

the appellants which document(s) shall be

supplied in accordance with law within three

working days.

c) Upon receipt of the reply, SEBI will grant an

opportunity of hearing to the appellants and

after considering their submissions pass a

confirmatory order within a period of four

weeks from the date when the hearing is

concluded.

24

19. In the circumstances of the case, party shall bear their own

costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 01.10.2019 Prepared & Compared By: PK