Man Industries Limited & Ors. vs Sebi

Date of Decision : 19.01.2023

Appeal No. 64 of 2023

1.

Man Industries Limited 101, Man House, S. V. Road, Vile Parle West, Mumbai, Maharashtra- 400 056

2. R C Mansukhani Aadhya, Plot No. 43, Jai Hind Co-op. Hsg. Soc., 10th Road, J.V.P.D. Scheme, Vile Parle (W), Mumbai- 400 049

3. Nikhil Mansukhani Aadhya, Plot No. 43, Jai Hind Co-op. Hsg. Soc., 10th Road, J.V.P.D. Scheme, Vile Parle (W), Mumbai- 400 049

4. Rishikesh Vyas Flat No. 1102, B Wing, Shiv Darshan CHS, Ahimsa Marg, Off Link Road, Malad (W), Mumbai- 400 064 ...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. Kunal Katariya, Advocate with Ms. Ashmita Goradia, Advocate and Mr. Harsh Kesharia, Advocates for Appellants. 2

Mr. Sumit Rai, Advocate with Mr. Ravishekhar Pandey, Mr. Nishit Dhruva and Ms. Shefali Shankar, Advocates i/b. MDP & Partners for the Respondent.

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

Per : Justice Tarun Agarwala, Presiding Officer (Oral)

1. The present appeal has been filed against the order dated

October 25, 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. 5 lakh under Section

15A(b) of the SEBI Act, 1992 read with Section 23E of the

Securities Contracts (Regulation) Act, 1956 ('SCRA' for short).

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

the appellants made a delayed disclosure to the Stock Exchange

by 217 days and consequently violated certain clauses of the

Listing Agreement. Based on the aforesaid delayed disclosure

which was made in the year 2012 a show cause notice was

issued on May 27, 2022 to show cause as why an inquiry should

not be held and penalty, if any, should not be imposed under

Section 15A(b) of the SEBI Act and Section 23E of the SCRA.

3. The AO after considering the submissions of the appellant

held that there was no undue delay in the issuance of the show 3

cause notice and that no prejudice was cased to the appellant.

Further, in view of the non-disclosure penalty under Section

23E of the SCRA was payable and accordingly imposed a

penalty of Rs. 5 lakh.

4. We have heard Shri Kunal Katariya, the learned counsel

for the appellant and Shri Sumit Rai, the learned counsel for the

respondent.

5. In Suzlon Energy Limited & Anr. vs SEBI in Appeal no.

201 of 2018 decided on May 3, 2021 this Tribunal held that

Section 23E of the SCRA is not applicable for violation of the

Listing Agreement and / or LODR Regulations. Consequently,

no penalty could be imposed under Section 23E of the SCRA

for violation of the Listing Agreement.

6. We also find that there is undue delay in the issuance of

the show cause notice. The disclosure was made in the year

2012 and the information came into the public domain. SEBI

took notice of this delayed disclosure and started an

investigation but issued a show cause notice only after 10 years

on May 27, 2022. Nothing has been indicated as to why the

show cause notice could not be issued earlier. The contention

raised that investigation was being made which took time is not 4

borne out from the impugned order. Even otherwise we are of

the opinion that violation of Listing Agreement was made

known to the authorities in 2012 and if action was required to be

taken at the earliest opportune moment which has not been done

in the instant case.

7. We are of the opinion that when there is an undue delay

that itself causes prejudice and the AO has committed a

manifest error in not dealing with the issue of undue delay and

brushing it aside by stating that no prejudice has been caused.

8. This Tribunal in a catena of cases over the past 15 years

have held that proceedings must be initiated in a timely manner

and that proceedings are liable to be set aside only on the

ground of undue delay in the initiation of the proceedings. One

such recent decision that comes to the notice of this Tribunal is

in the case of Mr. Rakesh Kathotia & Ors. vs SEBI, Appeal no.

7 of 2016 decided on May 27, 2019 wherein the proceedings

were quashed on account of inordinate delay. This Tribunal

held:-

"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 5

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 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."

9. Similar order was passed in Ashok Shivlal Rupani vs

SEBI, Appeal no. 417 of 2018 decided on August 22, 2019. This order was taken to the Supreme Court by SEBI in 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.

10. Recently, the Supreme Court in Adjudicating Officer,

SEBI vs Bhavesh Pabari (2019) SCC Online SC 294 held as

under:-

"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."

6 11. Similar orders were passed by this Tribunal in Ashlesh

Gunvantbhai Shah vs SEBI (Appeal no. 169 of 2019) decided

on January 31, 2020, SIC Stock & Services Pvt. Ltd. vs SEBI

(Appeal no. 639 of 2021), Morepen Laboratories Limited vs

SEBI (Appeal no. 62 of 2020) decided on April 15, 2021 and

in ICICI Bank Limited vs SEBI (Appeal no. 583 of 2019)

decided on July 8, 2020.

12. In view of the aforesaid, on both counts the impugned

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

with costs.

13. 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

19.01.2023 MADHUKAR Digitally signed by MADHUKAR SHAMRAO SHAMRAO BHALBAR msb BHALBAR Date: 2023.01.20 17:37:12 +05'30'