Mr. Praveen Mohnot vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision: 05.02.2015

Appeal No. 288 of 2014

Mr. Praveen Mohnot D-1, Sunita Apartments, 62-CC Peddar Road, Mumbai-400 036 ...Appellant

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. Janak Dwarkadas, Senior Advocate with Ms. Manik Joshi and Ms. Nimisha Rao, Advocates i/b Crawford Bayley & Co. for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Rushin Kapadia, Advocate i/b K. Ashar & Co. for the Respondent.

WITH Appeal No. 289 of 2014

Mrs. Priyanka Singhvi D-1, Sunita Apartments, 62-CC Peddar Road, Mumbai-400 036 ...Appellant

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. Ankit Lohia, Advocate with Ms. Manik Joshi and Ms. Nimisha Rao, Advocates i/b Crawford Bayley & Co. for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Rushin Kapadia, Advocate i/b K. Ashar & Co. for the Respondent. 2

WITH Appeal No. 290 of 2014

Mrs. Anita Ravichandran Plot Nos. 133 and 134, Chandramani Building, Flat No. 1101 and 1102, 11th Floor, Telang Cross Road No. 3, Swami Jain Acharya Marg, Matunga (East), Mumbai- 400 019 ...Appellant

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. P. N. Modi, Senior Advocate with Ms. Manik Joshi and Ms. Nimisha Rao, Advocates i/b Crawford Bayley & Co. for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Rushin Kapadia, Advocate i/b K. Ashar & Co. for the Respondent.

WITH Appeal No. 291 of 2014

Mr. N. Ravichandran Plot Nos. 133 and 134, Chandramani Building, Flat No. 1101 and 1102, 11th Floor, Telang Cross Road No. 3, Swami Jain Acharya Marg, Matunga (East), Mumbai- 400 019 ...Appellant

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. P. N. Modi, Senior Advocate with Ms. Manik Joshi and Ms. Nimisha Rao, Advocates i/b Crawford Bayley & Co. for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Rushin Kapadia, Advocate i/b K. Ashar & Co. for the Respondent. 3

AND Appeal No. 292 of 2014

1.

Mr. Hemant R. Patel A-502, Panchsheel Heights, Mahavir Nagar, Dhanukarwadi, Kandivali (W), Mumbai- 400 067

2. Mr. Hemant Patel HUF A-502, Panchsheel Heights, Mahavir Nagar, Dhanukarwadi, Kandivali (W), Mumbai- 400 067 ...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. Neville Lashkari, Advocate with Ms. Manik Joshi and Ms. Nimisha Rao, Advocates i/b Crawford Bayley & Co. for Appellants.

Mr. Kumar Desai, Advocate with Mr. Rushin Kapadia, Advocate i/b K. Ashar & Co. for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Jog Singh, Member A.S. Lamba, Member

Per: Justice J.P. Devadhar (Oral)

1. Appellants in all these appeals are aggrieved by the order passed

by the Whole Time Member ('WTM' for short) of Securities and

Exchange Board of India ('SEBI' for short) on July 24, 2014, whereby

the appellants are directed to disgorge the unlawful gains and are

restrained from accessing the securities market and prohibited from

buying, selling or otherwise dealing in securities directly or indirectly

for a period of 10 years from that date.

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2. Grievance of Mr. Dwarkadas, learned Senior counsel for

appellants is that the impugned order is unsustainable not only on merits

but also on ground that the said order has been passed in breach of the

principles of natural justice.

3. Relevant facts are that, in the earlier round of litigation, show

cause notice issued to the appellants on December 18, 2008 was decided

against the appellants by an order passed by WTM of SEBI on

September 22, 2009. This Tribunal, on October 21, 2010, while setting

aside the said order dated September 22, 2009 and remanding the

matters back for fresh decision had inter-alia observed thus:-

"We are of the view that lest there is any

miscarriage of justice, the cases be remanded to

the whole time member for issuing a

fresh/supplementary show cause notice to the

appellants laying therein a specific charge that

they being connected/ deemed to be connected

persons were "insiders" within the meaning of

the Regulations in addition to the allegations

already made and thereafter decide all the issues

afresh in accordance with law after affording an

opportunity of hearing to the appellants."

4. Accordingly, fresh show cause notice was issued though belatedly

on December 27, 2012. In the reply to the show cause notice filed by

appellants on May 08, 2013, appellants had sought clarification as to 5

whether the show cause notice dated December 27, 2012 was a

supplementary show cause notice to the earlier show cause notice dated

December 18, 2008 or it was a fresh show cause notice. Appellants had

also contended that issuing fresh show cause notice without withdrawing

the earlier show cause notice would be barred by the principle of res-

judicata. It was further contended that the show cause notice is contrary

to the order of this Tribunal dated 21/10/2010 and amounts to double

jeopardy in the eyes of law. Appellants requested SEBI to decide the

above issue as preliminary issue. In the said reply it was specially stated

that they were reserving their right to file detailed reply after obtaining

copy of the investigation report, inspection of documents and cross

examination of the witnesses whose statement are relied upon in the

show cause notice, in case the preliminary issue is decided against the

appellants.

5. In the notice given by SEBI fixing personal hearing on August 13,

2013 nothing was stated that the appellants are called upon to make

submissions on the preliminary issue as also on merits. According to the

appellants the arguments advance by them at the personal hearing on

August 13, 2013 was only with reference to the preliminary issue as is

evident from the written submissions filed by the appellants.

6. In the impugned order dated July 24, 2014, the WTM of SEBI has

dealt with preliminary issue of res-judicata raised by appellants by

stating that during the course of hearing on August 13, 2013 appellants

were informed that the earlier show cause notice should be treated as non

est and proceeded to decide the matters on merit against the appellants. 6

7. Question therefore to be considered is, whether, the appellants are

justified in contending that the impugned order is violative of the

principles of natural justice on ground that the said order has been passed

without giving an opportunity of hearing on merits and also on ground

that the said order is passed after 11 months of granting personal hearing.

8. Mr. Desai, learned counsel appearing on behalf of SEBI submitted

that the appellants in their reply/written statement, apart from raising the

preliminary issue had also dealt with the merits of the case and therefore

the WTM of SEBI was justified in dealing with the preliminary issue and

also on the merits of the case in the impugned order. As regards the

delay in passing the impugned order, counsel for SEBI submitted that the

appellants have not demonstrated as to how the delay has caused

prejudice to the appellants. Accordingly, counsel for SEBI submitted that

there is no merit in the appeals and the same are liable to be dismissed.

9. We have carefully considered rival submissions advanced by

counsel on both sides.

10. Admittedly, the show cause notice issued on December 27, 2012

after remand did not indicate as to whether it was issued as a

supplementary show cause notice to the earlier show cause notice dated

December 18, 2008 or it was issued in supersession of the earlier show

cause notice dated December 18, 2008. Admittedly, appellants had 7

sought clarification in that behalf in their reply dated May 8, 2013,

however no order was passed to that effect. There is nothing on record

to suggest that the personal hearing fixed on August 13, 2013 was for

hearing on the preliminary issue as also for hearing on merits.

11. Moreover, from the written submissions filed by the appellants it

is seen that apart from cursorily touching upon the merits of the case, the

appellants had not dealt with various grounds on the basis of which

appellants were treated as 'insiders' in the show cause notice issued on

December 27, 2012. Even from the impugned order it cannot be

inferred that the appellants on August 13, 2013 had made submissions

on all the grounds on the basis of which appellants were considered as

'insiders' in the fresh show cause notice issued to the appellants on

December, 27, 2012.

12. For the aforesaid reasons, we find merit in the contention of the

appellants that in the personal hearing granted on August 13, 2013

appellants had argued only on the preliminary issue and that they were

under the impression that fresh hearing would be given to them in case

the preliminary issue is decided against the appellants. While making it

clear that it is open to SEBI to hear on preliminary issue as well as

merits together and pass one composite order, in the facts of present

case, in our opinion, SEBI was not justified in passing impugned order

on merits without making it clear to the appellants that at the personal

hearing appellants would be heard both on the preliminary issue and on

merits.

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13. In these circumstances, the impugned order is quashed and set

aside and the matters are restored to the file of the WTM of SEBI for

passing common order on the preliminary issue as to whether the show

cause notice is contrary to the order of this Tribunal dated 21/10/2010

and also on merits. Appellants are directed to intimate to SEBI, list of

documents, inspection of which they seek and also the list of persons to

whom they want to cross examine. All contentions on both sides are

kept open.

14. All appeals are disposed in the above terms with no order as to

costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

A S Lamba Member 05.02.2015 Prepared & Compared By PK