Order on inspection in respect of Motilal Oswal Commodities Broker Pvt. Ltd

WTM/MPB/EFD-1-DRA-II/38 /2018 SECURITIES AND EXCHANGE BOARD OF INDIA MS. MADHABI PURI BUCH, WHOLE TIME MEMBER Order Under Regulation 28 of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 In respect of Sl. No NAME PAN 1. Motilal Oswal Commodities Broker Private Limited AAACP3147N

In Re Inspection of Documents.

1. Motilal Oswal Commodities Broker Private Limited (hereinafter referred to as “MOCBPL” / “Noticee”) a commodity broker / member of National Spot Exchange Limited (hereinafter referred to as “NSEL”), Multi Commodity Exchange of India Ltd (hereinafter referred to as “MCX”) and National Commodity & Derivatives Exchange Limited (hereinafter referred to as “NCDEX”).

2. Pursuant to the default at NSEL in 2012 and Economic Offences Wing’s (hereinafter referred to as “EOW”) initial investigations / arrests / complaints received from investors against the members / brokers of NSEL including MOCBPL (hereinafter collectively referred to as “Noticees”) NSEL vide complaint letters dated March 17, 2015 and March 24, 2015 and EOW via report dated April 04, 2015 had requested Securities and Exchange Board of India (hereinafter referred to as “SEBI”) to take appropriate/necessary action.

3. It is noted that on September 28, 2015, Forward Market Commission (hereinafter referred to as “FMC”) got merged with SEBI and pursuant to this merger, MOCBPL on December 11 & 16, 2015 had made an application to SEBI for registration as a commodity broker. Further, it is noted that as per Finance Act 2015, an intermediary may continue to buy, sell or deal in a commodity derivatives as a commodity broker, if it has made an application for such registration within a period of 3 months till the disposal of such application.

Order in respect of Motilal Oswal Commodities Broker Private Limited

4. Further, pursuant to merger of FMC with SEBI, the regulation and supervision of the commodity derivatives brokers has been entrusted to SEBI. Therefore, in view of the abovementioned NSEL complaint letters and EOW report, SEBI had appointed Gokhale and Sathe, Chartered Accountants (hereinafter referred to as “Auditor”) to carry out performance audit/inspection of MOCBPL respectively.

5. Audit report along with Annexures were submitted by the auditor to SEBI. Based on the findings of the auditors and further analysis of the same by SEBI, it was decided by SEBI to initiate enquiry proceedings against MOCBPL in terms of the SEBI (Intermediaries) Regulations, 2008 (hereinafter referred to as “Intermediaries Regulations”).

6. SEBI vide order dated October 06, 2016 had appointed a Bench of Designated Authorities to enquire into the alleged violations of various provisions of the SEBI (Stock Brokers & Sub Brokers) Regulations, 1992, (hereinafter referred to as the “Brokers Regulations”), SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”), Forward Contracts (Regulation) Act, 1952, (hereinafter referred to as “FCRA”), Prevention of Money Laundering Act, 2002 (hereinafter referred to as “PMLA”), Central Government Notifications and various Circulars / Code of Conduct, Guidelines, Bye Laws, Business Rules etc. of FMC / SEBI / NSEL / NCDEX / MCX.

7. In terms of regulation 27 of the Intermediaries Regulations, the Designated Authorities vide separate Enquiry Reports all dated April 11, 2017 in respect of MOCBPL recommended inter alia, that the application of MOCBPL submitted for registration as a commodity broker may not be considered in the interest of securities market and the application of the Noticee may be rejected. Subsequently, SEBI issued Show Cause Notice dated April 24, 2017 enclosing a copy of Enquiry Report dated April 11, 2017 (hereinafter referred to as “SCN” / “Enquiry Report”) to MOCBPL, wherein the Noticee was advised to reply to the SCN within 21 days from the receipt thereof.

8. MOCBPL vide letter dated May 15, 2017 had acknowledged the receipt of SCN.

Order in respect of Motilal Oswal Commodities Broker Private Limited

9. MOCBPL vide various letters/emails dated May 15, 2017, July 14, 2017, September 08, 2017, September 18, 2017, September 21, 2017, October 06, 2017, October 21, 2017, November 22, 2017, January 05, 2018 and January 19, 2018 etc. had sought inspection of documents as well as copies of documents and submitted that SEBI has not provided complete inspection of all relevant documents to them. However, SEBI submitted that it had granted inspection to MOCBPL on August 14, 2017 and copies of all relied upon documents were also provided to MOCBPL through various letters dated August 29, 2017, November 08, 2017 and January 05, 2018.

10. In the interest of natural justice and as per regulation 28(2) of Intermediaries Regulations, vide notice of hearing dated December 26, 2017, the Noticee was granted an opportunity of personal hearing on January 25, 2018 at SEBI, Head Office, Mumbai.

11. Further, the Noticee vide various aforesaid letters stated that the documents sought were required by them to finalize their reply and hence requested to grant an opportunity of hearing only after receipt of their detailed reply in the matter. In this regard, the Noticee had also cited the Order of Hon’ble Supreme Court in the matter of SEBI v. Price Waterhouse (Civil Appeal No. 6001 – 6002 and 6003-6004 of 2012 decided on 10.01.2017) wherein Supreme Court had held that a party before SEBI is entitled to get all the material on SEBI’s record.

12. In view of the stand of SEBI that it has granted inspection of all relied upon documents and the stand of the Noticee that they are entitled to get additional documents and their request that a hearing be fixed only after they file detailed reply based on all the requested documents, in order to overcome the impasse resulting from the conflicting stands, SEBI vide email dated January 23, 2018 informed the Noticee that the hearing scheduled would be in respect of inspection of documents.

13. On January 25, 2018 Mr. Jaikishan Lakhwani and Mr. Anand Narayan, Advocates along with Mr. Dwibendu Mohanty and Mr. Brijesh Bhatt from MOCBPL, Authorized Representatives (hereinafter referred to as “ARs”) of MOCBPL appeared for the hearing. Following was noted during the hearing held on January 25, 2018:

“…… Order in respect of Motilal Oswal Commodities Broker Private Limited (a) ARs submitted that they have not been provided with documents which are closely connected to the matter. (b) There are several fundamental issues in the matter such as jurisdiction of SEBI in the matter, issue as to why MOCBPL has been discriminated against several other brokers (approx. 200) who dealt in pair contracts. Since these issues required to be argued by a Senior Counsel and no Senior Counsel is available today for the matter, hence, they sought an adjournment of the hearing in the matter. (c) Upon query as to whether MOCBPL prepared item-wise reply to the SEBI’s letter dated January 05, 2018, MOCBPL sought time upto Wednesday i.e. January 31, 2018 to submit the same. The same has been granted. (d) Hearing in the matter is adjourned to January 31, 2018. ……”

14. MOCBPL vide letter dated January 30, 2018 had requested for the adjournment of hearing scheduled on January 31, 2018. Accordingly, the hearing was re-scheduled to February 14, 2018.

15. On February 14, 2018 Mr. Jayprakash Sen, Senior Counsel and Mr. Vaibhav Ghogare, Mr. Anand Narayan, Advocates along with Mr. Dwibendu Mohanty and Mr. Anupam Agal from MOCBPL, Authorized Representatives (“ARs”) of MOCBPL appeared for the hearing. ARs made their oral submission with respect to inspection of documents. The matter was heard at length.

16. During the hearing, ARs of MOCBPL stated that MOCBPL has sought for inspection of documents as well as copies of documents by their various letters/emails and submitted that SEBI has not provided complete inspection of all relevant documents to them, whereas SEBI states that all relied upon documents were provided to MOCBPL vide inspection granted on August 14, 2017 and copies of documents were also provided to MOCBPL through various letters dated August 29, 2017, November 08, 2017 and January 05, 2018.

17. During the course of hearing ARs were advised to submit their rationale for seeking various additional documents in the matter. ARs submitted that the rationale for seeking the documents is based on three categories viz., (A) Documents necessary for dealing with the issue of jurisdiction (B) Documents necessary for dealing with the issue of discrimination Order in respect of Motilal Oswal Commodities Broker Private Limited and (C) Documents relating to the merits of the case referred to or relied upon in the Enquiry Report. ARs once again submitted the list of below mentioned documents of which inspection / copies were not provided to MOCBPL. ARs explained the rationale/relevance of seeking inspection of below mentioned documents. ARs further stated that complete inspection of all documents as well as copies of the same are required to make a comprehensive reply to SCN as the said documents relate to the specific averments/allegations made in the SCN. Detailed item by item discussion held during the hearing was as follows:

“……… Table No. 1

Sl. No. Particulars of Observations and Conclusion Documents/information sought 1. Copy of order dated 06 October MOCBPL states that the document is required for the 2016. (Refer Paragraph 2, Page 2 determination of issue of jurisdiction of SEBI in NSEL of the Enquiry Report). matter.

SEBI explained that file notings are for internal purpose and the crystalized outcome in the form of communique of appointment of Designated Authorities was already given to MOCBPL.

SEBI is advised to provide the relevant portion/extract of file notings for appointment of Designated Authorities to MOCBPL.

Further, SEBI’s clarification on the issue of jurisdiction is as under:

SEBI clarified that since MOCBPL has applied to SEBI, for the purpose of granting registration to MOCBPL to act as a commodity broker, SEBI has jurisdiction to determine whether MOCBPL is a fit and proper person to act as a commodity broker.

Order in respect of Motilal Oswal Commodities Broker Private Limited

SEBI further states that the existence or absence of jurisdiction is determined only by statute. Thus, MOCBPL is not disadvantaged in any way without access to the additional documents/information sought in this regard.

SEBI’s stand on the same stands confirmed / clarified. 2. Basis for alleging that we acted in MOCBPL states that SEBI has alleged that MOCBPL complicity with NSEL. acted in complicity with NSEL, it is reasonable to believe that SEBI would have some information on its record and SEBI should provide us such material in order to enable us to defend our case. MOCBPL further, states that the document is also required for the determination of the differential treatment i.e. discrimination.

SEBI states that inference was drawn from documents such as Audit reports and annexures attached to it, NSEL complaints, EOW Report, FMC order etc. The copies of EOW report, NSEL complaints, Audit reports and annexures attached to audit reports and FMC order including annexures were already provided to the MOCBPL.

Further, SEBI’s clarification on the issue of discrimination is as under: SEBI clarified to MOCBPL that the selection of 5 brokers including MOCBPL was on the basis of objective criteria viz., based on 2 documents i.e. EOW report and NSEL complaint, copies of which were already provided to MOCBPL.

Further, it was clarified by SEBI that at the moment, qua the NSEL matter, no proceedings have been initiated against any other brokers (other than the 5 brokers) or Order in respect of Motilal Oswal Commodities Broker Private Limited any investors; however, SEBI has the power to initiate any proceedings in future as it deems fit.

Given this unequivocal stand by SEBI, MOCBPL has all the information it needs to make its representations qua the issue of discrimination and would not be disadvantaged in any way without access to the additional documents/information in this regard.

SEBI’s stand on the same stands confirmed / clarified.

3. Copy of minutes of Committee of MOCBPL states that the document is required for the Inter Division Chiefs (CIDC) of determination of issue of jurisdiction of SEBI in NSEL SEBI that has considered the matter. investigation report. SEBI informed to MOCBPL that copy of Audit Reports and annexures attached to it, analysis made by SEBI on the same and Enquiry Report were already provided to MOCBPL.

Additionally, SEBI’s clarification on issue of jurisdiction is same as Sr. no. 1 above of this table. 4. Names of all the other trading MOCBPL states that the document is required for the members to whom any Show determination of the differential treatment i.e. Cause Notice has discrimination. been issued by SEBI in NSEL matter. SEBI clarified to MOCBPL that the selection of 5 brokers including MOCBPL was on the basis of objective criteria viz., based on 2 documents i.e. EOW report and NSEL complaint, copies of which were already provided to MOCBPL.

Further, it was clarified by SEBI that at the moment, qua the NSEL matter, no proceedings have been initiated against any other brokers (other than the 5 brokers) or Order in respect of Motilal Oswal Commodities Broker Private Limited any investors; however, SEBI has the right to initiate any proceedings in future as it deems fit.

Given this unequivocal stand by SEBI, MOCBPL has all the information it needs to make its representations qua the issue of discrimination and would not be disadvantaged in any way without access to the additional documents/information in this regard.

SEBI’s stand on the same stands confirmed / clarified. 5. Names of all the other MOCBPL submits that the rationale is the same as Sr. no. individuals/listed companies to 4 above of this table. whom any Show Cause Notice has been issued by SEBI in this matter SEBI’s clarification is same as Sr. no. 4 above of this (if any). table. 6. List of NSEL members who have MOCBPL submits that the rationale is the same as Sr. no. been granted registration by SEBI 4 above of this table. in any capacity. SEBI’s clarification is same as Sr. no. 4 above of this table. 7. List of NSEL brokers who have MOCBPL submits that the rationale is the same as Sr. no. been denied registration by SEBI 4 above of this table. pursuant to its application to SEBI in any SEBI’s clarification is same as Sr. no. 4 above of this capacity. table. 8. Copies of replies/ affidavits filed MOCBPL states that the document is required for the by SEBI in any High Court(s) in determination of issue of jurisdiction of SEBI in NSEL the context of any case related to matter. NSEL. SEBI clarified that since MOCBPL has applied to SEBI, for the purpose of granting registration to MOCBPL to act as a commodity broker, SEBI has jurisdiction to determine whether MOCBPL is a fit and proper person to act as a commodity broker. SEBI further states that the existence or absence of jurisdiction is determined only by statute.

Order in respect of Motilal Oswal Commodities Broker Private Limited

Further, SEBI is instructed to provide further inputs for consideration of granting the said document to MOCBPL. SEBI is further instructed to convey their stand with respect to the same. 9. Total number of investors who had MOCBPL submits that the rationale is the same as Sr. no. traded on NSEL. 4 above of this table.

SEBI’s clarification is same as Sr. no. 4 above of this table. 10. Number of entities out of above MOCBPL submits that the rationale is the same as Sr. no. (i.e. investors) against whom any 4 above of this table. proceedings have been initiated in the context of their trading on SEBI’s clarification is same as Sr. no. 4 above of this NSEL. table. 11. Names of NSEL brokers and MOCBPL submits that the rationale is the same as Sr. no. persons of such NSEL brokers 4 above of this table. against whom a look out notice issued by EOW of Mumbai Police SEBI states that the information sought by MOCBPL is in context of NSEL matter not relied upon in the SCN / enquiry report

SEBI’s clarification is same as Sr. no. 4 above of this table. 12. Complete copy of material MOCBPL stated that the document is required for the considered by Board/WTM while determination of issue of jurisdiction of SEBI in NSEL ordering of appointment of matter and also to argue on merits of the case. Designated Authorities in our matter including relevant file SEBI explained that file notings are for internal purpose. notes by SEBI. Further SEBI states that copies of EOW Report, NSEL complaints, FMC order, Audit Reports, annexures to the reports including the PPT and analysis made by SEBI on the same and all other relevant documents which form the basis of materials considered by Board/WTM while ordering of appointment of Designated Authorities were already provided to MOCBPL. Further, the communique

Order in respect of Motilal Oswal Commodities Broker Private Limited of appointment of Bench of Designated Authorities was also given to MOCBPL.

Further, SEBI’s clarification on the issue of jurisdiction is same as Sr. no. 13 below of this table.

SEBI’s stand on the same stands confirmed / clarified. 13. Any documents indicating that MOCBPL stated that the document is required for the FMC, at any point, had determination of issue of jurisdiction of SEBI in NSEL jurisdiction to take any action matter. against the brokers of NSEL. SEBI clarified that since MOCBPL has applied to SEBI, for the purpose of granting registration to MOCBPL to act as a commodity broker, SEBI has jurisdiction to determine whether MOCBPL is a fit and proper person to act as a commodity broker. SEBI further states that the existence or absence of jurisdiction is determined only by statute. Thus, MOCBPL is not disadvantaged in any way without access to the additional documents/information sought in this regard.

SEBI’s stand on the same stands confirmed / clarified. 14. Copy of file notings on the basis of MOCBPL stated that the document is required for the which letters dated February 18, determination of issue of jurisdiction of SEBI in NSEL 2016 and April 4, 2016 were matter. issued by SEBI. SEBI explained that file notings, if any, are for internal purpose. SEBI states that the letters has been issued as per the delegation of powers. SEBI further states that copy of letters issued to the Auditor were also marked to MOCBPL. Copy of Audit Report and analysis made by SEBI on the same has already been provided.

Order in respect of Motilal Oswal Commodities Broker Private Limited

Further, SEBI’s clarification on the issue of jurisdiction is same as Sr. no. 13 above of this table.

SEBI’s stand on the same stands confirmed / clarified. 15. Analysis carried out by SEBI MOCBPL stated that the document is required for the pursuant to the Audit Report and determination of issue of jurisdiction of SEBI in the NSEL also the post inspection analysis of matter. SEBI SEBI stated that copy of Audit Report, Statement of facts and post inspection analysis made by SEBI were already provided to MOCBPL.

Further, SEBI’s clarification on the issue of jurisdiction is same as Sr. no. 13 above of this table.

SEBI’s stand on the same stands confirmed / clarified 16. Copy of file notings approving MOCBPL submits that the rationale is the same as Sr. no. letter dated October 06, 2016 for 1 above of this table. appointing the Designated Authorities. SEBI’s clarification is same as Sr. no. 1 above of this table. 17. Out of 22 defaulter brokers of MOCBPL states that the information/document is NSEL (buyers), name of the required for the determination of the differential defaulter brokers whose treatment i.e. discrimination. performance audit/inspection of books of accounts have been SEBI’s clarification is same as Sr. no. 4 above of this ordered by SEBI. table. 18. Any evidence of MOCBPL MOCBPL states that the document is required for the offering inducement to the client determination of third issue i.e. merits of the case. as mentioned in pars 4 (V) of the SCN-Copies of any Bye- SEBI states that copies of EOW Report, NSEL Law/mandate/Rule/Regulation / Complaints, Auditor Reports, annexures to the reports Circular prescribing that including the PPT, FMC Order and Annexures to FMC MOCBPL was to verify the order and other relevant documents such as SGS Report, authenticity of warehouse receipts Grant Thornton Report were already provided to and existence of warehouse goods. MOCBPL.

Order in respect of Motilal Oswal Commodities Broker Private Limited

SEBI’s stand on the same stands confirmed / clarified.

19. Copies of any Bye- MOCBPL states that the document is required for the Law/mandate/Rule/Regulation/ determination of third issue i.e. merits of the case. Circular that prohibited NSEL brokers from allowing debits of SEBI states that Enquiry Report is self-explanatory. clients in their books in the context of trading on NSEL platform. SEBI’s stand on the same stands confirmed / clarified. 20. Copies of any Bye MOCBPL states that the document is required for the Law/mandate/Rule/Regulation / determination of third issue i.e. merits of the case. Circular of NSEL/FMC/SEBI or any other authority which SEBI states that Enquiry Report is self-explanatory. required MOCBPL to carry out due diligence of the product in SEBI’s stand on the same stands confirmed / clarified. terms of risk suitability of client in the context of trading on NSEL platform. 21. We have sought various file MOCBPL argued that the same is required for the notings and minutes of meetings of determination of issue of jurisdiction of SEBI and FMC SEBI in the NSEL matter.

SEBI explained that file notings are for internal purpose. SEBI’s clarification on the issue of jurisdiction is same as Sr. no. 13 above of this table.

SEBI’s stand on the same stands confirmed / clarified.

…………”

18. With respect to the issue of jurisdiction, on the basis of documents available on record, it is observed that since the Noticee has applied to SEBI, for the purpose of granting registration to the Noticee to act as a commodity broker, SEBI has jurisdiction, inter alia, to determine whether the Noticee is a fit and proper person to act as a commodity broker. Further, the existence or absence of jurisdiction is determined by statute as the statute can vest or oust Order in respect of Motilal Oswal Commodities Broker Private Limited the jurisdiction and any representations or statements made by any party are not material to the arguments on jurisdiction. Thus, I am of the view that the Noticee is not disadvantaged in any way without access to additional documents/information in this regard.

19. With respect to the issue of discrimination, I note that, the following observations of the Hon’ble Supreme Court in the context of argument of discrimination to claim negative equality in Union of India and anr. vs. International Trading Co. and anr. (AIR 2003 SC 3983) dated May 07, 2003, would be squarely applicable to the facts of this case.

“……two wrongs do not make one right. A party cannot claim that since something wrong has been done in another case directions should be given for doing another wrong. It would not be setting a wrong right, but would be perpetuating another wrong. In such matters there is no discrimination involved. The concept of equal treatment on the logic of Article 14 of the Constitution of India, 1950 (in short ‘the Constitution’) cannot be pressed into service in such cases. What the concept of equal treatment presupposes is existence of similar legal foothold. It does not countenance, repetition of a wrong action to bring both wrongs on a par. Even if hypothetically it is accepted that a wrong has been committed in some other case by introducing a concept of negative equality the respondents cannot strengthen their case. They have to establish the strength of their case on some other basis and not by claiming negative equality……”

20. While Hon’ble Supreme Court has clearly laid down the non-availability of the above ground of discrimination to establish the strength of one’s case, even otherwise, when an argument of discrimination is advanced on the ground of violation of Article 14 of the Constitution of India, the same is in effect challenging the decision taken by SEBI in its administrative capacity to launch action against the Noticee. I consider that this quasi-judicial forum is not the right forum to test the decision, already taken by SEBI in its administrative capacity on this ground. Needless to say, Noticee has other appropriate forum for judicial review of administrative action of SEBI on the ground of perceived discrimination.

21. Without prejudice to paragraphs 19 & 20 above, with respect to the issue of discrimination, on the basis of documents available on record, it is noted that the stand taken by SEBI in selection of the 5 brokers (including Noticee) for initiating proceedings against them is that the selection was on the basis of two documents i.e. EOW report and NSEL complaints; and Order in respect of Motilal Oswal Commodities Broker Private Limited admittedly copies of both documents have been provided to the Noticee. It is also noted that, at the moment, qua the NSEL matter, no proceedings have been initiated against any other brokers (other than the 5 brokers) or any investors; however, needless to say, SEBI has the power to initiate any proceedings as it deems fit, if warranted at any point of time as per law. Thus, I am of the view that given this unequivocal stand by SEBI, the Noticee has all the information it needs to make its representations qua the issue of discrimination and would not be disadvantaged in any way without access to additional documents/information in this regard.

22. During the hearing, MOCBPL was advised to submit a revised list of documents required for inspection. It is noted that MOCBPL was granted another opportunity of inspection of documents on February 23, 2018. Authorized Representative of MOCBPL appeared for inspection scheduled on February 23, 2018. From the proceedings of inspection of documents dated February 23, 2018 and Table No.1 mentioned above at paragraph 17, following are noted:

(a) Copies of documents mentioned at Sr. No. 1 and 16 of Table no. 1 were provided to the Noticee at the time of inspection held on February 23, 2018. (b) The documents mentioned at Sr. No. 2, 4, 5, 6, 7, 9, 10, 11 and 17 of Table No. 1 lead to the issue of discrimination. The issue of discrimination is discussed at paragraph 21 above. (c) The documents mentioned at Sr. No. 1, 3, 12, 13, 14, 15 and 21 of Table No. 1 lead to the issue of jurisdiction. The issue of jurisdiction is discussed at paragraph 18 above. (d) At the time of hearing dated February 14, 2018, with respect to the document mentioned at Sr. No. 8 of Table No. 1, I note that “SEBI is instructed to provide further inputs for consideration of granting the said document to MOCBPL. SEBI is further instructed to convey their stand with respect to the same”. SEBI reiterated that the existence or absence of jurisdiction is determined only by statute. The issue of jurisdiction is discussed at length in paragraph 18 above. In view of the discussion in the said paragraph, I am of the view that the Noticee is not disadvantaged in any way without access to such documents/information.

Order in respect of Motilal Oswal Commodities Broker Private Limited (e) The stand of SEBI in respect to the documents mentioned at Sr. No. 2, 12, 13, 14, 15, 18, 19, 20 & 21 of Table No. 1 is confirmed.

23. The Hon’ble Supreme Court while discussing the scope of right of fair hearing in its order dated October 05, 2010 passed in the matter of Kanwar Natwar Singh vs Directorate of Enforcement & Anr (MANU/SC/0795/2010) observed that“…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 [(1955) 1 SCR 941, MANU/SC/0073/1954]……”

24. In the aforementioned Order, the Hon’ble Supreme Court further held that “…even the principles of natural justice do not require supply of documents upon which no reliance has been placed by the Authority to set the law into motion. Supply of relied on documents based on which the law has been set into motion would meet the requirements of principles of natural justice”. “…Concept of fairness is not a one way street. The principles of natural justice are not intended to operate as roadblocks to obstruct statutory inquiries. Duty of adequate disclosure is only an additional procedural safeguard in order to ensure the attainment of the fairness and it has its own limitation.

25. I also note the observations of the Hon’ble Securities Appellate Tribunal (hereinafter referred to as “SAT”) in the matter of Shri B. Ramalinga Raju v. SEBI (SAT order dated May 12, 2017, MANU/SB/0057/2017) …. “There can be no dispute that while determining the rights and obligations of the parties the quasi-judicial authority must adhere to the principles of natural justice which inter alia, includes the obligation to furnish requisite documents on the basis of which charges are framed and permit cross-examination of the persons whose statements are relied upon ….”

26. I also note that the Noticee has placed reliance on the decision of the Hon’ble Supreme Court in the case of SEBI v. Price Waterhouse (Civil Appeal No. 6003-6004 of 2012 decided on 10.01.2017). However, as regards the applicability of the said decision of Hon’ble Supreme Court to other cases in general, the following observations of Hon’ble SAT in the matter of Shri B. Ramalinga Raju v. SEBI (SAT order dated May 12, 2017, MANU/SB/0057/2017) are noteworthy:

Order in respect of Motilal Oswal Commodities Broker Private Limited “… Apex Court in case of Price Waterhouse has specifically recorded that the directions given in that case are general directions given as and by way of clarifications without going into the merits of the case. Therefore, directions given in the facts of Price Waterhouse cannot be said to be the ratio laid down by the Apex Court applicable to all other cases. In these circumstances, appellants are not justified in contending that the directions given by the Apex Court in case of Price Waterhouse must be applied to the case of the appellants.”

Thus, the observations of Hon’ble Supreme Court in the matter of SEBI v. Price Waterhouse being case specific in nature, cannot be applied to the facts of the present case. In view of the above facts, circumstances and observations of Hon’ble SAT, I am not inclined to accede to the request of Noticee for grant of inspection of all the documents collected during examination as the relied upon documents have already been granted in consonance with the principles of natural justice.

27. Thus, upon consideration of the submissions of the Noticee, I note that Noticee has availed various opportunities of inspection of documents and has already obtained the copies of various documents from SEBI as outlined above and hence I am of the view that a fair opportunity to defend the case has thereby been granted to the Noticee by way of granting inspection of documents. However, it is noted that till date Noticee has not submitted any reply on merits of the allegations specified in the SCN relying on those documents of which they have already taken inspection.

28. I note that till now approximately 16 months have lapsed since the issuance of SCN and approximately 24 weeks have passed since the last inspection, the Noticee has neither submitted its reply on merit nor attended any hearing on merit. I am of the view that, if the Noticee does not submit its reply on merits in the matter within the time limit specified at paragraph 32 of this order or requests additional time to submit its reply on merits or if the Noticee does not appear on the date of hearing mentioned at paragraph 32 of this order or requests continuously for adjournment of hearing, then from now onwards such requests of time and adjournment can only be seen as dilatory tactics of the Noticee.

29. I note that the issue of jurisdiction and discrimination is discussed at paragraphs 18 and 21 above respectively. From paragraph 22, I note that pursuant to the hearing, SEBI had granted

Order in respect of Motilal Oswal Commodities Broker Private Limited another opportunity of inspection to the Noticee and at the time of inspection copies of documents mentioned at para 22(a) were provided to the Noticee. I also note that SEBI had confirmed its stand in respect of documents mentioned at para 22(b), 22(c), 22(d) and 22(e). I am of the view that Noticee is not disadvantaged in any way without access to additional documents / information.

30. In summary, I am of the view that the Noticee has already been provided with all the relevant documents and clarifications which enable the Noticee to submit its defence in the present proceedings.

31. As a normal practice, the outcome on the issues of inspection is addressed by way of administrative notices/letters sent by SEBI. If formal orders are to be passed on every objection/issues raised by each Noticee in every proceeding, it will ultimately result in a multiplicity of orders in one and the same proceeding and further result in delay of dispensation of justice and also clog-up the quasi-judicial and appellate forum with unwarranted litigations. This will become a tool in the hands of entities who may not have substantive submissions to make on merit and seek to delay and wriggle out of rigors of timely enforcement action by raising such pleas with the intention of delaying final adjudication of the case on merits. SEBI has already passed an order on the aspect of outcome of inspection in a related matter Phillip Commodities India Private Limited stating that the said order will not be cited as precedent. In the interest of uniformity to the related matter this order is passed. Thus, I am of the opinion that this order should not be cited as a precedent in every matter where inspection is sought by parties. This order is passed to clarify expressly this stand i.e. outcome on the issues of inspection shall be addressed/communicated by way of administrative notices/letters.

32. Thus, in the interest of conclusion of the proceedings initiated vide SCN dated April 24, 2017, I direct the Noticee to submit its reply on merit within a period of 3 weeks from the date of this order and to appear for a personal hearing on merits on September 27, 2018 at 10:30 A.M., Head Office, Mumbai. If the Noticee opts not to submit a reply on merits or appear for the personal hearing on merits on the scheduled date or do both, then, in the interest of justice and to avoid any further delay in bringing the present quasi-judicial proceedings to its logical conclusion, the proceedings on merits shall proceed ex-parte on the basis of material available with SEBI.

Order in respect of Motilal Oswal Commodities Broker Private Limited

33. A copy of this order may be served on the Noticee by e-mail/ speed-post/hand-delivery immediately.

-Sd- Date: SEPTEMBER 03, 2018 MADHABI PURI BUCH Place: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Order in respect of Motilal Oswal Commodities Broker Private Limited