Raushan Kumar Jha vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Order Reserved: 04.4.2022 Date of Decision:25.4.2022 Misc. Application No.140 of 2022 And Appeal No.89 of 2022 Raushan Kumar Jha Room No.201, Rukmani Niwas Building, Opposite Poonam Tower, Nerul, Sector-20, Navi Mumbai-700706. ...Appellant Versus Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai-400051. ...Respondent Mr. Vikas Bengani, Advocate for the Appellant. Mr. Akash Rebello, Advocate with Mr. Nishit Dhruva, Mr. Yash Garach and Ms. Meghna Ashwin, Advocates i/b. MDP & Partners for the Respondent. CORAM: Justice Tarun Agarwala, Presiding Officer Justice M.T. Joshi, Judicial Member Ms. Meera Swarup, Technical Member 2 Per: Justice Tarun Agarwala, Presiding Officer 1. For the reasons stated in the application, the delay in filing the appeal is condoned. The application is allowed. 2. The present appeal has been filed against the order of the Adjudicating Officer imposing a penalty of Rs.25 lakhs upon the appellant for violation of Regulations 3 and 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as 'PFUTP Regulations").

3. It transpires that Securities and Exchange Board of India (hereinafter referred to as 'SEBI") conducted an investigation in the scrip of the Company for the period from 2nd January, 2009 to 9th September, 2009 observing that promoter group entities alongwith 3 connected entities had indulged in circular and reversal trades and also aided in price manipulation and thus violated Regulations 3 and 4 of the PFUTP Regulations, 2003. Accordingly, a show cause notice dated 23rd August, 2013 was issued followed by a supplementary show cause notice dated 29th October, 2014. The Adjudicating Officer after making due enquiries, passed the impugned order on 2nd August, 2019 against which the present appeal has been filed. 4. We have heard Mr. Vikas Bengani, Advocate for the appellant and Mr. Akash Rebello, Advocate assisted by Mr. Nishit Dhruva, Mr. Yash Garach and Ms. Meghna Ashwin, Advocates for the respondent. 5. The contention of the appellant is, that he was never served with the show cause notice or notice intimating the date of hearing and that he came to know for the first time when his bank account was attached in 4 March, 2021. In this regard, we had required the respondent to file a reply.

6. The impugned order indicates that the summons had returned undelivered and thereafter service was made by affixation at the last known address. In this regard, the appellant contended that he had left his Mumbai residence in 2010-11 and shifted to Valsad where he was helping his father in running an auto rickshaw. It was also contended that his demat account was closed in the year 2009. In support of his contention that the appellant was residing in Valsad the appellant has filed the aadhar card which was issued on 27th January, 2013 showing the Gujarat address. The appellant has also furnished the bank statement which shows that he had opened a bank account in 2018. 7. It was urged by the respondent that the appellant has not produced any document to substantiate his claim 5 that he had left the Mumbai residence and shifted to Valsad in 2011-12. 8. Having heard the learned counsel for the parties and having perused the documents that has been filed we are satisfied that sufficient service was not made upon the appellant. In the first instance, we find that under Rule 4 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 summons are required to be served through a process server which in the instant case was not done and steps were taken directly to serve the appellant by registered post which admittedly came back undelivered.

We are of the opinion that had personal service through process server being taken in the first instance the respondent would have got to know that the appellant had shifted his residence but this step was not taken and affixation was done where the appellant apparently had left and 6 shifted to Gujarat. The fact that the appellant shifted to Gujarat is borne out from his aadhaar card which shows the Gujarat address. Further, nothing has come on record to indicate the reason why the registered post came back undelivered. We can only presume that since the appellant had left the summons came back undelivered. 9. Considering the aforesaid, we find that summons were not served and that the entire matter proceeded ex-parte against the appellant. Consequently, on the ground of violation of the principles of natural justice the impugned order in so far as it relates to the appellant cannot be sustained and is quashed. The appeal is allowed. The matter is remitted to the Adjudicating Officer to pass a fresh order after serving the show cause notice. In this regard, the appellant shall appear personally or through his counsel before the AO on 13th May, 2022 on which date the AO will 7 serve the show cause notice and supplementary show cause notice and will proceed from there onwards in accordance with law.

In the circumstances of the case, there shall be no order as to costs. 10. 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 Justice M.T. Joshi Judicial Member Ms. Meera Swarup Technical Member RAJALA Digitally by signed 25.4.2022 KSHMI RAJALAKSHMI NAIR H Date: 2022.05.02 RHN H NAIR 11:02:43 +05'30'