Romit Mehta vs Sebi

Date of Decision : 02.01.2020

Misc. Application No. 413 of 2019 And Appeal No. 349 of 2019

Romit Mehta BC-84, Aradhana Apartment, Kamals Park, Kestopur near Ghosh Sweets, Kolkata - 700 101. ..... 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. Arka Saha, Advocate i/b Juris Link for the Appellant. Mr. Kumar Desai, Advocate with Mr. Shehaab Roshan, Advocate i/b K Ashar & Co. for the Respondent.

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

Per : Justice Tarun Agarwala, Presiding Officer (Oral)

1.

The present appeal has been filed against the order dated

May 31, 2018 passed by the Adjudicating Officer ('AO' for

short) of Securities and Exchange Board of India ('SEBI' for

short) imposing a penalty of Rs. 2 lakh. The appellant has also 2

challenged the order of attachment dated March 12, 2019 as

well as the Recovery Certificate dated February 15, 2019.

2. There is a delay in filing the appeal. Accordingly, an

application for condonation of delay has been filed.

According to the appellant there is a delay of 94 days which

has been opposed by the respondent contending that the delay

is about one year. The impugned order dated May 31, 2018

was passed ex parte and the submission of the appellant is

that he was never served with the show cause notice or with

the impugned orders. The issue in the application for

condonation of delay and in the adjudicating order revolves

on a common issue with regard to service of summons and

therefore the application as well as an appeal are being

decided together.

3. The contention of the appellant is, that the show cause

notice was never served upon him nor the impugned order

dated May 31, 2018 passed by the AO was ever served upon

him. It was contended that the appellant came to know for the

first time when he received this Recovery Certificate dated

February 15, 2019 after which he made due enquiries and

lodged a First Information Report (FIR) and wrote several

letters to SEBI to recall this order and when no action was 3

taken on his application the present appeal was filed on July

9, 2019 along with application for condonation of delay. It

was contended that since the applicant was unaware of the

proceedings, the delay in filing the appeal should be

condoned and that he may be allowed to contest the matter on

merits.

4. On the other hand, the respondent has contested the

application contending that the applicant was served with a

show cause notice dated December 5, 2017 through e-mail

after the show cause notice was sent by post returned

undelivered on November 16, 2017. It was also contended

that the impugned order dated May 31, 2018 was also served

by e-mail on August 3, 2018. It was contended that service of

summons / orders through e-mail is permissible under Rule

7(b) of SEBI (Procedure for Holding Inquiry and Imposing

Penalties by Adjudicating Officer) Rules, 1995.

5. We have heard Shri Arka Saha, the learned counsel for

the appellant and Shri Kumar Desai, the learned counsel for

the respondent SEBI and perused the material that has been

filed on affidavits. Admittedly, the show cause notice sent by

post came back undelivered and therefore the respondent sent 4

the show cause notice through e-mail on the following

address:-

romithehta02@hotmail.co.uk

It was urged that subsequently the notice for hearing and the

impugned order was also served upon the appellant by e-mail

at the same address. It was contended that sine the e-mails

never bounced back it was presumed that show cause notice

and the impugned orders were duly served upon the appellant.

6. Having perused the e-mails we find that the show cause

notice was sent at the following address:-

romithehta02@hotmail.co.uk

This address is incorrect. The correct address of the appellant

is:-

romitmehta02@hotmail.co.uk

Consequently, the show cause notice was not served upon

him. In Chandresh Narottam Mehta vs V.K. Chopra, Whole

Time Member SEBI, 2008 SCC OnLine SAT 216 this

Tribunal has held that if show cause notice is not served the

appellant was prejudiced in the matter of putting up his

defence. The impugned order was set aside and SEBI was

directed to decide the matter afresh. Similar view was taken

by this Tribunal in Appeal No. 387 of 2017, Pagita Leasing 5

& Finance Company Ltd. vs. Bombay Stock Exchange

decided on May 3, 2019.

7. Further, we find that a categorical statement was made

by the appellant that he was never served by e-mail through

which the impugned order dated May 31, 2018 was sent.

Once a categorical statement was made it was obligatory upon

the respondent to prove service which in the instant case was

not done. Merely presuming that service was done because

the e-mail never bounced back is insufficient.

8. The appellant clearly stated that he only came to know

of the proceedings when he received the Recovery Certificate

dated February 15, 2019 and thereafter not only he filed the

FIR but also made request to SEBI and then thereafter filed

the appeal. In our opinion, the delay in filing the appeal from

February 15, 2019 onwards has been sufficiently explained.

9. In the light of the aforesaid, we find that sufficient

grounds have been made out for condoning the delay in filing

the appeal. The Misc. Application No. 413 of 2019 is

accordingly allowed and the delay is condoned.

10. Admittedly, the impugned order was passed ex parte,

the appellant was not given any opportunity of being heard. 6

We also find that the show cause notice which was sent by

post came back undelivered and the show cause notice sent by

e-mail was sent at the wrong address. Consequently, the entire

proceedings are vitiated on the ground of violation of the

principles of natural justice. In our opinion, sufficient service

was not made.

11. Consequently, for the reasons stated aforesaid the

impugned order passed by the AO, Notice of Attachment and

the Recovery Certificate are all set aside. The appeal is

allowed on payment of costs of Rs. 25,000/- which shall be

deposited by the appellant before SEBI on or before the date

fixed. The appellant will appear before AO on January 16,

2020 on which date the respondent will serve the show cause

notice to the appellant and will proceed thereafter in

accordance with law.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member 02.01.2020 Prepared and compared by:msb