Suman Motels Limited vs Sebi

Date of Decision: 07.01.2021

Misc. Application No. 576 of 2019 And Appeal No. 459 of 2019

Suman Motels Limited 208 Parshva Chambers, 19/21 Essaji Street, Vadgadi, Mumbai- 400 003 ...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. N.K. Dayanandan, Advocate for the Appellant.

Ms. Anubha Rastogi, Advocate 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.

We have heard Mr. Dayanandan, the learned counsel for

the appellant and Ms. Rastogi, the learned counsel for the

respondent through video conference.

2

2. The present appeal has been filed against an ex-parte order

dated November 18, 2016 whereby the Adjudicating Officer

("AO" for convenience) of the Securities and Exchange Board

of India ("SEBI" for convenience) has imposed a penalty of

Rs. 1,00,000/- (Rupees One Lac Only) for not obtaining the

SEBI Complaints Redress System ("SCORES") authentication

vide Circular No. CIR/ OIAE/1/2014 dated December 18, 2014.

3. There is a delay of almost three years in the filing of the

appeal. According to the appellant they came to know about the

impugned order and the attachment order dated August 20, 2018

only on May 14, 2019 and thereafter the present appeal was

filed on July 09, 2019.

4. In the reply filed by the respondents it has been stated that

there has been an undue delay in the filing of the appeal and that

each days delay has not been explained and that the show cause

notice dated August 19, 2016 was initially sent by post which

came back undelivered but subsequently it was affixed on

September 01, 2016 and again on September 20, 2016 and lastly

on October 18, 2016. Since the appellant did not appear inspite

of service the impugned order was passed ex-parte. It was 3

submitted that the appellants had knowledge of the proceeding

and therefore no relief can be granted to them.

5. On the other hand, it has been stated and it has come on

record that the registered office of the company where the

alleged notice was affixed was attached by the special court of

Maharashtra Protection of Interest of Depositors ("MPID")

pursuant to a notification dated January 08, 2015.

Subsequently, on the intervention of SEBI, the registered office

of the company was sold through e-auction on March 29, 2016

i.e. prior to the issuance of notice and affixation of the show

cause notice. These facts are not disputed by the respondent.

6. In the light of the aforesaid, the fact that the show cause

notice was affixed at the registered office becomes immaterial

because prior to that date the office had itself been sold by the

Recovery Department of SEBI. It is very clear that the left arm

of SEBI does not know what the right arm of SEBI is doing.

7. We further find that the fact that the appellant came to

know of the impugned proceedings only on May 14, 2019 has

not been denied specifically. Consequently, we are satisfied 4

that the appellants had no knowledge of the order dated

November 18, 2016 or the attachment proceedings which was

subsequently initiated by the Recovery Officer of SEBI. The

delay in the filing of the appeal is accordingly condoned. The

application is allowed.

8. Since the impugned order admittedly was passed ex-parte,

we are of the opinion that the same cannot be allowed to

continue. The impugned order is accordingly quashed. The

matter is remitted to the AO of SEBI to decide the matter afresh

after giving an opportunity of hearing to the appellant. For this

purpose the appellant will appear before the AO of SEBI on

January 28, 2021 at 1200 hours and from there onwards the AO

will proceed in accordance with law.

9. The present matter was heard through video conference

due to Covid-19 pandemic. At this stage it is not possible to sign

a copy of this order nor a certified copy of this order could be

issued by the Registry. In these circumstances, 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 5

signed copy of this order. Parties will act on production of a

digitally signed copy sent by fax and/or email.

Justice Tarun Agarwala Digitally signed by RAJALAKSH RAJALAKSHMI H Presiding Officer NAIR MI H NAIR Date: 2021.01.08 22:11:40 +05'30'

Dr. C.K.G. Nair Member

Justice M. T. Joshi Judicial Member 07.01.2021 PK