Hemang S. Shah And Others vs Securities And Exchange Board Of India

Tarun Agarwala, Presiding Officer

All these appeals are against a common order and are being taken up together. The present appeals have been filed against the order of the Adjudicating Officer (“AO” for convenience) of the Securities and Exchange Board of India (“SEBI” for convenience) whereby penalties have been imposed upon the appellants.

The facts leading to the filing of the present appeals are that a common show cause notice dated July 27, 2012 was issued for violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (“PFUTP Regulations” for convenience). The AO passed an order dated June 05, 2013 which was challenged in an appeal filed before this Tribunal. This appeal was allowed on the ground of violation of the principles of natural justice. The impugned order was set aside by an order of this Tribunal dated December 18, 2013 and the matter was remitted to the AO to pass a fresh order on merits after giving an opportunity of hearing.

Thereafter, it transpires that a supplementary show cause notice dated October 31, 2014 was issued and, after giving opportunity of hearing, the matter was last heard on April 06, 2018 and thereafter the order was reserved by the AO.

It transpires that the AO could not deliver the order and a new AO was appointed on August 14, 2019 who issued notice for the first time on March 16, 2020 directing the parties to appear for hearing on March 24, 2020. Nothing could happen on this date as the nation was placed under a total lockdown on account of COVID-19 pandemic. The record indicates that the AO subsequently issued a fresh notice on August 28, 2020 directing the parties to appear for hearing on September 04, 2020. The appellants vide letter dated September 03, 2020 requested for an adjournment praying that sufficient time may be given so that appropriate instructions are received from the appellants who are residing in village. Considering the aforesaid, the AO issued a fresh notice on September 09, 2020 directing that a last and final opportunity is given to the appellants to appear on September 22, 2020. It transpires that on September 22, 2020 an email was sent by the appellants annexing a letter dated September 19, 2020 praying for an adjournment citing personal reason that the authorised representative is unable to appear on account of family medical emergency. The impugned order indicates that no action was taken on the aforesaid request for adjournment and the matter was closed and thereafter the impugned order was passed. Consequently, the present appeals.

We have heard Shri Shyam K. Shelat, the learned counsel for the appellants and Shri Sharan Jagtiani, the learned senior counsel for the respondent.

The contention of the learned counsel for the appellants is, that adequate opportunity of personal hearing was not provided by the new AO who issued notice for the first time on March 16, 2020. The learned counsel further submitted that the prayer for adjournment was totally bonafide and ought to have been granted instead of proceeding ex-parte and passing the order without giving an opportunity of hearing.

On the other hand, the learned counsel for the respondent vehemently contended that the AO had granted ample and adequate opportunity to the appellants to present their case and if the appellants chose not to appear then it was the appellant’s fault for which the respondent cannot be blamed. It was contended that the principles of natural justice was duly followed and adequate opportunity was provided to the appellants. It was further urged, that the past conduct of the appellants also indicates that adequate opportunity was not only provided on multiple occasions but the appellants conduct indicates that unnecessary adjournments were taken over a period of time. In this regard, the learned counsel has referred to the tabulation of various dates on which the appellants sought adjournments which is recorded in the impugned order. In support of his contention, the learned counsel placed reliance in The Chairman, Board of Mining Examination And Chief Inspector of Mines And Another vs. Ramjee (1977) 2 SCC 256, Geeta vs. State of Madhya Pradesh & Ors. (2007) 10 SCC 590, Roshan Lal Mehra vs. Ishwar Dass AIR 1962 SC 646, State Bank of Patiala And Ors. vs. S. K. Sharma (1996) 3 SCC 364.

Having heard the learned senior counsel/ learned counsel for the parties, we are of the opinion that the AO in the instant matter has proceeded in haste and has not given adequate opportunity to the appellants to present their view point in the personal hearing that was granted. No doubt the AO had issued a notice dated September 09, 2020 fixing September 22, 2020. Admittedly, an email was sent by the counsel on September 22, 2020 praying for adjournment on personal family medical emergency. This fact has not been disputed in the impugned order. Thus, considering the peculiar situation that an adjournment was being made on account of the personal request of the authorised representative/ counsel for the appellant, in our opinion, the AO should have considered this request and should have given another adjourned date for hearing. It is a well settled principle of law that a litigant should not suffer for the fault of the advocate, if any. The advocate was praying for an adjournment on account of personal medical emergency. By not adjourning the matters the appellants have suffered unnecessarily.

We may also not lose sight of the fact that the country was undergoing the first wave of the COVID-19 pandemic and it was at its peak in August/ September 2020. It’s a known fact that partial lockdown in the State of Maharashtra was continuing and movement was restricted. Considering these facts, in our opinion, sufficient and adequate opportunity for a personal hearing was not given to the appellants in the instant case.

As held by the Supreme Court in the Chairman, Board of Mining Examination & Another (Supra) that the Courts should not be finical nor fanatical but should be flexible yet firm in its jurisdiction and that no man should be hit below the belt. In the totality of the circumstances, this Tribunal is satisfied that there has been a denial of reasonable opportunity which has adversely affected the appellants. In our opinion, the impugned order suffers from the vice of violation of natural justice. The decision cited by the learned counsel for the appellants are distinguishable and not applicable in the present case.

In this regard, the past conduct narrated in the impugned order and argued by the learned counsel for the respondent, in our opinion an irrelevant consideration for the purpose of proceeding exparte. Whatever opportunities were given to the appellants in the past came to an end when orders were reserved by the AO on April 06, 2018 for delivery of orders. For almost two years no order was delivered. The first notice was issued by the new AO on March 16, 2020 fixing March 24, 2020 on the date when the entire nation was placed under lockdown. In this view of the matter, we are of the opinion that submissions made by the appellants in the past were made before erstwhile AO which submission becomes irrelevant and when a new AO takes over. Consequently, the AO is required to give a fresh opportunity of hearing and cannot take into consideration the earlier dates given by the previous AO of which submissions were made by the appellants. However, past conduct can be considered for imposition of cost. We find that in the past the appellants were taking undue adjournments and the matter was lingering because of delaying tactics being adopted by the appellants. Therefore , in the given circumstances, we are of the opinion that cost is required to be imposed upon the appellants.

For the reasons stated aforesaid, the impugned order cannot be sustained on the ground of violation of the principles of natural justice and on this short ground the impugned order is quashed. All the appeals are allowed with costs. Each appellant is required to pay cost of Rs. 25,000/ each to the respondent on or before the next date fixed. The matters are remitted to the AO to decide the matters afresh on merits after giving an opportunity of hearing to the appellants. In this regard, we direct the appellants to appear before the AO on March 21, 2022 at 12.30 P.M. on which date the AO will hear the submissions of the appellants or his authorised representative/ counsel and in the event the hearing is not concluded on that date the AO will accordingly adjourn and give another date with the consent of the parties. It is made clear that no undue adjournment will be taken by the appellants. We further request the AO to decide the matter within six months after the conclusion of the hearing as the matter is an old one.

The present matters were 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 signed copy of this order. Parties will act on production of a digitally signed copy sent by fax and/or email.