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Issues Involved:
1. Breach of principles of natural justice. 2. Denial of opportunity to cross-examine witnesses. 3. Legitimacy of SEBI's directive to refund public issue proceeds. 4. SEBI's authority and the procedural aspects under sections 11 and 11B of the SEBI Act. Issue-wise Detailed Analysis: 1. Breach of Principles of Natural Justice: The petitioner contended that the SEBI's order was in breach of principles of natural justice due to the denial of cross-examination of witnesses. The court acknowledged that while the SEBI Act does not explicitly mandate the observance of principles of natural justice, such principles must be implied where civil consequences ensue, especially when actions are initiated years after the event. However, the court emphasized that the principles of natural justice are not rigid and must be applied flexibly, considering the facts and circumstances of each case. The court concluded that the SEBI had substantially complied with the principles of natural justice by providing all relevant documents to the petitioner, and the denial of cross-examination did not constitute a breach. 2. Denial of Opportunity to Cross-examine Witnesses: The petitioner argued that the denial of cross-examination violated their rights under the principles of natural justice. The court examined whether cross-examination is an integral part of these principles in the context of SEBI's quasi-judicial powers. It was noted that cross-examination is necessary when the credibility of witnesses is in doubt or when there is a dispute over facts. However, in this case, the court found that the crucial evidence (e.g., stock invest issuance dates and cheque realization dates) was based on bank records and was not disputed by the petitioner. Therefore, the denial of cross-examination did not prejudice the petitioner, and the court upheld SEBI's decision. 3. Legitimacy of SEBI's Directive to Refund Public Issue Proceeds: The petitioner contended that the directive to refund public issue proceeds after four years was impracticable and impossible. The court rejected this argument, emphasizing that SEBI's duty is to protect investors' interests and regulate the securities market. The court found that the petitioner had shown artificial subscription to meet the 90% minimum subscription requirement and had thus obtained public funds under false pretenses. The court held that SEBI was within its rights to direct the refund of these funds to protect investors, regardless of the time elapsed or the company's subsequent use of the funds. 4. SEBI's Authority and Procedural Aspects under Sections 11 and 11B of the SEBI Act: The court reviewed the provisions of sections 11 and 11B of the SEBI Act, which empower SEBI to protect investors' interests and regulate the securities market. SEBI's powers include summoning persons, enforcing attendance, and inspecting documents. The court found that SEBI had acted within its authority in directing the refund of public issue proceeds and that such directions were necessary to prevent the affairs of the petitioner company from being conducted in a manner detrimental to investors' interests. The court also noted that SEBI's actions were confirmed by the appellate authority, which found strong evidence of a false market created by the petitioner. Conclusion: The court dismissed the petition, upholding SEBI's order and the appellate authority's confirmation. The court emphasized that SEBI's directive to refund the public issue proceeds was justified and necessary to protect investors and maintain market integrity. The court also imposed costs of Rs. 10,000 on the petitioner for the proceedings.
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