2015 (6) TMI 904 - AT - Companies Law

Validity of consent circulars issued by SEBI - whether SEBI is justified in rejecting the consent application filed by the appellant as not consentable under paragraph 1(ii) of consent circular dated May 25, 2012 - Section 15JB read with Section 30A inserted to SEBI Act with retrospective effect, whether appeal against the impugned order dated January 2, 2013 is maintainable before this Tribunal. Held that - In the present case, since consent application of appellant dated April 26, 2011 was disposed of on January 2, 2013 without giving an opportunity to the appellant to present consent proposal before the IC after perusing documents which were furnished by SEBI partly in the last week of November 2012 and partly in December 2013 (after disposal of consent application), appellant was entitled to file appeal under Section 15T(1) of SEBI Act alleging that the impugned order has been passed even before giving full inspection of documents referred to and relied upon in show cause notice dated December 16, 2010 and without giving an opportunity to submit consent proposal after perusing documents furnished to the appellant. Since Section 15T(2) is deleted and Section 15JB(4) is inserted to SEBI Act with retrospective effect from April 20, 2007 by Ordinance No. 2 of 2014 which bars appeal against any order passed in consent proceedings. - Appeal dismissed.

Summary

Issues Involved:
1. Rejection of consent application by SEBI.
2. Maintainability of appeal against SEBI's order under Section 15JB(4) of SEBI Act.
3. Inspection of documents by the appellant.
4. Procedural fairness in SEBI's handling of the consent application.

Detailed Analysis:

1. Rejection of Consent Application by SEBI:
The appellant challenged SEBI's order dated January 2, 2013, which rejected the consent application filed on April 26, 2011, as not consentable under paragraph 1(ii) of the consent circular dated May 25, 2012. The dispute arose from a show cause notice dated December 16, 2010, related to the sale of 20 crore Reliance Petroleum Ltd. shares in November 2007. SEBI alleged that the appellant, in connivance with other entities, took short positions in the Futures and Options segments while selling shares in the cash segment to depress the settlement price and gain Rs. 513.12 crores. The appellant sought settlement through a consent application, which SEBI rejected, citing the seriousness of the charges and the un-consentable nature of the dispute under the consent circular.

2. Maintainability of Appeal Against SEBI's Order:
The appeal's maintainability was questioned due to the insertion of Section 15JB(4) to the SEBI Act, which bars appeals against orders passed in consent proceedings. The Tribunal held that while Section 15T(2) of the SEBI Act previously allowed appeals against orders not made with the parties' consent, the new Section 15JB(4) created a complete bar on appeals against any order in settlement proceedings, effective retrospectively from April 20, 2007. Consequently, the appeal was dismissed as non-maintainable under the current legal framework.

3. Inspection of Documents by the Appellant:
The appellant contended that SEBI's refusal to provide complete inspection of documents referred to in the show cause notice hindered their ability to participate meaningfully in the consent proceedings. Despite SEBI's initial rejection of the inspection request, partial and substantial inspections were eventually provided, but only after significant delays and the appellant's persistent efforts, including filing an appeal. The Tribunal found SEBI's handling of the document inspection process to be unreasonable and prejudicial to the appellant, noting that SEBI's delay and piecemeal provision of documents deprived the appellant of a fair opportunity to present their case.

4. Procedural Fairness in SEBI's Handling of the Consent Application:
The Tribunal criticized SEBI for its undue haste in rejecting the consent application without giving the appellant a reasonable opportunity to review the voluminous documents provided belatedly. The appellant's request to postpone the meeting scheduled on December 7, 2012, to the third week of January 2013 was deemed reasonable, given the circumstances. SEBI's decision to proceed ex-parte and reject the consent application was found to be high-handed and procedurally unfair, causing prejudice to the appellant and leading to a miscarriage of justice.

Conclusion:
The appeal was ultimately dismissed due to the statutory bar on appeals against orders in consent proceedings under Section 15JB(4) of the SEBI Act. However, the Tribunal acknowledged the procedural shortcomings and prejudice caused by SEBI's handling of the consent application and document inspection process.