2018 (10) TMI 1684 - HC - SEBI

Stay of show cause - appropriatness for the petitioner to give reply to the show cause notices - HELD THAT - The petitioner is required to reply to the show cause notice to enable the respondent No.1 pass a final order against which the petitioner has a remedy of appeal before the SAT. We have been informed one of the noticee has already approached the SAT. That insofar as the subsequent notices are concerned, we agree with the submission of Mr. Mehta, appropriate for the petitioner is to give reply to the said notices. In any case, if any order is passed to the prejudice of the petitioner, remedy is for the petitioner to approach the SAT. The Court is not inclined to entertain this application, the same is dismissed.

Summary

Issues:
1. Stay of show cause notice dated March 14, 2018 during the pendency of the writ petition.
2. Alleged failure of respondent No.1 to provide inspection of all materials as directed by the Court.
3. Issuance of another show cause notice dated September 05, 2018 during the pendency of the writ petition.
4. Challenge to the provisions of Section 11 and 11(B) of the Securities and Exchange Board of India Act, 1992 as ultra vires.
5. Justification of the provisions challenged in the writ petition.
6. Variance between show cause notices issued on March 14, 2018, and September 05, 2018.
7. Decision on whether to interdict the proceedings arising from the show cause notice dated March 14, 2018.
8. Requirement for the petitioner to reply to show cause notices and avail remedies available in law.

Analysis:

1. The petitioner sought a stay on the show cause notice dated March 14, 2018, during the pendency of the writ petition. The Court noted that no notice of inquiry had been issued by the Securities and Exchange Board of India (SEBI) that could result in an adverse finding. The petitioner was permitted to inspect materials related to the notice, and the Court directed SEBI to provide access to all investigated materials. The petitioner alleged that SEBI did not comply with the order and issued another show cause notice dated September 05, 2018, for adjudication proceedings, potentially making the writ petition infructuous.

2. The respondent argued that the petitioner had the right to reply to the show cause notice and challenge it before the Securities Appellate Tribunal (SAT) if aggrieved. The respondent justified the provisions of the SEBI Act being challenged and stated that issuing separate show cause notices for different violations was within their rights. The Court observed that both show cause notices were at variance and emphasized the petitioner's need to reply to the notices and seek remedies available in law.

3. The Court dismissed the application for stay, noting that a similar prayer had been considered previously and not granted. It reiterated that the petitioner must reply to show cause notices to enable SEBI to pass final orders, with the remedy of appeal available before the SAT. The Court highlighted that if any order prejudicial to the petitioner was passed, the appropriate remedy would be to approach the SAT, declining to entertain the application further.