2016 (11) TMI 1662 - SC - SEBI

SEBI reiterated an ex-parte order - order was treated as a show cause notice in the facts of this case, and detailed directions were issued by this order - HELD THAT - We have been informed by learned Senior counsel appearing for SEBI that the ongoing investigations will be completed within six months from today, provided the respondents before us cooperate. We accept the said submission and expect that the ongoing investigations will decide one way or the other whether the respondents floated a Collective Investment Scheme (CIS). In the unlikely event that SEBI's investigation does not or is not complete within the period of six months from today, it is open for the respondents to ask for a variation of the order dated 24.08.2015 of SEBI from this Court. We further add that in case any alienation or encumbrance of assets is sought to be made by the respondents, they cannot do so without the prior permission of SEBI.

Summary

Issues Involved:
1. SEBI's ex-parte order and detailed directions
2. Appeal to the Securities Appellate Tribunal
3. Setting aside of SEBI's order and substitution with new directions
4. Consent of parties and setting aside of the judgment
5. Completion of ongoing investigations within six months
6. Permission requirement for alienation or encumbrance of assets

Analysis:

1. The Supreme Court addressed the issue of Securities and Exchange Board of India's (SEBI) ex-parte order dated 03.06.2015, reiterated by an order dated 24.08.2015, which was considered a show cause notice in the case. The Court noted that detailed directions were issued by this order, setting the initial framework for the proceedings.

2. The matter was taken up on appeal to the Securities Appellate Tribunal, which in its judgment dated 03.02.2016, upheld the factual findings of SEBI as correct prima facie. However, the Tribunal set aside SEBI's order and replaced it with specific directions, indicating a divergence from SEBI's original decision.

3. Considering the consent of the parties involved, the Supreme Court decided not to delve into further details except to declare that the judgment dated 03.02.2016 by the Tribunal was set aside. This action implied a reevaluation of the Tribunal's decision and a fresh perspective on the case.

4. The Court acknowledged the assurance from SEBI's senior counsel regarding the completion of ongoing investigations within six months, provided cooperation from the respondents. It was emphasized that the investigations would determine whether the respondents had engaged in the alleged act of floating a Collective Investment Scheme (CIS).

5. In the event that SEBI's investigation did not conclude within the stipulated six-month period, the respondents were granted the option to request a modification of SEBI's order dated 24.08.2015 from the Court. This provision ensured flexibility in case of unforeseen delays in the investigative process.

6. Additionally, the Court imposed a restriction stating that any attempt by the respondents to alienate or encumber their assets would require prior permission from SEBI. This measure aimed to safeguard the interests of the regulatory body and maintain the integrity of the ongoing proceedings.

In conclusion, the Supreme Court disposed of the appeals in accordance with the discussed issues and directives, outlining a structured approach to address the complexities of the case and ensure procedural fairness and compliance with regulatory standards.