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2021 (7) TMI 986 - HC - SEBIViolation of the provisions of the SEBI Act - What exact violations raised - HELD THAT - On going through Exhibit P3 show cause notice issued by the Deputy General manager of SEBI dated 13th March, 2020, we could not locate any such eventuality, apart from the same being explanatory in nature, enabling an aggrieved person to identify the exact violations raised against him and submit a reply understanding the gamut of the issues. Learned single Judge has rightly dismissed the writ petition holding that SEBI has power to initiate action against the appellant for violation of the provisions of the SEBI Act, 1992 - minute intricacies of the issues raised in regard to the power of the Deputy General Manager of SEBI, the question of limitation etc. are all aspects to be considered by the statutory authority in terms of the provisions of Act, 1992 and the regulations thereto discussed above. That said, the issues raised by the appellant in respect of the power of the authority under the Companies Act, 1956 vis-a-vis the Companies Act, 2013 are all matters, which can be raised before the statutory authority. This we say because, from the show cause notice it is clear that the violations are relating to the years 2007-2013 during which period the Companies Act,1956 was in force. We are also conscious of the fact that when the functions of an authority are regulated and controlled by clear statutory provisions and without any inhibitions created, we have no reason to think that the said authority would not adjudicate the issues in terms of law.
Issues Involved:
1. Jurisdiction of SEBI to issue the show cause notice. 2. Statutory sanction of the show cause notice issued by the Deputy General Manager of SEBI. 3. Limitation period for the issues raised in the show cause notice. 4. Validity of the show cause notice based on information collected without the appellant's knowledge. 5. Non-provision of documents relied upon by SEBI to the appellant. Issue-wise Analysis: 1. Jurisdiction of SEBI to issue the show cause notice: The appellant contended that SEBI lacked jurisdiction because the matter falls within the domain of the Reserve Bank of India (RBI). The Court examined the SEBI Act, 1992, which aims to protect investors' interests and regulate securities markets. The Court noted that SEBI's jurisdiction extends to all securities transactions, including those involving non-banking financial companies (NBFCs), unless specifically excluded. The Court held that SEBI has the authority to regulate debenture trustees and issue show cause notices under the SEBI Act, 1992. 2. Statutory sanction of the show cause notice issued by the Deputy General Manager of SEBI: The appellant argued that the show cause notice lacked statutory sanction because the Companies Act, 1956, was repealed and replaced by the Companies Act, 2013. The Court found that the violations pertained to the period from 2007 to 2013, during which the Companies Act, 1956, was in force. The Court held that SEBI's actions were valid under the provisions of the SEBI Act, 1992, and the SEBI (Debenture Trustees) Regulations, 1993. 3. Limitation period for the issues raised in the show cause notice: The appellant claimed that the issues raised in the show cause notice were barred by limitation. The Court determined that the question of limitation is a matter to be considered by the statutory authority (SEBI) during the adjudication process. The Court did not find any jurisdictional error in SEBI's issuance of the show cause notice. 4. Validity of the show cause notice based on information collected without the appellant's knowledge: The appellant contended that the show cause notice was issued based on information collected behind his back. The Court noted that the appellant has the opportunity to present his case and contest the proceedings before SEBI. The Court emphasized that SEBI's role is to protect investors' interests and regulate the securities market, and the appellant can raise all relevant contentions during the adjudication process. 5. Non-provision of documents relied upon by SEBI to the appellant: The appellant argued that he was not provided with copies of the documents on which SEBI based its charges. The Court directed SEBI to serve all copies of the documents relied upon to the appellant if not already served. This ensures compliance with the principles of natural justice and allows the appellant to prepare an adequate defense. Conclusion: The Court dismissed the appeal, upholding the learned single Judge's decision that SEBI has the jurisdiction to issue the show cause notice and that the appellant can contest the proceedings before SEBI. The Court found no jurisdictional error or legal infirmities in the learned single Judge's judgment and emphasized that the appellant has the liberty to raise all contentions before the statutory authority.
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