2023 (8) TMI 198 - AT - SEBI

Delay in the initiation of the proceedings by SEBI - False impression given to the investors regarding the subscription of the GDR - HELD THAT - We find that the GDR was issued by the Company on December 12, 2007 and the present show cause notice was issued on June 9, 2019 after an undue delay of 12 years. we are of the opinion that there has been an inordinate delay in the issuance of the show cause notice. Even though there is no period of limitation prescribed in the Act and the Regulations for issuance of a show cause notice and for completion of the adjudication proceedings, nonetheless, the authorities are required to exercise its powers within a reasonable period. In AO, SEBI vs Bhavesh Pabari 2019 (3) TMI 197 - SUPREME COURT the Supreme Court held that an authority is required to exercise its powers within a reasonable period. Thus we are of the opinion that power to adjudicate has not been exercised within a reasonable period. Consequently, no penalty could be imposed.

Summary

Issues involved:
The judgment involves issues related to the imposition of penalties by the Adjudicating Officer of the Securities and Exchange Board of India (SEBI) on eight noticees for fraudulent issuance of Global Depository Receipts (GDR) by a company, involving a false impression given to investors regarding subscription by a specific entity.

Details of the Judgment:

Issue 1: Undue delay in the initiation of proceedings
The appellants raised concerns about the undue delay in initiating proceedings, arguing that the show cause notice was issued 12 years after the issuance of GDRs. The Adjudicating Officer justified the delay citing the complexity of the matter involving entities registered under foreign jurisdiction and collaboration with foreign regulators. However, the Tribunal found that the investigation had been completed before a previous show cause notice in 2013, questioning the delay in initiating penalty proceedings. The Tribunal emphasized that the authorities must exercise their powers within a reasonable period, as established in previous judgments, and concluded that the 12-year delay in this case was unreasonable, leading to the quashing of the impugned order and disallowance of penalties.

Precedents and Legal Principles:
The Tribunal referred to previous judgments, including Mr. Rakesh Kathotia vs. SEBI, Ashok Ashok Shivlal Rupani & Anr. vs. SEBI, and Ashlesh Gunvantbhai Shah vs. SEBI, highlighting the requirement for authorities to act within a reasonable period even in the absence of a specific limitation period. The Supreme Court's stance on exercising powers within a reasonable time was reiterated, emphasizing the importance of timely adjudication.

Conclusion:
The Tribunal held that the undue delay of 12 years in initiating proceedings was unreasonable, leading to the quashing of the impugned order and the dismissal of penalties. The judgment highlighted the necessity for authorities to act promptly and within a reasonable timeframe, as established in legal precedents. The appeals were allowed with no costs, and the miscellaneous applications were disposed of, emphasizing the significance of timely exercise of powers in adjudication proceedings.