2015 (6) TMI 814 - AT - Companies Law

Prohibition from taking new assignment or contract or launch a new scheme for six months - Cross examination of the person whose statement is recorded by SEBI - Violation of principal of natural justice - Held that - Where a noticee seeks cross-examination of a person whose statement is recorded by SEBI, then, passing an order on the basis of the statement of that person without giving the noticee an opportunity to cross-examine that person, would be in violation of the principles of natural justice. In the present case, even if there was any doubt on part of SEBI as to whether the Appellant had in fact sought cross-examination of Mr. Devi Dutt, in our opinion, in view of the fact that the Appellant had sought cross-examination of all persons whose statements were taken on record including the statement of Branch Manager of BHOB, Ahmedabad Branch, it is evident that Appellant had sought cross-examination of Mr. Devi Dutt. Since statement of Mr. Devi Dutt played a dominant role in passing the impugned order, it would not be proper to proceed with hearing of the Appeal on merits without permitting the Appellant to cross-examine Mr. Devi Dutt. - Order of SEBI dated 14/3/2014 is quashed and set aside and the matter is restored to the file of SEBI for passing fresh order on merits after giving an opportunity to the Appellant to cross-examine.

Summary

Issues: Violation of principles of natural justice in SEBI order

The judgment by the Securities Appellate Tribunal dealt with an appeal challenging an order by the Whole Time Member of Securities and Exchange Board of India (SEBI) prohibiting the Appellant, a stockbroker, from taking up new assignments for six months. The Appellant raised a preliminary issue regarding the violation of principles of natural justice. The dispute arose from violations allegedly committed by the Appellant between 2003-2005, leading to SEBI suspending the Appellant's registration as a member of various stock exchanges. Upon appeal, the Tribunal had set aside SEBI's previous order and directed SEBI to pass a fresh order on merits. In the current appeal, SEBI relied on the statement of Mr. Devi Dutt, Chief Manager of a bank, which the Appellant had requested to cross-examine during the investigation. SEBI had not relied on Mr. Dutt's statement in the earlier order but did so in the impugned order, prompting the Tribunal to rule that the Appellant should have been given the opportunity to cross-examine Mr. Dutt before relying on his statement. The Tribunal quashed SEBI's order and remanded the matter back to SEBI for a fresh decision after allowing the Appellant to cross-examine Mr. Dutt if his statement was to be considered. The Tribunal directed SEBI to expedite the new decision within four months due to the time elapsed since the alleged violations. The appeal was disposed of with no order as to costs.