2021 (9) TMI 1426 - HC - SEBI

Offence under SEBI - Appointment of adjudicating officer for holding inquiry - HELD THAT - It is to be noted that, in the present proceedings, the Respondent issued Show Cause Notice to the Petitioner. Whatever documents can be provided to the Petitioner, the same were provided by the Respondent. Respondent, specifically informed to the Petitioner by their letter dated 24/03/2021 (Exhibit-H) that other documents cannot be provided because those were kept are confidential. Apart from that, the Petitioner already filed applications (Exhibit-P) and another interim application on the same day (Exhibit-Q) for directing the Respondent to provide the documents. These both applications are pending before the Authority. It is to be noted that the Judgment relied by the Petitioner as stated hereinabove are not applicable in the facts of the present case because in the present case, the Respondent Board specifically informed the Petitioner by letter dated 23/03/2021 that certain documents are confidential and that cannot provided to the Petitioner. The hearing of the show cause notice as well as applications filed by the Petitioner for certain documents (Exhibit-P and Exhibit-Q) are pending before the Whole Time Member of the SEBI. The letter of the Respondent dated 24/03/2021 and the statement made by the learned senior counsel for the Respondent stating that the they are not relying any other documents except those which are provided to the Petitioner, we do not find any substance in the present writ petition.

Summary

Issues Involved:
1. Request for documents relied upon by the Respondent.
2. Request for a copy of the Opinion formed under Rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995.
3. Compliance with principles of natural justice and fair procedure.

Detailed Analysis:

1. Request for Documents Relied Upon by the Respondent:
The Petitioner sought directions for the Respondent to furnish documents relied upon in the Show Cause Notice dated 17/11/2020. The Petitioner argued that without these documents, it would be impossible to respond adequately to the notice. The documents requested included the complete AZB report, RFL's reply to an interim order, parts of the MSA Probe Report, and other confidential enclosures. The Respondent provided some documents but withheld others, citing confidentiality. The court noted that the Respondent had informed the Petitioner that certain documents were confidential and could not be provided. The court found that the Respondent had already supplied the necessary documents and that the remaining documents were justifiably withheld due to their confidential nature.

2. Request for a Copy of the Opinion Formed Under Rule 3:
The Petitioner also requested a copy of the Opinion formed under Rule 3 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995. The Petitioner argued that it was mandatory for the Respondent to provide this Opinion before hearing the Show Cause Notice. The Respondent countered that the Board's formation of an Opinion to issue the Show Cause Notice did not necessitate providing a copy to the Petitioner. The court agreed with the Respondent, referencing the case of Natwar Singh Vs. Director of Enforcement and Ors., which established that the principles of natural justice do not require the supply of documents upon which no reliance has been placed by the Authority to set the law into motion.

3. Compliance with Principles of Natural Justice and Fair Procedure:
The Petitioner argued that the principles of natural justice and fair procedure necessitated the provision of all documents relied upon by the Respondent. The court reviewed the relevant rules and precedents, including the judgments in Natwar Singh Vs. Director of Enforcement and Ors., Shashank Vyankatesh Manohar Vs. Union of India, and Amit Jain Vs. Securities and Exchange Board of India & Anr. The court concluded that the Respondent had complied with the principles of natural justice by providing the documents it relied upon and that the withholding of confidential documents was justified. The court also noted that the Petitioner had pending applications before the SEBI for the same reliefs sought in the writ petition.

Conclusion:
The court dismissed the writ petition, finding no substance in the Petitioner's claims. The court held that the Respondent had provided the necessary documents and that the remaining documents were confidential and justifiably withheld. The court also found that the Respondent had complied with the principles of natural justice and fair procedure. The pending applications before the SEBI were noted, and the court saw no reason to interfere with the ongoing process. No order as to costs was made.