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2021 (9) TMI 1143 - HC - SEBIRecovery proceedings - Offence under SEBI Act - Denial of natural justice - whether the recovery notice is sustainable in law? - HELD THAT - The order does not fix any particular liability to be discharged by the writ-applicants. If upon such order recovery is sought to be undertaken of an amount then it was expected of the concerned authority to at least issue a notice to the writ-applicants and give an opportunity of hearing before arriving at a particular figure. The impugned recovery notice is hereby quashed and set aside. The matter is remitted to the respondent No.2. The respondent No.2 shall issue notice to the writ-applicants and fix a particular date so as to give an opportunity of hearing to the writ-applicants and thereafter determine a particular amount to be paid by the writ-applicants to the depositors in accordance with law.
Issues Involved:
1. Validity of the demand notice dated 05.11.2020. 2. Opportunity of hearing before issuing the demand notice. 3. Alternative remedy available to the writ-applicants. 4. Determination of the specific amount to be paid by the writ-applicants. Detailed Analysis: 1. Validity of the Demand Notice: The writ-applicants challenged the demand notice dated 05.11.2020, which sought to recover a sum of ?1,068,64,56,000 from them. The notice was issued under Rule 2 of the Second Schedule to the Income Tax Act, 1961, read with Section 28A of the Securities and Exchange Board of India Act, 1992. The applicants argued that the notice was issued without a clear basis for the amount demanded and without giving them an opportunity to present their case. 2. Opportunity of Hearing: The applicants contended that no opportunity of hearing was provided before issuing the demand notice, which sought to recover a substantial amount. They argued that the SEBI order dated 14.03.2003, which directed the company to wind up its schemes and refund the money collected, did not specify the exact liability. Therefore, the applicants should have been given a chance to explain their position and the payments they had already made. 3. Alternative Remedy: The respondents argued that the writ-applicants had an alternative remedy available under Section 15(T) of the SEBI Act, which allows for an appeal before the Securities Appellate Tribunal. However, the court noted that directing the applicants to this remedy would not address the core issue of determining the exact amount owed, as the appellate authority would face the same challenge. 4. Determination of Specific Amount: The court observed that the SEBI order dated 14.03.2003 did not fix a specific liability and merely directed the company to refund the money collected under the schemes. The court emphasized that before undertaking recovery of such a large amount, the concerned authority should have issued a notice and provided an opportunity of hearing to the applicants to determine the exact amount owed. Judgment: The court quashed the impugned recovery notice and remitted the matter to the respondent No.2. The respondent was directed to issue a notice to the writ-applicants, provide an opportunity of hearing, and then determine the specific amount to be paid by the writ-applicants to the depositors. The court clarified that the applicants could present all relevant aspects, including any payments already made, to the authority for consideration. The writ-application was disposed of accordingly.
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