2024 (3) TMI 1143 - HC - SEBI

Jurisdiction/ Validity of show-cause notice issued u/s 11(1) 11(2)(b) 11(4) and 11(B) of SEBI Act - as submitted show-cause notice is identical to what was issued to the Petitioner on the earlier occasion which came to be adjudicated and on which Petitioner was discharged and exonerated - Petitioner had earlier moved this Court by filing a Petition however the same was withdrawn by the Petitioner with liberty to approach the Security Appellate Tribunal and on such Interim Application came to be passed by the Tribunal ordered that in the interest of justice the Respondent be directed to give an opportunity of a cross-examination and personal hearing and when an opportunity of a personal hearing before the WTM would be given to the Petitioner the Petitioner could raise all issues including that of jurisdiction Contention as urged on behalf of the Petitioner is that the impugned show-cause notice is without jurisdiction and the issue of jurisdiction is required to be decided as a preliminary issue before the show-cause notice itself is taken up for adjudication. HELD THAT - It appears to be not the case that the Petitioner at any point of time including in the proceedings filed before the tribunal had given up his case that the impugned show-cause notice was without jurisdiction. In fact the Tribunal itself has observed that the Petitioner would be permitted to raise the issue of jurisdiction in the proceeding of the show-cause notice to be held on 16th February 2024. Thus we are of the opinion that the present Petition can be disposed of by directing the concerned Officer of the Respondent to decide the issue of jurisdiction being raised by the Petitioner as a preliminary issue and only after such issue is decided take an appropriate call on the adjudication of the show-cause notice. All contentions of the parties in that regard are expressly kept open. Petitioner shall be intimated the date on which the Petitioner would be heard on the issue of jurisdiction and appropriate orders in deciding such issue be passed as expeditiously as possible. We clarify that till the issue of jurisdiction is decided the concerned officer of the Respondent shall not adjudicate the show-cause notice on merits including recording of any evidence of the same.

Summary

Issues involved:
The issues involved in the case include challenging a show-cause notice issued by SEBI under Sections 11(1), 11(2)(b), 11(4), and 11(B) of the Securities Exchange Board of India Act, 1992, on the grounds of jurisdiction and maintainability.

Details of the Judgment:

Issue 1: Challenge to Show Cause Notice
The Petitioner was previously discharged and exonerated from charges under a show-cause notice dated 03.07.2018. However, a fresh show-cause notice dated 17.05.2023, identical to the previous one, was issued by SEBI. The Petitioner contended that the current notice is without jurisdiction and not maintainable due to the previous exoneration.

Issue 2: Tribunal Proceedings
The Petitioner approached the Tribunal seeking to quash the show-cause notice and stay the proceedings. The Tribunal directed SEBI to provide an opportunity for cross-examination and personal hearing to the Petitioner. It was noted that the issue of jurisdiction could be raised during the hearing before the Whole Time Member.

Issue 3: Jurisdiction Contention
The Petitioner argued that the impugned show-cause notice lacked jurisdiction and should be decided as a preliminary issue before adjudication. SEBI opposed this, stating that the notice was appropriately issued within its jurisdiction and the previous notice's outcome was irrelevant.

Judgment Summary:
The High Court directed SEBI to decide the jurisdictional issue raised by the Petitioner as a preliminary matter before proceeding with the show-cause notice. The Court emphasized that the Petitioner had not abandoned the jurisdictional challenge, as observed by the Tribunal. SEBI was instructed not to adjudicate on the merits of the notice until the jurisdictional issue was resolved. The Petitioner was to be informed of the hearing date for the jurisdictional matter, with the option to challenge any adverse decision. The Court clarified that its decision only applied to the current case and did not affect other proceedings. The Petition was disposed of accordingly, with no costs imposed.