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TMI Blog2019 (9) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... d to as 'first show-cause notice') alleging violation of clause 36 of listing agreement on the ground that there was non-disclosure of a tax demand of Rs. 450 crores which was raised under an assessment order dated 21.2.2014 against the company for AY 2009-2010. SEBI thereafter issued a corrigendum to the first show-cause notice on 17.3.2015. 3. On 4.3.2015, the petitioner filed reply to the said show-cause notice taking various defences inter alia contending that the petitioner was under legal advice and bonafide belief that the tax demand was not required to be reported under clause 36 of the listing agreement. The petitioner submitted additional documents under communications dated 10.4.2015 and 12.5.2015. 4. On 4.6.2015, SEBI passed order holding the petitioner liable for violation of clause 36 of the listing agreement and imposed a penalty of Rs. 25 lakhs under section 23A of the Securities Contracts (Regulation) Act, 1956. 5. On 23.7.2015, the petitioner filed appeal against the said order dated 4.6.2015 passed by SEBI before the Securities Appellate Tribunal, Mumbai ('the Tribunal' for short). At the time of filing of the petition, this appeal was pending. 6. On 20.8.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for condonation of delay dated 16.8.2017. 9. By the impugned order dated 23.7.2017, SEBI rejected the petitioner's application for condonation of delay dated 15.5.2017. By a further order at Annexure R, SEBI rejected the petitioner's application for condonation of delay dated 16.8.2017, consequently the respective settlement applications were returned. These orders, the petitioner has challenged in the present petition. 10. Learned Counsel for the petitioner took us through the documents on record and contended that - (i) No personal hearing was granted, though required. The Counsel submitted that the requirement of personal hearing should be read in the statutory provision and if not so read, the provision should be declared unconstitutional. (ii) The impugned orders are non-reasoned orders. No reasons are cited for rejection of delay condonation of applications. (iii) The petitioner had made out sufficient grounds for condoning delay. Delay, therefore, ought to have been condoned. (iv) The delay in view of the statutory provisions should be construed liberally. The very purpose is to bring about settlement as far as possible. The said legislative intent cannot be des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made under this Act. (4) No appeal shall lie under section 15T against any order passed by the Board or adjudicating officer, as the case may be, under this section. (5) All settlement amounts, excluding the disgorgement amount and legal costs, realised under this Act shall be credited to the Consolidated Fund of India." 13. Under subsection (1) of section 15JB of the Act thus, any person against whom proceedings have been initiated or may be initiated for alleged defaults under various provisions mentioned therein, may file an application in writing to the Board proposing for settlement of the proceedings. Under subsection (2) of section 15JB, the Board would decide such application. Sub-section (3) of section 15JB provides that the settlement proceedings under the said section would be conducted in accordance with the procedure specified in the regulations made under the Act. 14. In exercise of powers under section 30 of the Act, the Board has framed Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings) Regulations, 2014 (for short, the 'the said Regulations'). The terms 'alleged default' and 'specified proceedings' have been defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losures in such application in respect of the alleged defaults. Sub-regulation (4) provides that the applicant shall make one application for settlement of all the proceedings that have been initiated or may be initiated in respect of same cause of action. 15. Regulation 4 also contained in Chapter II pertains to limitation and reads as under: "Limitation. 4. (1) No application in respect of any specified proceedings pending with the Board shall be considered if it is made after sixty days from the date of service of the notice to show cause or supplementary notice(s) to show cause, whichever is served later. (2) Notwithstanding anything contained in sub-regulation (1), the panel of whole time members may consider the application, if it is satisfied that there was sufficient cause for not filing it within the period specified in sub-regulation (1) and it is accompanied with an application for condonation of delay and non-refundable fees as specified in Part-B of the Schedule-I. Provided that where the application is filed after sixty calendar days from the expiry of the period specified in subregulation (1), the settlement amount payable by the applicant shall be increased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate Limited against the SEBI penalty order. * The Applicants have now decided that considering the fact that the adjudication proceedings have not yet commenced and as an alternative the other legal recourse available to the Applicants is to propose settlement in the matter, considering the fact that it will be in the interest of all the Applicants and will lead to saving of time, cost and to quickly close the matter to avoid protracted litigation. * In view of the above, all the Applicants filed the aforementioned settlement application. It is submitted as a measure of abundant caution, the Applicants request for the condonation of delay, if any, in filing the settlement application in terms of Regulation 4 of the Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings), regulations, 2014. The said delay is due to above reasons which are bona-fide and not deliberate and hence there was a sufficient cause for not making the settlement application within 60 days from the date of issuance of the aforesaid Notice. Hence the delay may please be condoned in the interest of justice." 18. This application came to be rejected by the Board by the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to whether the Applicant will be able to sustain the discharge from all the non-disclosures given the fact that stock exchanges might have misplaced the alleged non-disclosures like the ones for which the documentary evidence is available with the Applicant. (d) Considering the fact that the adjudication proceedings have not yet commenced and it will be in the interest of the Applicant which will also lead to saving of time, cost and to quickly resolve the matter to avoid protracted litigation. The Applicant decided to file the settlement application as an alternative to other legal recourse available to the Applicant. (e) In view of the above, it is submitted that the Applicant requests for the condonation of delay, if any, in filing the settlement application in terms of Regulation 4 of the Securities and Exchange Board of India (Settlement of Administrative and Civil Proceedings), Regulations, 2014. The said delay is due to to above reasons which are bonafide and not deliberate and hence there was a sufficient cause for not making the settlement application within sixty (60) days from the date of issuance of the aforesaid Notice. Hence, the delay may be condoned in the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s error in rejecting both the applications for condonation of delay. Before examining the reasons cited by the petitioner for condonation of delay in these applications, we may have a closer look at the provisions contained in the said Regulations. The said Regulations have been framed to provide for the terms of settlement and the procedure for settlement and matters connected therewith or incidental therein. Under regulation 3, a person against whom any specified proceedings have been initiated or may be initiated can make an application to the Board for settlement in prescribed format. As per the sub-regulation (4) of regulation 3, the applicant would make one application for settlement of all proceedings that have been initiated or may be initiated in respect of same cause of action. 23. Regulation 4 pertains to limitation. Under sub-regulation (1) of regulation 4, no application in respect of any specified proceedings pending with the Board would be considered if it is made after 60 days from the date of service of the notice to show cause or supplementary notices to show cause, whichever is later. Sub-regulation (2) of regulation 4 however, authorises the panel of whole time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing from the sub-regulation (2) of regulation 4, therefore, has to be construed liberally. Ordinarily, the Courts always give precedence to decisions of disputes on merits instead of terminating proceedings on technicality. Independent of such consistent approach of the Courts, the regulations in the present case clearly demonstrate an intent on the part of the framers of the regulations to consider the applications for condonation of delay liberally. As noted, the period of limitation is prescribed for an application for settlement only in respect of specified proceedings pending with the Board. No such period of limitation is prescribed when the application for settlement is made in terms of regulation 16, in relation to the proceeding pending before the Tribunal or any Court. Sub-regulation (2) of regulation 4 while granting power to condone delay, makes provision for levying interest to the extent of delay caused in filing the application. All these are indications suggesting that the limitation provision for making application for settlement with accompanying application for condonation of delay should be liberally construed. 26. The issue can be looked from a slightly dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or not. These non-disclosures pertained to December, 2007, April, 2008, March, 2010 and March, 2011. Since the records were old, verification exercise took considerable time. Attempt was made to trace out documents of disclosure and despatch made to NSE and BSE. This caused further delay. It was further stated that even at present, the petitioner was not fully confident whether all disclosures were duly made or not. It is possible that though disclosures may have been made, documents are not immediately traceable since various officers in charge have changed from time to time. The petitioner was also additionally seeking legal advice on various aspects. Considering such facts and also looking to the fact that the adjudication proceedings have not commenced, the petitioner had in order to save time, cost and to curtail litigation, decided to apply for settlement. 30. The grounds made out for condonation of delay were elaborate and sufficient. Such grounds were rejected with one sentence that they were not found sufficient. In this case also, in our opinion, the Board has committed a serious error. 31. In both the cases, it was specifically stated by the petitioner and not refute ..... X X X X Extracts X X X X X X X X Extracts X X X X
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