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TMI Blog2020 (2) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... f the opinion that the impugned order is not sustainable in the eyes of law as it has been passed in gross violation of the principles of natural justice as embodied in Article 14 of the Constitution of India. The restraint order is in our opinion unjustified. At this stage, we can stay the operation of the impugned order to a limited extent. We, however, find that no useful purpose would be served in keeping the appeals pending and directing the respondent to file a reply. Thus, we are deciding the appeal itself, without calling for a reply at the admission stage itself. The impugned order insofar as it restrains the appellant from accepting fresh clients is quashed. Other directions issued by the WTM of SEBI will continue to operate against the appellant. The appeal is partly allowed. In the circumstances of the case, there shall be no orders as to costs. - Appeal No. 566 Of 2019 - - - Dated:- 26-11-2019 - Justice Tarun Agarwala, Presiding Officer, Dr. C.K.G. Nair, Member And M.T. Joshi, Judicial Member Somasekhar Sundaresan, Joby Mathew, Abhishek Venkataraman and Nikhil Shah, Advs. for the Appellant. Vikram Nankani, Sr. Adv., Anubhav Ghosh, Ms. Rashi Dalmia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... names and surnames. c. Following modus-operandi was observed in all these cases: i. a request for change of address was sent by the claimants by providing a copy of PAN stating to be in the name of the original shareholder; ii. thereafter a request for issue of duplicate share certificates was made; iii. after receipt of the duplicate share certificates, the said shares were lodged for transfer in the name of the Noticees; iv. then Noticees dematerialized these shares and sold these shares in the market. 4. Further examination and information sought from the claimant with regard to the appellant as RTA of other companies, discrepancies were found in six cases, namely that photocopies of the PAN card provided by the transferee were fake and that one transferee was having multiple PAN combination. There was mismatch of photo in the PAN card and other documents, etc. 5. Based on the aforesaid discrepancies, the WTM prima facie observed that the appellant did not exercise appropriate due diligence while processing various requests and prima facie found violating Clauses 2,3 and 16 of the Schedule III of the Securities and Exchange Board of India (Registrars to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or action in case of default. - A registrar to an issue or share transfer agent who- (a) fails to comply with any conditions subject to which registration has been granted; (b) contravenes any of the provisions of the Act, rules or regulations; (c) contravenes the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the rules made thereunder; (d) contravenes the provisions of the Depositories Act, 1996 or the rules made thereunder; (e) contravenes the rules, regulations or bye-laws of the stock exchange, shall be dealt with in the manner provided under chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. 10. Regulation 23 and Regulation 27 of the Intermediaries Regulations of 2008 being relevant are also extracted hereunder:- Cancellation or suspension of registration and other actions. 23. Where any person who has been granted a certificate of registration under the Act or regulations made thereunder, - (a) fails to comply with any conditions subject to which a certificate of registration has been granted to him; (b) contravenes any of the provisions of the securities laws or directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring on behalf of respondent SEBI contended that an ex parte ad interim order issued by the WTM of SEBI has not been passed under Regulation 27 of the Intermediaries Regulations of 2008 and that the power has been exercised under Section 11(1) and 11(4) of the SEBI Act. It was further contended that Regulation 23 of the Intermediaries Regulations of 2008 makes it apparently clear that in addition to the powers conferred under Regulation 27 SEBI could also exercise the powers under the Securities Laws, namely, Section 11 and 11B of the SEBI Act. The learned senior counsel for respondent SEBI thus contended that an ex parte ad interim order can be issued under Section 11 and 11B of the SEBI Act and, as and when the enquiry is completed, SEBI may take appropriate action, if any, under Regulation 27 of the Intermediaries Regulations of 2008. It was contended that discrepancies committed by the appellant are so glaring that appropriate action was taken which does not suffer from any error of law. 13. Having heard the learned counsel for the parties and having perused the ex parte ad interim order and the confirmatory order we find that except in the case of the complainant where ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing natural justice is to be applied whenever action is taken affecting the rights of the parties. At times, an opportunity of hearing may not be pre-decisional and may necessarily have to be post-decisional especially where the act to be prevented is imminent or where action to be taken brooks no delay. Thus, pre-decisional hearing is not always necessary when ex parte ad interim orders are made pending investigation or enquiry unless provided by the statute. In such cases, rules of natural justice would be satisfied, if the affected party is given a post-decisional hearing. 14. However, it does not mean that in every case, an ex parte ad interim order should be passed on the pretext that it was imminent to pass such interim order in order to protect the interest of the investor or the securities market. An interim order, however, temporary it may be, restraining an entity/person from pursuing his profession/trade may have substantial and serious consequences which cannot be compensated in terms of money. 15. Thus, ex-parte interim order may be made when there is an urgency. As held in Liberty Oil Mills Ors. v. Union of India 18 Ors. [AIR (1984) SC 1271] decided on May 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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