9911796707
TMI Blog2020 (12) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... in has not been determined - thus, a cloud hangs over their conduct and that is all. 2. We now turn to The Forward Contracts (Regulation) Act, 1952 (hereinafter referred to as the 'said Act'; since repealed by the Finance Act, 2015),as the proceedings against the first two respondents herein emanated from the powers exercised under the said Act. The said Act aimed to regulate certain matters relating to forward contracts, prohibition of options in goods and for other connected matters. A reading of the statement of objects and reasons shows that the said Act was a sequitur to the initial prohibition of forward trading in certain commodities as a result of the Central Government issuing orders under Rule 81 of the Defence of India Rules during the war period. 3. Chapter II of the said Act provides for the Forward Markets Commission (for short 'FMC'), an authority to regulate commodities futures market, which was established under Section 3, with its functions being provided under Section 4 of the said Act. The functions, inter alia, were to advise the Central Government in respect of the recognition of, or the withdrawal of recognition from, any association or in respect of any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercising powers under Sections 8(2) and 8(4) of the said Act as set out hereinabove, read with the Government of India Notification S.O. No.1162 dated 4.5.1960. A detailed show cause notice dated 21.6.2011 was served under Section 4(b) of the said Act. Section 4 (b) of the said Act reads as under: "4. Functions of the Commission.-The functions of the Commission shall be- (a) xxxx xxxx xxxx xxxx xxxx (b) to keep forward markets under observation and to take suchaction in relation to them as it may consider necessary, in exercise of the powers assigned to it by or under this Act;] xxxx xxxx xxxx xxxx xxxx" 8. This notice, running into about 150 pages, was addressed to Respondent No.2 herein, in his capacity as Vice Chairman of NMCE and Chairman and Managing Director of Respondent No.1, NOL giving him a period of 10 days from the date of receipt of notice to respond. A personal hearing was fixed for 4.7.2011. Liberty was granted to Respondent No.2 herein to peruse any documents within a period of 7 days from the date of receipt of notice, if he so desired. This resulted in a series of communications from 22.6.2011 to 20.7.2011, including the request of Respondent No.2 herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee adjournments had already been granted. Thus, the endeavour of Respondent No.2 herein, either in his own name or on behalf of Respondent No.1 herein, was only to seek postponement of the proceedings. As a last opportunity, Respondent Nos.1 and 2 herein were given time in the post-lunch recess session to address the FMC on the issue of jurisdiction, if they so desired, but the counsel for the said respondents only expressed the request for adjournment, which was apparently the only instructions to her. The proceedings were, thus, closed for orders and that order was pronounced on 23.7.2011. 11. The aforesaid order dated 23.7.2011 of the FMC opined against Respondent Nos.1 and 2 herein. The endeavour of Respondent No.2 herein to repeatedly seek adjournments was highlighted, especially as the proceedings in the High Court were filed only by Respondent No.1 herein, albeit through Respondent No.2 herein. On jurisdiction, the FMC clarified that Section 8(2)(b) of the said Act empowers the Central Government to make an inquiry in relation to the affairs of a registered association. The relevant provisions read as under: "8. Power of Central Government to call for periodical returns o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the show cause notice on Respondent No.1 herein and the NMCE, effectively depriving them of the opportunity to present their case before the FMC. Consequently, the order of the FMC dated 23.7.2011 was quashed. The violation of the principles of natural justice is all that weighed with the Division Bench, without getting into the merits of the case. It also opined that if any documents were in possession of FMC and had not been supplied to Respondent No.1 herein, the same should be supplied subject to payment of usual charges. 15. The successor entity of the FMC, the SEBI, challenged this order by way of a Special Leave Petition before this Court, being SLP No.10225-10227 of 2012 and in terms of an interim order dated 22.3.2012, the operation of the order of the Division Bench dated 9.2.2012 was stayed. The consequence of this was that the order of the FMC dated 23.7.2011 stood revived. That it had consequences was not in doubt as various proceedings were initiated thereafter both civil and criminal. The matter, however, remained at this stage before the Supreme Court right till the passing of the order on 7.3.2018, 6 years later, in terms whereof the order of the High Court was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Forward Contracts (Regulation) Act, 1952 and Forward Contracts (Regulation) Rules, 1954." 18. The concession made on behalf of FMC was relied upon by the SAT to reach a conclusion that once a concession has been made by the concerned authorities themselves and undisputedly no notice was issued to Respondent No. 1 herein and NMCE, the proceedings must emanate from the show cause stage. The SAT did take cognizance of the developments that had taken place subsequent to the issuance of show cause notice, focusing on the allegedly arbitrary denial of documents, to the requests made by Respondent No.2 herein. On the issue of request for adjournment on 20.7.2011, the SAT noted that only two weeks had elapsed from the date when the documents were supplied and, thus, further request for adjournment could not be said to be unreasonable especially as the documents were voluminous, running into thousands of pages. Thus, the time period for filing the reply was found to be inadequate. Consequently, the order dated 23.7.2011 passed on a Saturday, a non-working day of the FMC, was set aside and a reasonable opportunity was directed to be given to Respondent No.2 herein and the NMCE for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the said respondent. Not only that, there was no grievance ever made at the stage of final hearing before the learned Single Judge about the absence of show cause notice. This aspect was sought to be brought in only at the stage of appeal, for the first time, that too by amending it after the order dated 23.7.2011 was passed wherein the acts of Respondent No.2 herein of siphoning off money and interlinked issues was stated to require investigation and an adverse finding resulted. However, to our mind, that is not very relevant at this stage because that would amount to going into the merits of the controversy, which is not to be examined by us. 23. Mr. Dushyant Dave, learned senior counsel appearing for the ICEL, sought to emphasise that the two respondents are only playing games, when they are really one and the same entity. In a sense, it was argued, that the corporate veil must be pierced to see what is really the endeavour of the said two respondents. Principles of natural justice, it was urged, have to be seen in a holistic frame and cannot have a straitjacket formula. It was urged that adequate opportunities had been granted to both the respondents and the third entity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er had been set aside by the Supreme Court. The relegation of the proceedings to the SAT did not imply, in his view, that the whole chapter would be reopened, because this Court specifically opined that the appeal would be heard "on merits." It was his submission, that any other reading would negate the very words and spirit of the order of this Court. This, he sought to support by the fact that in those proceedings, this Court in its wisdom considered it appropriate to continue the interim order, which in turn meant that all proceedings initiated in pursuance of the order passed on 23.7.2011 would continue, subject to the final outcome of the proceedings before the SAT. He also emphasised on the fact that enough opportunity was granted and no prejudice had been caused to Respondent Nos. 1 and 2 herein. No answer had been provided to the act of omission or commission of Respondent Nos.1 and 2 herein as specified in the show cause notice and the inter se relationship of Respondent Nos.1 and 2 herein required a piercing of the corporate veil in view of the gross mismanagement. 26. On the other hand, the defence of the impugned order was vehemently led by Mr. Rishabh Parikh, who did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, the rights of Respondent No.1 herein had been clearly affected without even the courtesy of a show cause notice. Insofar as Respondent No.2 herein is concerned, there was stated to be a violation to the extent that no reasonable opportunity of hearing had been granted as a 150 page long show cause notice was handed over without any documents. The documents running into more than 4,000 pages were made available only on 5.7.2011 and the matter was closed in a period of 14 days denying Respondent No.2 herein the adjournment sought. 30. The task before us is all the more difficult because both set of arguments in a sense would have their appeal at the first blush. We have, thus, endeavoured to charter a course based on the pleas and the documents before us, as also the manner of conduct of the proceedings by the FMC and the nature of defences, technical or on merits sought to be raised by the first two respondents. 31. We have no doubt that a proper show cause notice was served on Respondent No.2 herein. The moot point, however, remains as to what is the effect of not serving him with the documents he sought for and within the compass of time, which was given to him to respond. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proceedings were sought to be closed raises serious doubts in our mind that a fair process and opportunity has been extended to Respondent No.2 herein. 35. Insofar as Respondent No.1 herein is concerned, not even a formal show cause notice has been issued. However, the fact remains that the communications addressed by Respondent Nos.1 and 2 herein do give rise to a clear and unequivocal view that it was understood as a notice both to Respondent Nos.1 and 2 herein. That is how the parties understood it. There is no doubt about the fact that Respondent No.1 herein made an endeavour to approach the High Court challenging the show cause notice at that time without being joined by Respondent No.2 herein -though it was through Respondent No.2 but that endeavour failed as the proceedings before the FMC had not culminated into any order. It is only in the Letters Patent Appeal filed against that the order of the FMC dated 23.7.2011 was sought to be assailed and Respondent No.2 herein joined the proceedings as a party in his personal capacity. There is, thus, to some extent truth in what has been alleged by the appellants before us, i.e., that Respondent Nos.1 and 2 herein are convenien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SAT. We may also note with regret that on the one hand it has been contended by the appellant that so many different proceedings have emanated and, thus, giving a fresh opportunity by issuing a fresh show cause notice having fresh proceedings before the SEBI would serve no effective purpose and yet the summary of those proceedings given to us show hardly any progress. It is not as if those proceedings are anywhere near an advanced stage. 38. The impugned order of the SAT dated 18.10.2019 is predicated on a plea of lack of adequate opportunity and there is no examination on merits. The questions, thus, arises what would be the appropriate directions to be passed since Respondent Nos.1 and 2 have to succeed in view of our aforesaid observations and what will be the nature of relegated proceedings. 39. We have already taken a view that directions passed by the SAT for the case to begin with the service of fresh show cause notices would not be an appropriate direction. In the conspectus of the factual position from the proceedings which have taken place and the legal principles discussed, we are of the view that the following directions would subserve the interest of justice and perf ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
