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TMI Blog2021 (9) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... er a court to decide the dispute and it is not as if each and every fact pleaded in the petition would automatically lead to a conclusion that there would arise a cause of action within the territorial jurisdiction of a particular High Court, unless the facts are of such a nature that they would have a nexus or relevance with the lis involved in the case. It is also not in dispute that the sale proceeds of the shares of SAIPL to TMPPL, i.e., a sum of ₹ 1000-1200 crores had been placed in an escrow account held in trust for the shareholders and the very same Transaction Committee was required to deliberate upon and evaluate the various options available for distribution of the monies to the shareholders - It has not been denied by the respondent No.2/company that during this entire period when a decision was taken to delist the company and give an exit option to the public shareholders by offering them a floor price of ₹ 63.77 ps per share, Mr. Anoop Krishna was closely connected not only to the management, but also to the aforesaid promoters of the respondent No.2/company. We are unable to sustain the order dated 20.10.2020 passed by the respondent No.1/SEBI insof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company entered into a Share Price Agreement dated 21.01.2019 for the sale of the entire share capital of SAIPL to TMPPL for a sale consideration of ₹ 1,227 crores approximately. It also approved the sale and transfer of its dairy product business to SAIPL, after completion of the transfer of the shares of SAIPL to TMPPL, in terms of the Business Transfer Agreement dated 21.01.2019, for a total consideration of ₹ 473 crores approximately. (e) On 25.03.2019, the respondent No.2/company made a further public disclosure to the BSE and NSE informing them about setting up of an escrow account to hold the proceeds of the aforesaid sale and constitution of a five member Transaction Committee comprising three independent Directors and not more than two other Directors in order to oversee, supervise and manage utilisation of the net proceeds from the aforesaid sale transaction in the escrow account held in trust for the shareholders. The said Transaction Committee was to deliberate upon and evaluate various options available for the distribution of the proceeds of the sale transactions to the shareholders. Mr. Anoop Krishna, an independent Director, appointed in the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent No.2/company, the respondent No.1/SEBI advised the stock exchanges to conduct an independent critical analysis of the issues based on the disclosures made by the respondent No.2/company. In the month of December, 2019 and January, 2020, BSE and NSE submitted reports where certain issues were raised with regard to the sale transaction and both the exchanges stated that they would not go ahead with the delisting process of the respondent No.2/company without obtaining express permission from the respondent No.1/SEBI. As a result, the entire delisting process was brought to a grinding halt. (i) The petitioner has further averred in the writ petition that on 23.07.2020, he became aware of the public disclosure made by the respondent No.2/company wherein it had stated that the respondent No.1/SEBI had appointed GTB as a forensic auditor to conduct forensic audit of the company in respect of the financial years ending on March, 2019 and March, 2020. Following were the terms of reference for the audit assignment of GTB, recorded by the respondent No.1/SEBI in its order dated 20.10.2020:- a. Manipulation of books of accounts; b. Misrepresentation including of fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e letter dated 30.09.2020, GTB gave a response and based thereon the respondent No.1/SEBI addressed a letter dated 27.10.2020 to the respondent No.2/company stating inter alia that there was no conflict of interest on the independence of GTB as a forensic auditor. The clarification offered by the GTB has been extracted in para 26 of the impugned order dated 20.10.2020, passed by the respondent No.1/SEBI and reads as follows:- i. In a professional services firm constituted as partnerships, a director/senior advisor is a fairly junior position and should not be construed to have same level of authority or responsibility as a director has in a company registered under the Companies Act, 2013. Such responsibility and authority in respect of a partnership firm rest with the designated partners under the provisions of the Limited Liability Partnership Act, 2008 and the other partners at the Firm; ii. Anoop Krishna is an independent consultant/contractor who is on a part-time retainer basis with GT Restructuring Services LLP who has been assigned the designation of Director/Senior Advisor . Anoop Krishna is not an employee, partner or a designated partner under the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid order was dismissed on 09.02.20201. During the pendency of the review application, the respondent No.1/SEBI passed an order directing BSE and NSE not to proceed with the delisting process of the respondent No.2/company and simultaneously, granted an extension of six months to the special resolution passed for delisting, i.e., till 13.04.2021. 5. On 09.03.2021, the petitioner addressed an e-mail to the respondent No.1/SEBI expressing an apprehension of breach of the rules of professional ethics, conflict of interest and bias in the appointment of GTB as a forensic auditor of the respondent No.2/company and requested for a fair and independent audit. Vide e-mail dated 09.03.2021, the respondent No.1/SEBI directed the petitioner to file a complaint on its SCORES PLATFORM . It was also mentioned that the said reply was an auto-generated one, addressed by the Investor Assistance and Education Cell of the respondent No.1/SEBI, which is extracted below:- Dear Sir/Madam, This is with reference to the trailing mail. Please lodge your complaint on SEBI Complaint Redress System (SCORES) at https://www.scores.gov.in or SCORES Mobile App which is available on both A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany had expressed an apprehension about the possibility of bias against the GTB on account of the affiliation of Mr. Anoop Krishna with its sister concern i.e. GT Restructuring Services LLP, the respondent No.1/SEBI has blindly accepted the reply received from GTB without applying its own mind on the aspect of clash of interest as pointed out; that it was not as if the petitioner was seeking appointment of a particular forensic auditor in respect of the respondent No.2/company, his request was only for appointment of any forensic auditor on the panel of the respondent No.1/SEBI to exclude any chance of bias or conflict of interest; that the presence of Mr. Anoop Krishna who is affiliated with the sister concern of GTB and has a close connection with the respondent No.2/company as its Director, as a Member of its Audit Committee and Transaction Committee are aspects that highlight the conflict for interest of appointment of GTB as a forensic auditor of the respondent No.2/company, but have been completely ignored by the respondent No.1/SEBI. 8. It was further argued that when the terms of reference of GTB as conveyed by the respondent No.1/SEBI itself shows that the Promoters/Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the registered office of the respondent No.1/SEBI is in Mumbai and the registered office of the respondent No.2/company is at Ahmednagar and the forensic auditor, GTB is also based in Maharashtra. He submitted that GTB ought to have been impleaded as a co-respondent in the present proceedings and its non-joinder is fatal to the writ petition; that the appointment of GTB as a forensic auditor by the respondent No.1/SEBI was after due diligence and the objections against the appointment of GTB were duly taken into account before passing the order dated 20.10.2020. 11. On the impugned decision of the respondent No.1/SEBI, dated 20.10.2020, learned Senior Advocate submitted that though the respondent No.2/company had questioned the appointment of GTB on the ground of lack of impartiality and conflict of interest, such a ground was specifically given up before SAT. The respondent No.2/company had agreed that it will cooperate and provide all necessary papers, as demanded by the forensic auditor. He contended that the SAT in its order dated 09.11.2020, had clarified that the forensic report has no relationship with the delisting approval of the respondent No.2/company and its order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holder can have a right to question the appointment of an investigator appointed by a statutory body and the only person who can raise such a grievance is the concerned company itself. 13. A counter affidavit has also been filed by the respondent No.2/company, wherein it has been admitted that the company did set up an escrow account in order to hold the consideration proceeds of the sale transaction and it had set up a Transaction Committee on 13.02.2019, which included Mr. Anoop Krishna as a member. The said Transaction Committee was entrusted with the role and function to oversee, supervise and manage the utilization of the net proceeds from the sale transactions as held in the escrow account, for being distributed among its shareholders. It has been stated that the proposed delisting of the respondent No.2/company has been completed and its shares were to be delisted on 25.04.2021 and that as per the records of the respondent No.2/company, the petitioner did not offer his shares in the exit offer that was provided by company. Referring to the order dated 09.11.2020, passed by the SAT, it has been averred that the SAT has delinked the forensic audit and the voluntary delistin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esiding in Hyderabad since the year 2019 and is residing at the address given in the Memo of Parties and that he had executed a rent agreement in respect of the flat taken by him on lease. He is working as a Project Engineering Consultant to a company situated in Hyderabad and he had purchased the shares of the respondent No.2/company on 10.10.2020, after shifting to Hyderabad; that the respondent No.1/SEBI has a local office in Hyderabad and simply because its registered office is situated in Mumbai would not mean that no part of cause of action has arisen in Hyderabad, for filing the petition in this court, more so when the e-mail was sent by the petitioner from Hyderabad and was lodged at the Centralised e-mail address of the respondent No.1/SEBI. It was urged that the petitioner is a minority shareholder of the respondent No.2/company and has not tendered his shares in the delisting offer and therefore, his locus standi to file the present petition and pursue the same within the State of Telangana, cannot be questioned. Referring to clause (1) of Article 226 of the Constitution of India, learned Senior Advocate submitted that this court is empowered to issue directions and pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court with a grievance that the respondent No.1/SEBI is not acting in the interest of the minority shareholders and investors of the respondent No.2/company and is insisting that GTB ought to continue as a forensic auditor to look into the affairs of the respondent No.2/company, when it has been clearly brought out that the integrity of the forensic audit would be compromised and the interest of the investor/shareholder of the respondent No.2/company, which the respondent No.1/SEBI is under a mandate to protect, will be adversely affected due to the same. Learned Senior Advocate concluded by submitting that the respondent No.1/SEBI has itself admitted that it has a panel of nine forensic auditors and the petitioner has not requested for any particular forensic auditor to be appointed in respect of the respondent No.2/company. His only grievance is that continuation of GTB as a forensic auditor would not result in a free and fair scrutiny of the books of accounts, to the detriment of the minority shareholders. 19. We have perused the records and given our careful consideration to the arguments advanced by learned counsel for parties. 20. Coming first to the preliminary object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Clause (1) of Article 226 begins with a non obstante clause - notwithstanding anything in Article 32 - and provides that every High Court shall have power throughout the territories in relation to which it exercises jurisdiction , to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, for the enforcement of any of the rights conferred by Part III or for any other purpose. Under clause (2) of Article 226 the High Court may exercise its power conferred by clause (1) if the cause of action, wholly or in part, had arisen within the territory over which it exercises jurisdiction, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories. On a plain reading of the aforesaid two clauses of Article 226 of the Constitution it becomes clear that a High Court can exercise the power to issue directions, orders or writs for the enforcement of any of the fundamental rights conferred by Part III of the Constitution or for any other purpose if the cause of action, wholly or in part, had arisen within the territories in relation to which it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following pertinent observations on the aspect of exercise of territorial jurisdiction by a High Court under Article 226 (2) of the Constitution of India:- 37. The object of the amendment by inserting clause (2) in the article was to supersede the decision of the Supreme Court in Election Commission v. Saka Venkata Rao [Election Commission v. Saka Venkata Rao, AIR 1953 SC 210] and to restore the view held by the High Courts in the decisions [Ed. : The reference is to K.S. Rashid Ahmed v. Income Tax Investigation Commission, 1950 SCC OnLine P H 58; M.K. Ranganathan v. Madras Electric Tramways (1904) Ltd., 1952 SCC OnLine Mad 34; Aswini Kumar Sinha v. CCE and Land Customs, 1951 SCC OnLine Gau 53.] cited above. Thus the power conferred on the High Courts under Article 226 could as well be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises and it is no matter that the seat of the authority concerned is outside the territorial limits of the jurisdiction of that High Court. The amendment is thus aimed at widening the width of the area for reaching the writs issued by different High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Court's jurisdiction and such infringement may take place by causing him actual injury or threat thereof. (emphasis added) 28. We may profitably refer to another decision of the Supreme Court in Nawal Kishore Sharma v. Union of India, reported as (2014) 9 SCC 329 , wherein emphasis has been laid on the nature of averments made in the writ petition for deciding the question of cause of action as follows:- 16. Regard being had to the discussion made hereinabove, there cannot be any doubt that the question whether or not cause of action wholly or in part for filing a writ petition has arisen within the territorial limit of any High Court has to be decided in the light of the nature and character of the proceedings under Article 226 of the Constitution. In order to maintain a writ petition, the petitioner has to establish that a legal right claimed by him has been infringed by the respondents within the territorial limit of the Court's jurisdiction. (emphasis added) 29. In Alchemist Limited v. State Bank of Sikkim, reported as (2007) 11 SCC 335 , the Supreme Court referred to several earlier rulings on the aspect of cause of action and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would or would not constitute a part of cause of action, one has to consider whether such fact constitutes a material, essential, or integral part of the cause of action. It is no doubt true that even if a small fraction of the cause of action arises within the jurisdiction of the court, the court would have territorial jurisdiction to entertain the suit/petition. Nevertheless it must be a part of cause of action , nothing less than that. (emphasis added) 30. In Ambika Industries v. Commissioner of Central Excise, reported as (2007) 6 SCC 769, the Supreme Court has opined that even if a small portion of cause of action arises in its jurisdiction, the court will have jurisdiction over a matter. Para 40 of the judgment states as follows:- 40. Although in view of Section 141 of the Code of Civil Procedure the provisions thereof would not apply to writ proceedings, the phraseology used in Section 20(c) of the Code of Civil Procedure and Clause (2) of Article 226, being in pari materia, the decisions of this Court rendered on interpretation of Section 20(c) CPC shall apply to the writ proceedings also. Before proceeding to discuss the matter further it may be pointed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi, then the Delhi High Court should be treated as the forum conveniens. We are unable to subscribe to the said view. 33. In view of the aforesaid analysis, we are inclined to modify the findings and conclusions of the Full Bench in New India Assurance Company Limited (supra) and proceed to state our conclusions in seriatim as follows: (a) The finding recorded by the Full Bench that the sole cause of action emerges at the place or location where the tribunal/appellate authority/revisional authority is situate and the said High Court (i.e., Delhi High Court) cannot decline to entertain the writ petition as that would amount to failure of the duty of the Court cannot be accepted inasmuch as such a finding is totally based on the situs of the tribunal/appellate authority/ revisional authority totally ignoring the concept of forum conveniens. (b) Even if a miniscule part of cause of action arises within the jurisdiction of this court, a writ petition would be maintainable before this Court, however, the cause of action has to be understood as per the ratio laid down in the case of Alchemist Ltd. (supra). (c) An order of the appellate authority constitutes a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now proceed to apply the aforesaid law to the facts of the instant case. The relevant averments made by the petitioner to approach this High Court for relief are that he is residing and working for gain in Hyderabad, Telangana from the year 2019; that subsequent to his shifting his residence to Hyderabad, he had purchased the shares of the respondent No.2/company in October, 2020; that the respondent No.1/SEBI has a local office in Banjara Hills, Hyderabad and further, that as a shareholder of the respondent No.2/company he had sent e-mails dated 09.03.2021 and 19.03.2021 from Hyderabad to the centralized e-mail address of the respondent No.1/SEBI. The petitioner has also averred that he has not offered his shares in response to the delisting offer made by the promoters for buying back the shares of the respondent No.2/company. Instead, he has raised a grievance on the competence and the objectivity of GTB to conduct a forensic audit of the respondent No.2/company on the directions of the respondent No.1/SEBI, which has not been addressed by the latter, compelling him to file the present writ petition. 34. On examining the aforesaid bundle of facts, it cannot be stated that not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns taken by the petitioner against continuation of GTB as a forensic auditor of the respondent No.2/company, it is apposite to examine the concept of principles of natural justice, as developed in our jurisprudence over the years, initially by drawing strength from the celebrated decisions of King s Bench Division in the King v. Sussex Justices, ex parte McCarthy, reported as [1924] 1 KB 256 = [1923] All ER Rep 233 and Queen s Division Bench in In re H.K. (an infant), reported as (1967) 2 QB 617, and in Baging v. Criminal Injuries Compensation Board Ex-parte Latin, reported as (1967) 2 QB 864 and thereafter, on the Supreme Court building the edifice of Rule of Law, brick by brick and case by case. 37. In the landmark case of A.K.Kraipak v. Union of India, reported as (1969) 2 SCC 262, a Constitution Bench of the Supreme Court has expounded on the scope of exercise of quasi judicial powers vis- -vis administrative powers and application of the principles of natural justice to such an exercise of power for ensuring a just and fair decision and held as follows:- 13. The dividing line between an administrative power and a quasi-judicial power is quite thin and is being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ancient remedy by way of certiorari have never been and ought not to be specifically defined. They have varied from time to time being extended to meet changing conditions. At one time the writ only went to an inferior court, later its ambit was extended to statutory tribunals determining a lis inter partes. Later again it extended to cases where there was no lis in the strict sense of the word but where immediate or subsequent rights of a citizen were affected. The only constant limits throughout were that it was performing a public duty. Private or domestic tribunals have always been outside the scope of certiorari since their authority is derived solely from contract, that is, from the agreement of the parties concerned. Finally, it is to be observed that the remedy has now been extended, See Reg. v. Manchester Legal Aid Committee, Ex parte R.A. Brand Co. Ltd. [(1952) 2 QB 413] to cases in which the decision of an administrative officer is only arrived at after an inquiry or process of a judicial or quasijudicial character. In such a case this court has jurisdiction to supervise that process. We have as it seems to me, reached the position when the ambit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the reasonableness of the decision of the respondent No.1/SEBI of continuing with GTB as the forensic auditor. 39. In Management of M/s. M.S.Nally Bharat Engineering Company Limited v. State of Bihar, reported as (1990) 2 SCC 48, the point that came up for consideration before the Supreme Court was whether the Government ought to have afforded an opportunity of hearing to the appellant/company therein before accepting the representation of the respondent/workmen, transferring a labour dispute raised by them from the Labour Court, Dhanbad to the Labour Court, Patna and the validity of the reasons given by the Government for passing such an order. Highlighting the concept of rule of law which requires the authorities vested with judicial or administrative functions to discharge their duty in a fair and just manner, the Supreme Court has made the following pertinent observations:- 12. After the leading English case of Ridge v. Baldwin [1964 AC 40 : (1963) 2 All ER 66] and an equally important case of this Court in A.K. Kraipak v. Union of India [(1969) 2 SCC 262 : (1970) 1 SCR 457] there was a turning point in the development of doctrine of natural justice as applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iament is not to be presumed to act unfairly , the courts may be able in suitable cases (perhaps always) to imply an obligation to act with fairness. 15. In Mohinder Singh Gill v. Chief Election Commissioner [(1978) 1 SCC 405, 434 : (1978) 2 SCR 272] Krishna Iyer, J. commented that natural justice though varying is the soul of the rule as fair play in action. It extends to both the fields of judicial and administrative. The administrative power in a democratic set up is not allergic to fairness in action and discretionary executive justice cannot degenerate into unilateral injustice. Good administration demands fair play in action and this simple desideratum is the fount of natural justice. Fairness is flexible and it is intended for improving the quality of government by injecting fair play into its wheels. 16. In Maneka Gandhi v. Union of India [(1978) 1 SCC 248 : (1978) 2 SCR 621] Bhagwati, J., expressed similar thought that audi alteram partem is a highly effective rule devised by the courts to ensure that a statutory authority arrives at a just decision and it is calculated to act as a healthy check on the abuse or misuse of power. 17. In Swadeshi Cotton M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout drawing any distinction. But Prof. Paul Jackson points out that Such phrases may sometimes be used to refer not to the obligation to observe the principles of natural justice but, on the contrary, to refer to a standard of behaviour which, increasingly, the courts require to be followed even in circumstances where the duty to observe natural justice is inapplicable ( Natural Justice by Paul Jackson, 2nd edn., p. 11). 20. We share the view expressed by Professor Jackson. Fairness, in our opinion, is a fundamental principle of good administration. It is a rule to ensure the vast power in the modern State is not abused but properly exercised. The State power is used for proper and not for improper purposes. The authority is not misguided by extraneous or irrelevant considerations. Fairness is also a principle to ensure that statutory authority arrives at a just decision either in promoting the interest or affecting the rights of persons. To use the time hallowed phrase that justice should not only be done but be seen to be done is the essence of fairness equally applicable to administrative authorities. Fairness is thus a prime test for proper and good administration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. They do not supplant law but supplement it. (Also see ITO v. Madnani Engg. Works Ltd [(1979) 2 SCC 455 : 1979 SCC (Tax) 140] ). 16. x x x 17. Initially, it was the general view that the rules of natural justice would apply only to judicial or quasi-judicial proceedings and not to an administrative action. However, in State of Orissa v. Dr. Binapani Dei [AIR 1967 SC 1269 : (1967) 2 SCR 625] the distinction between quasi-judicial and administrative decisions was perceptively mitigated and it was held that even an administrative order or decision in matters involving civil consequences, has to be made consistent with the rules of natural justice. Since then the concept of natural justice has made great strides and is invariably read into administrative actions involving civil consequences, unless the statute, conferring power, excludes its application by express language. 18. Recently, in Canara Bank v. V.K. Awasthy [(2005) 6 SCC 321 : 2005 SCC (L S) 833] the concept, scope, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial. 20. We may, however, hasten to add that no general rule of universal application can be laid down as to the applicability of the principle audi alteram partem, in addition to the language of the provision. Undoubtedly, there can be exceptions to the said doctrine. Therefore, we refrain from giving an exhaustive catalogue of the cases where the said principle should be applied. The question whether the principle has to be applied or not is to be considered bearing in mind the express language and the basic scheme of the provision conferring the power; the nature of the power conferred and the purpose for which the power is conferred and the final effect of the exercise of that power. It is only upon a consideration of all these matters that the question of application of the said principle can be properly determined. (See Union of India v. Col. J.N. Sinha [(1970) 2 SCC 458].) 21. In Mohinder Singh Gill v. Chief Election Commr. [(1978) 1 SCC 405] explaining as to what is meant by expression civil consequence , Krishna Iyer, J., speaking for the majority said: (SCC p. 440, para 66) 66. Civil consequences undoubtedly cover infraction of not merely property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion against the applicant and they were not biased by the presence of the Deputy Clerk in their chambers during the course of conferring with each other, the King s Bench Division quashed the applicant s conviction order on the ground that it was improper for the acting clerk to have remained present with the Justices when they were in consultation, having regard to his relationship with the Solicitor firm. We may usefully extract the following observations made in the captioned decision at pages 258 and 259:- It is clear that the deputy clerk was a member of the firm of solicitors engaged in the conduct of proceedings for damages against the applicant in respect of the same collision as that which gave rise to the charge that the justices were considering. It is said, and, no doubt, truly, that when that gentleman retired in the usual way with the justices, taking with him the notes of the evidence in case the justices might desire to consult him, the justices came to a conclusion without consulting him, and that he scrupulously abstained from referring to the case in any way. But while that is so, a long line of cases shows that it is not merely of some importance but is of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but must also appear to be done. As Viscount Cave, L.C. has observed in Frome United Breweries Co. v. Bath Justices [(1926) AC 586, 590] This rule has been asserted, not only in the case of Courts of Justice and other judicial Tribunals, but in the case of authorities which, though in no sense to be called Courts, have to act as Judges of the rights of others . In dealing with cases of bias attributed to members constituting Tribunals, it is necessary to make a distinction between pecuniary interest and prejudice so attributed. It is obvious that pecuniary interest, however small it may be in a subject-matter of the proceedings, would wholly disqualify a member from acting as a Judge. But where pecuniary interest is not attributed but instead a bias is suggested, it often becomes necessary to consider whether there is a reasonable ground for assuming the possibility of a bias and whether it is likely to produce in the minds of the litigant or the public at large a reasonable doubt about the fairness of the administration of justice. It would always be a question of fact to be decided in each case. The principle , says Halsbury, nemo debet esse judex in causa propria sua precl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid promoters of the respondent No.2/company. 49. Expressing an apprehension about the likelihood of a bias creeping into forensic audit proposed to be undertaken by the GTB in view of the prominent presence of Mr. Anoop Krishna as a Member of the Board of Directors in the sister concern of GTB and a probability of conflict of interest, the petitioner had addressed an e-mail dated 09.03.2021 to the respondent No.1/SEBI, requesting for appointment of any other fair and independent auditor. The said e-mail was replied to by the respondent No.1/SEBI vide e-mail dated 09.03.2021 which was nothing but an auto generated reply fed into the software installed by the respondent No.1/SEBI simply stating that if an investor proposed to lodge a complaint against a listed company, a SEBI registered intermediary or a SEBI recognized Market Infrastructure Institution, he ought to register himself on the SEBI Complaint Redress System (SCORES). Even though the petitioner had pointed out to the respondent No.1/SEBI vide e-mail dated 19.03.2021, he had no intention of lodging a complaint against any of the aforesaid entities and his grievance was directed against the respondent No.1/SEBI itself, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the respondent No.1/SEBI to continue with the very same forensic auditor and the matter was closed there. The above is no more than a narration of the sequence of events. There is no discussion on the conflict of interest and no demonstrable application of mind on the part of the whole time member of the respondent No.1/ SEBI for rejecting the request for a change of the forensic auditor. 52. We may note here that if application of mind for rejecting the objection relating to the objectivity of GTB to act as a forensic auditor of the respondent No.2/company could be deduced from a bare reading of the impugned order, then notwithstanding the objection taken by the petitioner herein that the respondent No.1/SEBI had declined to examine his objection to their appointment, we would have perhaps declined to interfere for the simple reason that the objections received by the respondent No.2/company from its shareholders on the conflict of interest qua GTB and placed before the respondent No.1/SEBI were akin in nature and having been taken into consideration and ruled upon, there would have been no good reason to delve into the matter all over again. However, in view of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nderlying principle is maintaining objectivity in dealing with or deciding a matter. There can be no gainsaying the fact that an auditor, being a professional person/entity has to function with complete impartially and independently. A shadow cast on the independence of a financial audit, need not necessarily be backed with any specific instance of bias or mala fides. The looming cloud of doubt itself would be a persuasive factor for interference. As observed by the Supreme Court in Management of M/s. M.S.Nally Bharat Engineering Company Limited (supra), non-observance of natural justice would itself cause prejudice to a person and independent proof of prejudice, is unnecessary. Due to the blurring of lines between an administrative order and a semi-judicial order, the decision of the respondent No.1/SEBI to appoint GTB as a forensic auditor of the respondent No.2/company would attract the doctrine of natural justice, requiring the authority to act in a just and fair manner. Acceptance by the respondent No.1/SEBI of the clarification offered by GTB on the aspect of bias, without offering any reasons for the same and continuing with GTB would, in our opinion, fall foul of the princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e unable to sustain the order dated 20.10.2020 passed by the respondent No.1/SEBI insofar as it has upheld the decision taken on 07.10.2020, of appointing GTB as a forensic auditor in respect of the financial affairs of the respondent No.2/company which is accordingly quashed and set aside. Respondent No.1/SEBI is directed to appoint any other auditor from its panel for conducting the forensic audit of the respondent No.2/company, as per the terms of reference drawn by it. We may note here that the financial audit was stayed vide order dated 22.04.2021. At that stage, GTB was in the process of calling for documents from the respondent No.2/company. Steps had yet to be taken to examine the said documents, which are stated to be fairly voluminous in nature. Therefore, no undue hardship or delay is likely to be caused if any other auditor is appointed by the respondent No.1/SEBI to audit the accounts of the respondent No.2/company, for the audit assignment. The newly appointed auditor shall pick up threads from the point at which it was left by GTB and complete the audit assignment, in accordance with the terms of the reference. The writ petition is allowed. There shall however, be no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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