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TMI Blog2024 (12) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... ne the delay in such cases is that the Petitioner should come to the writ Court before a parallel right is created and that the lapse of time is not attributable to any laches or negligence. The test is not a physical running of time. Where the circumstances justifying the conduct exist, the manifest illegality cannot be sustained on the sole ground of laches. The argument about the complaint against the Petitioners being hit by delay and laches would have to be examined in the above light. Such examination or evaluation would involve delving into factual aspects, determining prejudice, creating parallel rights, etc. Therefore, in this case, the impugned show cause notice cannot be set aside by alleging delay or laches. In any event, this plea can always be raised in response to the impugned show cause notice, and there is no reason to assume that the SEBI would not consider the same. Review, revisit, double jeopardy and res judicata - By simply alleging that this is a case of review, revisit, double jeopardy or res judicata, no case is made out to interfere with the impugned show cause notice. Undoubtedly, it would be open to the Petitioners to raise all such defences. If such def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs must not further delay in filing a response to the impugned show cause notice if they wish to file a response. Response must be filed within 4 weeks of the receipt of the information/documents which the SEBI has now agreed to furnish to the Petitioner. Regarding the information/documents for inspection of documents at least prima facie, we think that the Petitioners are only trying to create a base so that, in future, they can allege failure of natural justice. This is only a prima facie opinion; therefore, it is open to the Petitioners to complain about the non-furnish of this documents/material, demonstrate prejudice, if any, and urge failure of natural justice. However, exercising our extraordinary jurisdiction, we do not think that we should or could assist the Petitioners in unnecessarily prolonging the adjudication of the impugned show cause notice by interfering at every stage and over every matter. The extraordinary and discretionary jurisdiction cannot be invoked for such purposes. The impugned show-cause notice was issued on 20 August 2024. To date, the petitioners have not filed a proper reply. Mr. Doctor pointed out that the Petitioners have also submitted settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia (Procedure for holding Inquiry and Imposing Penalties) Rules, 1995. One of the noticees (Petitioner No. 5) was also called upon to show cause as to why a suitable penalty, as deemed fit, under Section 23A (a) read with Section 24 of Securities Contracts (Regulation) Act, 1956 read with Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 be not imposed upon him. PETITIONERS CONTENTIONS 4. The Petitioners challenge the impugned show cause notice mainly upon the following three grounds: - (i) Delay and laches in the issuance of impugned show cause notice; (ii) That SEBI cannot review or revisit its earlier decisions, and such review or revisiting amounts to double jeopardy or attracts the bar of res judicata; (iii) That the impugned show cause notice is vitiated by nonapplication of mind for failure to consider relevant material and non-furnish of relevant documents. 5. Mr Dwarkadas, the learned Senior counsel for the Petitioners, elaborated that the allegations in the impugned show-cause notice pertained to the 2014 reorganisation of the group, which forms the subject matter of the notice. He submitted that all disclosures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pitative action against the Petitioners, etc., were not considered by the SEBI before issuing the impugned show cause notice. He submitted that such non-consideration of relevant material vitiates the impugned show cause notice, which, therefore, ought to be quashed and set aside. 10. Mr Dwarkadas submitted that the Petitioners had applied for SEBI s file notings and other records concerning the complaints made by Aryas and the conclusion recorded by SEBI regarding such complaints. He submitted that the Petitioners had also requested information on the material placed before the whole-time members of SEBI to decide whether there were sufficient grounds to reopen the matter, enquire or investigate the allegations made and initiate proceedings against the Petitioners. He submitted that such information/documents have not been furnished to the Petitioners by misinterpreting the Hon ble Supreme Court s decision in T. Takano Vs Securities and Exchange Board of India and another (2022) 8 SCC 162 and by relying upon Securities Appellate Tribunal s ( SAT ) order dated 22 May 2024 in the matter of Madhyam Agrivet Industries Ltd Vs Securities and Exchange Board of India 2024 SCC OnLine SAT 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018, possibly to take advantage of the provisions of Regulation 8, which requires the final orders in show cause notices be kept in abeyance until the settlement application is disposed of. He submitted that frivolous objections are now being raised only to delay or stall the impugned show cause notice adjudication. 17. Mr Doctor submitted that there was no delay or laches involved in the issue of the impugned show-cause notice. In any event, he submitted that this is a ground that the Petitioners could always raise in reply to the show-cause notice, and it could be dealt with according to the law. He submitted that this was not a case of any review, and the arguments based on double jeopardy or res judicata are entirely misconceived. 18. After receiving the complaint, Mr Doctor submitted that the SEBI caused its Finance Investigation Department to investigate the matter. Based on the investigation report, a copy of which was duly furnished to the Petitioners, a decision was taken to issue the impugned show-cause notice. The SEBI considered all relevant material, and the argument about nonappli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order were to be made, the Petitioners would have an alternate and efficacious remedy of appealing such adverse order before the Securities Appellate Tribunal ( SAT ). He, therefore, submitted that this Petition be dismissed with cost. EVALUATION OF THE RIVAL CONTENTIONS 23. The rival contentions now fall for our determination. WAIVER/ACQUIESCENCE 24. The Petitioners have pleaded that the first Petitioner, earlier known as Jindal Steels Limited ( JSL ), was incorporated in 1983 and renamed Nalwa Sons Investments Limited in April 2005. In March 2014, the O.P. Jindal group decided to reorganise or segregate its companies and businesses, which was effectively achieved in 2014. Full disclosures were made to SEBI, the Registrar of Companies, and other statutory authorities. 25. On 12 August 2014, Mr Anil Arya and Ms Vaishali Arya, the shareholders of the 1st Petitioner, complained to the SEBI, among other things, about the 2014 reorganisation. SEBI forwarded this complaint to the National Stock Exchange (NSE). 26. The NSE furnished the first Petitioner with a copy of the complaint dated 12 August 2014 and invited responses/comments. The complaint was, in fact, registered on the SCORES p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks, Mumbai and others (1998) 8 SCC 1, the Hon ble Supreme Court has held that the power of the High Court under Article 226 of the Constitution to issue prerogative writs is plenary and not limited by any other provisions of the Constitution. However, the High Court, having regard to the facts of the case, has discretion to entertain or not to entertain a writ petition. Besides, High Courts have imposed upon themselves certain restrictions, one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. 33. The Court has explained that the rule/practice of exhaustion of the alternate remedies would not operate as a bar in at least three contingencies, namely, where the writ petition has been filed for enforcement of the fundamental rights or where there has been a violation of principles of natural justice or where the order or proceedings are wholly without jurisdiction or where the vires of an Act is challenged. The Court held that there is a plethora of case law on this point. Still, to cut down on this circle of forensic whirlpool, the Court chose to rely upon some old decisions of the evolutionary era of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ati Tondon and Others (2010) 8 SCC 110 in which it was observed that judicial notice to be taken of the fact that a vast majority of Petitions under Article 226 of the Constitution were filed only for obtaining interim orders and thereafter prolonging the proceedings. 38. The grounds urged on behalf of the Petitioners do not meet the parameters suggested in Whirlpool Corporation (supra). Apart from such parameters, no good ground exists to interfere with the impugned show-cause notice. The principles and the ratio of the above-referred decisions apply, and based on the same, this petition is not required to be entertained. DELAY AND LACHES 39. The argument about delay or laches would involve an investigation into factual matters and considerations of prejudice. Laches is not mere physical running of time. Laches consists of the creation of parallel rights in the party, which it would be inequitable to disturb, given the delay involved in the proposed action. Considerations of prejudice are also relevant in such matters; therefore, by merely alleging delay or laches or merely construing delay or laches as mere physical running of time, no case is made out to quash the impugned show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014, has not bothered to enclose the complaint with the Petition or even to transcribe the allegations in the said complaint in the Petition. This was necessary to compare whether the contents and the scope of the complaint and the complaint based on which the present show cause notice is issued were the same or substantially the same. The Hon ble Supreme Court has held the pleas of res judicata involve examination and comparison of the pleadings and issues in the two matters. Therefore, such a plea cannot ordinarily decided at the threshold in an application under Order 7 Rule 11 of the CPC. 43. In any event, the impugned show-cause notice was not issued based only on the complaint dated 19 August 2022. After receiving such a complaint, the SEBI appointed an Investigating Authority. This Investigating Authority investigated and submitted a report. Considering this report and other relevant material, the impugned show-cause notice has been issued. A copy of this report has admittedly been furnished to the Petitioners. 44. Therefore, by simply alleging that this is a case of review, revisit, double jeopardy or res judicata, no case is made out to interfere with the impugned show cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice based upon such pleas or the Petitioners understanding of Clause 12 of SEBI s circular dated 18 December 2014. 49. Again, the petitioners are free to raise all permissible pleas in response to the impugned show-cause notice, and there is no good reason to assume the SEBI cannot or will not consider such pleas. In this petition, we are only to consider whether the Petitioners have made out a case to secure the quashing of the impugned show-cause notice or nip the proceedings in the bud. Upon considering the material placed and the contentions advanced, no such extraordinary case is made out. NON-FURNISH OF DOCUMENTS 50. Mr Doctor is justified in contending that there is no clear ground in the Petition about the non-furnish of information/documents. He is also justified in contending that no show cause notice can be quashed based upon such a ground. This Petition was instituted on 8 November 2024. Still, there is no challenge to the denial of documents/information during the proceedings or inspection held on 4 October 2024. 51. In T Takano (supra) the Hon ble Supreme Court has held that the quasi-judicial authority has a duty to disclose the material that has been relied upon at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion/documents in paragraph 4(ii) of the proceedings for inspection of documents dated 4 October 2024, at least prima facie, we think that the Petitioners are only trying to create a base so that, in future, they can allege failure of natural justice. This is only a prima facie opinion; therefore, it is open to the Petitioners to complain about the non-furnish of this documents/material, demonstrate prejudice, if any, and urge failure of natural justice. However, exercising our extraordinary jurisdiction, we do not think that we should or could assist the Petitioners in unnecessarily prolonging the adjudication of the impugned show cause notice by interfering at every stage and over every matter. The extraordinary and discretionary jurisdiction cannot be invoked for such purposes. 56. The impugned show-cause notice was issued on 20 August 2024. To date, the petitioners have not filed a proper reply. Mr. Doctor pointed out that the Petitioners have also submitted settlement proposals, so no final orders can be made on the impugned show-cause notice until the settlement applications/proposals are disposed of. This Petition was filed in November 2024, and a stay was sought on further p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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