BEFORE THE SECURITIES APPELLATE TRIBUNAL

MUMBAI
Date of Decision: 05.02.2015
Appeal No. 288 of 2014
Mr. Praveen Mohnot
D-1, Sunita Apartments,
62-CC Peddar Road,
Mumbai-400 036

Appellant

Versus
Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051

Respondent

Mr. Janak Dwarkadas, Senior Advocate with Ms. Manik Joshi and
Ms. Nimisha Rao, Advocates i/b Crawford Bayley & Co. for the
Appellant.
Mr. Kumar Desai, Advocate with Mr. Rushin Kapadia, Advocate i/b K.
Ashar & Co. for the Respondent.

WITH
Appeal No. 289 of 2014
Mrs. Priyanka Singhvi
D-1, Sunita Apartments,
62-CC Peddar Road,
Mumbai-400 036

Appellant

Versus
Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051

Respondent

Mr. Ankit Lohia, Advocate with Ms. Manik Joshi and Ms. Nimisha Rao,
Advocates i/b Crawford Bayley & Co. for the Appellant.
Mr. Kumar Desai, Advocate with Mr. Rushin Kapadia, Advocate i/b K.
Ashar & Co. for the Respondent.

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WITH
Appeal No. 290 of 2014
Mrs. Anita Ravichandran
Plot Nos. 133 and 134,
Chandramani Building,
Flat No. 1101 and 1102, 11th Floor,
Telang Cross Road No. 3,
Swami Jain Acharya Marg, Matunga (East),
Mumbai- 400 019

Appellant

Versus
Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051

Respondent

Mr. P. N. Modi, Senior Advocate with Ms. Manik Joshi and

Ms. Nimisha Rao, Advocates i/b Crawford Bayley & Co. for the
Appellant.
Mr. Kumar Desai, Advocate with Mr. Rushin Kapadia, Advocate i/b K.
Ashar & Co. for the Respondent.
WITH
Appeal No. 291 of 2014
Mr. N. Ravichandran
Plot Nos. 133 and 134,
Chandramani Building,
Flat No. 1101 and 1102, 11th Floor,
Telang Cross Road No. 3,
Swami Jain Acharya Marg, Matunga (East),
Mumbai- 400 019

Appellant

Versus
Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051

Respondent

Mr. P. N. Modi, Senior Advocate with Ms. Manik Joshi and

Ms. Nimisha Rao, Advocates i/b Crawford Bayley & Co. for the
Appellant.
Mr. Kumar Desai, Advocate with Mr. Rushin Kapadia, Advocate i/b K.
Ashar & Co. for the Respondent.

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AND
Appeal No. 292 of 2014
1. Mr. Hemant R. Patel
A-502, Panchsheel Heights,
Mahavir Nagar, Dhanukarwadi,
Kandivali (W),
Mumbai- 400 067
2. Mr. Hemant Patel HUF
A-502, Panchsheel Heights,
Mahavir Nagar, Dhanukarwadi,
Kandivali (W),
Mumbai- 400 067

Appellants

Versus
Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051

Respondent

Mr. Neville Lashkari, Advocate with Ms. Manik Joshi and Ms. Nimisha
Rao, Advocates i/b Crawford Bayley & Co. for Appellants.
Mr. Kumar Desai, Advocate with Mr. Rushin Kapadia, Advocate i/b K.
Ashar & Co. for the Respondent.
CORAM: Justice J.P. Devadhar, Presiding Officer
Jog Singh, Member
A.S. Lamba, Member
Per: Justice J.P. Devadhar (Oral)

1.

Appellants in all these appeals are aggrieved by the order passed

by the Whole Time Member (WTM for short) of Securities and

Exchange Board of India (SEBI for short) on July 24, 2014, whereby
the appellants are directed to disgorge the unlawful gains and are
restrained from accessing the securities market and prohibited from
buying, selling or otherwise dealing in securities directly or indirectly
for a period of 10 years from that date.
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2.

Grievance of Mr. Dwarkadas, learned Senior counsel for

appellants is that the impugned order is unsustainable not only on merits

but also on ground that the said order has been passed in breach of the
principles of natural justice.

3.

Relevant facts are that, in the earlier round of litigation, show

cause notice issued to the appellants on December 18, 2008 was decided
against the appellants by an order passed by WTM of SEBI on
September 22, 2009. This Tribunal, on October 21, 2010, while setting
aside the said order dated September 22, 2009 and remanding the
matters back for fresh decision had inter-alia observed thus:We are of the view that lest there is any
miscarriage of justice, the cases be remanded to
the

whole

time

member

for

issuing

fresh/supplementary show cause notice to the

appellants laying therein a specific charge that
they being connected/ deemed to be connected
persons were insiders within the meaning of
the Regulations in addition to the allegations
already made and thereafter decide all the issues
afresh in accordance with law after affording an
opportunity of hearing to the appellants.

4.

Accordingly, fresh show cause notice was issued though belatedly

on December 27, 2012. In the reply to the show cause notice filed by
appellants on May 08, 2013, appellants had sought clarification as to
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whether the show cause notice dated December 27, 2012 was a
supplementary show cause notice to the earlier show cause notice dated
December 18, 2008 or it was a fresh show cause notice. Appellants had
also contended that issuing fresh show cause notice without withdrawing
the earlier show cause notice would be barred by the principle of resjudicata. It was further contended that the show cause notice is contrary
to the order of this Tribunal dated 21/10/2010 and amounts to double
jeopardy in the eyes of law. Appellants requested SEBI to decide the
above issue as preliminary issue. In the said reply it was specially stated
that they were reserving their right to file detailed reply after obtaining
copy of the investigation report, inspection of documents and cross
examination of the witnesses whose statement are relied upon in the
show cause notice, in case the preliminary issue is decided against the
appellants.
5.

In the notice given by SEBI fixing personal hearing on August 13,

2013 nothing was stated that the appellants are called upon to make
submissions on the preliminary issue as also on merits. According to the
appellants the arguments advance by them at the personal hearing on
August 13, 2013 was only with reference to the preliminary issue as is
evident from the written submissions filed by the appellants.
6.

In the impugned order dated July 24, 2014, the WTM of SEBI has

dealt with preliminary issue of res-judicata raised by appellants by

stating that during the course of hearing on August 13, 2013 appellants
were informed that the earlier show cause notice should be treated as non
est and proceeded to decide the matters on merit against the appellants.

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7.

Question therefore to be considered is, whether, the appellants are

justified in contending that the impugned order is violative of the

principles of natural justice on ground that the said order has been passed
without giving an opportunity of hearing on merits and also on ground
that the said order is passed after 11 months of granting personal hearing.

8.

Mr. Desai, learned counsel appearing on behalf of SEBI submitted

that the appellants in their reply/written statement, apart from raising the
preliminary issue had also dealt with the merits of the case and therefore
the WTM of SEBI was justified in dealing with the preliminary issue and
also on the merits of the case in the impugned order. As regards the
delay in passing the impugned order, counsel for SEBI submitted that the
appellants have not demonstrated as to how the delay has caused
prejudice to the appellants. Accordingly, counsel for SEBI submitted that
there is no merit in the appeals and the same are liable to be dismissed.

9.

We have carefully considered rival submissions advanced by

counsel on both sides.

10.

Admittedly, the show cause notice issued on December 27, 2012

after remand did not indicate as to whether it was issued as a

supplementary show cause notice to the earlier show cause notice dated
December 18, 2008 or it was issued in supersession of the earlier show
cause notice dated December 18, 2008. Admittedly, appellants had
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sought clarification in that behalf in their reply dated May 8, 2013,

however no order was passed to that effect. There is nothing on record
to suggest that the personal hearing fixed on August 13, 2013 was for
hearing on the preliminary issue as also for hearing on merits.

11.

Moreover, from the written submissions filed by the appellants it

is seen that apart from cursorily touching upon the merits of the case, the
appellants had not dealt with various grounds on the basis of which
appellants were treated as insiders in the show cause notice issued on
December 27, 2012.

Even from the impugned order it cannot be

inferred that the appellants on August 13, 2013 had made submissions
on all the grounds on the basis of which appellants were considered as
insiders in the fresh show cause notice issued to the appellants on
December, 27, 2012.

12.

For the aforesaid reasons, we find merit in the contention of the

appellants that in the personal hearing granted on August 13, 2013

appellants had argued only on the preliminary issue and that they were
under the impression that fresh hearing would be given to them in case
the preliminary issue is decided against the appellants. While making it
clear that it is open to SEBI to hear on preliminary issue as well as
merits together and pass one composite order, in the facts of present
case, in our opinion, SEBI was not justified in passing impugned order
on merits without making it clear to the appellants that at the personal
hearing appellants would be heard both on the preliminary issue and on
merits.

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13.

In these circumstances, the impugned order is quashed and set

aside and the matters are restored to the file of the WTM of SEBI for
passing common order on the preliminary issue as to whether the show
cause notice is contrary to the order of this Tribunal dated 21/10/2010
and also on merits. Appellants are directed to intimate to SEBI, list of
documents, inspection of which they seek and also the list of persons to
whom they want to cross examine. All contentions on both sides are
kept open.

14.

All appeals are disposed in the above terms with no order as to

costs.

Sd/Justice J.P. Devadhar

Presiding Officer

Sd/Jog Singh
Member

Sd/A S Lamba
Member
05.02.2015
Prepared & Compared By PK

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