Securities Appellate Tribunal
Jolly Plastic Industries Ltd & Ors. vs Sebi on 19 May, 2023
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision: 19.5.2023
Misc. Application No.1073 of 2022
And
Misc. Application No.2 of 2023
And
Appeal No.752 of 2022
1.Jolly Plastic Industries Ltd. 311, Third Floor, Pooja Complex, Harihar Chowk, Sadar Bazaar, Rajkot, Gujarat-360001.
2. Aglow Financial Services Pvt. Ltd. S-524, Vikas Marg, Shakarpur, Delhi (East) - 110092.
3. Svam Software Ltd.
224, G/F, Swayam Sewa, Co-operative Housing Society Ltd., Jhilmil Delhi (East) - 110032.
4. Shridhar Financial Services Ltd. 508, 5th Floor, Arunachal Building, Barakhamba Road, New Delhi, Central Delhi-110001.
5. Ashok Kumar Bansal Plot No.69, Krishna Gali, Sabili, Sabili Ind. Area Delhi-110093.
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6. Mamta Bansal 9C, Regal Building, Connaught Place, Delhi-110001.
7. Satish Kumar Bansal 9C, Regal Building, Connaught Place, Delhi-110001.
8. Nitin Gupta Mb-83, No.5, Shakarpur, New Delhi - 110092.
9. Pankaj Agarwal C-53, Ganesh Nagar Complex, Pandav Nagar, New Delhi-110092.
10. Brijesh Kumar Anand T-5, Second Floor, Green Park, Delhi-110016.
11. Manoj Anand T-5, Second Floor, Green Park, Delhi-110016.
12. Monika Anand T-5, Second Floor, Green Park, Delhi-110016.
13. Ravi Chopra 512/211, Geeta Colony, Delhi-110031.
14. Jitendra Kumar T-5, Second Floor, Green Park, Delhi-110016. ...Appellants 3 Versus Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 'G' Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. ...Respondent Mr. Parveen Kumar Bansal, Advocate with Mr. Anil Shah, Ms. Mamta Chaoji and Ms. Sanjana Sawardekar, Advocates i/b. Juris Matrix Partners LLP for the Appellants. CORAM: Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member Per: Justice Tarun Agarwala, Presiding Officer (Oral)
1. We have heard the learned counsel for the parties.
The present appeal has been filed against the order dated 29th July, 2022, wherein a penalty of Rs.25 lakhs was directed to be paid by the noticee, jointly and severally, for violation of Section 12A read with Regulations 3 and 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 2003. 4
2. The charge against the appellant is, that noticee no.1 issued preferential allotment to the other noticees after funding them and this was found to be violative of Regulations 3 and 4 of the PFTUP Regulations.
3. Before us, the matter has been contested on the ground that there was no connection of the noticees with Mr. Atul Agarwal and, consequently, with the Company. Further, the finding of funding by the Company is erroneous.
4. Without going into the merits of the case, we find that the preferential allotment was made on 2nd May, 2012 whereas the show cause notice was issued on 10th August, 2021 that is after more than nine years. The AO has rejected the plea of delay in the issuance of the show cause notice on the ground that no specific prejudice would be caused to the appellant. In our opinion, long delay itself causes prejudice. 5
5. In Mr. Rakesh Kathotia vs. SEBI in Appeal No. 7 of 2016 decided by this Tribunal on 27th May, 2019. This Tribunal held:-
"23. It is no doubt true that no period of limitation is prescribed in the Act or the Regulations for issuance of a show cause notice or for completion of the adjudication proceedings. The Supreme Court in Government of India vs. Citedal Fine Pharmaceuticals, Madras and Others, [AIR (1989) SC 1771] held that in the absence of any period of limitation, the authority is required to exercise its powers within a reasonable period. What would be the reasonable period would depend on the facts of each case and that no hard and fast rule can be laid down in this regard as the determination of this question would depend on the facts of each case. This proposition of law has been consistently reiterated by the Supreme Court in Bhavnagar University v. Palitana Sugar Mill (2004) Vol.12 SCC 670, State of Punjab vs. Bhatinda District Coop. Milk P. Union Ltd (2007) Vol.11 SCC 363 and Joint Collector Ranga Reddy Dist. & Anr. vs. D. Narsing Rao & Ors. (2015) Vol. 3 SCC 695. The Supreme Court recently in the case of Adjudicating Officer, SEBI vs. Bhavesh Pabari (2019) SCC Online SC 294 held:
"There are judgments which hold that when the period of limitation is not prescribed, such power must be exercised within a reasonable time. What would be reasonable time, would depend upon the facts and circumstances of the case, 6 nature of the default/statute, prejudice caused, whether the third-party rights had been created etc."
6. Similar view was held in Ashok Ashok Shivlal Rupani & Anr. vs. SEB, Appeal No. 417 of 2018 along with other connected appeals decided on 22nd August, 2019. Against the order of this Tribunal in the matter of Ashok Shivlal Rupani, SEBI filed Civil Appeal No. 8444-8445 of 2019 before the Supreme Court of India which was dismissed and the order of this Tribunal affirmed by the Supreme Court.
7. Similar view was again reiterated in the matter of Ashlesh Gunvantbhai Shah vs. SEBI, Appeal No. 169 of 2019 and other connected appeals decided on 31st January, 2020 (2020 SCC OnLine SAT 30) where on account of inordinate delay in the initiation of the proceedings by issuance of the show cause notice, the penalty order was quashed.
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8. Similar view was again reiterated in the matter of D. Sundarajan vs. SEBI and other connected appeals, Appeal no.119 of 2022 decided on 18th May, 2023 and the appeals were allowed.
9. In the light of the aforesaid, we are of the opinion that there has been an inordinate delay in the issuance of the show cause notice. Even though there is no period of limitation prescribed in the Act and the Regulations for issuance of a show cause notice and for completion of the adjudication proceedings, nonetheless, the authorities are required to exercise its powers within a reasonable period. In AO, SEBI vs. Bhavesh Pabari, 2019 SCC OnLine SC 294 the Supreme Court held that an authority is required to exercise its powers within a reasonable period.
10. In view of the aforesaid, we are of the opinion that in view of the inordinate delay in the issuance of show cause notice the impugned order cannot be sustained and 8 is quashed. The appeal is allowed. All the misc. applications are accordingly disposed of.
11. This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges.
Justice Tarun Agarwala Presiding Officer Ms. Meera Swarup Technical Member RAJALAK Digitally signed by SHMI RAJALAKSHMI 19.5.2023 HARISH HARISH NAIR NAIR Date: 2023.05.25 15:19:20 +05'30' RHN