Securities Appellate Tribunal
Chanda Kochhar vs Sebi on 5 January, 2023
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved on : 17.11.2022
Date of Decision : 05.01.2023
Appeal No. 751 of 2022
Chanda Kochhar
45, CCI Chambers,
Dinshaw Vachha Road,
Churchgate,
Mumbai - 400 020. ...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. Somasekhar Sundaresan, Advocate with Mr. Rohan
Dakshini, Mr. Vishesh Malviya, Ms. Deepa Shetty, Mr. Kyrus
Modi and Mr. Samved Pradhan, Advocates i/b. Rashmikant and
Partners for the Appellant.
Mr. Gaurav Joshi, Senior Advocate with Mr. Abhiraj Arora and
Mr. Shourya Tanay, Advocates i/b ELP for the Respondent.
CORAM : Justice Tarun Agarwala, Presiding Officer
Ms. Meera Swarup, Technical Member
Per : Justice Tarun Agarwala, Presiding Officer
1.The appellant has challenged the order dated August 17, 2022 passed by the Adjudicating Officer („AO‟ for short) of the 2 Securities and Exchange Board of India („SEBI‟ for short) partly allowing the application of the appellant for supply of certain documents and inspection thereof.
2. The facts leading to the filing of the present appeal is, that the respondent issued a show cause notice dated May 23, 2018 raising allegations of conflict of interest in respect of approvals of loans / credit facilities by the Bank to the Videocon Group.
3. The appellant submitted a detailed response to the show cause notice on August 24, 2018. A personal hearing was held on November 19, 2018 and thereafter, the appellant submitted its written submissions on December 19, 2018. The matter thereafter was reserved for orders.
4. On November 19, 2020 the appellant received an e-mail from the respondent in which an amended show cause notice dated November 19, 2020 was enclosed. In this e-mail, the appellant was directed to respond to the amended show cause notice.
5. It is alleged that the amended show cause notice which was sent was incomplete as it was not accompanied by any enclosures / annexures / exhibits / appendices. 3
6. The appellant addressed a letter requesting the respondent to provide inspection and copies of the complete file relating to the amended show cause notice including copies of the annexures / appendices / enclosures / exhibits and underlying material.
7. Since the inspection of the documents were not provided nor furnished the appellant filed Appeal no. 312 of 2021 which was disposed of on June 14, 2022 with the following directions:-
(i) The appellant shall file a fresh application indicating with clarity and precision the documents sought for inspection and / or supply of the said documents.
(ii) This application shall be filed within two weeks from today.
(iii) Upon receipt of the application, the AO shall pass an appropriate order either providing inspection and / or supply of the documents sought for or pass appropriate order giving reasons as to why the appellant cannot be provided inspection or provided copy of the documents.
(iv) Such order, if any, shall be passed within 4 weeks from the date of providing an opportunity of hearing.
(v) While passing the order the AO will also take into consideration the decision of the Supreme Court in T. Takano vs SEBI dated February 18, 2022.4
8. While directing the appellant to file a fresh application for supply of documents this Tribunal had further directed the AO as under:-
"20. Whether these annexures / exhibits / appendices and underlying material etc. are essential or not and whether the analysis of these documents forms the basis of the report is a question which is required to be considered by the AO. It is not possible nor appropriate for this Tribunal to delve into this arena and hold as to which document is necessary and which document is irrelevant. We, however, hold that the respondent acted in haste in fixing a date for hearing without supplying the requisite documents to the appellant. If such documents were not relevant appropriate orders ought to have been passed."
9. Based on the aforesaid order of this Tribunal the appellant filed a fresh application dated June 28, 2022 seeking supply of various documents and inspection thereof. This application was partly allowed by the AO and certain documents were denied. The appellant being aggrieved has filed the present appeal.
10. We have heard Shri Somasekhar Sundaresan, the learned counsel for the appellant and Shri Gaurav Joshi, the learned senior counsel for the respondent.
11. The learned counsel for the appellant contended that the documents sought for were essential and were required in order to give an appropriate reply to the amended show cause notice. 5 It was contended that the documents sought for were such documents which has been considered based on which certain findings have been given in the report and therefore it is part of the report which is required to be supplied. In support of his submission the learned counsel placed reliance upon the decision of the Supreme Court in the matter of T. Takano vs Securities and Exchange Board of India, Civil Appeal Nos. 487-488 of 2022 decided on February 18, 2022 and in the matter of Reliance Industries Limited vs Securities and Exchange Board of India in Criminal Appeal No. 1167 of 2022 decided on August 5, 2022.
12. On the other hand, the learned senior counsel for the respondent contended that there was no obligation to provide inspection or supply of documents which are not in possession of the respondent. Further, there was no obligation to provide inspection or to produce documents which were referred in the report. It was urged that the appellant is only making a roving and fishing enquiry which cannot be permitted as it is an abuse of the process of the Court. In support of his submission the learned senior counsel has placed reliance upon a decision of the Delhi High Court in Delhi State Industrial & Infrastructural Development Corporation Ltd. & Anr. vs Shiv 6 Kumar in CM(M) No. 404/2012 and C.M. No. 6267/2012 decided on September 20, 2013, Pooja Wadhawan vs SEBI, Appeal no. 487 of 2021 decided by this Tribunal on September 13, 2021 and decision of the Supreme Court in T. Takano (supra).
13. In order to proceed further it would be appropriate to indicate as to what documents were sought and were supplied by the AO and what documents were rejected. In this regard a chart is being prepared below for a proper appreciation.
Sr. Documents to be supplied Documents supplied by No. and inspection thereof the AO
1. Out of the 24 loan sanctions Minutes for the following set out in Table 37 at page 99 7 Sanctioning Committee to 102 of the CR Report, the meetings where the minutes of only one meeting Noticee has participated i.e. the minutes of the may be procured and Sanctioning Committee provided meeting dated 26th April 2012 (incorrectly recorded as i. August 26, 2009 24th April 2012 in the ASCN ii. September 29, 2009 and the Addendum to the iii. October 31, 2011 examination Report), has iv. August 05, 2014 been supplied. The Minutes v. July 28, 2016 for the following 23 other vi. September 14, 2016 Sanctioning Committee vii. June 28, 2017 meetings are yet to be 7 supplied:
(i) 14th May 2009;
(ii) 3rd June 2009;
(iii) 26th August 2009;
(iv) 16th October 2009;
(v) 29th September 2010;
(vi) 3rd November 2010;
(vii) 17th November 2010;
(viii) 17th November 2010;
(ix) 12th January 2011;
(x) 30th May 2011;
(xi) 13th July 2011;
(xii) 31st October 2011;
(xiii) 12th March 2012;
(xiv) 11th December 2012;
(xv) 30th April 2014;
(xvi) 6th June 2014;
(xvii) 5th August 2014;
(xviii) 30th September 2014; (xix) 20th May 2015;
(xx) 23rd December 2015;
(xxi) 28th July 2016;
(xxii) 14th September 2016 and (xxiii) 28th June 2017.
2. Out of the 71 loan sanctions The minutes of the set out in Table 38 at page Sanctioning Committee 102 to 108 of the CR Report, meetings of the following the minutes pertaining to 27 loan sanction only 8 loan sanctions have meetings, where the 8 been provided (i.e. 4 June Noticee has participated 2010, 5 August 2010, 24 may be procured and December 2010, 28 June provided:
2011, 18 September 2012, 19 June 2013 and 17 June 2014). i. June 02, 2009 The minutes of the other 63 ii. November 16, 2009 loan sanctions have not been iii. December 28, 2009 provided. The minutes of the iv. February 16, 2010 Sanctioning Committee v. March 12, 2010 meetings to be supplied are vi. June 25, 2010 as under: vii. June 28, 2010
(i) 2nd June 2009; viii. July 16, 2010
(ii) 10th June, 2009; ix. December 06, 2010
(iii) 5th October 2009; x. March 13, 2012
(iv) 16th November 2009; xi. March 26, 2012
(v) 28th December 2009; xii. June 15, 2012
(vi) 16th February 2010; xiii. September 26, 2012
(vii) 11th March 2010; xiv. March 22, 2013
(viii) 12th March 2010; xv. August 29, 2013
(ix) 9th June 2010; xvi. March 27, 2014
(x) 25th June 2010; (2 Meetings)
(xi) 28th June 2010; xvii. August 11, 2014
(xii) 16th July 2010; (2 Meetings) xviii. February 13, 2015
(xiii) 11th October 2010;
xix. March 13, 2015
(xiv) 6th December 2010;
xx. June 17, 2015
(xv) 20th December 2010;
xxi. June 26, 2015 (xvi) 24th December 2011;
xxii. March 23, 2016 (xvii) 10th March 2011;
xxiii. June 10, 2016 th (xviii) 4 May 2011;
xxiv. June 28, 2017 th (xix) 13 May 2011;9
(xx) 2nd June 2011; xxv. March 14, 2018 (xxi) 1st July 2011;
(xxii) 29th August 2011;
(xxiii) 29th August 2011; (xxiv) 19th September 2011; (xxv) 17th October 2011;
(xxvi) 23rd November 2011; (xxvii) 23rd November 2011; (xxviii) 13th March 2012; (xxix) 19th March 2012;
(xxx) 26th March 2012;
(xxxi) 12th June 2012;
(xxxii) 15th June 2012;
(xxxiii) 26th September 2012 (xxxiv) 31st October 2012; (xxxv) 20th November 2012; (xxxvi) 22nd March 2013;
(xxxvii) 17th May 2013;
(xxxviii) 21st June 2013; (xxxix) 29th August 2013; (xl) 22nd October 2013;
(xli) 9th December 2013;
(xlii) 27th March 2014;
(xliii) 27th March 2014;
(xliv) 13th May 2014;
(xlv) 24th July 2014;
(xlvi) 11th August 2014;
(xlvii) 11th August 2014; (xlviii) 13th February 2015; (xlix) 13th March 2015;10
(l) 30th March 2015;
(li) 17th June 2015;
(lii) 26th June 2015;
(liii) 3rd December 2015; (liv) 20th January 2016;
(lv) 23rd March 2016;
(lvi) 10th June 2016;
(lvii) 24th June 2016;
(lviii) 13th December 2016; (lix) 20th January 2017;
(lx) 28th June 2017;
(lxi) 19th December 2017; (lxii) 14th March 2018; and (lxiii) 16th March 2018.
3. (i) Minutes of the CR Report and the Project Recommending Indus Report lists 8 Committee meetings Committee meetings in which recommended which the Noticee sanction of the said 24 participated and where loans (to Videocon loans to Videocon Group Group) to the were sanctioned and also Sanctioning Committees lists 35 Committee of ICICI Bank; and meetings in which the
(ii) Minutes of the Noticee participated and Recommending where loans to Essar Committee meetings Group were sanctioned, which recommended minutes of these meetings sanction of the said 71 may be procured and loans (to Essar Group) to provided.
the Sanctioning
11
Committee of ICICI
Bank.
4. The list of 33 employees / These documents are not officials of ICICI Bank who available.
were interviewed as set out at ICICI Bank has stated in Section 9.11 of the CR its email dated June 01, Report is reproduced at 2021 - "no such Annexure "B" hereto. documents are available with the Bank and nor The transcripts / statements / were such documents a recordings of these part of the report provided interviews are to be supplied. to by the Bank by Justice (Rtd.) Srikrishna."
5. The transcripts / recordings / These documents are not notes of the meetings available.
conducted as listed in Section ICICI Bank has stated in 9.8 of the CR Report are to its email dated June 01, be supplied. 2021 - "recordings / minutes of 12 meetings conducted with 15 persons from different departments of the bank are not part of the Report, and are not available with the Bank. Hence, it is submitted that these are not available with the Bank. We note that the Report is a complete document by itself. We 12 also disclaim any knowledge of any recordings, minutes, notes, transcripts or the like that Justice (Rtd.) Srikrishna or the law firm or the forensic firm engaged have had, and which at any rate did not form part of the Reports submitted to the Bank."
6. Out of all the correspondence Such request is generic in exchanged between the Bank nature and no specific and CBI, Exhibits 31e, 36c request has been received and 36d to the CR Report regarding the relevance of containing certain such communication vis a correspondence between the vis the charges leveled in Bank and CBI has been the ASCN.
furnished. This includes the following: Further, ICICI Bank has
(i) Letter dated 6th June stated in its email dated 2018 from the Bank to June 01, 2021 - "with CBI; regard to the
(ii) Email dated 26th correspondence between September 2018 from bank and CBI, we note the Bank to CBI that such correspondence enclosing a letter dated ensued pursuant to 26th September 2018; investigation being and conducted by CBI, the
(iii) Email dated 26th status of which we are 13 September 2018 from unaware. We submit that the Bank to CBI with it is not appropriate to respect to "query provide any regarding authorization correspondence of an for release of FD" ongoing investigation by law enforcement agencies Documents pertaining to the (including the CBI) which "key information received may compromise the and reviewed" including all efficacy of such remaining "Correspondence investigation or between the Bank and CBI" undermine the same, and are to be supplied. accordingly note that we will not be in a position to provide these documents.
As such when prosecution is commenced by a law enforcement agency, all relevant documents as relied on for prosecution, are furnished to the accused, and not previously. If the Advocate of the Noticee No. 1 is of the view that such correspondence is useful or relevant for the subject matter of adjudication, then the appropriate course of action would be to seek 14 the same from CBI, which could appropriately respond to such request.
14. Having heard the learned counsel for the parties, we find that the documents sought for at Sr. No. 1, 2 & 3 of the aforesaid chart were only supplied in part, namely, that the minutes of the Sanctioning Committee in which the appellant participated were provided to the appellant and the other minutes have been denied only on the ground that the appellant was not a participant in those meetings. This distinction made by the respondent for not supplying the documents is not only absurd but perverse. In the first instance, the CR report clearly states that they have reviewed the minutes of the committee meetings through which the loans were sanctioned to Videocon Group entities. These meetings formed the main subject matter of the allegations in the amended show cause notice. In this regard the appellant submissions in the Project Indus Report was recorded, namely, that she only attended some meetings in relation to loan granted to Videocon Group and, therefore, could not be responsible for the loans or credit facilities which was sanctioned when she was not present. This submission was rejected in the said report.
15
15. We are, however, of the opinion that when all the minutes of the Sanctioning Committee meetings in respect of loan sanctioned to Videocon Group was considered in the report, it was obligatory for the respondent to supply all the minutes of the Sanctioning Committee meetings instead of partially supplying the minutes of those meetings where the appellant was present. Denial of the documents sought for by the respondent was in gross violation of the principles of natural justice. Similarly, the documents which has been sought for at Sr. No. 2 and 3 have been rejected also on the same ground that the minutes cannot be supplied where the appellant was not present. The AO has failed to consider that the documents sought for were those documents which were considered exhaustively in the report.
16. We find that the charge levelled against the appellant in the show cause notice was conflict of interest in respect of approvals of loans / credit facilities granted by Bank to Videocon Group. In our opinion, the grant of loan were not confined to such loans which were granted where appellant had participated but takes into consideration all the loans granted by the Bank to the Videocon Group. The report considers all loans granted by Bank after taking into consideration the minutes of 16 the Standing Committee meetings. Thus, all minutes of the Standing Committee meetings are to be provided / supplied to appellants.
17. Insofar as the documents sought for in Sr. No. 4, 5 and 6 of the aforesaid chart, the AO has given a categorical finding that these documents cannot be supplied as they are not available with the ICICI Bank nor were such documents were part of the report provided to the Bank by Justice (Retired) B.N. Srikrishna. In this regard we find from a perusal of the Project Indus Report dated January 27, 2019 that it was categorically stated that no written statements were taken of the persons who were interviewed. Consequently, the plea that transcripts statements or recording of interviews conducted with 33 existing and former employees / officials of the Bank and recording / notes of the meetings conducted with individual employees of the Bank should be supplied cannot be accepted since those documents / records / notes are not on the record nor are part of the report. Further, in our opinion, correspondence between the Bank and the CBI are not part of the report and cannot be provided. Such request amounts to a roving and fishing enquiry which cannot be entertained. 17
18. We also find that the AO committed an error in holding that the decisions in T. Takano (supra) and Reliance Industries Limited (supra) are distinguishable. In this regard we may state that the facts in the present case may be distinct and different from the facts in the matter of T. Takano (supra) and Reliance Industries Limited (supra) but the principles of law which has been propounded by the Supreme Court in the matter of the T. Takano (supra) and Reliance Industries Limited (supra) is squarely applicable and binding on the subordinate authorities. It is not open to the AO to brush aside those judgments simplicitor stating that those decisions are distinguishable especially when a specific direction was given by this Tribunal to take into consideration that the decision of the Supreme Court in T. Takano (supra) dated February 18, 2022.
19. In this regard the decision of the Supreme Court in the case of T. Takano vs Securities and Exchange Board of India, Civil Appeal Nos. 487-488 of 2022 decided on February 18, 2022 becomes relevant. One of the contentions raised in T. Takano was that he was entitled to a copy of the investigation report which was not provided. SEBI took a stand that only those material which have been relied upon is required to be disclosed and that the investigative report being an internal 18 document is not required to be disclosed. The Supreme Court found that if the report of the investigating authority is considered by the Board before satisfaction is arrived at on a possible violation of the Regulations, then the principles of natural justice require due disclosure of the report. Further, the Supreme Court held that once the subordinate legislation mandates that the investigating authority‟s report is an essential ingredient for the Board to arrive at the satisfaction, it requires due disclosure. The Supreme Court consequently held that the appellant had a right to disclosure of the material relevant to the proceedings initiated and that all information relevant to the proceedings must be disclosed in adjudication proceedings.
20. In view of the aforesaid, the appeal is partly allowed. Documents as mentioned at Sr. No. 1, 2 and 3 of the aforesaid chart is required to be supplied to the appellant. Documents mentioned at Sr. No. 4, 5 and 6 cannot be supplied and are rejected. In view of the partial success, parties are directed to bear their own costs.
21. 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 19 this order is also available from the Registry on payment of usual charges.
Justice Tarun Agarwala Presiding Officer Ms. Meera Swarup Technical Member MADHUK Digitally signed by MADHUKAR 05.01.2023 AR SHAMRAO SHAMRAO BHALBAR Date: 2023.01.06 msb BHALBAR 17:26:23 +05'30'