- Bookmark
- Share
- CaseIQ
Doel Saha v. Harishchandra Gupta
Factual and Procedural Background
Various investors filed complaints alleging that the directors and promoters of Vital Communication Ltd. issued misleading and fraudulent advertisements. In response, SEBI initiated proceedings restraining these directors and promoters from accessing the securities market and dealing in securities. The directors/promoters appealed against SEBI's prohibitory orders. On August 28, 2008, this Tribunal set aside SEBI's orders and remanded the matter back to SEBI to issue fresh show cause notices and pass appropriate orders. Despite multiple orders from the Tribunal, SEBI failed to pass a final order. The respondents filed Appeal No. 207 of 2012 seeking compensation for losses due to misleading advertisements, which the Tribunal rejected on April 30, 2013, but directed SEBI to investigate and communicate the outcome to the respondents. Subsequently, due to non-compliance by SEBI, respondents filed a Miscellaneous Application seeking perjury action against a SEBI officer. SEBI gave an assurance to pass appropriate orders within six months, leading to the withdrawal of that application. However, SEBI delayed further, only conducting limited hearings in early 2014 and then filing the present Miscellaneous Application No. 53 of 2014 on May 5, 2014, seeking a six-month extension to pass a final order. The Tribunal noted SEBI's prolonged failure to comply despite repeated directions and assurances.
Legal Issues Presented
- Whether SEBI should be granted an extension of six months from May 5, 2014 to pass a final order in compliance with the Tribunal’s prior directions.
- Whether the failure of SEBI to pass appropriate orders over a six-year period warrants consideration of perjury action against SEBI officers.
Arguments of the Parties
SEBI's Arguments
- SEBI sought an extension of six months from May 5, 2014, to pass a final order in accordance with law.
- Counsel for SEBI submitted that after filing the Miscellaneous Application, a personal hearing was fixed for June 20, 2014, and appropriate orders would follow within a time deemed fit by the Tribunal.
Respondents' Position
- The respondents insisted on initiating perjury proceedings against the SEBI officer for failure to comply with Tribunal orders despite solemn assurances.
- They highlighted SEBI’s callous and deplorable conduct in failing to pass any appropriate order over six years despite multiple Tribunal directions.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Tribunal analyzed the prolonged six-year delay by SEBI in passing appropriate orders despite multiple directions dated August 28, 2008, April 30, 2013, and December 6, 2013. It noted SEBI’s failure to act even after solemn assurances and the adverse impact on the respondents. The Tribunal observed the lack of explanation from SEBI for the absence of hearings between February 18, 2014, and May 5, 2014. While acknowledging SEBI’s recent scheduling of a hearing on June 20, 2014, the Tribunal emphasized the seriousness of SEBI’s non-compliance and the possibility of initiating perjury proceedings if the delay continued. The reasoning reflects the Tribunal’s insistence on timely compliance with its orders and accountability of regulatory officials.
Holding and Implications
The Tribunal granted SEBI an extension of six months from May 5, 2014, to pass an appropriate final order in compliance with its earlier directions.
Additionally, SEBI was directed to pay costs of Rs. 10,000 to the respondents within two weeks. The Tribunal made it clear that failure by SEBI to pass the order by July 31, 2014, would compel it to consider the respondents’ application for perjury proceedings against the concerned SEBI officer. The decision directly impacts the parties by imposing a final deadline and cost penalty but does not establish any new legal precedent.
J.P Devadhar (Oral):— By this Misc. Application No. 53 of 2014 Securities and Exchange Board of India (“SEBI” for short) seeks extension of 6 months time from May 5, 2014 to pass a final order in compliance with three orders passed by this Tribunal on August 28, 2008, April 30, 2013 and December 6, 2013 respectively.
2. Facts relevant for the present Misc. Application No. 53 of 2014 are that pursuant to complaints filed by various investors to the effect that the directors and promoters of a listed company namely Vital Communication Ltd. had issued misleading and fraudulent advertisement in various news papers, SEBI had initiated proceedings against the directors/promoters of Vital Communication Ltd. by restraining them from accessing the securities market and prohibiting them from buying, selling and dealing in securities for the period specified therein.
3. On the directors/promoters filing appeals against the above prohibitory orders, this Tribunal by a common order dated August 28, 2008 set aside the prohibitory orders passed by SEBI and remanded the case to SEBI with a direction to issue fresh show cause notice and thereupon pass appropriate order.
4. As no order was passed by SEBI inspite of lapse of several orders, the respondents herein filed Appeal No. 207 of 2012 against SEBI, Bombay Stock Exchange and Vital Communication Ltd. inter alia seeking compensation to the tune of Rs. 51,53,190 for the loss suffered in the process of purchasing shares from Vital Communication Ltd. on the basis of misleading and fraudulent advertisement issued by the directors/promoters of the company. By an order dated April 30, 2013 this Tribunal while rejecting the claim of the respondents herein for compensation, directed SEBI to look into the complaint of the respondents herein which related to the alleged misleading and fraudulent advertisement issued by Vital Communication Ltd. It was specifically stated in the said order that outcome of such investigation should also be conveyed to the respondents herein on completion of the investigation.
5. Since order passed by this Tribunal on April 30, 2013 was not complied with, respondents herein filed Misc. Application No. 121 of 2013 seeking perjury action against the officer of SEBI for failing to pass appropriate order inspite of giving undertaking to that effect. At the hearing of Misc. Application No. 121 of 2013 counsel for SEBI submitted that within a period of 6 months, SEBI would pass appropriate orders in compliance with order of this Tribunal dated August 28, 2008 and on April 30, 2013. Accordingly, accepting the solemn assurance given by counsel for SEBI extension of time was granted and respondents herein did not press Misc. Application No. 121 of 2013.
6. Thereafter it appears that the concerned officer of SEBI offered personal hearing to the 24 connected entities in the matter of Vital Communication Ltd. on January 7, 2014. On that day none, except one person viz. Mr. Vijay Jhindal appeared on behalf of himself, Mrs. Shubha Jhindal and M/s Master Finlease Limited and sought time for submitting reply. Accordingly, next date was fixed on February 18, 2014. On February 18, 2014 only Mr. Bhuwanesh Bansal appeared on behalf of the company and sought adjournment. Admittedly, none of the remaining 23 entities appeared on that date.
7. Instead of fixing another date for personal hearing, concerned officer of SEBI did nothing for three months and filed present Misc Application on May 5, 2014 seeking extension of 6 months time from May 5, 2014 to pass a final order in accordance with law.
8. Thus, it is evident that inspite of three orders passed by this since 2008, SEBI has failed to pass appropriate order on the complaints filed by investors of Vital Communication Ltd. six years from 2008 to 2014 is a fairly long period and failure on part of SEBI to pass appropriate order in these six years inspite of solemn assurances given by counsel for SEBI from time to time clearly shows callous attitude on part of SEBI in complying with the orders of this Tribunal. SEBI ought to have realized that inspite of perjury proceedings initiated by respondents, this Tribunal chose to accept the statement of counsel for SEBI that appropriate order would be passed within a period of six months from December 6, 2013 and prevailed upon the respondents not to press the Misc. Application.
9. Inspite of repeated opportunities given by this Tribunal, failure on part of SEBI to pass appropriate order during the period 2008 to 2014 demonstrates highly deplorable conduct on part of officers of SEBI.
10. It is relevant to note that the Misc. Application does not contain Tribunalany reason as to why no hearing took place from February 18, 2014 till present application seeking extension of 6 months time was filed on May 5, 2014. Counsel for SEBI submitted that after the filing of Misc. Application on May 5, 2014, concerned officer has fixed personal hearing on June 20, 2014 and further submitted that appropriate order would be passed thereafter within such time as deemed fit by this Tribunal.
11. In these circumstances, inspite of respondents herein insisting on perjury action against the officer of SEBI, as a last chance we direct SEBI to pass appropriate order on or before July 31, 2014 subject to payment of cost of Rs 10, 000/- to be paid by SEBI to the respondents herein within a period of 2 weeks from today. We make it clear that if SEBI fails to pass appropriate order by July 31, 2014, we will have option but to consider the application of the respondents herein seeking perjury action against officer of SEBI on its own merits.
12. Misc. Application filed by SEBI is disposed of accordingly.
Alert