Remarks Of 'Judicial Dishonesty' Against SEBI's Adjudicating Officer By SAT: Supreme Court Stays Remarks In SEBI's Plea

The Supreme Court of India on Monday stayed the Securities Appellate Tribunal's remarks of 'judicial dishonesty' against SEBI's Adjudicating Officer with regard to SEBI's investigation into irregular trading activities. 

The Court has also stayed SAT's direction dated 16th December 2021 that a reply be filed by SEBI sworn by the Adjudicating Officer himself and a subsequent order of 23rd December requiring the Officer to be present before it.

A Bench comprising Justice Vineet Saran and Justice Aniruddha Bose issued notice in a civil appeal filed by the Securities and Exchange Board of India challenging order by SAT, Mumbai staying the effect and operation of order passed by the Adjudicating Officer SEBI. The Adjudicating Officer had in September 2021 impose a penalty of Rs. two lakhs on the the present respondent Yatin Pandya HUF under Section 15 HA of the SEBI Act for fraudulent and unfair trade practices.

The SEBI was represented through Attorney General KK Venugopal and Advocate Pratap Venugopal.

Through the present SLP, SEBI has essentially challenged the 'unwarranted adverse remarks' against the AO, SEBI and the direction that reply be filed sworn by the AO, SEBI himself.

The respondent Mr Pandya had contended before SAT that proceedings initiated against him were belated. The SAT through its impugned order observed that the Adjudicating Officer's conduct amounted to judicial dishonesty for dealing with the issue in a very casual manner without dealing this contention raised by the respondent.

The special leave petition has argued that SAT exceeded its jurisdiction and the order passed is erroneous and wholly unsustainable in law.

SEBI has argued that SAT has grossly erred in making adverse remarks or observations without adhering to the tests laid down by Supreme Court in various decisions.

According to the regulatory authority, the making of adverse remarks or observations especially absent any pleading and finding of dishonesty or malafides, would not only affect the independent and fearless dispensation of justice in order to protect the interest of investors but is also wholly unsustainable in law

According to SEBI, SAT has grossly erred in directing that the reply to be filed by SEBI in the Appeal before the SAT be sworn by the AO, himself, who is an Adjudicating Authority under the SEBI Act, carrying out a quasi judicial function.

Facts:

The SEBI carried out an investigation in respect of irregular trading activities of certain entities in the scrip of Sterling International Enterprises Ltd, listed on the Bombay Stock Exchange Ltd, and adjudication proceedings were started by SEBI against the present respondent Yatin Pandya pursuant to the investigation, 

The adjudication proceedings were initiated under Section 15HA of the SEBI Act against for violation of the provisions of the SEBI Act read with Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. An Adjudicating Officer was appointed to enquire into and adjudge violations of the PFUTP Regulations

The petition states that a Show Cause Notice dated 12.02.2020 was issued to Respondent together with other entities to show cause as to why an enquiry should not be initiated and penalty should not be imposed for asserted violation of the provision of SEBI Act and Regulations.

The Appeal was taken up for hearing on 16.12.2021, when the impugned order was passed by the SAT, inter alia, directing that reply be filed by SEBI , which shall be sworn by the AO, SEBI himself.

Case Title: Securities and exchange Board of India vs Yatin Pandya HUF 

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