Appeal No. 1 of 2013. Case: Reliance Industries Limited Vs Securities and Exchange Board of India. Securities and Exchange Board of India
| Case Number | Appeal No. 1 of 2013 |
| Counsel | For Appellant: Janak Dwarkadas, Senior Advocate, Somasekhar Sundaresan, Paras Parekh, Abishek Venkatraman and Dhaval Kothari, Advocates and For Respondents: Darius Khambata, Advocate General, Shiraz Rustomjee, Senior Advocate, Jayesh Ashar, Mihir Mody and Pratham V. Masurekar, Advocates |
| Judges | J.P. Devadhar, Presiding Officer, Jog Singh and A.S. Lamba, Members |
| Issue | Securities And Exchange Board of India Act, 1992 - Sections 11, 11B, 11D, 12, 15-I, 15T, 15T(1), 15T(2) |
| Judgement Date | June 30, 2014 |
| Court | Securities and Exchange Board of India |
Judgment:
J.P. Devadhar, Presiding Officer
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Appellant herein seeks to challenge order of Securities and Exchange Board of India ("SEBI" for short) dated January 2, 2013 whereby consent application filed by appellant on April 26, 2011 for settling the dispute raised in show cause notice dated December 16, 2010 has been rejected as not consentable under paragraph 1(ii) of the consent circular dated May 25, 2012.
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This appeal was fully heard on January 6, 2014 and on conclusion of arguments order was reserved. Before reserved order could be pronounced, SEBI in exercise of powers conferred by Section 15JB of SEBI Act, 1992 and Section 23JA of Securities Contracts (Regulation) Act, 1956 and Section 19IA of the Depositories Act, 1996, framed SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2014 with retrospective effect from April 20, 2007 ("2014 Regulations" for short). In view of 2014 Regulations issued on January 9, 2014 with retrospective effect from April 20, 2007, present appeal was placed on Board for directions/hearing from time to time to consider effect of newly introduced provisions to facts of present case.
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In written submissions filed on June 20, 2014, SEBI has submitted that apart from fact that dispute raised in show cause notice dated December 16, 2010 is not consentable under consent circulars issued by SEBI, present appeal itself is not maintainable in view of Section 15JB(4), inserted to SEBI Act, 1992 under Ordinances promulgated from time to time. As on date, Section 15JB(4) inserted to SEBI Act by Securities Laws (Amendment) Ordinance No. 2 of 2014 and also 2014 Regulations, framed thereunder are in force.
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Question, therefore, to be considered in this appeal filed prior to insertion of Section 15JB(4) is, whether SEBI is justified in rejecting the consent application filed by the appellant as not consentable under paragraph 1(ii) of consent circular dated May 25, 2012. If answer to the above question is in the negative, then in view of Section 15JB read with Section 30A inserted to SEBI Act by Ordinance No. 2 of 2014, with retrospective effect, whether appeal against the impugned order dated January 2, 2013 is maintainable before this Tribunal.
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Dispute in the present case relates to sale of approximately 20 crore Reliance Petroleum Ltd. ('RPL' for short) shares by appellant in November 2007. After investigations SEBI issued show cause notice dated April 29, 2009 corrigendum dated October 8, 2009, wherein it was alleged that the appellant in connivance with other entities related/connected to it, took short positions in the Futures and Options ('F & O') segments of the National Stock Exchange of India Ltd. in the scrip of RPL, while the appellant, on or about the same time sold approximately 20 crore shares of RPL in the cash segment with a view to depress the settlement price in the F& O segment and thereby made illegal gain of ` 513.12 crores on the short positions. On receiving above show cause notice, appellant by letter dated October 12, 2009 sought inspection of documents which were referred to in the said show cause notice/corrigendum. Since there was delay in receiving inspection of documents, appellant filed its reply to the show cause notice/corrigendum under protest.
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While aforesaid show cause notice/corrigendum was pending, appellant filed consent application on November 5, 2009 seeking settlement of dispute raised in show cause notice dated April 29, 2009. The said consent application was rejected by SEBI on March 8, 2010.
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Thereafter, SEBI deemed it fit to reinvestigate the matter. On completion of reinvestigation, SEBI in supersession of its earlier show cause notice dated April 29, 2009 issued a fresh show cause notice on December 16, 2010 in relation to the very same transactions which were subject matter of earlier show cause notice dated April 29, 2009 but with certain modifications, such as, dropping the charge relating to insider trading. Vide its reply dated December 28, 2010 appellant raised preliminary objections against issuance of show cause notice dated December 16, 2010 inter alia on ground that reinvestigating the matter without hearing the appellant was bad in law and that the new show cause notice replaces previous show cause notice in its entirety and raises new issues which were not part of previous show cause notice. By that letter dated December 28, 2010 appellant sought inspection of all the documents that were referred to in show cause notice dated December 16, 2010.
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During the course of hearing of show cause notice dated December 16, 2010, SEBI addressed a letter to the appellant on April 15, 2011 stating therein that even though the show cause notice dated December 16, 2010 does not state anything about the consent proceedings, appellant had a right to seek settlement through the consent procedure as per consent circular issued by SEBI.
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Thereupon, appellant filed consent application on April 26, 2011 seeking settlement of dispute raised in show cause notice dated December 16, 2010 as per SEBI circular dated April 20, 2007 as amended by circular dated May 25, 2012.
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Before discussing consent proposal by and between appellant and SEBI at the Internal Committee ("IC" for short) meetings, appellant insisted on seeking inspection of documents referred to in show cause notice dated December 16, 2010 as also basis on which reinvestigation was carried out. By an e-mail dated December 7, 2011 SEBI informed appellant that request for inspection of documents was not tenable in consent proceedings. However, after almost one year on appellant insisting on inspection, SEBI vide letter dated November 2, 2012 furnished notings relating to reinvestigation but declined to give inspection of various documents sought by the appellant. Thereupon, appellant while seeking postponement of discussion before IC in relation to consent application dated April 26, 2011, filed Appeal No. 224 of 2012 before this Tribunal to challenge decision of SEBI in refusing to give inspection of documents. While Appeal No. 224 of 2012 was pending, SEBI chose to give inspection of documents substantially between November 21st to 23rd, 2012 and on November 27, 2012 and also supplied photocopies of documents running into 1300 pages.
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Thereafter, by a letter dated November 27, 2012 SEBI informed appellant that meeting before IC is scheduled on December 7, 2012. By a letter dated December 3, 2012 appellant requested that since photocopies of documents running into 1300 pages have been given belatedly in the last week of November 2012 i.e., after almost two years of making request and inspection of some material documents were yet to be given, meaningful participation in consent proceedings would be possible only when inspection of all material documents are given and sufficient time is given to the appellant to review photocopies of documents running into 1300 pages. By the said letter appellant further requested that since Senior Counsel of appellant would not be available once the Courts are on vacation from December 17, 2012, meeting before the IC scheduled on December 7, 2012 may be postponed to any date in the third week of January 2013.
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Internal Committee of SEBI did not accede to the request of the appellant and referred the matter to the High Powered Advisory Committee ("HPAC" for short). On December 21, 2012, HPAC after considering seriousness of the charges levelled in show cause notice, recommended that the case may not be settled in view of Clause 1(ii) of SEBI consent circular dated May 25, 2012. Above recommendation of HPAC was approved by panel of Whole Time Members ("WTM" for short) of SEBI on December 31, 2012. Accordingly, vide impugned order dated January 2, 2013 appellant was informed that in view of recommendation of HPAC being accepted by SEBI, the consent application cannot be entertained. In the impugned order dated January 2, 2013 it is also stated that HPAC has noted that adequate opportunity has been provided to the appellant to attend the IC meetings. Challenging order dated January 2, 2013 present appeal has been filed.
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To complete narration of facts, it may be noted that Appeal No. 224 of 2012 filed by the appellant was disposed of...
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