Bipin Taro Vazirani vs Securities And Exchange Board Of India

Tarun Agarwala, Presiding Officer

The present appeal has been filed against the order dated August 2, 2021 whereby the authority has refused to deal with or otherwise discuss the status of the appellant‟s complaint filed on the SCORES platform.

The SCORES platform was created by Securities and Exchange Board of India („SEBI‟ for short) to help lay investors to lodge their complaints with the respondent pertaining to securities market electronically against listed companies and SEBI registered intermediaries. All complaints received by respondent against listed companies is required to be dealt with in accordance with the circulars issued by respondent.

The facts leading to the filing of the present appeal is, that the appellant had filed a complaint on May 21, 2021 on the SCORES platform complaining that Edelweiss Custodial Services Limited as a Clearing Member was complicit in the financial and securities fraud perpetuated by Anugrah Stock and Broking Pvt. Ltd. A prayer was made that SEBI should investigate the role of Edelweiss Custodial Services Limited in Anugrah Stock and Broking Pvt. Ltd. scam. In this regard, a comprehensive complaint was filed on the SCORES platform. The complaint was dealt with and disposed of by an order dated August 2, 2021. For facility, the extract of the order is extracted here under:-

"Regarding your query on the reference / suggestion made against Edelweiss Custodial Services Ltd. it is to state that SEBI conducts examination and investigations based on the references and alerts received by it. Any investigation is conducted confidentially, as investigations are sensitive in nature. Thus, SEBI will not be able to confirm / deny the existence or otherwise of any examination / investigation in the matter for which information."

By the impugned order the respondent has refused to deal with or otherwise even discuss the status of the appellant‟s complaint against Edelweiss Custodial Services Limited and further informed the appellant that their complaint is only a mere query and further that the respondent was not duty bound to inform the appellant of any investigation opened by the respondent against Edelweiss Custodial Services Limited.

We have heard Shri Mustafa Doctor, the learned senior counsel along with Shri Nimay Dave, Advocate for the appellant and Shri Shiraz Rustomjee, the learned senior counsel for the respondent.

Having heard the learned counsel for the parties we are of the opinion that the respondent committed a manifest error in treating a serious complaint of the appellant as a mere query. A comprehensive complaint filed by the appellant in our opinion cannot be treated lightly as a query. The complaint is required to be dealt with on a merit which in the instant case has not been done.

We find that the sentence "Thus, SEBI will not be able to confirm / deny the existence or otherwise of any examination / investigation in the matter......" indicate non application of mind and further indicates that a mechanical order has been passed without looking into the complaint on merits.

Why we say that a mechanical order has been passed is because this Tribunal has noticed that a large number of complaints have been disposed of in a like manner. In one such Appeal no. 428 of 2019, Ashok Dayabhai Shah & Ors vs. Securities and Exchange Board of India & Ors dated November 14, 2019 this Tribunal had observed that the disposal of the complaint indicates non application of mind and non consideration of the interest of the investors and that SEBI as a regulator has not performed its duty. The order that was passed by SEBI in that appeal is also extracted here under:-

"SEBI will neither confirm nor deny the existence of any investigation. Any regulatory actions taken by SEBI are published at SEBI website."

The Tribunal while considering the aforesaid order found it strange that while disposing of the complaint SEBI would neither confirm nor deny as to whether the investigation in the complaint was going on or not.

The aforesaid order of the Tribunal was challenged by SEBI in Civil Appeal No. 363 of 2020, Securities and Exchange Board of India vs Ashok Dayabhai Shah & Ors. and the order of the Tribunal was affirmed by the Supreme Court in its decision dated January 27, 2020 and SEBI was directed to deal with the complaint positively and objectively in accordance with law.

Thus, the order of the Tribunal in Ashok Dayabhai Shah (supra) has become final and is binding upon SEBI. However, SEBI is not following the direction given in the order of this Tribunal and by the Supreme Court to deal with the complaints positively and objectively. In fact from a perusal of the reply filed by the respondent, it is clear that the respondent is justifying their order as having been passed in good faith.

In addition to the aforesaid, an additional affidavit has been filed by the respondent indicating that after the decision of the Supreme Court in Ashok Dayabhai Shah (supra) an office note dated November 12, 2020 was put up by the Enforcement Department handling SAT litigations indicating that the order of this Tribunal is binding on SEBI and gave certain suggestions namely, that reasons should be given instead of a common cryptic write up while closing the complaint on the SCORES platform and that the complainant should be informed of the status of his complaint. We find that there is nothing to suggest that the suggestions / recommendations given by the Litigation Department of SEBI was accepted and / or circulated to the relevant authorities.

In view of the aforesaid, in spite of this Tribunal stating categorically that such type of orders are being passed mechanically without any application of mind. SEBI is committing the same mistake again and again and refuses to redress itself which is very unfortunate.

Consequently, the impugned order which contains no reason and has been passed without any application of mind is set aside. The appeal is allowed with costs. The respondent is directed to deal with the complaint of the appellant‟s positively and objectively and pass appropriate order within six weeks from today. The miscellaneous application is accordingly disposed of.

The present matter was heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor a certified copy of this order could be issued by the registry. In these circumstances, 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. Parties will act on production of a digitally signed copy sent by fax and/or email.