Hemant Dusad And Others vs Securities And Exchange Board Of India

Meera Swarup, Technical Member

Heard the learned counsel for the parties on Miscellaneous Applications No. 1682 and 1683 of 2023 filed by the original respondent (SEBI).

The original appellants had preferred Appeal Nos. 672 to 677 of 2023 against the impugned order dated July 11, 2023 passed by the Whole Time Member (‘WTM’ for short) of the Securities and Exchange Board of India (‘SEBI’ for short) confirming the ex parte ad interim order dated March 2, 2023. This Tribunal by an order dated October 9, 2023 issued certain directions which are extracted as under:-

“24. The directions contained in the ad interim order and confirmatory order against the appellants is bereft of any evidence. Balance of convenience is required to be considered at this stage. Considering the aforesaid, we issue the following directions:-

(i) The impugned orders are set aside insofar as the appellants are concerned.

(ii) The appellants are restrained from trading in the scrip in question during the pendency of the investigation.

(iii) The deposit of the unlawful gains will continue till final order is passed, if any, by the WTM.

(iv) If the investigation is not completed and show cause notice, if any, is not issued on or before December 31, 2023 the aforesaid directions would come to an end automatically and it will be open to the appellants to trade in the scrip in question and withdraw the amount deposited pursuant to the order of the Tribunal.

(v) Any observation, findings given in this order is only tentative in nature and will not affect the investigation. Further, neither party will rely upon any observation / finding in any proceedings before any authority.”

As per the aforesaid directions, the Tribunal had directed SEBI to complete the investigation by December 31, 2023. SEBI has now moved an application seeking further time till March 31, 2024 as the investigation are still going on. SEBI listed out a number of hurdles being faced by them during the investigation due to which the investigation could not be completed by December 31, 2023. These include non-cooperation by few entities to whom summons were issued seeking information and for recording of statement, non-availability of officers for investigation due to them being involved in parallel investigations, increase in number of suspected entities based on investigation conducted so far and voluminous data obtained during search and seizure requiring detailed analysis.

The original appellants, on the other hand, opposed the application for seeking extension of time for completion of the investigation. The learned counsel of the appellants urged that order dated October 9, 2023 of this Tribunal is self-operative in the sense that as of December 31, 2023 the directions have come to an end. They urged that as SEBI could not complete the investigation and issue show cause notice by December 31, 2023, the entire confirmatory order stands aside. They further urged that SEBI should have approached this Tribunal earlier and that there were factual mistakes in the miscellaneous application regarding non-cooperation by the suspected entities, the summons to two of the suspected entities were received by them on December 19, 2023 while the hearing was on December 18, 2023.

The learned senior counsel for the SEBI urged that they had approached this Tribunal much before December 31, 2023, however, due to administrative reasons the miscellaneous application could not be heard by the Tribunal before the date. Urging that this was an application for extension of time for completing investigation, the learned senior counsel emphasized it cannot be construed as an review petition. There were no factual errors in the application filed as e-mail reminders for personal appearance were sent to the suspected entities. SEBI had put in all out efforts to complete the investigation but when it became clear that it is not likely to be completed by December 31, 2023, SEBI had no alternative but to approach this Tribunal seeking extension of time.

Having heard the learned counsel for the parties, in the interest of justice, miscellaneous application is disposed of allowing SEBI to complete the investigation and issue show cause notice, as prayed, by March 31, 2024. If the investigation is not completed and show cause notice not issued by March 31, 2024, it will be open to the appellants to trade in the scrips in question and to withdraw the amount deposited pursuant to the order of this Tribunal.