IGL Finance Ltd And Others vs Securities And Exchange Board Of India And Others

M. T. Joshi, J

In both the present appeals, identical facts are involved and all the respondents have raised a preliminary objection that the appeals are not

maintainable. In the circumstances, both the appeals were heard on this issue jointly and, therefore, the present common order is being passed.

The facts on record would show that the respondent No. 1 Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) in

both the appeals had conducted investigation into the alleged misconduct of Multi Commodity Exchange (hereinafter referred to as ‘MCX’) and

in the circumstances, a show cause notice was issued to the MCX. The other respondents in the appeals were either the officials of MCX or

connected thereto. It was found that after the issuing of show cause notice, they had traded in the scrip of the MCX and 63 Moons Technologies Ltd.

(hereinafter referred to as “63 Moonsâ€​), one of the sister company for a period between April 27, 2012 to July 31, 2013. It was alleged that during

this period, these respondents had traded in the scrip being in possession of Unpublished Price Sensitive Information (UPSI) i.e. issuance of notice to

MCX. The facts of the notice came to the knowledge of the public when the information of issue of notice to MCX etc. was published by daily

Economic Times on January 9, 2018.

Besides separate proceedings against, MCX, 63 Moons, etc. the proceedings were initiated against the present respondent Nos. 2 to 8 in the appeal

No. 256 of 2018 and respondent Nos. 2 to 9 in the appeal No. 257 of 2018 for alleged insider tradings. Interim orders of restraining them from dealing

in the securities market as detailed therein were also passed. After hearing these respondents, however, the impugned orders dated January 5, 2018

and January 31, 2018 were passed of exonerating these respondents in the respective matters out of which the present two appeals have arisen. By

the said impugned orders, the learned Whole Time Member (hereinafter referred to as ‘WTM’) had exonerated all these respondents. The

appellants claim that they are aggrieved by the said order and hence the present appeals were preferred.

It is the case of the appellants that they are the victims of the fraud committed by MCX. They had filed various complaints with various authorities

and even filed Writ Petition No. 1405 of 2015 and Writ Petition No. 519 of 2016 before the Bombay High Court. Respondent SEBI in one of the Writ

Petition submitted that it was carrying the investigation and the same would be concluded in a timely manner. Accordingly, the order was passed in the

Writ Petition. Now, however, the respondent Nos. 2 to 8 in the appeal No. 256 of 2018 and respondent Nos. 2 to 9 in the appeal No. 257 of 2018 are

exonerated by the learned WTM vide the impugned orders and, therefore, the appellants are aggrieved by the same.

The facts on record would show that MCX or National Spot Exchange Ltd. was acting as spot exchange in commodity under the exemption

granted by Department of Consumer Affairs (for short ‘DCA’). Since it was a National Spot Exchange Ltd. of the commodity, only one day

forward contract permission was granted. Since the year 2009, the Commodity Exchange started trading contract for a longer settlement cycle i.e.

trading day plus 25 day. It was alleged that in a way this cycle was used solely as a financial transactions - money lending cycle, wherein a pre-

determined amount as a profit was being given which in fact was an interest. In view of the various complaints of various stake-holders including the

appellants, the investigation was conducted. The show cause notice was issued against the Exchange etc. It appears that criminal cases were also

lodged by the Government of India and various proceedings were lodged.

During investigation it was noted that during the period the notice was issued and it remained unpublished, the present respondent Nos. 2 to 8 in the

appeal No. 256 of 2018 and respondent Nos. 2 to 9 in the appeal No. 257 of 2018 had traded in the scrip. Therefore, interim orders as detailed (supra)

were passed in each of the appeals. After receipt of the material found by the respondents and upon hearing them, the learned WTM in both the

appeals came to the conclusion that the appellants have not traded on the basis of unpolished price sensitive information (for short UPSI) and they

have not violated the provisions of Regulation 11 of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992

(hereinafter referred to as ‘PIT Regulations’) read with Regulation 15 of the PIT Regulations.

We have heard Mr. Ankit Lohia, the learned counsel for the appellants and Mr. Shyam Mehta and Mr. Vikram Nankani, the learned senior counsel

with Mr. Vinay Chauhan, Mr. Somasekhar Sundaresan, Mr. M. Raghuwamshi, the learned counsel for the respondent through video conference.

The respondent submits that the appellants cannot be termed as aggrieved due to the passing of the said orders. Respondent SEBI while making

investigation in the affairs of National Spot Exchange Ltd. and MCX had on the sideline, noted that the respondents have traded in the relevant scrips

after issuing show cause notice to the National Stock Exchange of India Ltd. (hereinafter referred to ‘NSEIL’) by the Department of

Corporate Affairs. Upon hearing the respondents, however, respondent SEBI came to the conclusion that no violation of the PIT Regulation was

found. Thus, the issue of insider trading is solely between SEBI and the noticees in both the proceedings, the appellants cannot be termed as aggrieved

by the same and, therefore, the present appeals are not maintainable.

On the other hand, the learned counsel for the appellants Mr. Ankit Lohia in both the appeals submitted that the appellants are the victim of the

misdeeds of the NSEIL, MCX and, therefore, the appeals are maintainable.

Section 15T of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’) which provides for appeal

runs as under :-

“Appeal to the Securities Appellate Tribunal â€" (1) Save as provided in sub-section (2), any person aggrieved â€

(a) by an order of the Board ……………….

(b) by an order made by an adjudicating officer under this Act, may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the

manner.

(2) to (6) ……………………………………………â€​

The issue is whether the present appellants can be termed as a person aggrieved by the impugned order ? It is to be noted that the appellants

claimed victims of the misdeeds of the MCX etc. Respondent SEBI had conducted investigations on the complaints of various people including the

appellants and orders are already passed regarding the acts of MCX as detailed (supra). During investigations, respondent SEBI found that the

present respondent Nos. 2 to 8 in the appeal No. 256 of 2018 and respondent Nos. 2 to 9 in the appeal No. 257 of 2018 had traded in the concerned

scrip and, therefore, the proceedings were lodged. After hearing them, however, the respondent SEBI came to the conclusion that they have not

indulged into the insider trading.

In the case of Jasbhai Motibhai Desai vs. Roshan Kumar & Ors. [AIR 1976 SC 578], the Hon’ble Supreme Court was examined that

question of locus-standi of the appellants therein and had laid down the following tests to determine when the person can be said to be aggrieved so as

to get a right of appeal. For facility, the relevant portion is extracted hereunder :-

“Whether the applicant is a person whose legal right has been infringed ? Has he suffered a legal wrong or injury, in the sense, that his interest,

recognized by law, has been prejudicially and directly affected by the act or omission of the authority, complained of? Is he a person who has suffered

a legal grievance, a person “against whom a decision has been pronounced which has wrongfully deprived him of something or wrongfully refused

him something, or wrongfully affected his title to something? Has he a special and substantial grievance of his own beyond some grievance or

inconvenience suffered by him in common with the rest of the public? Was he entitled to object and be heard by the authority before it took the

impugned action? If so, was he prejudicially affected in the exercise of that right by the act of usurpation of jurisdiction on the part of the authority? Is

the stature, in context of which the scope of the words “person aggrieved†is being considered, a social welfare measure designated to lay down

ethical or professional standards of conduct for the community? Or is it a stature dealing with private rights or particular individuals?â€​

So far as the present issue is concerned, the appellants cannot at all be called as an aggrieved persons. The facts and issue in the proceedings

before the learned WTM in both the appeals were as to whether the concerned respondent had indulged into the insider trading and whether they

were liable for restraint to be put by the respondent SEBI. The person can be said to be aggrieved by the order if the party is directly affected by the

order. The appellant cannot be said to have been affected by the order passed by the learned WTM. Admittedly, numerous persons have filed

complaints against the alleged misdeeds of the Exchange on the basis of which separate independent action was taken against the Exchange.

Therefore, in our view, since the appellants are not the aggrieved party, the appeals are not maintainable. In the reasons, the following order :-

ORDER

Appeal Nos. 256 and 257 of 2018 are hereby dismissed without any order as to costs.

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.