w w w . L a w y e r S e r v i c e s . i n



Ashlesh Gunvantbhai Shah & Others v/s Securities and Exchange Board of India SEBI Bhavan


Company & Directors' Information:- INDIA SECURITIES LIMITED [Amalgamated] CIN = L99999TN1984PLC075902

Company & Directors' Information:- K K SECURITIES LIMITED [Active] CIN = U74899DL1994PLC060238

Company & Directors' Information:- D J SHAH SECURITIES PRIVATE LIMITED [Active] CIN = U67120MH2000PTC123546

Company & Directors' Information:- A TO Z SECURITIES LIMITED [Active] CIN = U74899DL1994PLC063412

Company & Directors' Information:- A TO Z SECURITIES LIMITED [Active] CIN = L74899DL1994PLC063412

Company & Directors' Information:- I C P SECURITIES LIMITED [Under Process of Striking Off] CIN = U74899DL1994PLC060472

Company & Directors' Information:- P R B SECURITIES PVT LTD [Active] CIN = U67120WB1995PTC067948

Company & Directors' Information:- R J SHAH AND COMPANY LIMITED [Active] CIN = L45202MH1957PLC010986

Company & Directors' Information:- B. N. SECURITIES LIMITED [Active] CIN = U67120WB1994PLC110809

Company & Directors' Information:- H J SECURITIES PRIVATE LIMITED [Active] CIN = U67120MH1998PTC117076

Company & Directors' Information:- V G SECURITIES LIMITED [Strike Off] CIN = U65993TG1995PLC020179

Company & Directors' Information:- N P SHAH SECURITIES PRIVATE LIMITED [Converted to LLP] CIN = U67120MH1997PTC110922

Company & Directors' Information:- B J SECURITIES PRIVATE LIMITED [Active] CIN = U67120WB2000PTC092061

Company & Directors' Information:- B D SHAH SECURITIES LIMITED [Active] CIN = U67120MH1997PLC111171

Company & Directors' Information:- SHAH INDIA PVT LTD [Active] CIN = U51909WB1960PTC024535

Company & Directors' Information:- B AND H SECURITIES PRIVATE LIMITED [Active] CIN = U74999MH1974PTC017380

Company & Directors' Information:- B. B. SHAH PRIVATE LIMITED [Active] CIN = U17117RJ1984PTC002922

Company & Directors' Information:- A G SECURITIES PRIVATE LIMITED [Strike Off] CIN = U65921DL1993PTC052453

Company & Directors' Information:- I M SECURITIES PRIVATE LIMITED [Active] CIN = U67120DL1996PTC077356

Company & Directors' Information:- K L B SECURITIES PVT LTD [Active] CIN = U67120GJ1995PTC024411

Company & Directors' Information:- V H SECURITIES LIMITED [Active] CIN = U74899DL1995PLC072918

Company & Directors' Information:- R K G SECURITIES LIMITED [Active] CIN = U74899DL1993PLC055457

Company & Directors' Information:- S S G SECURITIES PRIVATE LIMITED [Under Process of Striking Off] CIN = U67120KL1995PTC009473

Company & Directors' Information:- L N SECURITIES PVT LTD [Active] CIN = U65993WB1992PTC057302

Company & Directors' Information:- M D SECURITIES PRIVATE LIMITED [Active] CIN = U74899DL1975PTC007928

Company & Directors' Information:- M D K SECURITIES PRIVATE LIMITED [Strike Off] CIN = U67110WB2000PTC092641

Company & Directors' Information:- D M SHAH & COMPANY PVT LTD [Active] CIN = U29244WB1988PTC045183

Company & Directors' Information:- A K D SECURITIES PRIVATE LIMITED [Active] CIN = U67120MH1997PTC112152

Company & Directors' Information:- P K J SECURITIES PRIVATE LIMITED [Active] CIN = U74899DL1991PTC044706

Company & Directors' Information:- S. D. L SECURITIES LIMITED [Active] CIN = U67120PB1995PLC016810

Company & Directors' Information:- J M SECURITIES PRIVATE LIMITED [Amalgamated] CIN = U67120MH1989PTC050648

Company & Directors' Information:- M M SECURITIES LIMITED [Under Process of Striking Off] CIN = U74920BR1995PLC006716

Company & Directors' Information:- R K D K SECURITIES LTD. [Amalgamated] CIN = L67120WB1994PLC063609

Company & Directors' Information:- S AND F SECURITIES PRIVATE LIMITED [Strike Off] CIN = U67120DL1993PTC054557

Company & Directors' Information:- C & S SECURITIES PRIVATE LIMITED [Strike Off] CIN = U67120TN1994PTC028091

Company & Directors' Information:- K AND P SECURITIES LIMITED [Strike Off] CIN = U65910MH1995PLC092715

Company & Directors' Information:- C. M. SHAH AND COMPANY PRIVATE LIMITED [Strike Off] CIN = U74140MH1971PTC015107

Company & Directors' Information:- A & B SECURITIES PRIVATE LIMITED [Strike Off] CIN = U65993TN1995PTC032716

Company & Directors' Information:- V R B SECURITIES INDIA PRIVATE LIMITED [Active] CIN = U67120KL2008PTC021718

Company & Directors' Information:- T M SHAH PRIVATE LIMITED [Strike Off] CIN = U10101UP1966PTC003139

Company & Directors' Information:- A M SECURITIES PRIVATE LIMITED [Active] CIN = U67120KL1997PTC011182

Company & Directors' Information:- P K SECURITIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1994PTC061444

Company & Directors' Information:- S B SHAH AND COMPANY PRIVATE LIMITED [Active] CIN = U51496DL1991PTC045040

Company & Directors' Information:- J J SECURITIES LIMITED [Strike Off] CIN = U65993TN1994PLC029598

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

Company & Directors' Information:- H B SHAH PRIVATE LIMITED [Active] CIN = U36100MH1947PTC005536

Company & Directors' Information:- P K T SECURITIES PRIVATE LIMITED [Active] CIN = U65921UP1995PTC017797

Company & Directors' Information:- S S V SECURITIES PRIVATE LIMITED [Strike Off] CIN = U67120DL2000PTC105232

Company & Directors' Information:- N R. SECURITIES LTD [Strike Off] CIN = U67120CH1995PLC015991

Company & Directors' Information:- G K R SECURITIES PRIVATE LIMITED [Strike Off] CIN = U67120TG2000PTC035435

Company & Directors' Information:- M M SHAH PRIVATE LIMITED [Strike Off] CIN = U51311MH1962PTC012293

Company & Directors' Information:- D J SHAH AND CO PRIVATE LIMITED [Active] CIN = U74899DL1987PTC030169

Company & Directors' Information:- T N S SECURITIES PRIVATE LIMITED [Active] CIN = U67120WB1992PTC055839

Company & Directors' Information:- R L F SECURITIES PRIVATE LIMITED [Active] CIN = U74899DL1995PTC069597

Company & Directors' Information:- SHAH SECURITIES PVT LTD [Strike Off] CIN = U67120MH1992PTC068868

Company & Directors' Information:- J M L SECURITIES LIMITED [Strike Off] CIN = U67110UP2000PLC025628

Company & Directors' Information:- C C SHAH LTD. [Strike Off] CIN = U15421WB2000PLC007659

Company & Directors' Information:- A P SECURITIES PRIVATE LIMITED [Active] CIN = U74899DL1995PTC065651

Company & Directors' Information:- M G SECURITIES PRIVATE LIMITED [Active] CIN = U74899DL1994PTC058074

Company & Directors' Information:- C S SECURITIES PRIVATE LIMITED [Strike Off] CIN = U67120KL1998PTC012664

Company & Directors' Information:- M M SECURITIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1995PTC066511

Company & Directors' Information:- M N K SECURITIES PRIVATE LIMITED [Active] CIN = U67120MH2001PTC133711

Company & Directors' Information:- A H SHAH AND CO PVT LTD [Active] CIN = U51311MH1949PTC007019

Company & Directors' Information:- SHAH AND SHAH PVT LTD [Strike Off] CIN = U33112WB1980PTC032838

Company & Directors' Information:- N K J SECURITIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1995PTC070233

Company & Directors' Information:- N G SECURITIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1995PTC071199

Company & Directors' Information:- S V SECURITIES PRIVATE LIMITED [Strike Off] CIN = U65993DL1993PTC051885

Company & Directors' Information:- R D T SECURITIES PRIVATE LIMITED [Strike Off] CIN = U67120DL1994PTC057218

Company & Directors' Information:- M V SECURITIES PRIVATE LIMITED [Strike Off] CIN = U67120PB1996PTC018391

Company & Directors' Information:- A D SHAH PVT LTD [Strike Off] CIN = U51909MH1972PTC015715

Company & Directors' Information:- B. SHAH AND COMPANY LIMITED [Dissolved] CIN = U99999MH1952PLC008789

    Appeal Nos. 169, 171, 172, 231, 264, 266, 277, 278, 279, 280, 281 of 2019

    Decided On, 31 January 2020

    At, SEBI Securities amp Exchange Board of India Securities Appellate Tribunal

    By, THE HONOURABLE MR. JUSTICE TARUN AGARWALA
    By, PRESIDING OFFICER & THE HONOURABLE DR. C.K.G. NAIR
    By, MEMBER

    For the Appellant: Rinku Valanju, Hiral Shah i/b R.V. Legal, Nishant K. Upadhyay, Vijay Pandey, Akhil Sarathy, i/b Jyoti Pandey, Advocates. For the Respondent: Karan Bhosale, Kumar Desai, Kaushal Parsekar, Tanvi Rana, Advocates i/b Legasis Partners.



Judgment Text


Tarun Agarwala, Presiding Officer

1. In this group of appeals the appellants have challenged a common order dated November 16, 2018 passed by the Adjudicating Officer (‘AO’ for short) of Securities and Exchange Board of India (‘SEBI’ for short) imposing penalties against each of the appellants for violation of Section 12(A)(a), (b) and (c) read with Regulations 3(a),(b),(c) & (d) and 4(1), (4(2)(a) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (‘PFUTP Regulations’ for short). Since the issue is common all the appeals are being decided by a common order.

2. Certain irregularities in the scrip of M/s. Oregon Commercial Ltd. now known as M/s. Saianand Commercial Ltd. was noticed by SEBI and accordingly an investigation was started in August 2011 for the period January 4, 2010 to January 10, 2011. Based on this investigation and the investigation report, a show cause notice was issued to the appellants alleging that they had created artificial volumes and misleading appearance in the securities market by trading among others through matched trades, reversal trades and self trades. The AO after considering the replies of the appellants found them guilty of the aforesaid violations and accordingly imposed different monetary penalties under Section 15HA of the SEBI Act, 1992. The appellants being aggrieved filed separate appeals which are being decided together.

3. The ground urged is, that there is an inordinate delay in the issuance of the show cause notice for violation of Section 12(A)(a), (b) and (c) read with Regulations 3(a),(b),(c) & (d) and 4(1), (4(2)(a) and (g) of PFUTP Regulations. It was urged that on the ground of inordinate delay the proceedings should have been dropped and no penalty could have been imposed. It was contended that the alleged violations occurred in the year 2010 whereas the show cause notice was issued in the year 2017 after 7 years for which no explanation has been given.

4. In support of his submission the learned counsel for the appellants have relied upon a decision of this Tribunal in Ashok Shivlal Rupani & Ors. vs. SEBI (Appeal No. 417 of 2018 along with other connected appeals decided on August 22, 2019) as well as a decision in Sanjay Jethalal Soni & Ors. vs SEBI in Appeal No. 102 of 2019 and other connected appeals decided on November 14 2019.

5. On the other hand, the contention of the respondent that the issue of delay was not raised by the appellants and consequently it is no longer open to the appellants to raise a plea of laches at this stage. It was also contended that the SEBI Act does not provide any period of limitation and therefore proceedings cannot be quashed only on the ground of laches. It was further contended that the respondent in any case have explained the delay in the issuance of the show cause notice which has been explicitly stated in their additional affidavit dated December 20, 2019 which should be considered and the delay, if any, in the issuance of show cause notice in the peculiar circumstances of the case should be condoned.

6. We have heard the leaned counsel for the parties in the respective appeals. From the material available on record we find that the alleged irregularities was noticed by SEBI in August 2011 and immediately thereafter investigation was launched for the period January 4, 2010 to January 10, 2011. Based on the investigation a show cause notice was issued on November 20, 2017. Thus, there is a delay of 7 years in the issuance of the show cause notice.

7. The respondent have tried to explain the delay in the issuance of show cause notice in the additional affidavit contending that on the basis of the investigation which started in September / October 2011 a preliminary report was prepared on April 2, 2012 but no action could be taken in 2013-14 as there were certain changes in the officers of the Investigation department. The investigation report was subsequently approved in February 2016 based on which a show cause notice was issued on July 24, 2017.

8. In our opinion, the grounds shown by the respondent in its additional affidavit only indicates the lackadaisical attitude in proceeding against the entities. It is quite clear that no urgency was shown by the respondent to culminate the proceedings and has moved at a leisurely pace. We find that after the submission of the preliminary report on April 2, 2012 no further steps were taken in 2012 and the period of 2013-14 has been covered with a vague allegation that there were certain changes in the officers of the Investigation department. We also find that after the report was submitted on February 1, 2016 it took the respondent another 17 months to issue the show cause notice. The explanation given in the additional affidavit is patently farcical and appears to be an afterthought.

9. An objection was raised by the respondent that the appellants did not raise the issue of delay before the AO. This fact is apparently incorrect as some of the appellants have raised a specific issue with regard to the inordinate delay in issuing the show cause notice. In this regard, we find from a perusal of Appeal No. 171 of 2019 that the appellants had made a specific assertion with regard to the inordinate delay in the issuance of the show cause notice. Similar objection has been raised in Appeal No. 171, 172 etc. For facility, paragraph 3 of the reply given by the appellant in Appeal No. 171 of 2019 is extracted herein below:-

“3. At the oustset, the Noticee may bring to your kind notice that the investigation period in the OCL scrip is between 04.01.2010 to 10.01.2011 and the above referred SCN is dated 24.07.2017. There is, therefore, a great delay of 7 years in issuance of the SCN which is not even explained. This delay has caused prejudice to the Noticee. On the basis of Hon’ble SAT judgment in the matter of Subhkam Securities Private Limited versus Securities and Exchange Board of India (Appeal No. 73 of 2012) observed as follows, “There is yet another aspect of the case which we would like to highlight here. The trades for which investigation was carried out pertain to the year 2000 and the impugned order has been passed only in March, 2012. Investigation started in or around June, 2001. It has taken the Board twelve years to complete the proceedings in a matter relating to market manipulation. This is not the way to conduct proceedings against entities who are charged with serious allegations like market manipulation or insider trading. Expeditious disposal of such proceedings by the Board alone will ensure that the Board is carrying out its duty effectively to protect the interest of investors in securities and to promote the development of and regulating the securities market as mandated by section 11(1) of the Act. Inordinate delay in conducting inquiries and in punishing the delinquent not only permits market manipulator to operate in the market, it also has demoralizing effect on the market players who are ultimately ‘not found guilty’ but damocles’ sword of inquiry keeps hanging on them for years together from the date of starting investigation by the Board to the date of completion of inquiry proceedings”, notice hereby requests SEBI to provide explanation for the inordinate delay and request SEBI to dispose off the matter as expeditiously as possible.”

Similar objections have been raised by the other appellants.

10. It was contended that all the appellants have not raised the issue of delay and therefore they cannot be permitted to raise the issue of delay for the first time before this Tribunal.

11. On this aspect we are of the opinion that the issue of delay is a mixed question of fact and law and if it goes to the root of the matter such an issue can be raised even at the appellate stage even though such objection was not raised before the AO. In the instant case, we find that some of the appellants had raised a specific issue with regard to the inordinate delay in the issuance of the show cause notice. This aspect should have been considered by the AO which in the instant case has not been done and in fact it has totally ignored such objection. We are further of the opinion that when the matter is being decided against the appellants as a group by a common order, an objection raised by one appellants will cover for all the appellants and it will not be confined to that appellant alone especially when the objection raised is one of mixed question of law which goes to the root of the matter.

12. Having considered the matter we are of the view that there has been an inordinate delay on the part of the respondent in initiating proceedings against the appellants for the alleged violations. The controversy in this regard is squarely covered by a decision of this Tribunal in Mr. Rakesh Kathotia & Ors. vs SEBI in Appeal No. 7 of 2016 decided by this Tribunal on May 27, 2019. The relevant paragraph is extracted herein below:-

“23. It is no doubt true that no period of limitation is prescribed in the Act or the Regulations for issuance of a show cause notice or for completion of the adjudication proceedings. The Supreme Court in Government of India vs, Citedal Fine Pharmaceuticals, Madras and Others, [AIR (1989) SC 1771] held that in the absence of any period of limitation, the authority is required to exercise its powers within a reasonable period. What would be the reasonable period would depend on the facts of each case and that no hard and fast rule can be laid down in this regard as the determination of this question would depend on the facts of each case. This proposition of law has been consistently reiterated by the Supreme Court in Bhavnagar University v. Palitana Sugar Mill (2004) Vol.12 SCC 670, State of Punjab vs. Bhatinda District Coop. Milk P. Union Ltd (2007) Vol.11 SCC 363 and Joint Collector Ranga Reddy Dist. & Anr. vs. D. Narsing Rao & Ors. (2015) Vol. 3 SCC 695. The Supreme Court recently in the case of Adjudicating Officer, SEBI vs. Bhavesh Pabari (2019) SCC Online SC 294 held:

“There are judgments which hold that when the period of limitation is not prescribed, such power must be exercised within a reasonable time. What would be reasonable time, would depend upon the facts and circumstances of the case, nature of the default/statute, prejudice caused, whether the third-party rights had been created etc.”

13. Similar view was again relied in Ashok Shivlal Rupani & Ors. vs. SEBI (Appeal No. 417 of 2018 along with other connected appeals decided on August 22, 2019) and again in Sanjay Jethalal Soni & Ors. vs SEBI in Appeal No. 102 of 2019 and other connected appeals decided on November 14 2019.

14. We also find that in the case of Ashok Shivlal Rupani (supra) the period of investigation was January 4, 2010 to January 10, 2011 in the scrip of M/s. Oregon Commercial Ltd. and the show cause notice issued on November 20, 2017 which this Tribunal held that there was an inordinate delay. In the instant case, the same scrip was investigated for the same period and there is a delay of 7 years in issuing the show cause notice. To this extent, the facts are common. Further, Civil Appeal

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No. 8444 – 8445 of 2019 Securities and Exchange Board of India vs. Ashok Shivlal Rupani & Anr, etc was dismissed by the Supreme Court on November 15, 2019 thus affirming the decision of this Tribunal. 15. In the light of the aforesaid, we are of the opinion that there has been an inordinate delay in the issuance of the show cause notice. Even though there is no period of limitation prescribed in the Act and Regulations in the issuance of a show cause notice or for completion of the adjudication proceedings the authority is required to exercise its powers within a reasonable period as held recently in Adjudicating Officer, Securities and Exchange Board of India vs. Bhavesh Pabari (2019) SCC OnLine SC 294. In the instant case, we are of the opinion that the power to adjudicate has not been exercised within a reasonable period and therefore no penalty could be imposed. 16. As a result, without going into the merits of the case, we find that on account of the inordinate delay in the initiation of the proceedings by issuance of a show cause notice, the penalty order cannot be sustained. The impugned order passed by the AO is quashed. All the appeals are allowed. In the circumstances of the case, there shall be no order on costs.
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