Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): A Division Bench of Sulekha Beevi (Judicial Member) and Anil G. Shakkarwar (Technical Member) allowed an appeal filed aggrieved by the order of the Commissioner.

The appellants, who were engaged in execution of construction services, were issued Show Cause Notice dated 07-10-2010 proposing to demand Service Tax under the category of ‘Construction of Commercial or Industrial Complex Service’ and ‘Construction of Residential Complex Service’.

The Original Authority confirmed the demand, interest and passed an order in respect of penalty, against the reduced penalty imposed by the Additional Commissioner, the Department had filed an appeal before the Commissioner result of which the Commissioner had modified the penalty thus the appellants had filed the instant appeal. The counsel for the appellant, M. Vigneshwari submitted that appellant had paid up the Service Tax liability to the tune of Rs 36,39,526 much before the issuance of Show Cause Notice. However, the demand raised in the Show Cause Notice was Rs 46,36,419. The appellant had pleaded to grant them the benefit of cum-tax value. After extending such cum-tax value benefit, Service Tax liability was re-determined as Rs 39,80,678. The appellant had paid the remaining Rs 3,41,152 along with interest. They had also paid penalty of Rs 10,000 and also 25% of the reduced penalty.

The Court while allowing the appeal stated that the appellant had paid up major portion of the Service Tax liability before issuance of the Show Cause Notice and later paid up the balance amount. Thus the order needs to be set aside. [MSR Constructions v. Commr. Of CE & ST, Service Tax Appeal No. 40460 of 2013, decided on 06-03-2020]

Case BriefsHigh Courts

Rajasthan High Court: A Division Bench of Sangeet Lodha and Mahendar Kumar Goyal JJ., ordered for seizure of building and issued show-cause notices to respondents for deliberate disobedience of the order of the Court.

The present Civil Contempt petition has been filled by the petitioners alleging disobedience of the previous interim of the present High Court. Previously the Court had directed that no building shall be allowed to be constructed/raised in the vicinity of the area in question except on issuance of a No Objection Certification in accordance with the guidelines issued by the Government of India.

The Learned Additional Solicitor General representing the petitioner, R.D. Rastogi submitted photographs of the construction of the building demonstrating that the respondent had defied the orders of the Court and continued construction of the building. It was also submitted that in pursuance of the Court’s directions the respondents were under obligation to ensure that no further construction is raised. However, the respondents deliberately allowed the constructions due to extent undue favour to the fourth respondents.

The Court upon perusal of the facts and records placed before the bench directed to seize the building constructed and it shall not be released from the seizure without permission from the Court. The Court also ordered to issue show-cause notices to the respondents asking them to provide reasons for wilful disobedience of Court orders. [Union of India v. State of Rajasthan, 2020 SCC OnLine Raj 241, decided on 11-02-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Exchange Board of India (SEBI): G. Mahalingam (Whole Time Member), issued an impounding order and issued show-cause notices against the ‘Insiders’ and suspected entities who had traded in the scrip of PC Jeweller and found to be in violation of the provisions of Sections 12A(d) and (e) of the SEBI Act and Regulations 4(1) read with 4(2) of the Insider Trading Regulations, 2015.

In the present case, SEBI conducted an investigation in the scrip of PC JewellerLimited to ascertain whether or not suspected entities had traded in the said scrip during the investigation period on the basis of unpublished price sensitive information in contravention of the provisions of SEBI Act 1992 read with SEBI (Prohibition of Insider Trading) Regulations, 2015.

During the investigation, it was observed that corporate announcements by PC Jeweller had been made with respect to buyback equity shares of the Company. Price data for the scrip prior to and after the aforementioned announcements along with date and time of dissemination of the same by BSE/NSE on their websites indicated that the information pertaining to the approval &subsequent withdrawal of the buyback is considered to be price-sensitive information.

Further adding to the above, information pertaining to the buyback of equity shares of the Company, which was related to a change in the capital structure of the Company, qualified as UPSI in terms of Regulation 2(1)(n)(iii) of the Insider Trading Regulations 2015.

SEBI sought information from PC Jeweller and certain other entities regarding details of persons including Promoters/Directors/Employees and/or any other persons who were having access to and/or in possession of the information pertaining to the buyback of equity shares.

After considering the information and investigation conducted by SEBI, the Board in light of provisions of Insider Trading Regulations, 2015, the investigation identified Padam Chand and Balram Garg, Shivani Gupta, Sachin Gupta, Amit Garg and Quick Developers Pvt. Limited as ‘Insiders’.

  • Padam Chand Gupta is the Chairman of the Company and as such, is connected to the Company and was reasonably expected to have access to the aforesaid UPSI–I and UPSI–II. Therefore, Padam Chand Gupta is a ‘Connected Person’ in terms of Regulation 2(1)(d)(i) of the Insider Trading Regulations, 2015 and is considered to be an ‘Insider’.
  • Balram Garg was the Managing Director of the Company and was privy to the discussions/information regarding the approval for and withdrawal of the buyback of equity shares of the Company i.e. UPSI–I and UPSI–II. Therefore, Balram Garg is a ‘Connected Person’ in terms of Regulation 2(1)(d)(i) of the Insider Trading Regulations, 2015 and is considered to be an ‘Insider’.
  • Shivani Gupta had traded in the scrip. Sachin Gupta (Shivani Gupta’s husband and son of Padam Chand Gupta) had traded in the scrip through the trading account of Shivani Gupta. Further, Shivani Gupta’s brother–in–law i.e. Amit Garg [nephew of Padam Chand Gupta and Balram Garg and son of Amar Chand (Ex-Vice Chairman of PC Jeweller)] had traded in the scrip through the trading account of Shivani Gupta with Karvy Stock Broking Limited.
  • QDPL – The entity had traded in the scrip through Karvy.
    In view of the facts, charges alleged in the instant proceedings against the above-mentioned, are brought out as under-

“Padam Chand Gupta (Chairman of PC Jeweller) and Balram Garg (Managing Director of PC Jeweller) (‘Insiders’ in terms of Regulations 2(1)(d)(i) read with 2(1)(g) of the Insider Trading Regulations, 2015) had communicated UPSI–I and UPSI–II to Shivani Gupta, Sachin Gupta, Amit Garg and QDPL (who qualify as ‘Insiders’ in accordance with Regulations 2(1)(g)(i) read with 2(1)(d)(i) of the Insider Trading Regulations, 2015 and also Regulation 2(1)(g)(ii) of the aforesaid Regulations). Accordingly, Padam Chand Gupta and Balram Garg have prima facie violated Section 12A(e) of the SEBI Act and Regulation 3(1) of the Insider Trading Regulations, 2015, by communicating UPSI–I and UPSI–II to Shivani Gupta, Sachin Gupta, Amit Garg and QDPL.”

SEBI noted the copy of a death certificate obtained from KARVY that Padam Chand Gupta passed away on 28-01-2019.

Need of the impounding order?

Non–interference by SEBI at this stage would, therefore, result in irreparable injury to the interests of the securities market and the investors. It, therefore, becomes necessary for SEBI to take urgent steps of impounding and retaining the proceeds (notional loss/gains) made by Shivani Gupta, Sachin Gupta, Amit Garg and QDPL, by way of an interim measure.


A. A sum of Rs 6,17,60,184.13 shall be impounded jointly and severally, from Shivani Gupta, Sachin Gupta and Amit Garg, being the notional loss avoided on account of trades carried out in the trading accounts of Shivani Gupta, and

B. A sum of Rs 2,13,23,161.64 shall be impounded jointly and severally, from Quick Developers Pvt. Limited and Amit Garg, being the notional loss avoided/gains made on account of trades carried out in the trading account of Quick Developers Pvt. Limited.

The above-said amount has to be credited to an Escrow Account in a Nationalised Banks, by marking a lien over it.

Banks shall not allow debits from the bank accounts of Shivani Gupta, Sachin Gupta, Amit Garg and Quick Developers Pvt. Limited, to the extent of the amounts impounded, until the Escrow Account(s) as stated above are opened by them and the amounts as stated are transferred.

In light of the alleged violations of the provisions of Sections 12A(d) and (e) of the SEBI Act and Regulations, 4(1) read with 4(2) of the Insider Trading Regulations, 2015, by Shivani Gupta, Sachin Gupta, Amit Garg and Quick Developers Pvt. Limited, this Order shall be treated as a Notice under Sections 11(1), 11(4) and 11B(1) of the SEBI Act calling upon the above mentioned to show cause as to why certain directions shall not be passed against them.

This Order shall come into force with immediate effect and shall be in force till further orders.[PC Jeweller Ltd., In Re., 2019 SCC OnLine SEBI 304, decided on 17-12-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Central Information Commission (CIC): The Division Bench of Suresh Chandra and Bimal Julka, Information Commissioners, directed for a show-cause notice to be issued to the CPIO with respect to misleading the Commission in regard to the information sought by the Complainant.

Facts of the Case

Complainant sought information regarding Mr Srinivas – Inspector of Customs, detailed list of Postings/Departments served from the date of joining duty till the date of RTI application, address and ownership details of present residential premises, etc.

With respect to the above-sought information, CPIO and Dy. Commissioner (ACC) stated that there was no person by the name of Mr Srinivas – Inspector of Customs working at their office hence the information sought could be treated as ‘Nil’.

Complainant being dissatisfied by the response of CPIO, approached the Commission. Commission had given out the following order in the said respect,

“Keeping in view the facts of the case and the submissions made by both the parties and in the light of the aforesaid judgments, no further intervention of the Commission is warranted in the matter. For redressal of grievance, the Complainant is required to approach an appropriate forum.”

Complainant aggrieved by the decision of the Commission approached the Karnataka High Court. Further, Legal Cell, CIC in compliance with the order of Karnataka High Court placed the matter before the IC- Bimal Julka, who vide its order proposed to schedule the hearing with another IC for the sake of objectivity/transparency.

Complainant’s stand

According to the complainant documents and evidences including criminal cases which revealed that there was one person Mr M.V. Srinivas who was working in the customs Department had been furnished and hence not adverting to that, the CPIO had perhaps evaded the disclosure of information.

CPIO had not taken the plea that the RTI application was indefinite or unspecific while giving nil information and that Mr Sujith Kumar P. Sompur, CPIO who was also the reporting officer of Mr M.V. Srinivas deliberately misled the Commission despite being aware of the facts and the antecedents of the individual.

Respondent’s stand

Respondent while defending the reply given by the then CPIO argued that the information sought was not about the specific person (Mr M.V. Srinivas) and subsequently the Complainant had revealed the specific person.

Thus, the CPIO in the absence of specific name could not have inferred or created information which was not in the custody of the CPIO and that there had been a plethora of judicial pronouncement and other precedents of the Central Information Commission supporting his viewpoint that as CPIO he was not to invent or create information/provide opinion/advice or draw inference.

Further, the Commission had received complainant’s written submission wherein it was stated that RTI application was filed seeking information on  Mr M.V. Srinivas who was directly reporting to the CPIO. Sujith Kumar P.  Sompur being the CIU head had only two inspectors allocated to him namely Mr Srinivas and Mr Niranjana Murthy. He thereafter alleged that Mr  Sujith Kumar P. Sompur and Mr Srinivas had jointly and severally committed several corrupt criminal acts and numerous FIRs and Charge Sheets had been filed.

When the RTI application was filed seeking information on Mr Srinivas, CPIO with a sinister view to exonerate and extricate themselves had intentionally filed a false and malicious statement that there exists “No person by the name Srinivas, Inspector of Customs, Air Cargo Complex, Bengaluru working at their office.”

Hence, CPIO indulged in such misleading mischief thereby misinterpreting the facts to exonerate and extricate themselves from the pending as well as impending cases.

Tribunal giving the interim decision, in order to ascertain clarity and reasons, issued a show-cause notice to the then CPIO and the present CPIO as to why penal action should not be initiated against them in accordance with the provisions of RTI Act, 2005 for misleading the Commission with the correct identity of the Customs Official where information as sought by the Complainant. [Kriplani M. v. CPIO, 2019 SCC OnLine CIC 1266, decided on 01-11-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Custom, Excise and Service Tax Appellant Tribunal (CESTAT): A Division Bench of Rachna Gupta (Judicial Member) and C.L. Mahar (Technical Member) dismissed a rectification appeal filed by the applicant.

The applicant had submitted that the Tribunal in the impugned order had committed an error by not dealing with the following contentions of the appellant as were made against impugned order-in-original dated 31-03-2014:

  • No specific categorization of demand was made in the impugned show-cause notice which should render the entire proceedings as vague and bad in law.
  • In Skylarks Cazers International v. CST 2018 (5) TMI 877, a similar demand was set aside for want of bifurcation of demand under various services.
  • The order omitted to consider the other grounds mentioned in the appeal and therefore must be an error apparent on the face of the record.

On the other hand, the department contended that the impugned appeal has been allowed by way of remand. The demand for Service Tax was confirmed on principle, however, quantification of the same was given to the adjudicating authority for de novo adjudication. Thus, all the grounds as raised by the appellant were not the subject matter of rectification of mistake.

The Tribunal explained that the show-cause notice proposing the impugned demand of Rs 64,04,301 was served upon the appellant observing that the appellant had a number of companies under its aegis and was availing payment of Service Tax by suppressing the full taxable amount collected from various clients who were receiving the services as that the security agency and manpower supply services from the appellant. The contention about show-cause notice being barred was also considered. Finally, the contention that the demand for gross turnover of all the services provided by the appellant without bifurcation had also been dealt with as the matter had been remanded back for the quantification of the demand on the basis of financial year-wise receipt service tax value.

The Tribunal finally dismissed the appeal stating that the decision cannot be re-opened under the guise of rectification of mistake. As far as the arbitrary/vagueness of a show-cause notice was concerned, the same was held to be correct in principle by the Tribunal. A decision on a debatable point of law or fact cannot be corrected by way of rectification. Otherwise also the impugned final order was remanded to the adjudicating authority for quantification of the demand. [Skylark Hi-Tech Solution (P) Ltd. v. Commissioner, 2019 SCC OnLine CESTAT 303, decided on 11-11-2019]

Case BriefsHigh Courts

Gujarat High Court: Dr A.P. Thaker, J. declined the prayer for the grant of interim relief after considering the averments and documentary evidence on record.

The petitioner had challenged an order passed by the respondent which blacklisted the petitioner due to which it was unable for him to take part in a new tender which was floated by the respondent. Dixa Pandya, advocate for the petitioner also stated that the blacklisting is hampering the petitioner’s reputation.

Per Contra Dr Venugopal Patel submitted that the petitioner was unable to fulfill the earlier responsibilities and the petitioner was not able to give any reasonable explanation for the same in addition to which a show-cause notice was also served to the petitioner which does not give him a chance to put up his case.

The Court while dismissing the application for the grant of interim relief clarified that the respondent had floated the necessary guidelines with certain conditions to the petitioners which were accepted by the petitioner and the petitioner was given proper opportunity in every case to be heard the petitioner, however, can move to respondent for reconsideration for the decision of blacklisting. [Bindiya Enterprise v. State of Gujarat, 2019 SCC OnLine Guj 1, Order dated 01-01-2019]

Case BriefsHigh Courts

Madhya Pradesh High Court: G. S. Ahluwalia, J., allowed a petition and directed the respondents to not take any coercive step against the petitioner unless and until an enquiry is conducted under Section 89 of M.P. Panchayat Raj Awam Gram Swaraj, Adhiniyam, 1993.

 The petitioner has filed the instant petition under Article 226 of the Constitution of India has against the order passed under Section 92 of the M.P. Panchayat Raj Awam Gram Swaraj, Adhiniyam, 1993. The facts of the case are that a show-cause notice was issued to the petitioners under Section 92 of the Adhiniyam for recovery of Rs 2,70,000. The show-cause notice was duly replied by the petitioners, however, without conducting any enquiry, the impugned order was passed.

Counsel for the petitioner submitted that the respondents have already taken a final decision, which is bad because the provision of Section 92 of Adhiniyam, is merely an execution provision, and unless and until an enquiry is conducted under Section 89 of Adhiniyam, no action can be taken against the petitioners.

Counsel for the State stated that the impugned order is not a final order, but it is merely a show-cause notice and no action under Section 92 of Adhiniyam would be taken unless and until an enquiry is conducted under Section 89 of Adhiniyam.

In view of the above, the court relying upon the decision in Kadam Singh v. CEO, 2019(1) MPLJ 420, directed that the respondents shall not affect any recovery or shall not take any coercive step against the petitioners, unless and until an enquiry is conducted under Section 89 of Adhiniyam. Further, the Court has also directed the respondents to initiate an enquiry under Section 89 of Adhiniyam and decide the same within a period of six months in accordance with the law. [Kamla Yadav v. State of M.P., 2019 SCC OnLine MP 3090, decided on 22-10-2019]

Case BriefsHigh Courts

Himachal Pradesh High Court: Tarlok Singh Chauhan, J. partly allowed the appeal of filed by an employer challenging the compensation granted to a deceased employee’s wife under the Employees Compensation Act, 1923 on the ground that before passing a penalty order against the employer, a reasonable opportunity must have been given to him to justify himself.

Appellant herein was the employer of the respondent’s husband (deceased employee) who was employed as a driver by the appellant and died in an accident. Respondent’s wife filed a petition against the appellant seeking payment of compensation along with interest and penalty against the appellant and other respondents towards their joint and severe liability under the Employees Compensation Act, 1923. The appellant in his reply denied the salary as claimed and requested the recovery of the insurance amount. However, the Employee’s Compensation Commissioner-II awarded the respondent with compensation and interest along with a penalty. Aggrieved by this award, the appellant filed the present appeal.

Navlesh Verma learned counsel for the appellant, contended that there was no employer-employee relationship between the appellant and the deceased employee; and secondly that no show-cause notice was issued on the appellant-employer before passing an adverse award against him.

The Court held that the records proved that there was a relationship of employer and employee between the appellant and the deceased.

With respect to the second contention, it was held that as per the judgment in Ved Prakash Garg v. Premi Devi, (1997) 8 SCC 1 penalty under Section 4-A(3)(b) of the Act can only be imposed when the employer is given a prior notice and an opportunity to defend himself against the same which was certainly not given to the appellant herein.

Hence, the court allowed the appeal and set aside the penalty imposed on the appellant. [Amandeep Singh v. Shaheena Parveen, 2019 SCC OnLine HP 1416, decided on 30-08-2019]

Case BriefsHigh Courts

Allahabad High Court: Siddhartha Varma, J., set aside the impugned order as the charge enumerated in the show cause notice was rightly replied to by the petitioner and there was no illegality to that effect.

In the pertinent case, the petitioner moved to this Court against the impugned order which cancellation the license of the petitioner to run the Fair Price Shop. The factual matrix of the case was that upon a complaint being made by one Sunil Kumar Maurya on the telephone that the petitioner, who was a Fair Price Shop dealer, had in the month of May 2018 not distributed the essential commodities but had sold them out in the open market, an inspection was made by the Supply Inspector on 26-5-2018. Thereafter on 29-5-2018, the petitioner was served with a show-cause notice and a suspension order. The petitioner replied to the show-cause notice on 11-6-2018. However, when the Sub-Divisional Officer, on 18-8-2018 cancelled the licence of the petitioner to run the Fair Price Shop which was affirmed by the Appellate Authority by its order dated 12-12-2018.

The counsel for the petitioner contended that the show-cause notice which was served on the petitioner along with the suspension order did not contain any specific charge. The only charge appeared in the show cause notice was just with regard to the 81 missing bags of wheat, therefore, no further charge should have been dealt with while passing the impugned order.

High Court was of the view that the charges should be very clear and if the charges are vague then the inquiry itself becomes vitiated. The Court further allowed the writ petition as the charge in the show cause notice was just one in number and that had been replied to by the petitioner and the other charges should not have been taken into account for terminating the licence of the petitioner.

Further, the Court gave directions to the State Government that “they should advise their officers that when they issue show-cause notices then they should enumerate the charges properly. They should not be merged with the details of the complaints and the inspection report”. [Manoj Kumar Yadav v. State of U.P., 2019 SCC OnLine All 3476, decided on 19-09-2019]

Case BriefsHigh Courts

Bombay High Court: A Full Court Bench of Pradeep Nandrajog, CJ and Revati Mohite Were and Bharati H. Dangre, JJ. returned a reference unanswered in light for the reason that the law is well settled and there was no contradiction in the judgments delivered by different Benches.

The questions were referred to be answered by a Full Bench relating to the procedure to be followed by the Magistrate while issuing a Show Cause Notice under Section 107 CrPC (security for keeping the peace in other cases, i.e. other than the case of security for keeping the peace on conviction under Section 106). The Division Bench, in the present case, noted that as many as eight judgments passed by different Benches had held that before proceeding to issue a Show Cause Notice envisaged under Section 107, the opinion contemplated by Section 111 CrPC (order to be made) had to be separately authored. It was also noted that another Division Bench in Suleman Adam v. Emperor, 1909 SCC Online Bom 102, had taken a contra view. Therefore, the instant reference was made to the Full Bench.

The High Court perused all the decisions mentioned in the reference order and noted that the procedure followed in Suleman Adam’s case was in the peculiar facts of that particular case. It was observed: “To put simply, the requirement of law is that the Magistrate has to form an opinion in writing contemplated by Section 111 CrPC and thereafter proceed to issue a show cause notice as contemplated by Section 107 and along with the show cause notice annex the opinion. But, in a given case, it may happen that the language in which the order/opinion contemplated under Section 111 is not comprehensible to the noticee, then the may integrate the order/opinion and convey to the noticee in the language which the noticee comprehends.”

It was further stated: “The purpose of the law is that the noticee is to be made known the factual matrix comprising either the complaint or the information received by the Magistrate and the reasons for the opinion formed by the Magistrate.”

The High Court did not find any contra opinion in Suleman Adam’s case vis-a-vis the opinion given in the other eight judgments mentioned in the reference order. Resultantly, the Full Bench returned the reference unanswered for the reason that the law is well settled as captured in the said eight judgments.[Farhan Nasir Khan v. State of Maharashtra, 2019 SCC OnLine Bom 1777, decided on 03-09-2019]

Case BriefsHigh Courts

Bombay High Court: A Division Bench of Akil Kureshi and S.J. Kathawalla, JJ. addressed the petition filed by NDTV challenging orders passed by Securities Exchange Board of India (SEBI). Orders passed by SEBI pertained to the rejection of applications filed by NDTV for condonation of delay in filing settlement applications.

Facts pertaining to the present case

SEBI had initiated adjudication proceedings against the petitioner. The ‘first show-cause notice’ dated 12-02-2015 alleged violation of Clause 36 of Listing Agreement on the ground that there was non-disclosure of a tax demand of Rs 450 Crores which was raised under an assessment order against the Company for the assessment year 2009-2010.

04-03-2015 – Petitioner filed reply contending that he was under legal advice and bonafide belief that the tax demand was not required to be reported under Clause 36 of the Listing Agreement.

04-06-2015 – SEBI passed order holding the petitioner liable for the violation of Clause 36 of Listing Agreement and imposed a penalty of Rs 25 lakhs under Section 23-A of the Securities Contracts (Regulation) Act, 1956.

23-07-2015 – Petitioner filed an appeal against the above-stated order of SEBI before SAT, Mumbai.

28-08-2015 – SEBI issued ‘second show-cause notice’ against the company and its directors and key managerial personnel in which the allegations included non-disclosure of tax demand of Rs 450 Crores, delayed disclosure of certain sale of shares by KVL Narayan Rao, Group CEO and Executive Vice-Chairman and delayed disclosure by the petitioner under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992.

08-06-2016 – SEBI issued the ‘third show cause notice’ alleging the petitioner for violation of certain provisions of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.


Petitioner stated that there was no contravention of non-disclosure of tax demand which was the main subject matter of the first and second show-cause notices. In regard to the allegations in the third show cause notice, the petitioner stated that it could trace the proof of some of the disclosures but could not trace the proof of the rest. Under the circumstances, without conceding to the correctness of the allegations made, the petitioner took a decision to seek settlement of all three cases.

21-03-2017 – Petitioner filed settlement application with respect to the first and second show-cause notices.

24-07-2017 – In respect to the third show-cause notice, the settlement application was filed.

15-05-2017 – Petitioner filed an application for condonation of delay in filing settlement application dated 21-03-2017. Further, it was stated that the settlement application was re-presented on 26-09-2017 confined to the second show-cause notice.

Additionally to the above contentions, counsel for the petitioner stated that:

  • No personal hearing was granted.
  • Impugned orders are non-reasoned orders, due to no reasons being cited for rejection of delay of condonation
  • Petitioner made out sufficient grounds for condoning the delay.
  • Delay in view of the statutory provisions should be construed liberally. SEBI committed a serious error in not entertaining settlement applications on merits simply rejecting on the ground of delay.

Counsel for SEBI opposed the petition contending that the delay in both the cases was substantial which was not satisfactorily explained. SEBI considered the applications on merits and recorded that for want of satisfactory reasons, delay cannot be condoned. Orders, therefore cannot be termed as unreasoned orders.


The High Court perused relevant statutory provisions, i.e. Securities and Exchange Board of India Act, 1992 and SEBI (Settlement of Administrative and Civil Proceedings) Regulations 2014.

With the stated statutory framework in mind, Court perused the relevant documents on record. Further perusal of both the impugned orders suggested that the Board had not cited any reasons for rejecting the respective obligations of the petitioner for condonation of the delay. “Mere statement that the panel of whole-time members did not find the reason given as sufficient would not constitute proper reasons for dealing with the applications.”

“Facts and grounds stated in both the delay condonation applications were different. However, both the applications met with the same response from the Board. Citing identical one line consideration both applications were rejected. It ought to have been appreciated that the result of the rejection of delay condonation applications would be to terminate respective settlement applications without consideration on merits.”

Court stated that the Board committed a serious error in rejecting both the applications for condonation of delay.

Court further added that, “In the present case, we are not inclined to express any conclusive opinion with respect to the right of an applicant of settlement application to be heard in person at the stage where application for condonation is being decided by the Board.”

Thus, the Court set aside both the impugned orders and the applications for condonation of delay stood allowed. [NDTV v. SEBI, 2019 SCC OnLine Bom 1772, decided on 04-09-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): Coram of Justice Tarun Agarwala (Presiding Officer), Dr C.K.G. Nair (Member), and Justice M.T. Joshi (Judicial Member) set aside the impugned order in this case. The appellant challenged an ex-parte order passed against him alleging that he was not served properly and therefore the impugned order was against the principles of natural justice as under Article 14 of the Constitution. The appellant, being the Managing Director of Sigrun Holdings Ltd. (SHL) sold 45,000 shares of the company on 24-05-2010, while having knowledge/possession of the adverse quarterly result of SHL based on sensitive information which had not yet been made public, without the authorization of the board.  The adjudicating officer imposed heavy penalties on the appellant in an order citing the various SEBI regulations which had been violated.

The appellant, being aggrieved by the said order, filed an appeal on the ground that the impugned order is an ex-parte order and that he had no knowledge of the proceedings initiated by the Adjudicating Officer. The Appellant has alleged that he did not receive the show cause notice for the proceedings by the Adjudicating Officer and the proper procedure for service of the same has not been followed as under Rule 7 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995.

The Court held that the respondent was in violation of Rule 7 as stated above as they had not tried to personally serve the appellant at the place where he carried on business or had worked for gain and had instead directly moved on to affixation which does not comply with the procedure laid down in Rule 7. The Court further said that “mode of service prescribed under Rule 7 is not exhaustive and other modes of service was always available in addition to the modes of service prescribed under Rule 7 i.e. for example publication of the notice in an appropriate newspaper or service through email.”

Thus, the Court set aside the impugned order in the interest of natural justice and in violation of the principles of natural justice as embodied under Article 14 of the Constitution of India and ordered the Adjudicating Officer to comply with the proper procedure.[C.R. Rajesh Nair v. Securities & Exchange Board of India, 2019 SCC OnLine SAT 71, decided on 18-07-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for SAFEMA, FEMA, PMLA, NDPS & PBPT Act: Justice Manmohan Singh (Chairman), dismissed an appeal filed by a company challenging a show-cause notice for retention of its property, on the ground that no hardship was caused to the appellant-company by the impugned notice.

In the present case, FIR was registered by CBI against Videocon International Electronics Limited under Sections 120-B and 420 of Penal Code, 1860 and Sections 7 and 13(2) of Prevention of Corruption Act, 1988. It is pertinent to note that appellant’s name was not mentioned in the said FIR. An Enforcement Case Information Report (ECIR) was recorded, but appellant was not even supplied a copy of that report. Search was conducted by Enforcement Directorate (ED) at the appellant’s offices and various documents were seized without even mentioning what those files pertained to. An application was filed by the ED under Section 17(4) of the Prevention of Money Laundering Act, 2002 seeking retention of the seized property. The said application was allowed by the Adjudicating Authority, and appellant was served a show-cause notice under Section 8(1) PMLA seeking his reply as to sources of procurement of property seized. Aggrieved by the said order, the instant appeal was filed.

Learned counsels Vinit Virmani and  R.K. Gosain appearing on behalf of the appellant, submitted that the impugned notice was issued on the basis of reason to believe and there was non-application of mind because the Authority did not even peruse the report of records seized. Further, the details of seizure documents were not in the manner prescribed. Since a proper list of documents had not been supplied to the appellant, it was not even aware of the contents of seized documents. It was further contended that the name of the appellant was not even mentioned in the FIR. Lastly, the seizure memo prepared was contrary to Rule 3(3)(A) of PMLA (Restoration of Property) Rules read with Rule 5 of PMLA (Forms, Search & Seizure, Etc.) Rules, 2005.

Counsels for the respondent, Nitesh Rana and A.R. Aditya, submitted that the appeal filed was not maintainable. They argued that before issuing the notice, if there are certain mistakes and defects or omissions, the notice already issued cannot be declared invalid at this stage, under Section 68 of PMLA. It was contended that the Adjudicating Authority did not pass an order, but had merely issued a show-cause notice. An appeal can be filed under Section 26(1) PMLA before this Tribunal only against an order of the Adjudicating Authority which has been passed under Section 8(4) of PMLA. Further, if an appeal is allowed against every procedural act of the Adjudicating Authority, as is the case of appellant, it would lead to multiplicity of proceedings. Respondent’s counsels admitted that a thirty-day notice, as mandated under Section 8 PMLA, was not given prior to issuance of show-cause notice. But he submitted that it was a curable defect under Section 68 PMLA, and that appellant could still be given 30 days to file a reply to the notice.

The Tribunal placed reliance on Farida Begum Biswas v. UOI, 2015 SCC OnLine Del 11834 where it was held that “Any person aggrieved by an order made by the Adjudicating Authority under Section 8 of PMLA can avail the remedy of appeal under Section 26 of PMLA to the Appellate Tribunal” It was opined that an appeal under Section 26 PMLA may or may not be maintainable. An appeal before PMLA may be maintainable in exceptional circumstances such as great hardship being caused to a party, abuse of the law, injustice, irreparable loss and great prejudice to party concerned. Thus, maintainability as an issue could only be decided on the facts and circumstances of each case.

It was noted that in the present case, the respondent had merely seized two files containing papers, and the appellants were entitled to receive copies of the same under Section 21(2) PMLA at the appropriate time. Therefore, no hardship was being caused to the appellant if the objections raised by it would be decided by the Adjudicating Authority within a time-bound manner. Moreover, appellant always had the remedy to challenge the Authority’s order in appeal after the retention order under Section 17(4) PMLA is passed.

In view of the above, the present appeal was dismissed.[Pacific Capital Services (P) Ltd v. Deputy Director, Directorate of Enforcement, Mumbai, 2019 SCC OnLine ATPMLA 26, decided on 30-05-2019]

Case BriefsHigh Courts

Madhya Pradesh High Court: A Bench of Vandana Kasrekar, J. allowed a writ petition and set aside an order passed by Director, Employment and Training, MP Civil Centre, in the appeal against the impugned order, removing the petitioner from his services by the Joint Director of the aforementioned Training Centre.

The petitioner was appointed as Class-III employee in the aforementioned Centre on a compassionate basis. The petitioner contended that, Joint Director issued a show cause notice which stated the non fulfillment of the conditions of employment i.e. passing of Hindi typing examination by the petitioner, further as per the terms and conditions of the appointment order he has availed 466 days of leave without pay and was continuously absent for a period of 3 months, for which he was terminated from his services as a way of punishment, allegations were found to be true in internal enquiry. The petitioner was aggrieved by such report and was not given an opportunity of being heard by the Joint Director.  He was equally aggrieved by the order of Director, terminating his services and agreeing with the order of Joint Director, therefore, dismissing his appeal.

Learned Counsel for petitioner, M.I. Khan, argued that order impugned is arbitrary and illegal, it is also violative of the principles of natural justice i.e. ‘Audi Alteram Partem’. According to his submissions, the order of the Director was contrary to the provision of Civil Services Rule, 1966. No proper procedure was followed while adjudicating the matter of the petitioner. The enquiring officer has filed the report on the basis of the fact that the petitioner has admitted the charges and no statements of witness were recorded by the enquiring officer. He further submitted that the order of removal is not passed by the competent authority. Joint Director was in no position to terminate the petitioner as he was appointed by the Director and no person subordinate to him had such powers.

Learned Counsel for the respondent, Vikas Yadav, replied that the petitioner has not cleared the essential requirement of qualification for the respective post i.e. Hindi typing exam. The non-performance of the petitioner was also highlighted by his continuous unauthorized absence from work for a period of almost 3 months and his non-attendance for a total of 466 days.  Respondent contended that though, the petitioner replied to the show cause notice, the same was not satisfactory. After issuance of the charge sheet, the petitioner himself admitted the charges levelled against him before the enquiring officer. Therefore, the impugned order of removal was passed. Thus, no illegality was caused in removing the petitioner from his services.

The Court observed that, before the show cause notice was issued no enquiry was initiated against the petitioner by the respondents and the said show cause notice was issued for termination of services of the petitioner. “It shows that the authorities have make up their mind for terminating the services of the petitioner before initiating any departmental enquiry.” Court was of the view that petitioner stated the medical reasons in reply to the show cause notice, but he also admitted not clearing the exam and taking unauthorized leaves for such a long tenure.

Court held, that no alleged enquiry was conducted by the respective respondents, which was arbitrary and they served a copy of the report without filing any charge sheet. The Court stated the provisions of CCA Rules, which provide for the opportunity of hearing to the accused even if the charges in written statements are admitted. The enquiring officer must always ask the accused whether he pleads guilty or not in a proper recorded manner. It was found by the Court that there was a breach in proper proceedings in recording the statements of the petitioner and the proceedings were not in conformity with the law. The Court directed the respondents to reinstate the petitioner in service without any back wages.[Ajay Kadam v. State of M.P., 2019 SCC OnLine MP 769, Order dated 07-05-2019]

Case BriefsHigh Courts

Jharkhand High Court: The Bench of Ananda Sen, J. set aside a punishment order issued against a police constable in departmental proceedings, for being in violation of principles of natural justice.

Petitioner, a constable in the police department, was served with a departmental charge sheet alleging misconduct. In the departmental inquiry was held. In the inquiry, charges against him were held not to be proved. The disciplinary authority, disagreeing with the findings given of inquiry report, punished him with two black marks and withheld his salary on the basis of no work no pay.  The said order was challenged by the petitioner in departmental appeal, which was also dismissed by the appellate authority. Aggrieved thereby, the instant writ application was filed praying for quashing of the said order.

Petitioner’s only submission was that it is well within the jurisdiction and domain of disciplinary authority to differ with the findings of Inquiry Officer, but if the disciplinary authority wants to punish the delinquent, a second show cause notice has to be served and reasons for his differing from findings of the inquiry report must be mentioned in the show cause notice. This process had not been followed before passing the impugned order, and only on this ground, the impugned order could be set aside.

The Court noted that the respondent had not issued second show cause notice to the petitioner, but punished him after differing with the findings of the inquiry report. It was opined that this procedure was in utter violation of the principles of natural justice, as the petitioner ought to have been issued a second show cause notice indicating the ground of disagreement, before punishing him. Thus, the punishment order was set aside for being unsustainable in the eyes of law.[Lalit Oraon v. State of Jharkhand, 2019 SCC OnLine Jhar 279, Order dated 13-03-2019]

Case BriefsHigh Courts

Kerala High Court: The Bench of Devan Ramachandran, J. disposed of a petition cautioning Passport Authority of not taking any action against the petitioner without properly notifying him as any action taken against him without his knowledge, might be detrimental to his employment in the USA.

Petitioner herein had applied for renewal of his passport; but when the Consulate subsequently received information of a criminal case pending against him, he was issued a notice by the Vice-Consul (Passports) asking him to show cause why his passport should not be revoked under Section 10(1)(b) and 10(1)(e) of the Passport Act, 1967. Aggrieved thereby, the instant petition was filed.

Petitioner’s submission was that when he applied for renewal of his passport, he was not aware of any crime pending against him since he had not received any notice or summons from Court with respect to this case.

The Court noted that it was virtually admitted that there was a criminal case pending against the petitioner at the time of submitting an application for renewal. It may be true that the petitioner was not aware of pendency of the criminal case, because he had not received any notice/summons from Court. However, these are issues that the petitioner ought to have brought to notice of Consulate General of India.

It was opined that since the impugned notice was only a show cause notice, there was no need for petitioner to approach this Court by filing this writ petition since these issues could certainly have been considered by the appropriate authority in terms of Passport Act. In view thereof, petitioner was directed to answer the show cause, detailing all his defences and the Passport Authority was directed to consider the same, after affording the petitioner an opportunity of hearing.[Arun Harshan v. Union of India, 2019 SCC OnLine Ker 776, Order dated 01-03-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Central Information Commission (CIC): Sudhir Bhargava, Chief Information Commissioner, directed the Registry of the Bench to issue a Show Cause Notice to the respondent to explain as to why action under Section 20(1) of the RTI Act should not be initiated against him.

The facts of the case are that the Commission directed DPS NALCO to provide a copy of the Record Retention Schedule as well as the order of the Competent Authority for the destruction of the attendance register for the year 1989-90, to the appellant within a period of four weeks from the date of the order, and grant one more opportunity to the appellant to inspect all the relevant records pertaining to the information sought in her RTI application on a mutually decided date and time as per the provisions of the RTI Act. The appellant again submitted an application alleging non-compliance of the directions of the Commission by the respondent. The respondents denied the same.

The Commission held that in the view of such evident contradiction in the submissions of the respondent, leading to non compliance of specific directions of the Commission and deliberate obstruction to the flow of information, a show cause notice is to be issued to the respondent for explaining as to why action under Section 20(1) of the RTI Act should not be initiated against him. [Puspalata Rout v. CPIO, 2019 SCC OnLine CIC 1, Order dated 07-02-2019]

Case BriefsHigh Courts

Allahabad High Court: This petition was filed before a Single Judge Bench of Ajit Kumar, J. where petitioner was alleged of fraud and forgery.

Petitioner is an assistant teacher working in a junior primary school. Petitioner submitted that he had obtained B. Ed. degree from Dr Bhim Rao Ambedkar University, Agra. After this, he completed the special BTC training course and was appointed by the District Basic Education Officer. It was in 2015 that he was promoted as headmaster in junior basic school. There was some investigation done by Special Investigating Team and report filed perusing to which show cause notices were issued to some teachers who received their degree from the Ambedkar University. The show cause notice is impugned in this writ. Petitioner alleges that a prima facie opinion of fraud and forgery was formed by the District Basic Education without giving prior opportunity to explain. Argument advanced by petitioner was that if any illegality has been found in the appointment after confirmation of the person in the service the respondent were bound to proceed by instituting departmental proceedings in accordance with the service rules i.e. U.P. Government Servant (Discipline and Appeal) Rules, 1999 but the said procedure has not been followed prior to issuing the impugned notice.

High Court found substance in the arguments of petitioner and that this matter required to be considered. Until further order, a stay was put on impugned order. [Rohitashwa Kumar v. State of U.P., 2018 SCC OnLine All 3232, order dated 11-12-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

“Why is RBI fighting tooth and nail to defend defaulters?”

Central Information Commission (CIC): A Bench comprising of Prof. M. Sridhar Acharyulu issued a show-cause notice to Reserve Bank of India (RBI) Governor Urjit Patel holding him as deemed Public Information Officer (PIO) responsible for non-disclosure of a list of wilful defaulters of big bad loans worth crores of rupees.

A Jaipur-based RTI activist sought information from respondent about wilful defaulters of bank loans of Rs 50 crores and above, names of guarantors, details of sanction of loans, default and details of NPA accounts, and cost and investment of the projects for employment generating schemes initiated by the Central Government between 2005 and 2018 along with the list of failed projects. The CPIO dismissed the request stating that the information was not maintained in the form sought. Aggrieved by the said order, a first appeal was preferred wherein the reply of CPIO was upheld. The said circumstances necessitated the instant second appeal.

The Commission observed that RBI is a statutory regulatory authority whose function is to oversee the functioning of banks and the country’s banking sector. It is supposed to uphold public interest and not the interest of individual banks. Thus, RBI ought to act with transparency and not hide information that might embarrass individual banks. Financial institutions are obliged to provide all information to RBI and such information cannot be considered to be shared in the capacity of a fiduciary relationship. RBI was held to be duty bound to comply with provisions of RTI Act and disclose the information sought by the appellant.

Commission issued a show-cause notice to RBI Governor asking him to explain as to why maximum penalty of Rs 25,000 should not be imposed on him for wilful defiance of RTI provisions. It also directed RBI to disclose bad debt details of defaulters worth more than Rs 1000 crore at the beginning, Rs 500 crore or less at a later stage within five days and collect such information from the banks in due course to update their voluntary disclosures from time to time as a practice under Section 4(1)(b) of RTI Act. [Sandeep Singh Jadoun v. PIO, DGEAT, CIC/DGEAT/A/2018/117567, decided on 02-11-2018]