SAT orders fresh adjudication in response to SEBI’s ex-parte decision due to inadequate service of SCN

Case Details: Shree Krishan Choudhary v. Securities & Exchange Board of India - [2023] 147 taxmann.com 229 (SAT-Mumbai)

Judiciary and Counsel Details

• • Justice Tarun Agarwala, Presiding Officer & Ms Meera Swarup, Technical Member
  • Saurabh Bachhawat, Adv., Yahya Batatawala, Shantanu Roy & Ms Uma Chatterjee, Advs. for the Appellant.
  • Pradeep Sancheti, Sr. Counsel, Nishit Dhruva, Ravishekhar Pandey & Ms Shefali Shankar, Advs. for the Respondent.

Facts of the Case

In the instant case, service of notices and orders of SEBI directed the appellants and other noticees to refund the money collected by the company from investors during their respective tenure as directors along with the interest.

A show cause notice was served to the appellants through speed post as per rule 7 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules 1995. The proof of service had been filed which had a track record issued by the post office showing that the item was delivered.

However, the acknowledgement due card was not given and proof of service had been filed, which had a track report issued by the post office showing that the item was delivered.

Now, the question that arose before the Securities Appellate Tribunal (SAT) was whether the tracking report of the post office could replace the acknowledgement due card, which is mandatory requirement under rule 7 of the SEBI Rules, 1995.

SAT Held

The SAT observed that tracking report of post office cannot replace acknowledgement due card which is a mandatory requirement under rule 7 of Rules of 1995. Further, the track report of post office only indicates that item was delivered, it does not show any proof that item was delivered to the appellant or to his authorised agent.

The SAT held that adequate service of show cause notice was not made and the entire matter proceeded ex parte against the appellants. Therefore, the impugned order insofar as it related to the appellants was to be remitted to SEBI for adjudication afresh.