Furnishing of Opinion not necessary when Inspection of Opinion already made under SEBI Adjudication Rules

Kavi Arora Vs SEBI (Supreme Court)

Conclusion: In present facts of the case, the Hon’ble Supreme Court dismissed the SLP filed by the Petitioner by making observations that where the Petitioner has apparently been  permitted to inspect the opinion under SEBI Adjudication Rules and apparently there is no rule which requires SEBI to furnish the opinion under Rule 3 to the noticee in its entirety. The documents relied upon for formation of opinion were not required to be disclosed to the noticee unless relied upon in the inquiry.

Facts: This SLP was filed against the impugned judgment and final order dated 15^th September 2021, passed by the Division Bench of the Hon’ble Bombay High Court, dismissing Writ Petition (L) No. 19352 of 2021, filed under Article 226 of the Constitution of India, whereby the Petitioner had sought directions against the SEBI to furnish to the Petitioner documents relied upon by the Respondent-SEBI, in Show Cause Notice dated 17^th November 2020 issued to the Petitioner to show cause why appropriate directions should not be taken against him under Sections 11(1), 11(4), 11B(1) 11B(1), 11B(2), and 11(4A) of the SEBI Act and Section 12A(1) and 12A(2) of the Securities Contract (Regulation) Act. The Petitioner had also sought orders for supply of a copy of the opinion formed under Rule 3 of the SEBI Adjudication Rules 1995, for constituting an Adjudicating Authority to issue Show Cause Notice dated 17^th November 2020 to the Petitioner. After receipt of the SCN, the Petitioner filed a Settlement Application dated 22.02.2021, proposing to settle the proceedings initiated by the SCN, in terms of SEBI (Settlement Proceedings), Regulations, 2018 but the Petitioner could not settle the proceedings.

On 15.01.2021, the Petitioner sent an e-mail to the Respondent SEBI, requesting Respondent SEBI to afford him an opportunity to inspect the documents relied upon by the Respondent SEBI. The Petitioner submits that, as per SEBI Rules, it is mandatory on the part of Respondent SEBI to provide a copy of the opinion formed by Respondent SEBI for issuance of the Show Cause Notice to the noticee, before hearing the Show Cause Notice. It is further submitted that copies of all documents were relied upon by the Respondent SEBI at the time of issuing Show Cause Notice have to be provided to the Petitioner. It was contended that without getting access to those documents, it would not be possible for the Petitioner to reply to the Show Cause Notice.

On the other hand, the Respondent submitted that, that as per the SEBI Adjudication Rules, the Board has to form an opinion, to decide whether the Show Cause Notice is required to be issued or not. The Respondent SEBI is not required to furnish the noticee with a copy of the opinion. Respondent SEBI has provided the Petitioner with a Compact Disc containing voluminous records, except those which contain internal confidential documents or documents which affect the confidentiality of third parties. By a letter dated 24^th March 2021, the Petitioner was informed that the documents mentioned in paragraphs 3, 4 and 5 of his e-mail dated 23^rd March 2021 were confidential documents. The Petitioner, however, made an application to SEBI to supply the documents relied upon to form an opinion as per the SEBI Adjudication Rules, to commence inquiry. The Respondent, in this Case clearly stated that the documents specified, namely, Index of bank statements, Calendar of evidence (oral) consisting of emails/letters/hard copies, Calendar of evidence (documentary) consisting of emails/ letters/ hardcopies, Calendar of evidence (documentary) consisting of soft copies of emails/communications/ bank statements & certain supporting documents in CDs were confidential.

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