RATNESH CHAND JAIN Vs. SECURITIES & EXCHANGE BOARD

JUDGEMENT

(1.) THIS order will dispose of appeal no. 54 of 2006 and also the application filed by the appellant seeking condonation of delay.

(2.) CHALLENGE in the appeal is to the order dated September 10, 2004 passed by the Securities and Exchange Board of India (for short œthe Board ) whereby directions have been issued, amongst others, to the appellants under Section 11B of the Securities and Exchange Board of India Act, 1992 (for short œthe Act ) read with the Regulation 13 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995. There is a delay of more than 15 months in filing the appeal. The primary ground on which the delay is sought to be condoned is that the appellants had never been issued with a show cause notice and that they had no knowledge of the proceedings that were pending before the Board which eventually culminated in the issuance of the impugned directions. The impugned order in the appeal is also sought to be challenged primarily on the same ground.

(3.) THE learned counsel appearing for the Board very fairly concedes that no notice was issued to the appellants. He, however, contends that notice was issued to the company of which the appellants were directors and, therefore, they ought to have appeared in response to that notice before the Board. We cannot accept this contention. When directions are issued to the appellants in their individual capacity, it was incumbent upon the Board to have issued a notice to them and the principles of natural justice require that they be afforded an opportunity of hearing before any directions could be issued. The company may have been issued a notice but it is distinct and different from the appellants who may or may not have been its directors and therefore notice to the company cannot be treated as a notice to the directors when directions are issued to them in their individual capacity. The learned counsel appearing for the appellants very vehemently contends that the appellants had ceased to be the directors of the company long before the proceedings were initiated by the Board. Be that as it may, it is not necessary for us to record a finding as to whether the appellants were the directors of the company at the relevant time. Admittedly directions have been issued to the appellants without issuing any notice to them. On this ground alone we allow the application seeking condonation of delay and condone the same. For this very reason the impugned order also cannot be sustained.