Indian Commodity Exchange Limited vs Neptune Overseas Limited & Ors.

Natural Justice – Show cause notice with documents – Held: The show cause notice should be comprehensive enough with full supporting documents being handed over.

OVERSEAS LTD.

Natural Justice – Opportunity to be heard – Held: Looking into the enormity of the contents of the show cause notice running into 150 pages with documents spanning 4,000 pages supporting it, a reasonable time had to be given to respond to the same – After handing over the copies of the documents, the proceedings were concluded within the span of two weeks, which cannot be said to be an adequate opportunity – An opportunity of hearing is not a mere nicety but a valuable right – That it does not fall in a straitjacket formula is the accepted legal position – The question is whether there was substantial compliance of the principles of natural justice and whether there were unnecessary adjournments being sought, which were declined.

Company Law – Corporate veil – Respondent No.1 is Company (NOL) and respondent No.2 is the founder and CEO of National Multi Commodity Exchange India Limited (NMCE) as well as Managing Director of NOL – Respondent No.2 was served with a detailed show cause notice – Held: Respondent No.1 herein is a separate legal entity being a registered company, but the concept of piercing the veil is not unknown to law – By this process, the law either goes behind the corporate personality to the individual members or ignores the separate personality of the company – This course is adopted when it is found that the principle of corporate personality is flagrantly opposed to justice, convenience or the interest of the Revenue – This Court is, thus, not able to hold that there was a failure to serve show cause notice to respondent No.1 herein merely because no such notice was specifically addressed to it.

Disposing of the appeals, the Court

HELD: 1. This Court has no doubts that a proper show cause notice was served on Respondent No.2. The moot point, however, remains as to what is the effect of not serving him with the documents he sought for and within the compass of time, which was given to him to respond. [Para 31][146-D-E]

2. Once again, it may be stated that a large part of the documents would have been within the custody of the Respondent No. 2 herein or for that matter with Respondent No.1 herein. However, this would not encompass all the documents. Not only that, when reliance is placed on as many as 4,000 pages of documents, it would not be fair to expect that the party in question ferrets through its own record trying to locate the documents, when on basis of formation of an opinion for issuance of the show cause notice, logic and requirement of law both would dictate that the show cause notice should be comprehensive enough with full supporting documents being handed over. The answer cannot be that they are free to inspect 4,000 pages on their own! In fact, in so many terms, ultimately most of those documents were made available and it would not be appropriate to go back into the issue of whether the documents should have been supplied or not. In a sense, that chapter closed with the supply of documents on 05.07.2011 even though some more documents were sought thereafter.[Para 32][146-E-H]

3. This Court fails to appreciate why there should have been a cussedness in handing over mere copies of documents when serious allegations and serious consequences which would flow to the respondents herein. Not only that, the endeavour to conclude the proceedings within a span of two weeks thereafter cannot, in view of this Court, be said to be an adequate opportunity as has been found by the SAT. An opportunity of hearing is not a mere nicety but a valuable right. That it does not fall in a straitjacket formula is no doubt the accepted legal position [Dharampal Satyapal Ltd.]. The question is whether there was substantial compliance of the principles of natural justice [Chairman, Board of Mining Examination] and whether there were unnecessary adjournments being sought, which were declined [Titaghur Paper Mills Co. Ltd. and Anr. and Cement Workers Karamchari Sangh] [Para 33][147-A-C]

4. This Court does feel that there was an endeavour to some extent by Respondent No.2 herein to prolong the proceedings but then looking into the enormity of the contents of the show cause notice running into 150 pages with documents spanning 4,000 pages supporting it, a reasonable time had to be given to respond to the same. The manner in which the proceedings were sought to be closed raises serious doubts that a fair process and OVERSEAS LTD.

opportunity has been extended to Respondent No.2 herein. [Para 34][147-C-E]

5. There is, thus, to some extent truth in what has been alleged by the appellants before us, i.e., that Respondent Nos.1 and 2 herein are conveniently playing this game of coming up separately even though they are joined in all purposes. This Court is conscious of the fact that Respondent No.1 herein is a separate legal entity being a registered company, but the concept of piercing the veil is not unknown to law. By this process, the law either goes behind the corporate personality to the individual members or ignores the separate personality of the company. This course is adopted when it is found that the principle of corporate personality is flagrantly opposed to justice, convenience or the interest of the Revenue. This Court is, thus, not able to hold that there was a failure to serve show cause notice to Respondent No.1 herein merely because no such notice was specifically addressed to it. This Court conscious of the fact that there was some concession made before the Division Bench of the Gujarat High Court by the counsel for the FMC. Be that as it may, this Court is of the view that it would be a hyper technicality now to say that Respondent No.1 herein should be served a fresh show cause notice, more so in view of the directions which we are proceeding to pass in the present judgment. [Para 35][148-A-D]

6. In the conspectus of the factual position from the proceedings which have taken place and the legal principles discussed, this Court is of the view that the following directions would subserve the interest of justice and perfect the rights of the parties:

i.

No fresh show cause notice is required to be served on Respondent No.1 herein and the show cause notice dated 21.6.2011 would be treated as a show cause notice to both Respondent Nos.1 and 2 herein.

ii.

The documents already asked for by Respondent No.1 and 2 herein and not supplied should be supplied. In order to obtain clarity on this issue, we direct that a list of documents sought for by either respondents be supplied to the SEBI within two weeks from the date of this order and those documents are to be supplied by SEBI within two weeks thereafter. iii.

Respondent Nos. 1 and 2 herein are granted

opportunity to file their reply to the show cause notice without any further delay within a period of four weeks after receiving aforementioned documents.

iv.

The SEBI would thereafter proceed to give an opportunity for personal hearing both to Respondent Nos.1 and 2 herein and these proceedings are to go on, on a day-to-day basis and no request for adjournment will be entertained in this behalf from either respondents..

v.

The SEBI would take a final view on the subject matter thereafter.

vi.

Needless to say, if Respondent Nos.1 and 2 herein are aggrieved by the same, the remedy against the same lies before the SAT.

vii.

This Court makes it clear that all pleas as raised by Respondent Nos.1 and 2 herein would be considered by the SEBI, legal or factual including but not confined to aspects of jurisdiction. In fact, this is the very purpose of relegating the proceedings before the SEBI and not to SAT as the right of appeal is a valuable right to be exercised after adequate opportunity at the first adjudication stage level. [Para 39][149-C-H; 150-A-C]

Chairman, Board of Mining Examination and Chief Inspector of Mines and Anr. v. Ramjee (1977) 2 SCC

256 : [1977] 2 SCR 904; Titaghur Paper Mills Co. Ltd. and Anr. v. State of Orissa and Ors (1983) 2 SCC 433 : [1983] 2 SCR 743; Cement Workers Karamchari Sangh v. Jaipur Udyog Limited and Ors. (2008) 4 SCC

701 : [2008] 5 SCR 276; Dharampal Satyapal Ltd. v. Deputy Commissioner of Central Excise, Gauhati and Ors. (2015) 8 SCC 519 : [2015] 6 SCR 437; New Horizons Limited and Another v. Union of India and OVERSEAS LTD. [SANJAY KISHAN KAUL, J.]

Others (1995) 1 SCC 478 : [1994] 5 Suppl. SCR 310 – referred to.