Principle of double jeopardy not applicable where proceedings investigated by SFIO and SEBI Act were distinct: SAT

Case details: Seashore Securities Ltd. v. Securities and Exchange Board of India - [2021] 128 taxmann.com 301 (SAT - Mumbai)

Judiciary and Counsel Details

• • Justice Tarun Agarwal, Presiding Officier and M.T Joshi, Judicial Member
  • Nimay Dave, Ankur Loona, Ms. Aparna Wagle and Yash Garach, Advs. for the Appellant.
  • Pradeep Sancheti, Sr. Adv., Anubhav Ghosh and Ravishekhar Pandey, Advs. for the Respondent.

Facts of the Case

In the given case, the Company under investigation had issued Redeemable Preference Shares (RPS) to allottees from 2008-09 to 2012-13 and had raised an amount of approximately Rs. 503 crore in violation of SEBI Act, 1992 and Companies Act.

Accordingly, an order was passed by a Whole-time member, SEBI holding that company came out with an offer that was violative of sections 56 and 73 of the Companies Act, and accordingly, certain directions were issued to appellants to refund monies so collected during their period of directorship along with interest and they were restrained from selling their assets and were further restrained from accessing securities market, etc.

However, the Appellants contended that Serious Fraud Investigation Office (SFIO) was looking into the complaint under section 212(2) of the Companies Act and therefore no proceedings could have been initiated by SEBI.

SAT Held

It was alleged that it was a case of double jeopardy and that two different proceedings could not be initiated for the same cause of action. However, it was found that two proceedings investigated by SFIO under section 212(2) of the Companies Act and proceedings initiated by SEBI were distinct and cause of action was also not the same, and, in any case, the principle of double jeopardy was not applicable in the instant case.

Furthermore, it was also found that section 212(2) relates to a bar on other investigating agencies and in the instant case, SEBI was a Regulator and was not an investigating agency, thus the contention raised had no basis. Therefore, there being no error in the impugned order passed by WTM, SEBI, the appeal was to be dismissed.