Extraordinary Jurisdiction of HC Can’t Be Invoked to Stop or Delay Proceedings by Quashing SCN Issued by SEBI to Petitioner

Case Details: Nalwa Sons Investments Ltd. v. Securities and Exchange Board of India - [2024] 169 taxmann.com 226 (HC-Bombay)

Judiciary and Counsel Details

• M.S. Sonak & Jitendra Jain, JJ.
• Janak Dwarkadas, Sr. Adv., Rohan Rajadhyaksha, Indranil Deshmukh, Darshan Furia, Ms Priyanka Desai, Arnav Misra, Kushal Tekriwal for the Petitioner.
• Mustafa Doctor, Sr. Adv., Ms Hubab Sayeed, Nishin Shrikhande, Harish Ballani for the Respondent.

Facts of the Case

In the instant case, pursuant to the complaint of the petitioner’s shareholder, SEBI issued a show cause notice to petitioners, calling upon them to show cause as to why suitable directions should not be issued and/or penalty, as deemed fit, should not be imposed upon them under sections 11, 11B and 15HA of SEBI Act, 1992.

The petitioner challenged the impugned show cause notice mainly on the grounds of delay and laches in issuing the impugned show cause notice and non-furnish of relevant documents.

It was noted that the impugned show cause notice could not be set aside by alleging delay or laches. This plea could always be raised in response to the impugned show cause notice, and there was no reason to assume that SEBI would not consider it.

High Court Held

The High Court observed that it was open to the petitioners to complain about the non-furnish of documents/material, demonstrate prejudice, if any, and urge failure of natural justice and, therefore, extraordinary and discretionary jurisdiction could not be invoked for such purposes.

The High Court held that the petitioner had not even filed a proper reply to the impugned show cause notice, which suggested that the Court’s extraordinary jurisdiction was being invoked to stall or delay the proceedings to the extent possible. Thus, the impugned show cause notice was not to be interfered with, and the instant petition was to be dismissed.

List of Cases Reviewed

• Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and others (1998) 8 SCC 1
• Rashid Ahmed v. Municipal Board, Kairana AIR 1950 SC 163: 1950 SCR 566
• K.S. Rashid & Son v. Income Tax Investigation Commissioner AIR 1954 SC 207: (1954) 25 ITR 167
• State of U.P. v. Mohd Nooh AIR 1958 SC 86: 1958 SCR 595
• A.V. Venkateswaran, Collector of Customs v. Ramchand Sobhraj Wadhwani AIR 1961 SC 1506: (1962) 1 SCR 753
• Culcutta Discount Co. Ltd v. ITO, Companies Distt. AIR 1961 SC 372: (1961) 41 ITR 191
• Oberoi Constructions Ltd v. Union of India Writ Petition (L) No. 33260 of 2023 decided on 11-11- 2024
• Malladi Drugs and Pharma Limited v. Union of India 2020 12 SCC 808
• State of Maharashtra & Others v. Greatship (India) Limited 2022 LiveLaw SC 784
• United Bank of India v. Satyawati Tondon and Others (2010) 8 SCC 110 [Para 38]; followed.

List of Cases Referred to

• T. Takano v. SEBI and another (2022) 8 SCC 162 (para 10)
• Madhyam Agrivet Industries Ltd v. SEBI 2024 SCC OnLine SAT 296 (para 10)
• Milind Patel v. Union Bank of India and others 2024 SCC OnLine Bom 745 (para 13)
• Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and others (1998) 8 SCC 1 (para 32)
• Rashid Ahmed v. Municipal Board, Kairana 1950 SCR 566 (para 33)
• K.S. Rashid & Son v. Income Tax Investigation Commissioner AIR 1954 SC 207 (para 33)
• K.S. Rashid and Son v. Income-tax Investigation Commission [1954] 25 ITR 167 (SC) (para 33)
• State of U.P. v. Mohd Nooh 1958 SCR 595 (para 33)
• A.V Venkateswaran, Collector of Customs v. Ramchand Sobhraj Wadhwani 1 SCR 753 (para 33)
• Culcutta Discount Co, Ltd. v. ITO AIR 1961 SC 372 (para 33)
• Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) (para 33)
• Oberoi Constructions Ltd v. Union of India Writ Petition (L) No. 33260 of 2023 (para 35)
• Malladi Drugs and Pharma Limited v. Union of India & another 2020 12 SCC 808 (para 35)
• United Bank of India v. Satyawati Tondon and Others (2010) 8 SCC 110 (para 37)
• Dehri Rohtas Light Railway Company Limited v. District Board, Bhojpur and Others (1992) 2 SCC 598 (para 40).