INDIAN COMMODITY EXCHANGE LIMITED versus NEPTUNE OVERSEAS LIMITED & ORS.

Citation: [2020] 13 S.C.R. 129 · Decided: 27-11-2020 · Supreme Court of India · Bench: SANJAY KISHAN KAUL · Disposal: Disposed off

cites 4 · see the full citation network in Lexace

Judgment (excerpt)

A
B
C
D
E
F
G
H
129
INDIAN COMMODITY EXCHANGE LIMITED
v.
NEPTUNE OVERSEAS LIMITED & ORS.
(Civil Appeal No. 9037 of 2019)
NOVEMBER 27, 2020
[SANJAY KISHAN KAUL AND HRISHIKESH ROY, JJ.]
Forward Contracts (Regulation) Act, 1952 – ss.3, 4, 5, 6, 7
and 8 – 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 dated
21.06.2011 on basis of a communication by a independent journalist
to Forward Markets Commission (FMC) which alleged trading
irregularities within NMCE along with an allegtion of abuse of
position by respondent nos.1 and 2 – The notice gave respondent
no.2 a period of 10 days to respond and liberty to peruse any
documents within a period of 07 days from the date of receipt of
notice – Respondent no.2 requested for copies of documents,
questioned the jurisdiction of the FMC and made repeated requests
for adjournments – The respondent no.1 challenged the show cause
notice before the High Court – The High Court gave respondent
no.1 liberty to appear before the FMC and held that FMC is yet to
take a final view, it was premature effort of respondent no.1 to
approach the High Court – Before the FMC, the grievance of
respondent no.2 that entire documentation was not supplied was
rejected and it was reasoned that all documents were either available
in public domain or not relevant – On 20.07.2011, the request for
adjournment was denied – By order dated 23.07.2011, the FMC
opined against respondent nos.1 and 2 and held hat respondent
no.2 was in complete breach of his fiduciary responsibility to the
NMCE by systematically defrauding misusing and misappropriating
its property – However, the Division Bench of the High Court held
that FMC had not serviced show cause notice on respondent no.1,
consequently, quashed the order dated 23.07.2011 – The Supreme
Court set aside the order of the Division Bench of the High Court
and directed the respondents to approach the Securities Appellate
129
   [2020] 13 S.C.R. 129
A
B
C
D
E
F
G
H
130
SUPREME COURT REPORTS
[2020] 13 S.C.R.
Tribunal (SAT) against the order dated 23.07.2011 – SAT found
absence of any show cause notice to respondent no.1 – SAT also
noted on the issue of request for adjournment on 20.07.2011 that
only two weeks had elapsed from the date when the documents were
supplied and thus, further request for adjournment was not
unreasonable as the documents were voluminous – The time to file
reply was also found inadquate – Therefore, the order dated
23.07.2011 passed by FMC was set aside and the successor to the
FMC, the SEBI was directed to grant adequate time to respondent
nos.1 and 2 to file their reply and the application for supply of
documents, if any, and the issue of jurisdiction to be decided in
accordance with law – Aggrieved, the SEBI and ICEL (successor of
NMCE) filed appeals before the Supreme Court – Held: When
reliance is placed on voluminous documents (4000 pages) 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 hand over – The answer cannot be that party is
free to inspect 4000 pages on its own – SAT was right that adequate
opportunity was not given – As documents were voluminous,
reasonable time had to be given to respond to the same – As far as
service of notice to respondent no.1 is concerned, both respondents
are joined in all purposes – Thus, there was no failure to serve
show cause notice to respondent no.1 merely because no such notice
was addressed to it – In the conspectus of the factual position, the
following directions are issued: (i) the show cause notice dated
21.06.2011 would be treated as a show cause notice to both
respondent nos.1 and 2; (ii) the list of documents asked by
respondents to be supplied by SEBI; (iii) Respondents granted
opportunity to file their reply to show cause notice; (iv) SEBI would
give an opportunity for personal hearing to both the parties and
take final view of the matter.
Natural Justice – Show cause notice with documents – Held:
The show cause notice should be comprehensive enough with full
supporting documents being handed over.
A
B
C
D
E
F
G
H
13

Excerpt shown. Read the full judgment & AI analysis in Lexace.