LexSECURITIES AND EXCHANGE BOARD OF INDIA versus RAM KISHORI GUPTA & ANR.
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[2025] 4 S.C.R. 2789 : 2025 INSC 454 Securities and Exchange Board of India v. Ram Kishori Gupta & Anr. (Civil Appeal No. 7941 of 2019) 07 April 2025 [Sanjay Kumar* and K.V. Viswanathan, JJ.] Issue for Consideration Whether SEBI can pass multiple final orders on the same cause of action; applicability of principles of res judicata/constructive res judicata; whether the Appellate Tribunal was justified in setting aside the 2018 disgorgement order passed by SEBI holding that it was barred by the principle of res judicata in view of its earlier 2014 order. Headnotes† Securities and Exchange Board of India Act, 1992 – ss.11, 11B – Code of Civil Procedure, 1908 – s.11 – Principles of res judicata/constructive res judicata – Applicability of – SEBI issued show cause notices in 2012 to VCL, a public limited company in relation to alleged misleading advertisements issued by it – Respondents had allegedly purchased shares of VCL on the basis of misleading advertisements and suffered heavy loss – Eventually, in 2014, SEBI passed order u/ss.11 and 11B and the Regulations, finding VCL guilty of spreading misleading information to the public and imposed penalties however, no penalty of disgorgement was imposed – Subsequently, in 2018, SEBI passed a disgorgement order whereby VCL was held liable to disgorge the unlawful gains along with interest – Appeals filed before the Tribunal – Tribunal inter alia set aside the disgorgement order holding that it was barred by the principle of res judicata – Justification: Held: Tribunal was fully justified in setting aside the disgorgement order – SEBI cannot pass multiple final orders on the same cause of action – Having undertaken the exercise pursuant to its show- cause notices issued in 2012, SEBI passed the 2014 order, in exercise of power u/s.11B, with certain directions which attained * Author 2790 [2025] 4 S.C.R. Supreme Court Reports finality and were given full effect to – Thus, SEBI could not have reopened the entire exercise without just cause so as to pass a fresh order u/s.11B, once again, 4 years later – Imposition of the penalty of disgorgement was very much within the ambit and scope of SEBI even at the time the initial 2014 order was passed but, it chose not to resort to it – Once the said order attained finality, as it was neither challenged nor set aside, and was fully given effect to, passing of a fresh order once again, on the very same cause of action, trampled upon and reversed the finality that had already attached to the said order – Principles of res judicata/constructive res judicata not only apply to the parties to a dispute but also bind the adjudicating authorities, judicial, quasi-judicial or administrative, seized of such dispute – The entire exercise undertaken by SEBI after the passing of the final 2014 order resulting in the 2018 disgorgement order is unsustainable. [Paras 25, 28, 29, 31, 33] Securities and Exchange Board of India Act, 1992 – s.15U(1) – Code of Civil Procedure, 1908 – s.11 – Principles of res judicata/ constructive res judicata – Applicability of – SEBI contended that the principle of res judicata in s.11CPC, cannot be imported into these proceedings, due to s.15U(1) of the 1992 Act: Held: Not agreed – s.15U(1) merely deals with the procedure and powers of the Tribunal and states that the Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice and shall have the power to regulate its own procedure – Thus, it does not cover proceedings before the SEBI and its Whole-Time Members (WTMs) under the Act of 1992 – Therefore, SEBI cannot claim exemption from the applicability of the principle of res judicata thereunder – When the earlier 2014 order, on the same cause of action and based on the very same show-cause notices, remained intact and attained finality, the later 2018 order could not have been passed, supplementing it with additional directions – By the time this order was passed, the penalties of restraint and prohibition visited upon the 24 entities, under the earlier 2014 order, had already been suffered by them – Therefore, the order had worked itself out – While so, 22 out of the 24 entities were again visited with fresh penalties in the form of disgorgement coupled with much longer restraints/prohibitions, in the event of default in payment – Though, the illegalities committed by
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