On June 04, 2019, in the matter of Sanjay Gupta v. SEBI, the Securities Appellate Tribunal (Tribunal) set aside the confirmatory order and imposed costs of ₹50,000 upon SEBI for adopting a casual and mechanical approach and causing a delay in issuing the confirmatory order.
In the instant matter, the appellant had filed an appeal against the order confirming the earlier ex-parte ad interim order prohibiting the appellant from trading on the securities market for committing fraud. The allegations were that the appellant had manipulated the share price of M/s Supreme Tex Mart Ltd (Company), in which the appellant was a director. It is alleged that an agreement had been executed with a third party for sending bulk SMSs to the public recommending trading in the shares of the Company. Payment for this was alleged to have been made through a bank account, in which the appellant was a joint holder. The appellant contended before the Tribunal that he had resigned as a director of the Company before the fraud had been committed, and that he was not a joint account holder but merely an authorized signatory of the bank account through which payment had been made.
Noting that the appellant incurred heavy losses on account of prematurely closing out his positions, the Tribunal stated that an interim order restraining a person from pursuing his trade may have substantial and serious consequences. Hence, an interim order may be passed when there is urgency and on the basis of prima facie evidence of guilt.
The Tribunal held that the confirmatory order was passed in a mechanical manner without considering the contentions and evidence presented by the appellant, and when there is no urgency in continuing the restraint order. It is pertinent to note that the confirmatory order had been passed after almost a year of issuing the interim ex parte order. Condemning the casual approach, the Tribunal imposed costs, and observed that after passing an ex-parte order, endeavor should be made to dispose the matter expeditiously when the party appears.
This is welcome order as it may deter the regulator from needlessly imposing directions on parties through interim orders and delaying the disposal of applications seeking vacation of such directions.
