Case: INDIAN COMMODITY EXCHANGE LIMITED Vs. NEPTUNE OVERSEAS LIMITED &amp; ORS

there should have been a cussedness in handing over mere copies of documents when serious allegations and serious consequences which would flow to the respondents herein. Not only that, the endeavour to conclude the proceedings within a span of two weeks thereafter cannot, in our view, be said to be an adequate opportunity as has been found by the SAT. An opportunity of hearing is not a mere nicety but a valuable right. That it does not fall in a straitjacket formula is no doubt the accepted legal position [Dharampal Satyapal Ltd. (supra) ].The question is whether there was substantial compliance of the principles of natural justice [Chairman, Board of Mining Examination (supra) ] and whether there were unnecessary adjournments being sought, which were declined [Titaghur Paper Mills Co. Ltd. and Anr. (supra) and Cement Workers Karamchari Sangh (supra) ] 34. We do feel that there was an endeavour to some extent by Respondent No.2 herein to prolong the proceedings but then looking into the enormity of the contents of the show cause notice running into 150 pages with documents spanning 4,000 pages supporting it, a reasonable time had to be given to respond to the same. We may note that the whole enquiry was at the behest of independent enterprising journalist. The manner in which the proceedings were sought to be closed raises serious doubts in our mind that a fair process and opportunity has been extended to Respondent No.2 herein. 35. Insofar as Respondent No.1 herein is concerned, not even a formal show cause notice has been issued. However, the fact remains that the communications addressed by Respondent Nos.1 and 2 herein do give rise to a clear and unequivocal view that it was understood as a notice both to Respondent Nos.1 and 2 herein. That is how the parties understood it. There is no doubt about the fact that Respondent No.1 herein made an endeavour to approach the High Court challenging the show cause notice at that time without being joined by Respondent No.2 herein -though it was through Respondent No.2 but that endeavour failed as the proceedings before the FMC had not culminated into any order. It is only in the Letters Patent Appeal filed against that the order of the FMC dated 23.7.2011 was sought to be assailed and Respondent No.2 herein joined the proceedings as a party in his personal capacity. There is, thus, to some extent truth in what has been alleged by the appellants before us, i.e., that Respondent Nos.1 and 2 herein are conveniently playing this game of coming up separately even though they are joined in all purposes. We are conscious of the fact that Respondent No.1 herein is a separate legal entity being a registered company, but the concept of piercing the veil is not unknown to law. By this process, the law either goes behind the corporate personality to the individual members or ignores the separate personality of the company. This course is adopted when it is found that the principle of corporate personality is flagrantly opposed to justice, convenience or the interest of the Revenue. (New Horizons Limited and Another v. Union of India and Others. (1995) 1 SCC 478 ) We are, thus, not able to hold that there was a failure to serve show cause notice to Respondent No.1 herein merely because no such notice was specifically addressed to it. We are conscious of the fact that there was some concession made before the Division Bench of the Gujarat High Court by the counsel for the FMC. Be that as it may, we are of the view that it would be a hyper technicality now to say that Respondent No.1 herein should be served a fresh show cause notice, more so in view of the directions which we are proceeding to pass in the present judgment. 36. We now come to the plea based on the directions passed by this Court on 7.3.2018 in the earlier appeal. No doubt the findings of the Division Bench of the High Court based on the violation of the principles of natural justice were set aside. But this setting aside will have to be read in the context of the fact that it was felt that Respondent Nos.1 and 2 had an adequate alternative remedy of appeal before the SAT. Not too much can be read into the use of the expression that the appeal had to be decided on merits. The merits of a case include of factual and legal pleas. A plea of lack of opportunity to defend its case is also a legal plea. The order read as a whole only gives rise to the conclusion that the hearing was shifted to the SAT instead of before the High Court, in view of it being the competent body 37. Similarly, the continuation of the interim order passed ealier in those proceedings on 22.3.2012, has to be read in the context of other consequential proceedings having been initiated. The objective was that those proceedings should not be brought to a naught at this stage; but even those were to abide by the result of the appeal before the SAT. We may also note with regret that on the one hand it has been contended by the appellant that so many different proceedings have emanated and, thus, giving a fresh opportunity by issuing a fresh show cause notice having fresh proceedings before the SEBI would serve no effective purpose and yet the summary of those proceedings given to us show hardly any progress. It is not as if those proceedings are anywhere near an advanced stage. 38. The impugned order of the SAT dated 18.10.2019 is predicated on a plea of lack of adequate opportunity and there is no examination on merits. The questions, thus, arises what would be the appropriate directions to be passed since Respondent Nos.1 and 2 have to succeed in view of our aforesaid observations and what will be the nature of relegated proceedings.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]21. We have gone through the record before us and perused the synopses placed before us apart from the submissions made in Court.22. The stand of the ICEL becomes relevant to the extent that the order of the SAT is predicated on ICEL not being served the show cause notice. This really does not withstand scrutiny, for the reason they had not sought so and, in fact, are themselves in appeal before us. Thus, the denial of opportunity to be heard is really being claimed only by Respondent Nos.1 and 2 herein. In fact, what has been urged before us by the ICEL is that, while the challenge before the Gujarat High Court was laid only by Respondent No.1 herein, it is Respondent No.2 herein who was simultaneously seeking adjournments before the FMC on one pretext or the other. This is despite the fact that Respondent Nos.1 and 2 herein were addressing communications to the FMC interchangeably on the same subject matter. As such, Respondent No.1 herein was fully aware of the show cause notice and acknowledged the same as one, which had been addressed to the said respondent. Not only that, there was no grievance ever made at the stage of final hearing before the learned Single Judge about the absence of show cause notice. This aspect was sought to be brought in only at the stage of appeal, for the first time, that too by amending it after the order dated 23.7.2011 was passed wherein the acts of Respondent No.2 herein of siphoning off money and interlinked issues was stated to require investigation and an adverse finding resulted. However, to our mind, that is not very relevant at this stage because that would amount to going into the merits of the controversy, which is not to be examined by us.30. The task before us is all the more difficult because both set of arguments in a sense would have their appeal at the first blush. We have, thus, endeavoured to charter a course based on the pleas and the documents before us, as also the manner of conduct of the proceedings by the FMC and the nature of defences, technical or on merits sought to be raised by the first two respondents.31. We have no doubt that a proper show cause notice was served on Respondent No.2 herein. The moot point, however, remains as to what is the effect of not serving him with the documents he sought for and within the compass of time, which was given to him to respond.32. Once again, it may be stated that a large part of the documents would have been within the custody of the Respondent No. 2 herein or for that matter with Respondent No.1 herein. However, this would not encompass all the documents. Not only that, when reliance is placed on as many as 4,000 pages of documents, 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 handed over. The answer cannot be that they are free to inspect 4,000 pages on their own! In fact, in so many terms, ultimately most of those documents were made available and it would not be appropriate to go back into the issue of whether the documents should have been supplied or not. In a sense, that chapter closed with the supply of documents on 5.7.2011 even though some more documents were sought thereafter.33. We fail to appreciate why there should have been a cussedness in handing over mere copies of documents when serious allegations and serious consequences which would flow to the respondents herein. Not only that, the endeavour to conclude the proceedings within a span of two weeks thereafter cannot, in our view, be said to be an adequate opportunity as has been found by the SAT. An opportunity of hearing is not a mere nicety but a valuable right. That it does not fall in a straitjacket formula is no doubt the accepted legal position [Dharampal Satyapal Ltd. (supra) ].The question is whether there was substantial compliance of the principles of natural justice [Chairman, Board of Mining Examination (supra) ] and whether there were unnecessary adjournments being sought, which were declined [Titaghur Paper Mills Co. Ltd. and Anr. (supra) and Cement Workers Karamchari Sangh (supra) ]34. We do feel that there was an endeavour to some extent by Respondent No.2 herein to prolong the proceedings but then looking into the enormity of the contents of the show cause notice running into 150 pages with documents spanning 4,000 pages supporting it, a reasonable time had to be given to respond to the same. We may note that the whole enquiry was at the behest of independent enterprising journalist. The manner in which the proceedings were sought to be closed raises serious doubts in our mind that a fair process and opportunity has been extended to Respondent No.2 herein.35. Insofar as Respondent No.1 herein is concerned, not even a formal show cause notice has been issued. However, the fact remains that the communications addressed by Respondent Nos.1 and 2 herein do give rise to a clear and unequivocal view that it was understood as a notice both to Respondent Nos.1 and 2 herein. That is how the parties understood it. There is no doubt about the fact that Respondent No.1 herein made an endeavour to approach the High Court challenging the show cause notice at that time without being joined by Respondent No.2 herein -though it was through Respondent No.2 but that endeavour failed as the proceedings before the FMC had not culminated into any order. It is only in the Letters Patent Appeal filed against that the order of the FMC dated 23.7.2011 was sought to be assailed and Respondent No.2 herein joined the proceedings as a party in his personal capacity. There is, thus, to some extent truth in what has been alleged by the appellants before us, i.e., that Respondent Nos.1 and 2 herein are conveniently playing this game of coming up separately even though they are joined in all purposes. We are conscious of the fact that Respondent No.1 herein is a separate legal entity being a registered company, but the concept of piercing the veil is not unknown to law. By this process, the law either goes behind the corporate personality to the individual members or ignores the separate personality of the company. This course is adopted when it is found that the principle of corporate personality is flagrantly opposed to justice, convenience or the interest of the Revenue. (New Horizons Limited and Another v. Union of India and Others. (1995) 1 SCC 478 ) We are, thus, not able to hold that there was a failure to serve show cause notice to Respondent No.1 herein merely because no such notice was specifically addressed to it. We are conscious of the fact that there was some concession made before the Division Bench of the Gujarat High Court by the counsel for the FMC. Be that as it may, we are of the view that it would be a hyper technicality now to say that Respondent No.1 herein should be served a fresh show cause notice, more so in view of the directions which we are proceeding to pass in the present judgment.36. We now come to the plea based on the directions passed by this Court on 7.3.2018 in the earlier appeal. No doubt the findings of the Division Bench of the High Court based on the violation of the principles of natural justice were set aside. But this setting aside will have to be read in the context of the fact that it was felt that Respondent Nos.1 and 2 had an adequate alternative remedy of appeal before the SAT. Not too much can be read into the use of the expression that the appeal had to be decided on merits. The merits of a case include of factual and legal pleas. A plea of lack of opportunity to defend its case is also a legal plea. The order read as a whole only gives rise to the conclusion that the hearing was shifted to the SAT instead of before the High Court, in view of it being the competent body37. Similarly, the continuation of the interim order passed ealier in those proceedings on 22.3.2012, has to be read in the context of other consequential proceedings having been initiated. The objective was that those proceedings should not be brought to a naught at this stage; but even those were to abide by the result of the appeal before the SAT. We may also note with regret that on the one hand it has been contended by the appellant that so many different proceedings have emanated and, thus, giving a fresh opportunity by issuing a fresh show cause notice having fresh proceedings before the SEBI would serve no effective purpose and yet the summary of those proceedings given to us show hardly any progress. It is not as if those proceedings are anywhere near an advanced stage.38. The impugned order of the SAT dated 18.10.2019 is predicated on a plea of lack of adequate opportunity and there is no examination on merits. The questions, thus, arises what would be the appropriate directions to be passed since Respondent Nos.1 and 2 have to succeed in view of our aforesaid observations and what will be the nature of relegated proceedings.