If Prejudicial Allegations Are Made Against Person, He Must Be Given Particulars Of That Before Hearing: Delhi High Court

The Delhi High Court reiterated that if prejudicial allegations are being made against the person, he must be given particulars of that, before hearing so that he can prepare the defence.

The Court reiterated thus in a Petition filed under Section 482 of the Code of Criminal Procedure, 1973 (CrPC), seeking quashing of the Order dismissing the Application under Section 208 of CrPC by the Trial Court in a Criminal Complaint under Section 24 of the Securities and Exchange Board of India Act, 1992 (SEBI Act).

A Single Bench of Justice Neena Bansal Krishna observed, “The law is well-settled that if prejudicial allegations are being made against the person, he must be given particulars of that, before hearing so that he can prepare the defence. … The concept of fairness may require the Adjudicating Authority to furnish the copies of the documents upon which reliance has been placed by him to issue Show Cause Notice requiring a notice to explain why an inquiry under Section 16 of the Act, should not be initiated.”

The Bench said that the Investigation Report prepared under Regulation 9, is the basis on which the Board decides whether there is violation and proceeds under Order 10, to take further action in terms of Regulations 11 and 12 and it is a document which is relevant and essential for the Petitioner, to prepare their defence and to have a fair hearing.

Advocate Adit S. Pujari represented the Petitioner, while Senior Advocate Sunil Dalal represented the Respondent.

Factual Background

The core grievance of the Petitioner was related to the dismissal of his Application filed under Section 208 CrPC read with Section 26D of the SEBI Act, wherein he sought the supply of certain documents including the Investigation Report, which formed the basis of the Complaint, but were not supplied to him along with the summons. The Respondent-SEBI instituted a Complaint in 2015 against a company and its Directors including the Petitioner-accused, alleging offences under Section 24 of SEBI Act read with Section 23M of the Securities Contracts (Regulation) Act, 1956.

The Petitioner was summoned and he moved an Application under Section 208 of CrPC seeking the supply of documents relied and those forming the basis of the Complaint. Specifically, the Petitioner sought the “Investigation Report” mentioned in the Annexure C-5 of the Complaint, the material constituting the ‘grounds’ for SEBI’s satisfaction to initiate proceedings, Investor complaints, and the statements recorded by the Investigating Officer. The Trial Court dismissed the Petitioner’s Application and being aggrieved, he was before the High Court.

Court’s Observations

The High Court after hearing the contentions of the counsel, noted, “The language of Regulation 9 and 10, is indicative that The words of Regulation 10 are that Board “after consideration of the report referred to in Regulation 9, if satisfied that there is a violation of the Regulations and after giving reasonable opportunity of hearing to the person concerned”, takes action under Regulations 11 and 12. Therefore, the consideration of the Report of the Investigating Authority submitted under Regulation 9, is an intrinsic component of the Board’s satisfaction for determining whether there is any violation of the Regulations.”

The Court added that the principles of natural justice and concept of fairness are required to be read into Rule 4(1) of the Rules.

“The Noticee is always entitled to satisfy the Adjudicating Authority that those very documents upon which reliance has been placed, do not make out even a prima facie case requiring any further inquiry. Therefore, all such documents relied on by the Authority are required to be furnished to the notice enabling him to show a proper cause as to why an inquiry should not be held against him”, it observed.

The Court further said that where there is material before the District Magistrate, which is of the character as would have reasonable probability to influence the decision of a reasonable man, the Court would be reluctant to accept the ipse dixit of the District Magistrate that he was no so influenced and a fortiori, if such material is not disclosed to the detenu, the Order of detention would be vitiated.

“Although the Disciplinary Authority is required to arrive at its own findings on the basis of the evidence, but it is equally true that the Disciplinary Authority takes into consideration the findings recorded by the Enquiry Officer along with the evidence on record. In the circumstances, the findings of the Enquiry Officer do constitute an important material, which is likely to influence the conclusions of the Disciplinary Authority and therefore, the same must be made available to the employee”, it also noted.

The Court was of the view that the Investigation Report between the Officers investigating the matter and Authority is in the nature of inter-departmental communication and since it is the basis of satisfaction of the enforcement authority for determination of alleged violation, it is necessarily required to be provided to the person.

“Since it meets the test of not only being relevant but also of having nexus with the Order and it is the basis for the decision of the Authority, it would be contrary to assert that the Investigation Report is merely an internal document, the disclosure of which is not warranted. Even in the language of Regulation 10, the Board forms an opinion regarding the violation of Regulations after considering the Investigation Report prepared under Regulation 9”, it added.

Conclusion

Moreover, the Court remarked that the only exception recognised is that those portions of the Enquiry Report, which involve information on third parties or confidential information on the securities market, may not be disclosed and may be redacted while the remaining Investigation Report, be made available to the person.

“It was thus, held that the Investigation Report submitted under Regulation 9 to the Board in terms of the Regulation 10, is not merely an internal document but is the basis on which opinion is formed by the Board. Therefore, the same is required to be provided to the person. … In the light of the aforesaid decision of T. Takano (supra), it is evident that the Investigation Report prepared under Regulation 9, is the basis on which the Board decides whether there is violation and proceeds under Order 10, to take further action in terms of Regulations 11 and 12. It is a document which is relevant and essential for the Petitioner, to prepare their defence and to have a fair hearing”, it concluded.

Accordingly, the High Court allowed the Petition and directed that the Investigating Report be provided to the Petitioner, in accordance with law, by the Respondents.

Cause Title- Siddharth Shankar v. SEBI (Neutral Citation: 2025:DHC:11482)

Appearance:

Petitioner: Advocates Adit S. Pujari and Manvendra Singh Shekhawat.

Respondent: Senior Advocate Sunil Dalal, Advocates Ashish Aggarwal, Shivani Joshi, Ankit Rana, Shipra Bali, Bharat Khurana, and Sarthak Malhotra.

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