SAT pulls up regulatorfor sending notices 12 years after incident – The Hindu BusinessLine

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Tribunal says it is judicial dishonesty; asks SEBI officer to file sworn affidavit

The Securities and Appellate Tribunal (SAT) has called the actions by market regulator SEBI as ‘judicial dishonesty’, namely, sending show cause notices to traders 12 years after the alleged incidents of share price manipulation and insider trading. This is the second instance this month of SAT calling out SEBI on its casual approach to legal proceedings.

Second instance

For the first time, SAT has asked the SEBI adjudicating officer (AO) to file a sworn affidavit for not considering arguments on delay in action submitted by noticee.

This is the second rare instance where SAT has taken stern steps against SEBI for lapse in legal procedures. Earlier this month, SAT imposed a penalty-like cost of ₹2 lakh on SEBI to be paid to each of the four appellants for unnecessary waste of their time and clear abuse of the process of the court.

In the case involving a 12-year delay in show cause notice, SAT judges Tarun Agarwala and MT Joshi said in an order on December 16 that SEBI adjudicating officer (AO) had dealt with proceedings against one Yatin Pandya in a casual manner. SAT stayed the effect and operation of the SEBI order against the appellant.

Sterling Biotech case

SAT observed that SEBI did not take into consideration a specific plea by Pandya, where he had argued that the SEBI proceedings initiated against him were belated.

SAT observed that SEBI had issued its show cause notice to Pandya in February 2020 for certain alleged violations or manipulative trading between 2008 and 2009 in the share price of Sterling International Enterprises. The trading involved the members of the now infamous Sandesara group of Sterling Biotech whose promoters Nitin and Chetan Sandesara fled to Nigeria allegedly after syphoning ₹15,000 from the banks. SEBI observed in its investigations that 29 connected entities including Pandya had traded among themselves repeatedly on a daily basis between 2008 and 2009.

Pandya argued, saying, “There has been inordinate delay in issuing the show cause notice. I am unable to collate exact circumstances and situations which may have happened in the distant past. This puts me in a disadvantageous position to adequately clarify on the matter and defend the allegations against me.

Therefore, on this ground alone, I request a lenient view be taken and the aforesaid show cause notice against me may be withdrawn or alternatively I may be exonerated as also upheld by SAT in various appeals.”

SAT considered this argument of Pandya as meeting the merits since the tribunal has cleared its positions on delayed action by SEBI in its past judgement. But SEBI did not take this under consideration, which irked the SAT. In another judgement where SAT imposed a cost on SEBI and called its actions abuse of law, it was observed that SEBI had asked four entities to release unlawful gains of ₹4.55 crore with 10 per cent per annum with effect from ‘August 1, 2002’ till the date of payment.

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