REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2104 of 2009

SECURITIES AND EXCHANGE BOARD OF INDIA ....APPELLANT(S)

VERSUS

MEGA CORPORATION LIMITED .…RESPONDENT(S)

JUDGMENT

PAMIDIGHANTAM SRI NARASIMHA, J.

1. This is a statutory appeal under Section 15Z of the Securities and

Exchange Board of India Act, 19921 against the final order of the Securities

Appellate Tribunal2, by which the Tribunal has set aside the order passed by

the Securities and Exchange Board of India3 restricting the respondent-

company from accessing the capital market for one year and further restraining

the promoter directors from buying, selling or otherwise dealing with securities

for India. While dismissing the appeal, we have explained that the jurisdiction

of the Supreme Court under Section 15Z is confined to question of law.

Signature Not Verified

Digitally signed by Dr.

Mukesh Nasa
Date: 2022.03.25
16:55:36 IST
Reason:
1
hereinafter referred to as the ‘Act’.
2
hereinafter referred to as the ‘Tribunal’.
3
hereinafter referred to as ‘SEBI’ or ‘the Board’.
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of the Act and the PFUTP Regulations, SEBI restrained the Company from

accessing the capital market in any manner and its directors from dealing in

securities for one year. The operative portion of the order is as follows:

“4.1 Now, therefore, I in exercise of powers conferred

upon me under Section 11 and 11B read with Section 19 of
the SEBI Act, 1992 further read with PFUTP Regulations
2003, hereby restrain Mega Corporation Limited (PAN-
AAC-CM-9506-E) from accessing the capital market in any
manner whatsoever for a of period of one year (1 year) and
Shri Kunal Lalani (PAN-AAG-OPL-0992-C), Shri Himanshu
Mehta (PAN-AAL-PM-5750-F) and Shri Surendra Chhalani
(PAN-ACI-PC2863-K) Directors of the company are hereby
restrained from buying, selling or otherwise dealing in
securities, in any manner, for a period of one year
(1 year).”

5. The Company filed an appeal under Section 15T of the Act being Appeal

No. 60 of 2008 before the Tribunal. The Tribunal re-examined the three

circumstances which became the basis of SEBI decision and finally allowed the

appeal, by its judgment dated 15.10.2008. The Tribunal held:

5.1 The unusual profits, if any, made during the year 2004-05 by itself

cannot constitute any transgression of law. The powers vested in

the Board are only to ensure that investors are not misled in

making investments based on fraud and allurement and that there

is nothing unusual about investors being attracted when the

Company comes with positive annual reports. The Tribunal held

that extraordinary profits in itself cannot be the basis for

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 concluding that the Company's accounts are manipulated with a

specific objective to mislead the investors.

5.2 On the issue of public statements in the form of advertisements

and notifications dated 07.04.2005 and 20.04.2005, the Tribunal

concluded that there is nothing wrong in the advertisements issued

for entering into the business of foreign exchange with the launch

of ‘Mega Forex Brand’ and also the announcement relating to tour

services based on the agreement with Gems Tours and Travels

Private Limited. The Tribunal found that these announcements

were in the ordinary course of business, and there was sufficient

evidence to that effect. Having considered facts in detail, the

Tribunal reversed the findings of the SEBI.

5.3 Finally, the Tribunal also examined the allegation relating to

manipulation. It considered the findings of the SEBI that the

transactions were orchestrated through entities that had links with

the Company. On reappreciation the Tribunal found that the

alleged links were not established and that the Board had

unnecessarily read into certain activities, a meaning which could

not be inferred in the ordinary course of events.

It is in this context that the Tribunal proceeded to accept the

submission made on behalf of the Company that the Board could

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 violation of the Regulations are based on the correct facts as

evidenced by the material placed before the Board. Reliance was

placed on the judgment of the Tribunal in M/s Vijay Textile.8

8.4 Shri Gaggar submitted that the conclusions drawn by the Board on

the assumption that the sales were orchestrated through artificial

purchase and sale are incorrect. He endeavoured to establish that

the assumed link between the parties is non-existent and only

imaginary. Reliance was placed on the decision of this Court in

Rakhi Trading9 and Kishore Ajmera10.

8.5 A final submission was made on the ground that principles of

natural justice would be violated if an opportunity to cross-

examine is not granted in a case where a material adverse to the

party is taken cognisance by SEBI. In support of this, decisions of

this Court in the judgments in Meenglas11, Bareilly

Electricity12and Swadeshi Cotton Mills13 were relied on.

9. In his rejoinder, Shri Singh has distinguished the cases cited by

Shri Gaggar and referred to precedents to establish that there is no right to

8
M/s Vijay Textile v. Securities and Exchange Board of India (2011) SCC Online SAT 50.
9
Securities and Exchange Board of India v. Rakhi Trading Private Limited (2018) 13 SCC 753.
10
Securities and Exchange Board of India v. Kishore R. Ajmera (2016) 6 SCC 368.
11
Meenglas Tea Estate v. Workmen (1964) 2 SCR 165.
12
Bareilly Electricity Supply Co. Ltd v. Workmen and Ors. (1971) 2 SCC 617.
13
Swadeshi Cotton Mills v. Union of India (1981) 1 SCC 664.
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 respondent should prima facie establish that the disclosure of
the report would affect third-party rights and the stability and
orderly functioning of the securities market. The onus then
shifts to the appellant to prove that the information is
necessary to defend his case appropriately; and
(vi) Where some portions of the enquiry report involve
information on third-parties or confidential information on
the securities market, the respondent cannot for that reason
assert a privilege against disclosing any part of the report.
The respondents can withhold disclosure of those sections of
the report which deal with third-party personal information
and strategic information bearing upon the stable and
orderly functioning of the securities market.”

35. As per the principles laid down in the above referred case, there is a right

of disclosure of the relevant material. However, such a right is not absolute and

is subject to other considerations as indicated under paragraph 62(v) of the

judgment above referred. In this judgment, there is no specific discussion on

the issue of a right to cross-examination but the broad principles laid down

therein are sufficient guidance for the Tribunal to follow. There is no need for

us to elaborate on this point any further.

36. Coming back to the facts of the present case, we have noticed that the

Tribunal has arrived at its conclusions based on independent facts concerning

(a) the allegations under Regulation 4 relating to the issuance of misleading

advertisements dated 07.04.2005 and 20.04.2005 as well as (b) allegations

relating to manipulation of scrip prices and profits to lure investors. As

indicated earlier, the Tribunal concluded that the allegations could be proved.

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As we are not interfering in the findings of fact arrived at by the Tribunal the

Company’s claim for cross-examining would pale into insignificance. This

question presents itself merely as an academic issue.

37. We are also of the opinion that, there was no necessity for the Tribunal

to lay down as an inviolable principle that there is a right of cross-examination

in all cases. In fact, the conclusion of the Tribunal based on evidence on record

did not require such a finding. We, therefore, set aside the findings of the

Tribunal to this extent while upholding its decision on all other grounds. We

would also leave the question of law relating to the right of cross-examination

open and to be decided in an appropriate case by this Court.

38. For the reasons stated above, while we dismiss Civil Appeal No. 2104 of

2009 against the judgment of the Securities Appellate Tribunal in Appeal

No. 60 of 2008 dated 15.10.2008, the general observations of the Tribunal that

there is a right of cross-examination is hereby set aside.

39. Parties to bear their own costs.

……………………J.
[L. NAGESWARA RAO]

……………………J.
[PAMIDIGHANTAM SRI NARASIMHA]
NEW DELHI.
MARCH 25, 2022

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