CROSSEAS CAPITAL SERVICES PVT LTD v. SECURITIES AND EXCHANGE BOARD OF INDIA AND ORS
Discusses res judicata, issue estoppel, principles of natural justice, and court's discretionary powers, applicable across legal domains.
Court: Bombay High Court
Citation: 2025:BHC-AS:28601-DB
Decision Date: 11-07-2025
List of Laws
Securities and Exchange Board of India Act, 1992; Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (“the PFUTP Regulations"); Securities and Exchange Board of India (Stockbrokers and the Sub-Brokers) Regulations, 1992 (“the SBSB Regulations, 1992"); Code of Civil Procedure, 1908; Constitution of India, 1949; General Principles of Law (Res Judicata and Issue Estoppel)
- Securities and Exchange Board of India Act, 1992: The judgment discusses the Act in relation to the issuance of Show Cause Notices (SCNs). It mentions that the SCNs were issued under the provisions of the Securities and Exchange Board of India Act, 1992 (“the SEBI Act”). The petitioners argued that the jurisdictional facts regarding the breach of PUFTP regulations were absent, and therefore, the SCNs could not have been issued. The judgment refers to Sections 15HA and 15HB of the SEBI Act, noting that the investigating authority did not recommend any action under Section 15HA but made a recommendation under Section 15HB for alleged violation of the Securities and Exchange Board of India (Stockbrokers and the Sub-Brokers) Regulations, 1992. The judgment also mentions Sections 12A(a), 12A(b), and 12A(c) of the SEBI Act. The Whole Time Director ("WTD") had originally issued show cause notices to several Noticees, including Aman, under Section 11(b) of the SEBI Act, for disgorgement.
- Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (“the PFUTP Regulations"): The judgment discusses the PFUTP Regulations in relation to the issuance of Show Cause Notices (SCNs). The petitioners argued that the jurisdictional facts regarding the breach of PUFTP regulations were absent, and therefore, the SCNs could not have been issued. The investigating authority did not recommend any action under Section 15HA of the SEBI Act or the PFUTP Regulations. The investigating authority concluded there was no breach of regulations 3(b), 3(c), and 3(d) of the PFUTP Regulations in conjunction with Sections 12A(a), 12A(b), and 12A(c) of the SEBI Act. However, the investigation only identified a violation of Regulation 4(1) of the PFUTP Regulations. The Adjudicating Officer (AO) recorded a violation of Regulation 4(1) of PUFTP Regulations. However, this order noted that it could not be said that PRBS had violated the provisions of Regulations 3(b), 3(c) and 3(d) of the PFUTP Regulations.
- Securities and Exchange Board of India (Stockbrokers and the Sub-Brokers) Regulations, 1992 (“the SBSB Regulations, 1992"): The judgment mentions that a recommendation was made under Section 15HB of the SEBI Act for alleged violation of certain provisions of the Securities and Exchange Board of India (Stockbrokers and the Sub-Brokers) Regulations, 1992. The adjudicating officer merely imposed a penalty of Rs. 3 lakhs for violation of the SBSB Regulations.
- Code of Civil Procedure, 1908: The judgment discusses Order XIV Rule 1 of Code of Civil Procedure, 1908, noting that it may not be applicable to proceedings under the SEBI with all its rigour. It provides that notwithstanding that a case may be disposed of on a preliminary issue, the Court shall, subject to the provisions of Sub Rule-(2), pronounce judgment on all issues. Order XIV Rule 2(2) provides that where issues both of law and of fact arise in the same suit, and the Court is of the opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if the issue relates to (a) the jurisdiction of the Court, or (b) a bar to the suit created by any law for the time being in force.
- Constitution of India, 1949: The judgment refers to Article 226 of the Constitution, stating that the jurisdiction under it is equitable and discretionary. The learned Senior Counsel for SEBI submitted that the jurisdiction under Article 226 of the Constitution is equitable and discretionary. The Court notes that challenges to a show cause notice must not be entertained in Petitions under Article 226 of the Constitution ordinarily. The Petitions may be entertained where there has been a violation of principles of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of the act is challenged.
- General Principles of Law (Res Judicata and Issue Estoppel): The judgment extensively discusses the principles of res judicata and issue estoppel. The petitioners contended that the impugned SCNs were barred by the principles of res judicata or issue estoppel. They relied on Securities and Exchange Board of India V/s. Ram Kishori Gupta and Anr. for the proposition that the principle of res judicata equally applies to SEBI and the issuance of the impugned SCN was without jurisdiction. The Court notes that in SEBI Vs. Ram Kishori Gupta (Supra), the Hon'ble Supreme Court has held that the principle of res judicata or issue estoppel applies to proceedings before SEBI. The Court also discusses the waiver of the plea of res judicata and its relation to fundamental rights. The Court notes that the plea of res judicata, depending on the facts of a given case, is capable of being waived, if not properly raised at an appropriate stage and in an appropriate manner.
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