BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved on : 9.12.2019
Date of Decision:
12.12.2019
Appeal No.407 of 2019
Kishore V. Gandhi
12/A, Vaibhav Apartment,
Bhulabhai Desai Road,
Near American Consulate,
Mumbai-400026.

…. Appellant
Versus
Securities and Exchange Board of India
SEBI Bhawan, Plot No.C-4A,
G-Block, Bandra Kurla Complex,
Bandra (E), Mumbai – 400 051.

… Respondent
Mr. Kunal Katariya, Advocate with Ms. Sourbahi Waknis,
Advocate i/b. Aagam Doshi & Co. for the Appellant.
Mr. Vishal Kanade, Advocate with Mr. Chirag Bhavsar and
Ms. Eram Quraishi, Advocate i/b. MDP & Partners for the
Respondent.
CORAM: Justice Tarun Agarwala, Presiding Officer
Dr. C.K.G. Nair, Member
Justice M.T. Joshi, Judicial Member
Per : Justice Tarun Agarwala
1.

Against the order of the Adjudicating Officer imposing
a penalty of Rs.10 lakhs the present appeal has been filed.
The Adjudicating Officer held that the appellant alongwith
other entities had indulged in circular, reversal and
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synchronized trades thereby violating Regulations 3 and 4 of
the Securities and Exchange Board of India (Prohibition of
Fraudulent and Unfair Trade Practices relating to Securities
Market) Regulations, 2003 (hereinafter referred to as
‘PFUTP Regulations’).
2.

The penalty order has been imposed upon Kishor V.

Gandhi, HUF. The present appeal has been filed by Kishor
V. Gandhi contending that the HUF was dissolved and,
therefore, the present appeal was being filed in his individual
capacity.

Considering the peculiar facts of the case, we
permit the appellant to pursue the appeal as the Karta of
Kishor V. Gandhi, HUF.
3.

The ground urged by the appellant are two folds,
namely, that the show cause notice was never served upon
the appellant and consequently was denied an opportunity of
hearing. The second ground urged is, that the proceedings
are liable to be quashed on the ground of laches in as much as
there is an inordinate delay in initiating the proceedings.
4.

In this regard, the relevant facts is, that the investigation
period is 1st September, 2009 to 15th January, 2010. The
Adjudicating Officer was appointed on 8th August, 2013 and
the show cause notice was issued on 28th February, 2018.

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The said show cause notice came back undelivered and
consequently it was affixed at the last known address of the
appellant on 14th April, 2018. Subsequently, the notice for
hearing fixing 12th June, 2018 and again for 16th July, 2018
came back undelivered and thereafter notice for hearing for
27th July, 2018 was served by affixation again at the last
known address. In this fashion, substantial compliance was
made by the Adjudicating Officer who proceeded with the
matter ex-parte and passed the impugned order.
5.

We have heard Mr. Kunal Katariya, Advocate assisted
by Ms. Sourbahi Waknis, Advocate for the Appellant and
Mr. Vishal Kanade, Advocate assisted by Mr. Chirag
Bhavsar and Ms. Eram Quraishi, Advocates for the
Respondent.
6.

It was contended by the learned counsel of the
appellant that the notice was sent at the address which he had
vacated and sold to one Mr. Satish Chowdhary in 2011 and,
since then, the appellant had not been occupying the said
premises. Thus, the question of service of summons does not
arise.
7.

The fact that the appellant had sold the premises and
vacated the same has been denied by the respondent for want
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of knowledge.

The respondents however submit that the
summons were sent at the last known address and when it
came back undelivered the same was served by affixation at
the last known address and, consequently, service of the
summons was made in accordance with Securities and
Exchange Board of India (Procedure for Holding Inquiry and
Imposing Penalties by Adjudicating Officer) Rules, 1995.
8.

In this regard, Rule 7 of the Rules is extracted as
under:Service of notices and orders.
7.

A notice or an order issued under these rules shall
be served on the person in the following manner, that is
to say,(a) by delivering or tendering it to that person or
his duly authorised agent;
(b) by sending it to the person by registered post
with acknowledgement due to the address of his
place of residence or his last known place of
residence or the place where he carried on, or
last carried on, business or personally works, or
last worked, for gain:
(c) if it cannot be served under clause (a) or
clause (b), by affixing it on the outer door or some
other conspicuous part of the premises in which
that person resides or is known to have last
resided, or carried on business or personally
works or last worked for gain and that written
report thereof should be witnessed by two
persons.

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9.

The aforesaid Rules provide the manner of service of
the notice, namely, by delivering or tendering it to the person
or to his authorized agent or by sending it by registered post
acknowledgment due to the address of his place of residence
or his last known place of residence or the place where he
carried on, or last carried on, business. Rule 7(c) further
provided that if the person cannot be served under the modes
prescribed under Clause 7(a) and (b) in that event service
would be made by affixation at the place where he had last
resided or carried on business.
10. In the instant case, we do not find anything on the
record to indicate that any effort was made by the respondent
to serve the notice personally.

Had this procedure been
adopted the process server would have come to know as to
whether the appellant was staying at the premises or had left
the premises. Thus, without complying with the procedure
adopted under clause (a) under Rule 7 respondent cannot take
steps to serve by way of speed post or by affixation under
clause (c).
11. We are also of the opinion, that the mode of service
prescribed under Rule 7 is not exhaustive and other modes of
service is available in addition to the mode of service
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prescribed under Rule 7, for example, publication of notice in
newspaper or service through email.
12. In addition to the modes prescribed under the Rules of
1995, other modes could also be utilized such as O29R2 of
CPC or under the Securities and Exchange Board of India
(Manner of Service of Summons and Notices issued by the
Board) (Amendment) Regulations, 2007 which has been
issued in exercise of the powers conferred by Section 30 of
the SEBI Act, 1992 which provides various modes for
tendering notice to a person which also includes service by
electronic mail service.
13. Consequently, we are of the opinion that sufficient
service was not made upon the appellant. Since the show
cause notice was not served upon the appellant a vital right
was denied to him to reply to the show cause notice and
thereafter to defend himself. Such denial of right is violative
of the principles of natural justice as embodied under Article
14 of the Constitution of India.
14. In our opinion, in the given circumstances, service of
the summons pursuant to the show cause notice was
insufficient even though the summons and the affixation of
summons thereafter was done at the last known address.

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Service by affixation can only be resorted after all other
attempts by other means are exhausted which in the instant
case was not done. The affixation was done admittedly when
the summonses were returned undelivered. No effort was
made by the respondents to find out the correct address of the
appellant after he vacated the premises.
15.

In the light of the aforesaid, we are of the opinion, that
the impugned order suffers from the principles of natural
justice as embodied in Article 14 of the Constitution. We
find that the appellant was not served and affixation of the
summons was made at the address were the appellant had
already vacated and left.

We accordingly hold that the
appellant was not served with the summons and the entire
procedure proceeded ex-parte in violation of the principles of
natural justice. On this short ground, the impugned order
cannot be sustained and, therefore, it is not necessary for the
Tribunal to dwell on the issue as to whether the proceedings
should be quashed on the ground of laches.
16. We accordingly set aside the impugned order of the
Adjudicating Officer. The appeal is accordingly allowed.
The matter is remitted to the Adjudicating Officer to decide
the matter afresh after giving an opportunity of hearing to the
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appellant. For this purpose, the appellant will appear before
the Adjudicating Officer on 27th December, 2019 on which
date he would be supplied with a copy of the show cause
notice.

The appellant will provide his residential and
business address along with mobile numbers, land line
numbers and email address. The Adjudicating Officer will
thereafter proceed with the matter and pass appropriate
orders after providing the appellant an opportunity to file his
reply and after giving an opportunity of hearing. It would be
open to the appellant to raise all such grounds that are
permissible in law before the Adjudicating Officer which if
raised will be considered and dealt with.

Sd/Justice Tarun Agarwala
Presiding Officer
Sd/Dr. C. K. G. Nair
Member
Sd/Justice M.T. Joshi
Judicial Member
12.12.2019
Prepared and compared by
RHN