SEBI cannot issue multiple final orders on the same cause of action due to the principle of res judicata, which upholds the finality of judicial determinations.

JUDGMENT :

SANJAY KUMAR, J.

1. Delay in the filing of Civil Appeal (Diary) No. 42829 of 2019 is condoned.

2. Considering the twists and turns that this litigation has taken since its inception in 2005, these appeals put to test the saying that the scales of justice may be slow to tip but when they do, let them tip in favour of what is right¹[Nancy Taylor Rosenberg, American author.].

3. M/s. Vital Communications Limited, New Delhi (hereinafter, ‘VCL’), is a public limited company whose shares were listed on the Bombay Stock Exchange, the Delhi Stock Exchange and the National Stock Exchange. While so, the Securities and Exchange Board of India (hereinafter, ‘SEBI’) issued show-cause notice dated 24.05.2005 to VCL and its promoters and directors under Section 11(4) read with Sections 11 & 11B of the Securities and Exchange Board of India Act, 1992 (for brevity, ‘the Act of 1992’), in relation to alleged misleading advertisements issued by VCL with regard to buyback of its shares, issue of bonus shares and preferential issue of shares within 30 days. Details of the advertisements published in the newspapers between 27th May, 2002 and 24th June, 2002 were furnished therein and these advertisements were stated to be a ploy to mislead investors by benchmarking the price of the scrip at Rs.30/-, when the share was trading at around Rs.3/- to Rs.12/-. SEBI further stated that its investigation had revealed that VCL had allotted 72 lakh equity shares of Rs.10/- each at a premium of Rs.2.50/-, amounting to Rs.9,00,00,000/-, on 14.12.1999 to 15 companies which had all given the same address at the time of opening their demat accounts. That apart, these 15 companies were shown as suppliers of VCL. VCL’s funds were indirectly used for purchase of its own shares, inasmuch as it gave advances to M/s. Anupama Communications Pvt. Ltd. and M/s. CBS Systems Pvt. Ltd. which, in turn, gave trade advances to the 15 companies. Thereby, the same money came back to VCL as share application money. It was also alleged that, between 2nd May, 2002 and 31st July, 2002, 71.14 lakh shares were sold by promoter-related entities in the market, taking advantage of the artificial interest created by the misleading advertisements. SEBI asserted that the chain of events in respect of the buyback of shares, bonus issue and preferential allotment by VCL, along with the unwarranted advertisements, etc., suggested an orchestrated ploy on the part of VCL and its promoters to create an artificial demand for the shares of VCL and induce innocent investors into purchasing shares so as to absorb sales by the promoter-related entities. VCL and its promoters and directors were alleged to have violated Regulations 3, 4, 5(1) & 6(a) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 1995, along with Section 77 of the Companies Act, 1956. SEBI, therefore, called upon the addresses of the notice to show cause as to why suitable directions, including a direction to restrain all of them from accessing the securities market, and prohibiting them from buying, selling or dealing in securities for a suitable period, should not be passed under Section 11(4) read with Sections 11 and 11B of the Act of 1992.

4. Thereafter, SEBI, speaking through a Whole-Time Member (WTM), passed order dated 20.02.2008 in exercise of power under Section 11B of the Act of 1992 and Regulation 11 of the aforestated Regulations of 1995. SEBI dropped the charges against Vinay Talwar, former Chairman-cum-Managing Director of VCL, and imposed a lesser penalty on Shubha Jhindal, Director of VCL, whereby she was restrained from accessing the securities market and prohibited from buying, selling and dealing in securities in any manner for a period of six months. As regards the remaining noticees, i.e., VCL and its other directors and promoters, SEBI restrained them from accessing the securities market and prohibited them from b