The SEBI Adjudication process mandates a preliminary opinion for the appointment of an Adjudicating Officer, and failure to record this opinion can vitiate subsequent proceedings.

JUDGMENT

HARISH VAIDYANATHAN SHANKAR, J.

1. These two cross Letters Patent Appeals, LPA 412/2018 and LPA 550/2018, filed under Clause 10 of the Letters Patent read with Section 5(1) of the Delhi High Court Act, 1966, assail the Judgment dated 09.07.2018, Impugned Judgment passed by the learned Single Judge in W.P.(C) 8394/2014, titled “Amit Jain v. Securities and Exchange Board of India & Anr.”.

2. By the Impugned Judgment, the learned Single Judge set aside the Show Cause Notice dated 14.11.2013 and the consequential adjudication proceedings on the ground that the appointment of the Adjudicating Officer, AO, in the absence of a recorded opinion under Rule 3 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, SEBI Adjudication Rules, was without jurisdiction.

3. As both appeals stem from the same Impugned Judgment, they are being disposed of by this common judgment. For the sake of convenience, clarity, and to avoid repetitive description of party ranks in this common judgment, the Appellant in LPA 412/2018, Securities and Exchange Board of India, shall hereinafter be referred to as “SEBI”, and the Appellant in LPA 550/2018, Amit Jain, shall hereinafter be referred to as “Petitioner”

BRIEF FACTS:

4. The prefatory facts, which are common and germane to the adjudication of both the present Appeals, are set out in brief as follows:

I. The Petitioner, Amit Jain, was a shareholder of Himalaya Granites Ltd., a listed company. On 10.10.2011, the Bombay Stock Exchange, BSE addressed a communication to SEBI reporting certain transactions undertaken in the shares of the said company. In that communication, BSE indicated that mandatory disclosures required under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, SEBI SAST Regulations and the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, PIT Regulations appeared to have been violated by certain entities, including the Petitioner.

II. SEBI undertook an internal examination of the said information. The transaction statements of the concerned entities, including that of the Petitioner for the period 01.01.2009 to 15.03.2012, were reviewed. Upon such examination, it was noted that disclosures contemplated under Regulations 13(3) and 13(5) of the PIT Regulations had allegedly not been made by the Petitioner. These observations, along with similar findings against other entities, were placed before the Group of Assistant General Managers, GAGMs. In its meeting held on 20.06.2012, the GAGMs recommended that adjudication proceedings be initiated for the alleged violations.

III. The recommendations of the GAGMs were thereafter placed before the Committee of Division Chiefs of Surveillance, CDCS which, in its meeting dated 25.06.2012, concurred with the recommendations and advised initiation of adjudication proceedings under Section 15A (b) of the Securities and Exchange Board of India Act, 1992, The Act, for the alleged failure to make disclosures mandated under the PIT Regulations.

IV. These recommendations were then submitted to the Whole Time Member, Mr. Rajeev Kumar Agrawal, for consideration. V. The file was subsequently placed before another Whole Time Member for the purpose of appointing an AO in terms of Section 15-I of the Act and Rule 3 of the SEBI Adjudication Rules.

VI. Pursuant thereto, Ms. Anita Kenkare was appointed as the AO by Order dated 04.10.2013, and the appointment was communicated on 18.10.2013 by the Executive Director.

VII. Upon her appointment, the AO issue