JUDGMENT

Dated this the 25^th day of May, 2023

The petitioner is an unlisted public limited company registered with the Reserve Bank of India as a Non-Banking Finance Company (NBFC) and carrying on the business of asset financing. The second respondent is the Securities and Exchange Board of India (SEBI) constituted under the Securities and Exchange Board of India Act, 1992 with the objective of protecting the interest of investors in securities and regulating the securities market.

2. On 18.03.2020, the petitioner was served with Ext.P3 show cause notice issued by the second respondent alleging violation of provisions of the Companies Act, 1956, SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and SEBI (Disclosure and Investor Protection) Guidelines, in the issuance of debentures and bonds during the period 2003 to 2017. Refuting the allegations and asserting that it has not contravened any statutory provision, regulations or guidelines, the petitioner submitted Exts.P4 and P5 replies and requested for a personal hearing. By Ext.P6 letter, the petitioner was informed that personal hearing would be held before the Whole Time Member of the Board. However, the hearing scheduled on 22.02.2022 was adjourned. Thereafter, by Ext.P8 letter, the petitioner was informed that the personal hearing would be held before the Chief General Manager on 03.10.2022. However, by Ext.P9 letter it was informed that the hearing before the Chief General Manager was adjourned to 18.10.2022. The writ petition was filed at that stage.

3. Senior Advocate E.K.Nandakumar appearing for the petitioner contended that, the proposed proceedings being quasi-judicial in nature conducted only by the SEBI Board established as per Section 3(1) of the SEBI Act. The functions of the Board, enumerated in Section 11, cannot be delegated to an officer of the Board. Likewise, as per Section 11A, only the Board is empowered to regulate or prohibit issue of prospectus, offer document or advertisement soliciting money for issue of securities. Again, under Section 11B, the Board alone is vested with the authority to issue directions in the interest of investors, the orderly development of the securities market etc and levy penalties. Although Section 19 of the SEBI Act provides for delegation of the Board's powers and functions (except the powers under Section 29) to any member, officer of the Board or any other person, the provision does not envisage delegation of quasi-judicial functions of the Board. The SEBI (Delegation of Statutory and Financial Powers) Order, 2019, issued in purported exercise of power under Section 19, providing for delegation of Board's function, including those under Sections 11(1), 11(4A), 11B(1), 11B(2), 11B of the SEBI Act or any regulations framed by SEBI to the Chief General Manager, is ultra vires the SEBI Act, to the extent, the quasi-judicial functions of the Board is delegated. It is argued that, wherever delegation of powers is intended and permissible, the SEBI Act specifically provides for such delegation as in Section 11C, dealing with appointment of Investigating Authority and Section 15I providing for appointment of Adjudicating Officer. This is for the reason that the Board is best suited to exercise quasi- judicial functions as the members are persons with expertise and knowledge, either appointed or nominated by the Central Government or nominated by the Reserve Bank.

4. To drive home the contention that quasi- judicial functions cannot be delegated, learned Senior Counsel drew attention to the meaning of ‘permissible delegation’ in 4^th Edition (Volume 1) of Halsubury's Laws of England, extracted below;

“750. Permissible delegation. An authority to delegate will in some cases be implied, generally on the ground that there is no personal confidence reposed or skill required, and that the duties are capable of being equally well discharged by any person.”

Reference was made to the 10^th Edition of Wade’s Administrative Law, to poi