NDLI: Indian Commodity Exchange Limited Vs. Neptune Overseas Limited & Ors.

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	4 5 6 7 and 8 Forward Contracts (Regulation) Act ss.3 1952
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Forward Contracts (regulation) Act, 1952 (74 of 1952)
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3 Referred Case 4
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Disposed Off
Headnote	Forward Contracts (Regulation) Act, 1952 – ss.3, 4, 5, 6, 7and 8 – Respondent No.1 is Company (NOL) and respondent No.2is the founder and CEO of National Multi Commodity ExchangeIndia Limited (NMCE) as well as Managing Director of NOL –Respondent No.2 was served with a detailed show cause notice dated21.06.2011 on basis of a communication by a independent journalistto Forward Markets Commission (FMC) which alleged tradingirregularities within NMCE along with an allegtion of abuse ofposition by respondent nos.1 and 2 – The notice gave respondentno.2 a period of 10 days to respond and liberty to peruse anydocuments within a period of 07 days from the date of receipt ofnotice – Respondent no.2 requested for copies of documents,questioned the jurisdiction of the FMC and made repeated requestsfor adjournments – The respondent no.1 challenged the show causenotice before the High Court – The High Court gave respondentno.1 liberty to appear before the FMC and held that FMC is yet totake a final view, it was premature effort of respondent no.1 toapproach the High Court – Before the FMC, the grievance ofrespondent no.2 that entire documentation was not supplied wasrejected and it was reasoned that all documents were either availablein public domain or not relevant – On 20.07.2011, the request foradjournment was denied – By order dated 23.07.2011, the FMCopined against respondent nos.1 and 2 and held hat respondentno.2 was in complete breach of his fiduciary responsibility to theNMCE by systematically defrauding misusing and misappropriatingits property – However, the Division Bench of the High Court heldthat FMC had not serviced show cause notice on respondent no.1,consequently, quashed the order dated 23.07.2011 – The SupremeCourt set aside the order of the Division Bench of the High Courtand directed the respondents to approach the Securities AppellateTribunal (SAT) against the order dated 23.07.2011 – SAT foundabsence of any show cause notice to respondent no.1 – SAT alsonoted on the issue of request for adjournment on 20.07.2011 thatonly two weeks had elapsed from the date when the documents weresupplied and thus, further request for adjournment was notunreasonable as the documents were voluminous – The time to filereply was also found inadquate – Therefore, the order dated23.07.2011 passed by FMC was set aside and the successor to theFMC, the SEBI was directed to grant adequate time to respondentnos.1 and 2 to file their reply and the application for supply ofdocuments, if any, and the issue of jurisdiction to be decided inaccordance with law – Aggrieved, the SEBI and ICEL (successor ofNMCE) filed appeals before the Supreme Court – Held: Whenreliance is placed on voluminous documents (4000 pages) it wouldnot be fair to expect that the party in question ferrets through itsown record trying to locate the documents, when on basis offormation of an opinion for issuance of the show cause notice,logic and requirement of law both would dictate that the show causenotice should be comprehensive enough with full supportingdocuments being hand over – The answer cannot be that party isfree to inspect 4000 pages on its own – SAT was right that adequateopportunity was not given – As documents were voluminous,reasonable time had to be given to respond to the same – As far asservice of notice to respondent no.1 is concerned, both respondentsare joined in all purposes – Thus, there was no failure to serveshow cause notice to respondent no.1 merely because no such noticewas addressed to it – In the conspectus of the factual position, thefollowing directions are issued: (i) the show cause notice dated21.06.2011 would be treated as a show cause notice to bothrespondent nos.1 and 2; (ii) the list of documents asked byrespondents to be supplied by SEBI; (iii) Respondents grantedopportunity to file their reply to show cause notice; (iv) SEBI wouldgive an opportunity for personal hearing to both the parties andtake final view of the matter.Natural Justice – Show cause notice with documents – Held:The show cause notice should be comprehensive enough with fullsupporting documents being handed over.Natural Justice – Opportunity to be heard – Held: Lookinginto the enormity of the contents of the show cause notice runninginto 150 pages with documents spanning 4,000 pages supportingit, a reasonable time had to be given to respond to the same – Afterhanding over the copies of the documents, the proceedings wereconcluded within the span of two weeks, which cannot be said tobe an adequate opportunity – An opportunity of hearing is not amere nicety but a valuable right – That it does not fall in astraitjacket formula is the accepted legal position – The question iswhether there was substantial compliance of the principles of naturaljustice and whether there were unnecessary adjournments beingsought, which were declined.Company Law – Corporate veil – Respondent No.1 is Company(NOL) and respondent No.2 is the founder and CEO of NationalMulti Commodity Exchange India Limited (NMCE) as well asManaging Director of NOL – Respondent No.2 was served with adetailed show cause notice – Held: Respondent No.1 herein is aseparate legal entity being a registered company, but the conceptof piercing the veil is not unknown to law – By this process, the laweither goes behind the corporate personality to the individualmembers or ignores the separate personality of the company – Thiscourse is adopted when it is found that the principle of corporatepersonality is flagrantly opposed to justice, convenience or theinterest of the Revenue – This Court is, thus, not able to hold thatthere was a failure to serve show cause notice to respondent No.1herein merely because no such notice was specifically addressed toit.
Judge	Hon'ble Mr. Justice Sanjay Kishan Kaul
Neutral Citation	2020 INSC 663
Petitioner	Indian Commodity Exchange Limited
Respondent	Neptune Overseas Limited & Ors.
SCR	[2020] 13 S.C.R. 129
Judgement Date	2020-11-27
Case Number	9037

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