(Civil Appeal no.9037 of 2019 and Civil Appeal no.629 of 2020)


Appellant: Indian Commodity Exchange Ltd.[the successor of National Multi Commodity Exchange], hereinafter referred as ICEL

Respondent no.1: Neptune Overseas Ltd. ,hereinafter referred as NOL, [A company registered under Companies Act for import ,export and trading in various commodities including rubber]

Respondent no.2 : Mr.Kailash Ramkishan Gupta [ The CEO of National Multi Commodity Exchange and the Managing Director of NOL]

Provisions Involved: Sections 3,4 and 8 of Forward Contracts Act hereinafter referred to as The FC Act which under Section 3 provides for the establishment of Forward Market Commission hereinafter referred to as FMC , an authority regulating commodities future market.

Section 4 of the Act states that the function of FMC and Section 8 grants power to the Central Govt. to return or direct inquiry.

Issue: Whether the Principles of Natural Justice were violated in the proceedings transpired against the Respondents.

Facts : An independent journalist on 28.11.10 reported irregularities in trading and abuse of positions by the Respondents to FMC.

The FMC thus initiated an inquiry into the affairs of NMCE exercising the powers under Section 8(2) and 8(4) of the FC Act and a detailed show cause notice was served under section 4(b) of the said Act which empowers FMC to keep forward markets under observation and take action if necessary. This notice was addressed to Respondent no.2 in his capacity as Vice Chairman of NMCE and Chairman and Managing Director of Respondent No.1, NOL giving him a period of 10 days from the date of receipt of notice to respond. A personal hearing was fixed and liberty was granted to Respondent No.2 to peruse any documents within a period of 7 days from the date of receipt of notice, if he so desired.

However, Respondent no.2 kept on asking for adjournments, questioning jurisdiction of FMC and parallel proceedings were initiated by Respondent No.1 herein by filing Special Civil Application before the Gujarat High Court. These proceedings sought to challenge the show cause notice and, inter alia, raised the issue that FMC had no jurisdiction, power or authority to commence or continue any enquiry or issue any directions. The issuance of notice to Respondent no.1 was thus construed through Respondent no.2 by the learned Single Judge.

It was thus opined that proper opportunity was given to Respondent no.1 however FMC has not taken final view till now therefore it was premature for Respondent no.1 to approach the HC.

On the date of the said order, Respondent no.2 filed grievance for documents not supplied and sought adjournment which was declined by the FMC after which Respondent no.1 filed an LPA through Respondent no.2 who now filed an impleadment to plead himself in personal capacity and challenged the order of FMC which prohibited the respondents from continuing trading activities.The order was quashed by the Division Bench of Gujarat High Court weighing on the Principles of Natural Justice without getting into the merits of the case and opined to supply documents to respondents on payment of usual charges.

The successor entity of FMC, SEBI challenged the order in the Supreme Court and the operation of order of Division Bench was stayed however, 30 days time was granted to respondents to appeal to Securities Appellate Tribunal.

The appeal was filed by the respondents where SAT passed an order that there was a lack of opportunity to the respondents as the request for provision of documents was denied by the FMC. Also the lack of jurisdiction to issue the show cause notice was re-agitated and SEBI was directed to grant adequate time to respondents and also consider the jurisdiction issue in accordance with law.

Aggrieved by the order, an appeal was raised before Supreme Court by Indian Commodity Exchange Ltd. and SEBI( the successor of FMC) under two different Civil Appeals.


Appellant :Mr. Dushyant Dave Senior Counsel for ICEL sought that the two respondents are playing games as they are in real one and the same entity, therefore the corporate veil must be pierced through to see what really is the endeavour of the respondents.

He also urged that the principles of natural justice be simply fitted in a straight jacket formula,it has to be seen in a holistic view and that adequate opportunities be provided to both the respondents .

He also contended that ICEL, who is the successor of NMCE is itself standing for appeal and the earlier communications show that both have been treated as one by the entities themselves and therefore the validity of the order must be decided on the touchstone of prejudice.

Another learned Senior Counsel Mr. C.U.Singh supported the plea of ICEL and laid emphasis on the fact that the order of Gujarat High Court which was solely predicated on the denial of opportunity of hearing which was already set aside by the Hon’ble Supreme Court.

Respondent: Learned Counsel Rishabh Parikh contended that since there was no question of law, the appeal is not maintainable and that the appellants have no locus to file the appeal.

He further contended that there has been no show cause notice served on Respondent 1 and FMC has conceded this fact.

That the common thread of arguments is the violation of Principles of Natural Justice as without even any notice served, the shares of the Respondent were cancelled and the holding of shares was also prohibited by the order of FMC.

That a notice of 150 pages was served without any documentation which was denied and on frequent askings a documentation of 4000 pages was provided with a time period of only 14 days denying further adjournments within which the matter was closed as well.

Judgment: The Supreme Court after hearing both sets of arguments observed that there is no doubt that the notice was served on the Respondents. However, the court fails to appreciate why there should have been a cussedness in handing over mere copies of documents when serious allegations and serious consequences are put to the respondents and also the endeavour to conclude the proceedings within a span of two weeks thereafter cannot, in our view, be said to be an adequate opportunity as has been found by the SAT.

The Supreme Court therefore disposed of the appeal with the modification of the impugned order leaving the parties to bear their own costs along with the following directions:

No fresh show cause notice to be issued. The one already served is to be treated as served to both the Respondents.

The documents not supplied to the Respondents must be supplied, for clarity. Respondents must seek the required documents within two weeks and within another two weeks they must be supplied by the authorities and the respondents must file a reply within 4 weeks of supply of documents.

SEBI would proceed with the personal hearing of Respondents on a day to day basis and no adjournments shall be entertained and that SEBI would take the final view on the matter.

In case the Respondents are aggrieved the remedy still lies with SAT.

Pleas raised by the Respondents shall be considered on the basis of legal and actual findings including jurisdiction and not only confined to jurisdiction.

In case the Respondents fail in their endeavour, no new proceedings will begin and can continue from where they are.

The impugned order of FMC is set aside and a fresh order is to be passed, the proceedings shall be kept in abeyance of this order until a final view is taken by SEBI.


Conclusion: The facts and judgment of the above case clearly manifest that any action in Violation of Principles of Natural Justice from the authorities is bound to be struck down; however, this does not mean that one can hide behind the veil and flee from their respective liabilities and responsibilities. The Judgment upholds the fact that the two Respondents are one and interchangeable entities but on the other hand also held the arbitrary declination of documents and not granting adequate and reasonable time by the Appellants to the respondents Inaccurate. Thus the balance of convenience has been truly and properly justified by the Supreme Court.





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