SEBI is empowered to pass an ex-parte interim order only in extreme urgent cases and that such power should be exercised sparingly.
In the matter of Cameo Corporate Services Limited vs. Securities and Exchange Board of India, Appeal No. 566 of 2019, the appellant being aggrieved by the ex parte ad interim order dated October 18, 2019 and confirmatory order dated November 7, 2019 passed by the Whole Time Member (‘WTM’ for short) of the Securities and Exchange Board of India (‘SEBI’ for short) has filed the present appeal.
In was observed by the Tribunal in Appeal No. 80 of 2019 and other connected appeals, North End Foods Marketing Pvt. Ltd. vs. SEBI decided on March 12, 2019 that an interim order, however, temporary it may be, restraining an entity/person from pursuing his profession/trade may have substantial and serious consequences which cannot be compensated in terms of money. Thus, ex-parte interim order may be made when there is an urgency. As held in Liberty Oil Mills & Ors. vs. Union of India & 18 Ors. [AIR (1984) SC 1271] decided on May 1, 1984, the urgency must be infused by a host of circumstances, viz. large scale misuse and attempts to monopolise or corner the market. In the said decision, the Supreme Court further held that the regulatory agency must move quickly in order to curb further mischief and to take action immediately in order to instil and restore confidence in the capital market.
Considering the above, the aforesaid principle of law is squarely applicable in the instant case and the Tribunal were of the opinion that there was no real urgency in passing an ex parte ad interim restraint order which virtually amounts to passing a final order especially when a detailed enquiry has been ordered. However, SEBI is empowered to pass an ex-parte interim order only in extreme urgent cases and that such power should be exercised sparingly. In the instant case, we do not find that any extreme urgent situation existed which warranted the respondent to pass an ex-parte interim order.