Supreme Court rules SEBI cannot issue multiple final orders for same cause of action

The recent ruling by the Supreme Court concerning the Securities and Exchange Board of India (SEBI) emphasizes the importance of not passing multiple final orders on the same cause of action. The Court’s decision came in response to a Civil Appeal filed by SEBI against the Judgment of the Securities Appellate Tribunal (SAT).

In a two-Judge Bench comprising Justice Sanjay Kumar and Justice K.V. Viswanathan, the Court stated that SEBI cannot claim the authority to issue multiple final orders on the same cause of action. It was noted that once SEBI had issued an order in response to show-cause notices back in 2012, it could not simply reopen the case and issue a fresh order under Section 11B of the Act of 1992 four years later without just cause.

The principle of res judicata, based on public policy and justice, was highlighted by the Bench. This principle prevents parties from relitigating the same issue repeatedly, even if the initial determination may have been flawed. Senior Advocate Chander Uday Singh represented SEBI in the case, while Senior Advocate Purvish Malkan represented the Respondents.

The case in question involved M/s. Vital Communications Limited (VCL), a public limited company listed on various stock exchanges. SEBI had issued a show-cause notice to VCL regarding allegedly misleading advertisements related to share transactions. Despite dropping charges against some parties, SEBI imposed penalties on others, leading to a series of appeals and reconsiderations.

The Supreme Court’s reasoning behind its decision emphasized the finality of judicial determinations and the importance of adhering to previous orders. While SEBI argued against the application of the principle of res judicata in this context, citing provisions of the SEBI Act, the Court disagreed, pointing out that SEBI could not claim immunity from the principle of res judicata.

Furthermore, the Court expressed concern about SEBI’s handling of the case, noting delays and a lackadaisical approach that could undermine its role in protecting investors and regulating the securities market. The Court’s stance on this matter underscored the need for regulatory bodies like SEBI to act promptly and decisively in fulfilling their duties.

In conclusion, the Supreme Court’s decision serves as a reminder of the legal principles that govern regulatory authorities like SEBI. By upholding the sanctity of judicial determinations and emphasizing the rule of res judicata, the Court’s ruling contributes to the clarity and consistency of legal processes in such cases.