In a first, market regulator SEBI has been penalised with a cost (₹2 lakh payment to each of the four appellants) by the Securities Appellate Tribunal (SAT). The tribunal observed that SEBI’s common order against the parties was a clear abuse of the court process, causing needless waste of time and money, Indialegallive said.

In September 2018, SEBI had asked Vital Communications, Flare Finance (India), Master Finlease and Shubha Jhindal to release unlawful gains of ₹4.55 crore with 10 per cent interest per annum with effect from August 1, 2002, till the date of payment. The order restrained them from buying, selling or dealing in securities market for five years if they failed to pay within 45 days.

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The SAT bench of Justice Tarun Agarwala, Presiding Officer, and Justice MT Joshi, Judicial Member, noted that SEBI was wrong.

“Since we have held that the fresh initiation of proceedings by show-cause notice, which culminated in the impugned order, was an abuse of process of the court, the appellants are entitled for costs,” SAT said.

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Counsel for the appellant Prakash Shah and authorised representative Chintan Sheth had submitted that the SEBI order is barred by the principles of res judicata (a matter that has been adjudicated by a competent court and, therefore, may not be pursued further by the same parties).

SEBI Whole Time Member (had issued a show-cause notice, which led to a final order on July 31, 2014. Since this order became final, SEBI cannot pass another order for the same cause of action. But SEBI did.

Advocate Kevic Setalvad, who appeared for SEBI, argued that there was no res judicata since Section 15U of the SEBI Act specifically states that the SAT will not be bound by the procedure laid down by the Code of Civil Procedure, 1908. Therefore the principles of res judicata would not apply. SAT rejected these arguments.