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The High Court declined to get in the way of SEBI's decision not to grant JK Paper Ltd. an opportunity for a private physical hearing with reference to an application made for exemption from the SEBI (Share Based Employee Benefits) Regulations, 2014, which were otherwise applicable to an employee stock option scheme.
The Court noted that there have been no specific provisions within the 2014 regulations which mandated that a chance for private hearing should tend.
It is a settled position that the need for compliance with the principle of natural justice can vary in several situations and conditions.
The court held.
The Regulations of 2014 lay down various regulatory measures regarding schemes on the subsequent aspects:
The direct or indirect benefit to employees of the corporate.
Dealing, subscribing to, or purchasing securities of the corporate, directly or indirectly.
Their object is to see and stop the manipulation of share prices within the larger interest of the investors.
JK Paper had sought relaxation from the applicability of those Regulations. To this end, they filed an exemption application before the SEBI under Regulation 29, which allowed for the relief of the strict enforcement of the regulations.
SEBI denied the application but did not spell out the specific reasons for rejection.
In an appeal challenging the order, the Securities Appellate Tribunal directed SEBI to offer a reasoned order for rejecting the appliance within a group deadline.
SEBI sought for more reasons through an email communication thereafter.
SEBI stated that a personal hearing wasn't required.
The denial of SEBI to grant JK Paper a personal hearing was challenged before the Bombay High Court. JK Paper submitted three grounds in the plea:
1.The proceedings before SEBI were quasi-judicial in nature. Therefore, a personal hearing is necessary.
2.The language of Regulation 29 provided for a private hearing.
3.Whatever could also be the character of the facility, considering the results, a private hearing should tend.
JK Paper also requested to grant personal hearing “to serve the ends of justice” besides the opposite legal submissions.
All these grounds were denied by the Bombay High Court, which held, "there is no duty on the Board while considering an exemption application under Regulation 29 of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, to offer a private hearing to the applicant."
The Court further observed that if SEBI finds that exemption needn't be granted, it'll give reasons for an equivalent which may be tested in appeal.
Given that during this case SEBI had also allowed JK Paper to file written submissions, the Court added that "the power in question may be a discretionary power and therefore the use of this discretion can be challenged in appeal within the parameters. Full transparency is maintained by permitting written submissions providing reasons and therefore the right to appeal."
Therefore, the writ petition challenging the SEBI's refusal to allow a personal hearing was disbanded.
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