INDIAN COMMODITY EXCHANGE LIMITEDversusNEPTUNE OVERSEAS LIMITED & ORS.

                         [2020] 13 S.C.R. 129                           129


         INDIAN COMMODITY EXCHANGE LIMITED                              A
                                 v.
            NEPTUNE OVERSEAS LIMITED & ORS.
                  (Civil Appeal No. 9037 of 2019)
                       NOVEMBER 27, 2020                                B
  [SANJAY KISHAN KAUL AND HRISHIKESH ROY, JJ.]
       Forward Contracts (Regulation) Act, 1952 – ss.3, 4, 5, 6, 7
and 8 – Respondent No.1 is Company (NOL) and respondent No.2
is the founder and CEO of National Multi Commodity Exchange
                                                                        C
India Limited (NMCE) as well as Managing Director of NOL –
Respondent No.2 was served with a detailed show cause notice dated
21.06.2011 on basis of a communication by a independent journalist
to Forward Markets Commission (FMC) which alleged trading
irregularities within NMCE along with an allegtion of abuse of
position by respondent nos.1 and 2 – The notice gave respondent         D
no.2 a period of 10 days to respond and liberty to peruse any
documents within a period of 07 days from the date of receipt of
notice – Respondent no.2 requested for copies of documents,
questioned the jurisdiction of the FMC and made repeated requests
for adjournments – The respondent no.1 challenged the show cause
                                                                        E
notice before the High Court – The High Court gave respondent
no.1 liberty to appear before the FMC and held that FMC is yet to
take a final view, it was premature effort of respondent no.1 to
approach the High Court – Before the FMC, the grievance of
respondent no.2 that entire documentation was not supplied was
rejected and it was reasoned that all documents were either available   F
in public domain or not relevant – On 20.07.2011, the request for
adjournment was denied – By order dated 23.07.2011, the FMC
opined against respondent nos.1 and 2 and held hat respondent
no.2 was in complete breach of his fiduciary responsibility to the
NMCE by systematically defrauding misusing and misappropriating
                                                                        G
its property – However, the Division Bench of the High Court held
that FMC had not serviced show cause notice on respondent no.1,
consequently, quashed the order dated 23.07.2011 – The Supreme
Court set aside the order of the Division Bench of the High Court
and directed the respondents to approach the Securities Appellate
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                                129
130            SUPREME COURT REPORTS                     [2020] 13 S.C.R.


A     Tribunal (SAT) against the order dated 23.07.2011 – SAT found
      absence of any show cause notice to respondent no.1 – SAT also
      noted on the issue of request for adjournment on 20.07.2011 that
      only two weeks had elapsed from the date when the documents were
      supplied and thus, further request for adjournment was not
      unreasonable as the documents were voluminous – The time to file
B
      reply was also found inadquate – Therefore, the order dated
      23.07.2011 passed by FMC was set aside and the successor to the
      FMC, the SEBI was directed to grant adequate time to respondent
      nos.1 and 2 to file their reply and the application for supply of
      documents, if any, and the issue of jurisdiction to be decided in
C     accordance with law – Aggrieved, the SEBI and ICEL (successor of
      NMCE) filed appeals before the Supreme Court – Held: When
      reliance is placed on voluminous documents (4000 pages) it would
      not be fair to expect that the party in question ferrets through its
      own record trying to locate the documents, when on basis of
      formation of an opinion for issuance of the show cause notice,
D
      logic and requirement of law both would dictate that the show cause
      notice should be comprehensive enough with full supporting
      documents being hand over – The answer cannot be that party is
      free to inspect 4000 pages on its own – SAT was right that adequate
      opportunity was not given – As documents were voluminous,
E     reasonable time had to be given to respond to the same – As far as
      service of notice to respondent no.1 is concerned, both respondents
      are joined in all purposes – Thus, there was no failure to serve
      show cause notice to respondent no.1 merely because no such notice
      was addressed to it – In the conspectus of the factual position, the
      following directions are issued: (i) the show cause notice dated
F
      21.06.2011 would be treated as a show cause notice to both
      respondent nos.1 and 2; (ii) the list of documents asked by
      respondents to be supplied by SEBI; (iii) Respondents granted
      opportunity to file their reply to show cause notice; (iv) SEBI would
      give an opportunity for personal hearing to both the parties and
G     take final view of the matter.
           Natural Justice – Show cause notice with documents – Held:
      The show cause notice should be comprehensive enough with full
      supporting documents being handed over.

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    INDIAN COMMODITY EXCHANGE LTD. v. NEPTUNE                           131
                 OVERSEAS LTD.

       Natural Justice – Opportunity to be heard – Held: Looking        A
into the enormity of the contents of the show cause notice running
into 150 pages with documents spanning 4,000 pages supporting
it, a reasonable time had to be given to respond to the same – After
handing over the copies of the documents, the proceedings were
concluded within the span of two weeks, which cannot be said to         B
be an adequate opportunity – An opportunity of hearing is not a
mere nicety but a valuable right – That it does not fall in a
straitjacket formula is the accepted legal position – The question is
whether there was substantial compliance of the principles of natural
justice and whether there were unnecessary adjournments being
                                                                        C
sought, which were declined.
       Company Law – Corporate veil – Respondent No.1 is Company
(NOL) and respondent No.2 is the founder and CEO of National
Multi Commodity Exchange India Limited (NMCE) as well as
Managing Director of NOL – Respondent No.2 was served with a
                                                                        D
detailed show cause notice – Held: Respondent No.1 herein is a
separate legal entity being a registered company, but the concept
of piercing the veil is not unknown to law – By this process, the law
either goes behind the corporate personality to the individual
members or ignores the separate personality of the company – This
course is adopted when it is found that the principle of corporate      E
personality is flagrantly opposed to justice, convenience or the
interest of the Revenue – This Court is, thus, not able to hold that
there was a failure to serve show cause notice to respondent No.1
herein merely because no such notice was specifically addressed to
it.                                                                     F
      Disposing of the appeals, the Court
      HELD: 1. This Court has no doubts that a proper show
cause notice was served on Respondent No.2. The moot point,
however, remains as to what is the effect of not serving him with
                                                                        G
the documents he sought for and within the compass of time,
which was given to him to respond. [Para 31][146-D-E]
     2. Once again, it may be stated that a large part of the
documents would have been within the custody of the Respondent
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132            SUPREME COURT REPORTS                    [2020] 13 S.C.R.


A     No. 2 herein or for that matter with Respondent No.1 herein.
      However, this would not encompass all the documents. Not only
      that, when reliance is placed on as many as 4,000 pages of
      documents, it would not be fair to expect that the party in question
      ferrets through its own record trying to locate the documents,
      when on basis of formation of an opinion for issuance of the show
B
      cause notice, logic and requirement of law both would dictate
      that the show cause notice should be comprehensive enough with
      full supporting documents being handed over. The answer cannot
      be that they are free to inspect 4,000 pages on their own! In fact,
      in so many terms, ultimately most of those documents were made
C     available and it would not be appropriate to go back into the issue
      of whether the documents should have been supplied or not. In
      a sense, that chapter closed with the supply of documents on
      05.07.2011 even though some more documents were sought
      thereafter.[Para 32][146-E-H]
D           3. This Court fails to appreciate why there should have been
      a cussedness in handing over mere copies of documents when
      serious allegations and serious consequences which would flow
      to the respondents herein. Not only that, the endeavour to
      conclude the proceedings within a span of two weeks thereafter
      cannot, in view of this Court, be said to be an adequate opportunity
E     as has been found by the SAT. An opportunity of hearing is not a
      mere nicety but a valuable right. That it does not fall in a
      straitjacket formula is no doubt the accepted legal position
      [Dharampal Satyapal Ltd.]. The question is whether there was
      substantial compliance of the principles of natural justice
F     [Chairman, Board of Mining Examination] and whether there were
      unnecessary adjournments being sought, which were declined
      [Titaghur Paper Mills Co. Ltd. and Anr. and Cement Workers
      Karamchari Sangh] [Para 33][147-A-C]
            4. This Court does feel that there was an endeavour to some
G     extent by Respondent No.2 herein to prolong the proceedings
      but then looking into the enormity of the contents of the show
      cause notice running into 150 pages with documents spanning
      4,000 pages supporting it, a reasonable time had to be given to
      respond to the same. The manner in which the proceedings were
      sought to be closed raises serious doubts that a fair process and
H
    INDIAN COMMODITY EXCHANGE LTD. v. NEPTUNE                          133
                 OVERSEAS LTD.

opportunity has been extended to Respondent No.2 herein. [Para         A
34][147-C-E]
       5. There is, thus, to some extent truth in what has been
alleged by the appellants before us, i.e., that Respondent Nos.1
and 2 herein are conveniently playing this game of coming up
separately even though they are joined in all purposes. This Court     B
is conscious of the fact that Respondent No.1 herein is a separate
legal entity being a registered company, but the concept of piercing
the veil is not unknown to law. By this process, the law either
goes behind the corporate personality to the individual members
or ignores the separate personality of the company. This course
is adopted when it is found that the principle of corporate            C
personality is flagrantly opposed to justice, convenience or the
interest of the Revenue. This Court is, thus, not able to hold that
there was a failure to serve show cause notice to Respondent
No.1 herein merely because no such notice was specifically
addressed to it. This Court conscious of the fact that there was       D
some concession made before the Division Bench of the Gujarat
High Court by the counsel for the FMC. Be that as it may, this
Court is of the view that it would be a hyper technicality now to
say that Respondent No.1 herein should be served a fresh show
cause notice, more so in view of the directions which we are
proceeding to pass in the present judgment. [Para 35][148-A-D]         E

      6. In the conspectus of the factual position from the
proceedings which have taken place and the legal principles
discussed, this Court is of the view that the following directions
would subserve the interest of justice and perfect the rights of
the parties:                                                           F

      i.    No fresh show cause notice is required to be served
            on Respondent No.1 herein and the show cause notice
            dated 21.6.2011 would be treated as a show cause
            notice to both Respondent Nos.1 and 2 herein.
                                                                       G
      ii.   The documents already asked for by Respondent No.1
            and 2 herein and not supplied should be supplied. In
            order to obtain clarity on this issue, we direct that a
            list of documents sought for by either respondents
            be supplied to the SEBI within two weeks from the
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134          SUPREME COURT REPORTS                   [2020] 13 S.C.R.


A              date of this order and those documents are to be
               supplied by SEBI within two weeks thereafter.
      iii.     Respondent Nos. 1 and 2 herein are granted
               opportunity to file their reply to the show cause notice
               without any further delay within a period of four weeks
B              after receiving aforementioned documents.
      iv.      The SEBI would thereafter proceed to give an
               opportunity for personal hearing both to Respondent
               Nos.1 and 2 herein and these proceedings are to go
               on, on a day-to-day basis and no request for
C              adjournment will be entertained in this behalf from
               either respondents..
      v.       The SEBI would take a final view on the subject
               matter thereafter.
      vi.      Needless to say, if Respondent Nos.1 and 2 herein
D              are aggrieved by the same, the remedy against the
               same lies before the SAT.
      vii.     This Court makes it clear that all pleas as raised by
               Respondent Nos.1 and 2 herein would be considered
               by the SEBI, legal or factual including but not confined
E              to aspects of jurisdiction. In fact, this is the very
               purpose of relegating the proceedings before the
               SEBI and not to SAT as the right of appeal is a
               valuable right to be exercised after adequate
               opportunity at the first adjudication stage level. [Para
F              39][149-C-H; 150-A-C]
      Chairman, Board of Mining Examination and Chief
      Inspector of Mines and Anr. v. Ramjee (1977) 2 SCC
      256 : [1977] 2 SCR 904; Titaghur Paper Mills Co. Ltd.
      and Anr. v. State of Orissa and Ors (1983) 2 SCC 433
      : [1983] 2 SCR 743; Cement Workers Karamchari
G
      Sangh v. Jaipur Udyog Limited and Ors. (2008) 4 SCC
      701 : [2008] 5 SCR 276; Dharampal Satyapal Ltd. v.
      Deputy Commissioner of Central Excise, Gauhati and
      Ors. (2015) 8 SCC 519 : [2015] 6 SCR 437; New
      Horizons Limited and Another v. Union of India and
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     INDIAN COMMODITY EXCHANGE LTD. v. NEPTUNE                                 135
        OVERSEAS LTD. [SANJAY KISHAN KAUL, J.]

      Others (1995) 1 SCC 478 : [1994] 5 Suppl. SCR 310                        A
      – referred to.
                           Case Law Reference
[1977] 2 SCR 904                     referred to        Para 24
[1983] 2 SCR 743                     referred to        Para 24
                                                                               B
[2008] 5 SCR 276                     referred to        Para 24
[2015] 6 SCR 437                     referred to        Para 24
[1994] 5 Suppl. SCR 310 referred to                     Para 35
       CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9037
OF 2019
                                                                               C
       From the Judgment and Order dated 18.10.2019 of the Securities
Appellate Tribunal, Mumbai in Appeal No. 96 of 2018.
       With
       Civil Appeal No. 629 of 2020.
       Mohit D. Ram, Pratap Venugopal, Ms. Surekha Raman, Ms. Ayushi           D
Gaur, Ms. Ila Haldia, Akhil Abraham Roy For M/S. K J John And Co,
Abhinav Agrawal, Rishabh Parikh, Advs. for the appearing parties.
       The Judgment of the Court was delivered by
       SANJAY KISHAN KAUL, J.
       1. A lot of noise but no music! The present case is a classic one       E
where multiple proceedings have been initiated but have resulted in no
culmination over a period just short of a decade. And this is not so
because of any interdicts from the courts in preventing these legal
proceedings, yet the proceedings have hardly moved. The result is that
the culpability of the first two respondents herein has not been determined
                                                                               F
– thus, a cloud hangs over their conduct and that is all.
       2.We now turn to The Forward Contracts (Regulation) Act, 1952
(hereinafter referred to as the ‘said Act’; since repealed by the Finance
Act, 2015),as the proceedings against the first two respondents herein
emanated from the powers exercised under the said Act. The said Act
aimed to regulate certain matters relating to forward contracts, prohibition   G
of options in goods and for other connected matters. A reading of the
statement of objects and reasons shows that the said Act was a sequitur
to the initial prohibition of forward trading in certain commodities as a
result of the Central Government issuing orders under Rule 81 of the
Defence of India Rules during the war period.                                  H
136            SUPREME COURT REPORTS                         [2020] 13 S.C.R.


A             3. Chapter II of the said Act provides for the Forward Markets
      Commission (for short ‘FMC’), an authority to regulate commodities
      futures market, which was established under Section 3, with its functions
      being provided under Section 4 of the said Act. The functions, inter
      alia, were to advise the Central Government in respect of the recognition
      of, or the withdrawal of recognition from, any association or in respect
B
      of any other matter arising out of the administration of this Act; and to
      keep forward markets under observation. Chapter III deals with the
      recognition of associations concerned with the regulations and control
      of forward contracts. An application for such recognition of associations
      had to be made under Section 5 of the said Act for grant of recognition
C     under Section 6. Section 7 of the said Act dealt with withdrawal of
      recognition. The Central Government had the power under Section 8 to
      call for periodical returns or direct inquiries to be made. Suffice to say
      that it is in exercise of these powers under Section 8(2) of the said Act
      that the proceedings against Respondent Nos.1 & 2 herein commenced.
D            4. In the aforesaid play of the said Act, we now turn to National
      Multi Commodity Exchange of India Limited (for short ‘NMCE’), which
      is an association registered under the provisions of the said Act. NMCE
      is registered with the FMC, under Section 14B of the said Act. The
      subsequent development has been that in pursuance of a scheme of
      amalgamation, concluded in 2018, the Indian Commodity Exchange
E     Limited (for short ‘ICEL’), who is the Appellant before us, emerged as
      the successor of NMCE.
            5. Respondent No. 1 herein, Neptune Overseas Limited (for short
      ‘NOL’) is a company registered under the Companies Act, 1956 dealing
      with export/import and trading in various commodities including rubber.
F
      This company is the core promoter of NMCE, being its largest
      shareholder with 30.18% shareholding. The role of Mr. Kailash
      Ramkishan Gupta, Respondent No.2 herein, was dual in character – he
      was the founder and CEO of NMCE as well as the Managing Director
      of NOL. The other related development is that the FMC, in view of the
G     said Act being repealed, itself merged with the Securities and Exchange
      Board of India (for short ‘SEBI’) with effect from 28.9.2015.
            6. The genesis of the dispute is a communication dated 28.11.2010,
      made by a stated independent journalist to the FMC alleging, inter alia,
      trading irregularities within the NMCE along with an allegation of abuse
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     INDIAN COMMODITY EXCHANGE LTD. v. NEPTUNE                                 137
        OVERSEAS LTD. [SANJAY KISHAN KAUL, J.]

of position by Respondent Nos.1 & 2 herein. The proceedings that               A
transpired thereafter, and the related compliance with principles of natural
justice form the subject matter of the present litigation.
       7. The FMC, on the basis of the abovementioned complaint,
initiated an inquiry into the affairs of NMCE on 14.12.2010, exercising
powers under Sections 8(2) and 8(4) of the said Act as set out                 B
hereinabove, read with the Government of India Notification S.O.
No.1162 dated 4.5.1960. A detailed show cause notice dated 21.6.2011
was served under Section 4(b) of the said Act. Section 4 (b) of the said
Act reads as under:
      “4. Functions of the Commission.—The functions of the                    C
      Commission shall be—
      (a) xxxx xxxx                xxxx             xxxx         xxxx
      (b) to keep forward markets under observation and to take such
      action in relation to them as it may consider necessary, in exercise
      of the powers assigned to it by or under this Act;]                      D
      xxxx        xxxx             xxxx             xxxx          xxxx”
       8. This notice, running into about 150 pages,was addressed to
Respondent No.2 herein, in his capacity as Vice Chairman of NMCE
and Chairman and Managing Director of Respondent No.1, NOL giving
                                                                               E
him a period of 10 days from the date of receipt of notice to respond. A
personal hearing was fixed for 4.7.2011. Liberty was granted to
Respondent No.2 herein to peruse any documents within a period of 7
days from the date of receipt of notice, if he so desired. This resulted in
a series of communications from 22.6.2011 to 20.7.2011, including the
request of Respondent No.2 herein for copies of documents relied upon          F
in the show cause notice, a questioning of the jurisdiction of the FMC,
and repeated requests for adjournments. Most of these letters were by
Respondent No.2 herein but on record is also a letter dated 2.7.2011
addressed by Respondent No.1 herein and signed by Respondent No.2
herein. The stand of FMC was that most of the documents were already
                                                                               G
under the control of Respondent No.2 herein or were either irrelevant or
not relied upon. However, possibly to put the matter at rest, some
documents were supplied on 5.7.2011 and the hearing was consequently
adjourned to 13.7.2011.

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138             SUPREME COURT REPORTS                         [2020] 13 S.C.R.


A            9. In the course of these developments, parallel proceedings were
      initiated by Respondent No.1 herein by filing Special Civil Application
      No.8377 of 2011 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 learned Single Judge
B
      who considered the matter, construed the issuance of the show cause
      notice to Respondent No.1 to be through Respondent No.2 herein.
             Thus, in terms of order dated 8.7.2011, it was opined that
      opportunity of hearing had been and was being provided to Respondent
      No.1 herein, who could furnish a reply to the show cause notice as well
C     as appear personally with material in its support. The principles of natural
      justice were observed to have been complied with and Respondent No.1
      herein was given liberty to appear before the FMC in pursuance to the
      show cause notice and produce the material in support thereof. The
      conclusion was that the final view was yet to be taken by the FMC, and
D     only a show cause notice had been issued. As such, in the absence of
      any adjudication on merits, it was a premature effort on the part of
      Respondent No.1 herein to approach the High Court.
             10. On the day of the aforesaid order being passed, once again, a
      grievance of entire documentation not being supplied was raised by
E     Respondent No.2 herein. This request was rejected by the FMC with
      the reasoning that all documents were either available in the public domain
      or not relevant. The subsequent endeavour of Respondent No.2 herein,
      to seek adjournment on 20.7.2011 in a bid to raise issues of jurisdiction
      was not accepted. The order of the FMC dated 20.7.2011 recorded that
      three adjournments had already been granted. Thus, the endeavour of
F     Respondent No.2 herein, either in his own name or on behalf of
      Respondent No.1 herein, was only to seek postponement of the
      proceedings. As a last opportunity, Respondent Nos.1 and 2 herein were
      given time in the post-lunch recess session to address the FMC on the
      issue of jurisdiction, if they so desired, but the counsel for the said
G     respondents only expressed the request for adjournment, which was
      apparently the only instructions to her. The proceedings were, thus,
      closed for orders and that order was pronounced on 23.7.2011.
            11. The aforesaid order dated 23.7.2011 of the FMC opined against
      Respondent Nos.1 and 2 herein. The endeavour of Respondent No.2
H     herein to repeatedly seek adjournments was highlighted, especially as
    INDIAN COMMODITY EXCHANGE LTD. v. NEPTUNE                                 139
       OVERSEAS LTD. [SANJAY KISHAN KAUL, J.]

the proceedings in the High Court were filed only by Respondent No.1          A
herein, albeit through Respondent No.2 herein. On jurisdiction, the FMC
clarified that Section 8(2)(b) of the said Act empowers the Central
Government to make an inquiry in relation to the affairs of a registered
association. The relevant provisions read as under:
      “8. Power of Central Government to call for periodical                  B
      returns or direct inquiries to be made.—
      [(1) Every recognised association and every member thereof shall
      furnish to the Central Government such periodical returns relating
      to its affairs, or the affairs of its members, or his affairs, as the
      case may be, as may be prescribed.]                                     C
      (2) Without prejudice to the provisions contained in sub-section
      (1) where the Central Government considers it expedient so to
      do, it may, by order in writing,—
      (a) xxxx     xxxx           xxxx        xxxx            xxxx
                                                                              D
      (b) appoint one or more persons to make an inquiry in relation to
      the affairs of such association or the affairs of any of its members
      and submit a report of the result of such inquiry to the Central
      Government within such time as may be specified in the order or,
      in the alternative, direct the inquiry to be made, and the report to
      be submitted, by the governing body of such association acting          E
      jointly with one or more representatives of the Central
      Government; and”
       12. This power of the Central Government had been delegated to
the officers of the FMC by Government Notification S.O. Nos.1162 and
928 dated 4.4.1960 and 12.3.1964 respectively. On examination of merits,      F
the attitude and the approach of Respondent No.2 herein was found to
be non-cooperative. On the basis of the documents gathered and
statements recorded during the course of inquiry, Respondent No.2 herein
was held to be in complete breach of his fiduciary responsibility to the
NMCE by systematically defrauding, misusing and misappropriating its
                                                                              G
property and committing a series of crimes under various laws for
benefiting himself. Directions were issued to the NMCE to take
appropriate legal action against Respondent No.2 herein and his family
members who benefitted from his acts.

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140             SUPREME COURT REPORTS                          [2020] 13 S.C.R.


A            13. In the meantime, the parallel proceedings in the High Court
      before the learned Single Judge discussed aforesaid, resulted in an intra
      court appeal filed by Respondent No.1 herein, once again, through
      Respondent No.2 herein, in LPA No.1039/2011 filed on 15.7.2011.
      Interestingly, now Respondent No.2 herein filed an impleadment
      application to implead himself in his personal capacity, which was allowed.
B
      The appeal was also amended to raise a challenge to the order dated
      23.7.2011 which had been passed by the FMC.
               14. The Division Bench of the Gujarat High Court in terms of its
      order dated 9.2.2012 allowed the appeal on the short ground that the
      FMC had not served the show cause notice on Respondent No.1 herein
C     and the NMCE, effectively depriving them of the opportunity to present
      their case before the FMC. Consequently, the order of the FMC dated
      23.7.2011 was quashed. The violation of the principles of natural justice
      is all that weighed with the Division Bench, without getting into the merits
      of the case.It also opined that if any documents were in possession of
D     FMC and had not been supplied to Respondent No.1 herein, the same
      should be supplied subject to payment of usual charges.
              15. The successor entity of the FMC, the SEBI, challenged this
      order by way of a Special Leave Petition before this Court, being SLP
      No.10225-10227 of 2012 and in terms of an interim order dated 22.3.2012,
E     the operation of the order of the Division Bench dated 9.2.2012 was
      stayed. The consequence of this was that the order of the FMC dated
      23.7.2011 stood revived. That it had consequences was not in doubt as
      various proceedings were initiated thereafter both civil and criminal. The
      matter, however, remained at this stage before the Supreme Court right
      till the passing of the order on 7.3.2018, 6 years later, in terms whereof
F     the order of the High Court was set aside, which, had re-started the
      proceedings against Respondent Nos.1 and 2 herein. An opportunity
      was given to the respondents herein to approach the Securities Appellate
      Tribunal, Mumbai (for short ‘SAT’) by way of a statutory appeal against
      the order dated 23.7.2011. A 30 day time period was granted for the
G     same. On the appeal being filed, it was held, that the SAT “will hear the
      appeal on merits.” Not only that, the interim order passed on 22.3.2012
      by this Court was directed to continue to have effect, and any proceedings
      initiated in pursuance of the order dated 23.7.2011 passed by the FMC
      (now SEBI) was to abide by the final result of the appeal. The judgment
      of the Division Bench was specifically set aside.
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    INDIAN COMMODITY EXCHANGE LTD. v. NEPTUNE                                 141
       OVERSEAS LTD. [SANJAY KISHAN KAUL, J.]

      16. We may note that one of the main issues before us is the            A
consequence of the aforesaid order in view of what has transpired before
the SAT and the High Court thereafter.
       17. Respondent Nos.1 and 2 herein, in pursuance of the aforesaid
liberty, filed Appeal No.96 of 2018 before the SAT, which passed the
order dated 18.10.2019. It appears that the substratum of the pleas raised    B
by Respondent Nos.1 and 2 herein was the lack of adequate and proper
opportunity of hearing given to them, before passing of the order dated
23.7.2011.The requests for provision of further documents which had
been denied earlier and the lack of jurisdiction of the FMC to issue the
show cause notice under the said Act were re-agitated. The order dated
18.10.2019 of the SAT, impugned before this Court is predicated on the        C
absence of any show cause notice to Respondent No.1 herein. This
aspect was noted to have been conceded by the FMC before the Division
Bench of the High Court along with an assurance to carry out the same.
The relevant extract in this behalf is as under:
      “9. The aforesaid contentions raised by the learned counsel for         D
      the appellants is vehemently contested by Mr. P.S. Champaneri,
      learned Assistant Solicitor General of India and learned Advocate
      Mr. Navin Pahwa, appearing for respondent No.3 and 7, however,
      they have agreed that no show cause notice has been issued either
      to the appellant No.1 and/or respondent No.3-NMC by respondent          E
      No.1-Commission. At this stage, learned counsel for the
      respondent No.1 Commission Mr. Champaneri states that they
      will be issuing a show cause notice to the appellants as well as
      respondent No.3 as contemplated under the Forward Contracts
      (Regulation) Act, 1952 and Forward Contracts (Regulation) Rules,
      1954.”                                                                  F

        18. The concession made on behalf of FMC was relied upon by
the SAT to reach a conclusion that once a concession has been made by
the concerned authorities themselves and undisputedly no notice was
issued to Respondent No. 1 herein and NMCE, the proceedings must
emanate from the show cause stage. The SAT did take cognizance of             G
the developments that had taken place subsequent to the issuance of
show cause notice, focusing on the allegedly arbitrary denial of documents,
to the requests made by Respondent No.2 herein. On the issue of request
for adjournment on 20.7.2011, the SAT noted that only two weeks had
elapsed from the date when the documents were supplied and, thus,             H
142             SUPREME COURT REPORTS                         [2020] 13 S.C.R.


A     further request for adjournment could not be said to be unreasonable
      especially as the documents were voluminous, running into thousands of
      pages. Thus, the time period for filing the reply was found to be
      inadequate. Consequently, the order dated 23.7.2011 passed on a Saturday,
      a non-working day of the FMC, was set aside and a reasonable
      opportunity was directed to be given to Respondent No.2 herein and the
B
      NMCE for the purposes of filing objections/reply to the show cause
      notice.
            19. The successor to the FMC, SEBI was directed to grant
      adequate time to Respondent Nos.1 and 2 herein to file their reply and if
      an application requesting the supply of documents was filed, the same
C     was to be dealt with in accordance with law. The issue of jurisdiction
      was also to be considered and decided by the SEBI in accordance with
      law.
             20. The appeals before this Court have emanated under Section
      15Z of the Securities and Exchange Board of India Act, 1992 – Civil
D     Appeal No.9037 of 2019 having been filed by the Indian Commodity
      Exchange Limited (the successor of NMCE) while Civil Appeal No.629
      of 2020 is by the SEBI, the successor of the FMC with NOL and Mr.
      Kailash being common respondents. Notice was issued on 2.12.2019 in
      Civil Appeal No. 9037/2019 and interim order was passed directing status
E     quo with regard to operation of the impugned order to the extent it operated
      against the appellant. The SEBI’s appeal was tagged with this matter.
      There are other appeals also but it was agreed that these two appeals
      should be taken up first as they may have ramifications on the result of
      those appeals. This was recorded in order dated 11.9.2020. Thus, these
      two appeals were heard and judgment reserved on 5.11.2020 after hearing
F     learned counsels for the parties.
           21. We have gone through the record before us and perused the
      synopses placed before us apart from the submissions made in Court.
            22. The stand of the ICEL becomes relevant to the extent that the
G     order of the SAT is predicated on ICEL not being served the show cause
      notice. This really does not withstand scrutiny, for the reason they had
      not sought so and, in fact, are themselves in appeal before us. Thus, the
      denial of opportunity to be heard is really being claimed only by
      Respondent Nos.1 and 2 herein. In fact, what has been urged before us
      by the ICEL is that, while the challenge before the Gujarat High Court
H     was laid only by Respondent No.1 herein, it is Respondent No.2 herein
       INDIAN COMMODITY EXCHANGE LTD. v. NEPTUNE                                143
          OVERSEAS LTD. [SANJAY KISHAN KAUL, J.]

who was simultaneously seeking adjournments before the FMC on one               A
pretext or the other. This is despite the fact that Respondent Nos.1 and
2 herein were addressing communications to the FMC interchangeably
on the same subject matter. As such, Respondent No.1 herein was fully
aware of the show cause notice and acknowledged the same as one,
which had been addressed to the said respondent. Not only that, there
was no grievance ever made at the stage of final hearing before the             B
learned Single Judge about the absence of show cause notice. This
aspect was sought to be brought in only at the stage of appeal, for the
first time, that too by amending it after the order dated 23.7.2011 was
passed wherein the acts of Respondent No.2 herein of siphoning off
money and interlinked issues was stated to require investigation and an         C
adverse finding resulted. However, to our mind, that is not very relevant
at this stage because that would amount to going into the merits of the
controversy, which is not to be examined by us.
        23. Mr. Dushyant Dave, learned senior counsel appearing for the
ICEL, sought to emphasise that the two respondents are only playing
games, when they are really one and the same entity. In a sense, it was         D
argued, that the corporate veil must be pierced to see what is really the
endeavour of the said two respondents. Principles of natural justice, it
was urged, have to be seen in a holistic frame and cannot have a
straitjacket formula. It was urged that adequate opportunities had been
granted to both the respondents and the third entity for whose benefit          E
the order was passed by the SAT, i.e., the NMCE is predecessor entity
of the ICEL who itself has come up in appeal against the said order.
The communications as well as the proceedings in the High Court all
give rise only to one conclusion that the two entities are treated as one
and the same by the said entities themselves.
                                                                                F
        24. In order to substantiate the contention learned counsel referred
to the following judgments and related principles:
         1. Chairman, Board of Mining Examination and Chief
         Inspector of Mines and Anr. v. Ramjee 1 : Compliance of
         principles of natural justice requires only a substantial compliance
         and not every miniscule violation would spell illegality.              G
         2. Titaghur Paper Mills Co. Ltd. and Anr. v. State of Orissa
         and Ors.2 and Cement Workers Karamchari Sangh v. Jaipur
1
    (1977) 2 SCC 256
2
    (1983) 2 SCC 433                                                            H
144               SUPREME COURT REPORTS                          [2020] 13 S.C.R.


A              Udyog Limited and Ors.3 : Mere denial of adjournment would
               not always be violative of principles of natural justice, i.e.,
               adjournment is not a birthright.
               3. Dharampal Satyapal Ltd. v. Deputy Commissioner of
               Central Excise, Gauhati and Ors.4 : Principles of natural justice
B              cannot be applied in a straitjacket formula and at times the futility
               of giving relief is a matter of consideration. It all depends upon
               the extent to which a person is likely to be affected. Not every
               case where there is a violation of principles of natural justice,
               would the action be struck down and the matter referred back to
               the authorities to take a fresh decision after complying with the
C              procedural requirement. Therefore, every violation of a facet of
               natural justice may not lead to the conclusion that order passed is
               always null and void. The validity of the order has to be decided
               on the touchstone of prejudice. The ultimate test is always the
               same, viz., the test of prejudice or the test of fair hearing.
D            25. Mr. C.U. Singh, learned senior counsel canvassing the case
      of the SEBI supported the plea raised by ICEL. He laid emphasis on the
      fact that the judgment of this Court in the earlier proceedings being SLP
      No.10225-10227 of 2012 dated 7.3.2018, had put a quietus to the issue
      of any plea of violation of the principles of natural justice. This submission
E     was based on the fact that the order of the Division Bench of the Gujarat
      High Court was predicated solely on denial of opportunity of fair hearing
      and that order had been set aside by the Supreme Court. The relegation
      of the proceedings to the SAT did not imply, in his view, that the whole
      chapter would be reopened, because this Court specifically opined that
      the appeal would be heard “on merits.” It was his submission, that any
F     other reading would negate the very words and spirit of the order of this
      Court. This, he sought to support by the fact that in those proceedings,
      this Court in its wisdom considered it appropriate to continue the interim
      order, which in turn meant that all proceedings initiated in pursuance of
      the order passed on 23.7.2011 would continue, subject to the final outcome
G     of the proceedings before the SAT. He also emphasised on the fact that
      enough opportunity was granted and no prejudice had been caused to
      Respondent Nos. 1 and 2 herein. No answer had been provided to the
      act of omission or commission of Respondent Nos.1 and 2 herein as
      specified in the show cause notice and the inter se relationship of
      3
          (2008) 4 SCC 701
H     4
          (2015) 8 SCC 519
     INDIAN COMMODITY EXCHANGE LTD. v. NEPTUNE                                 145
        OVERSEAS LTD. [SANJAY KISHAN KAUL, J.]

Respondent Nos.1 and 2 herein required a piercing of the corporate veil        A
in view of the gross mismanagement.
       26. On the other hand, the defence of the impugned order was
vehemently led by Mr. Rishabh Parikh, who did full justice to the task at
hand despite two senior counsels on the opposing side. It was his
submission that the present proceedings being in the nature of an appeal       B
under Section 15Z of the SEBI Act, it must answer the parameters of
the provisions. The said provision reads as under:
      “15Z. Appeal to Supreme Court.—Any person aggrieved by
      any decision or order of the Securities Appellate Tribunal may file
      an appeal to the Supreme Court within sixty days from the date of        C
      communication of the decision or order of the Securities Appellate
      Tribunal to him on any question of law arising out of such order:
      Provided that the Supreme Court may, if it is satisfied that the
      applicant was prevented by sufficient cause from filing the appeal
      within the said period, allow it to be filed within a further period
      not exceeding sixty days.”                                               D

       .27. It was his submission that there was no question of law and,
thus, the appeal was not maintainable. On the appeal of the ICEL, it was
stated that it had no locus to file the appeal as the issue related only to
Respondent Nos.1 and 2 herein. But we negate this contention at the
threshold itself. ICEL had to approach this Court, as failure to serve         E
show cause notice to it was one of the grounds which weighed with the
SAT, even though ICEL was not making any such claim.
       28. Learned counsel strongly relied on the fact that the counsel
for FMC had conceded before the Division Bench that no show cause
notice was ever served upon Respondent No.1 herein and NMCE (which             F
fact, as aforesaid, is no longer relevant). Insofar as the direction of this
Court in terms of the order dated 7.3.2018 is concerned, it was submitted
that the direction to the SAT to decide the matter on merits would
encompass every aspect, including the one about the plea of violation of
principles of natural justice.                                                 G
       29. Learned counsel contended that the common thread of the
arguments of both Respondent Nos.1 and 2 herein was that there has
been a violation of the principles of natural justice qua both of them.In
case of Respondent No.1 herein, the show cause notice was never issued
but the shares it held in NMCE numbering 29,32,280 shares were
                                                                               H
146            SUPREME COURT REPORTS                          [2020] 13 S.C.R.


A     cancelled by the FMC in its 23.7.2011 order. The order in question had
      also prohibited Respondent No.1 from holding any shares in any
      association or exchange recognised by the Government in excess of 2%
      of the issued capital. Thus, the rights of Respondent No.1 herein had
      been clearly affected without even the courtesy of a show cause notice.
      Insofar as Respondent No.2 herein is concerned, there was stated to be
B
      a violation to the extent that no reasonable opportunity of hearing had
      been granted as a 150 page long show cause notice was handed over
      without any documents. The documents running into more than 4,000
      pages were made available only on 5.7.2011 and the matter was closed
      in a period of 14 days denying Respondent No.2 herein the adjournment
C     sought.
             30. The task before us is all the more difficult because both set of
      arguments in a sense would have their appeal at the first blush. We
      have, thus, endeavoured to charter a course based on the pleas and the
      documents before us, as also the manner of conduct of the proceedings
D     by the FMC and the nature of defences, technical or on merits sought to
      be raised by the first two respondents.
            31. We have no doubt that a proper show cause notice was served
      on Respondent No.2 herein. The moot point, however, remains as to
      what is the effect of not serving him with the documents he sought for
E     and within the compass of time, which was given to him to respond.
             32. Once again, it may be stated that a large part of the documents
      would have been within the custody of the Respondent No. 2 herein or
      for that matter with Respondent No.1 herein. However, this would not
      encompass all the documents. Not only that, when reliance is placed on
F     as many as 4,000 pages of documents, it would not be fair to expect that
      the party in question ferrets through its own record trying to locate the
      documents, when on basis of formation of an opinion for issuance of the
      show cause notice, logic and requirement of law both would dictate that
      the show cause notice should be comprehensive enough with full
      supporting documents being handed over. The answer cannot be that
G     they are free to inspect 4,000 pages on their own! In fact, in so many
      terms, ultimately most of those documents were made available and it
      would not be appropriate to go back into the issue of whether the
      documents should have been supplied or not. In a sense, that chapter
      closed with the supply of documents on 5.7.2011 even though some
H     more documents were sought thereafter.
     INDIAN COMMODITY EXCHANGE LTD. v. NEPTUNE                                    147
        OVERSEAS LTD. [SANJAY KISHAN KAUL, J.]

       33. We fail to appreciate why there should have been a cussedness          A
in handing over mere copies of documents when serious allegations and
serious consequences which would flow to the respondents herein. Not
only that, 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. An opportunity of hearing is
                                                                                  B
not a mere nicety but a valuable right. That it does not fall in a straitjacket
formula is no doubt the accepted legal position [Dharampal Satyapal
Ltd.5].The question is whether there was substantial compliance of the
principles of natural justice [Chairman, Board of Mining
Examination6] and whether there were unnecessary adjournments being
sought, which were declined [Titaghur Paper Mills Co. Ltd. and Anr.7              C
and Cement Workers Karamchari Sangh8]
      34. We do feel that there was an endeavour to some extent by
Respondent No.2 herein to prolong the proceedings but then looking into
the enormity of the contents of the show cause notice running into 150
pages with documents spanning 4,000 pages supporting it, a reasonable             D
time had to be given to respond to the same.We may note that the whole
enquiry was at the behest of “independent enterprising journalist.” The
manner in which the proceedings were sought to be closed raises serious
doubts in our mind that a fair process and opportunity has been extended
to Respondent No.2 herein.
                                                                                  E
        35. Insofar as Respondent No.1 herein is concerned, not even a
formal show cause notice has been issued. However, the fact remains
that the communications addressed by Respondent Nos.1 and 2 herein
do give rise to a clear and unequivocal view that it was understood as a
notice both to Respondent Nos.1 and 2 herein. That is how the parties
understood it. There is no doubt about the fact that Respondent No.1              F
herein made an endeavour to approach the High Court challenging the
show cause notice at that time without being joined by Respondent No.2
herein -though it was through Respondent No.2 but that endeavour failed
as the proceedings before the FMC had not culminated into any order.
It is only in the Letters Patent Appeal filed against that the order of the       G
FMC dated 23.7.2011 was sought to be assailed and Respondent No.2

5
  (supra)
6
  (supra)
7
  (supra)
8
  (supra)
                                                                                  H
148                SUPREME COURT REPORTS                            [2020] 13 S.C.R.


A     herein joined the proceedings as a party in his personal capacity. There
      is, thus, to some extent truth in what has been alleged by the appellants
      before us, i.e., that Respondent Nos.1and 2 herein are conveniently
      playing this game of coming up separately even though they are joined in
      all purposes. We are conscious of the fact that Respondent No.1 herein
      is a separate legal entity being a registered company, but the concept of
B
      piercing the veil is not unknown to law. By this process, the law either
      goes behind the corporate personality to the individual members or ignores
      the separate personality of the company. This course is adopted when it
      is found that the principle of corporate personality is flagrantly opposed
      to justice, convenience or the interest of the Revenue.9 We are, thus, not
C     able to hold that there was a failure to serve show cause notice to
      Respondent No.1 herein merely because no such notice was specifically
      addressed to it. We are conscious of the fact that there was some
      concession made before the Division Bench of the Gujarat High Court
      by the counsel for the FMC. Be that as it may, we are of the view that
      it would be a hyper technicality now to say that Respondent No.1 herein
D
      should be served a fresh show cause notice, more so in view of the
      directions which we are proceeding to pass in the present judgment.
              36. We now come to the plea based on the directions passed by
      this Court on 7.3.2018 in the earlier appeal. No doubt the findings of the
      Division Bench of the High Court based on the violation of the principles
E     of natural justice were set aside. But this setting aside will have to be
      read in the context of the fact that it was felt that Respondent Nos.1 and
      2 had an adequate alternative remedy of appeal before the SAT. Not
      too much can be read into the use of the expression that the appeal had
      to be decided “on merits.” The merits of a case include of factual and
F     legal pleas. A plea of lack of opportunity to defend its case is also a legal
      plea. The order read as a whole only gives rise to the conclusion that the
      hearing was shifted to the SAT instead of before the High Court, in view
      of it being the competent body.
              37. Similarly, the continuation of the interim order passed ealier in
      those proceedings on 22.3.2012, has to be read in the context of other
G     consequential proceedings having been initiated. The objective was that
      those proceedings should not be brought to a naught at this stage; but
      even those were to abide by the result of the appeal before the SAT.
      We may also note with regret that on the one hand it has been contended
      by the appellant that so many different proceedings have emanated and,
      9
H         New Horizons Limited and Another v. Union of India and Others. (1995) 1 SCC
      478
     INDIAN COMMODITY EXCHANGE LTD. v. NEPTUNE                                    149
        OVERSEAS LTD. [SANJAY KISHAN KAUL, J.]

thus, giving a fresh opportunity by issuing a fresh show cause notice             A
having fresh proceedings before the SEBI would serve no effective
purpose and yet the summary of those proceedings given to us show
hardly any progress. It is not as if those proceedings are anywhere near
an advanced stage.
       38. The impugned order of the SAT dated 18.10.2019 is predicated           B
on a plea of lack of adequate opportunity and there is no examination on
merits. The questions, thus, arises what would be the appropriate
directions to be passed since Respondent Nos.1 and 2 have to succeed
in view of our aforesaid observations and what will be the nature of
relegated proceedings.
                                                                                  C
       39. We have already taken a view that directions passed by the
SAT for the case to begin with the service of fresh show cause notices
would not be an appropriate direction. In the conspectus of the factual
position from the proceedings which have taken place and the legal
principles discussed, we are of the view that the following directions
would subserve the interest of justice and perfect the rights of the parties:     D
       (i)     No fresh show cause notice is required to be served on
               Respondent No.1 herein and the show cause notice dated
               21.6.2011 would be treated as a show cause notice to both
               Respondent Nos.1 and 2 herein.
                                                                                  E
       (ii)    The documents already asked for by Respondent No.1 and
               2 herein and not supplied should be supplied. In order to
               obtain clarity on this issue, we direct that a list of documents
               sought for by either respondents be supplied to the SEBI
               within two weeks from the date of this order and those
               documents are to be supplied by SEBI within two weeks              F
               thereafter.
       (iii)   Respondent Nos.1 and 2 herein are granted opportunity to
               file their reply to the show cause notice without any further
               delay within a period of four weeks after receiving
               aforementioned documents.                                          G
       (iv)    The SEBI would thereafter proceed to give an opportunity
               for personal hearing both to Respondent Nos.1 and 2 herein
               and these proceedings are to go on, on a day-to-day basis
               and no request for adjournment will be entertained in this
               behalf from either respondents..                                   H
150                SUPREME COURT REPORTS                          [2020] 13 S.C.R.


A            (v)     The SEBI would take a final view on the subject matter
                     thereafter.
             (vi)    Needless to say, if Respondent Nos.1 and 2 herein are
                     aggrieved by the same, the remedy against the same lies
                     before the SAT.
B            (vii)   We make it clear that all pleas as raised by Respondent
                     Nos.1 and 2 herein would be considered by the SEBI, legal
                     or factual including but not confined to aspects of jurisdiction.
                     In fact, this is the very purpose of relegating the proceedings
                     before the SEBI and not to SAT as the right of appeal is a
C                    valuable right to be exercised after adequate opportunity at
                     the first adjudication stage level.
             40. The effect of the aforesaid direction is that the order of the
      FMC dated 23.7.2011 has been set aside and a fresh order has to be
      passed. The different proceedings initiated, still pending almost at a nascent
D     stage, are in pursuance of that order. The natural consequence, thus,
      would be that those proceedings would have to be kept in abeyance for
      the time being, till a view is taken by SEBI in pursuance of the directions
      passed by this order and would have to abide by the decision taken by
      the SEBI or in appeal arising therefrom. We clarify that were Respondent
      Nos.1 and 2 herein to fail in their endeavours, it will not mean that those
E     other proceedings have to start de novo and can continue from the
      stage where they are, subject, of course, to the nature of directions
      passed afresh by SEBI. Really speaking, this would not result in much
      of a delay considering that nothing has happened till now.
            41. We, thus, dispose of the appeals with the modification of the
F     impugned order to the aforesaid extent leaving the parties to bear their
      own costs and with the hope that the proceedings initiated against
      Respondent Nos.1 and 2 herein, at least, now see the light of the day in
      not too far a time ahead.

G     Ankit Gyan                                                    Appeals disposed of.




H