In this Finsec Case Digest, we analyze the Hon’ble Securities Appellate Tribunal (“SAT”)’s order in the matter of Chanda Kochhar v. Securities and Exchange Board of India (“Order”),1 in which SAT appears to have significantly broadened the scope of a noticee’s entitlement to inspection of documents in order to defend itself adequately. The subsequent paragraphs provide a brief overview of the facts, followed by our analysis.
Facts
The Securities and Exchange Board of India (“SEBI”) issued a show-cause notice dated May 23, 2018 (First Notice) to Kochhar and ICICI Bank Limited (ICICI), to which Kochhar filed a detailed reply and was granted a hearing as well. However, SEBI did not pass any orders, and instead, issued an ‘amended’ notice on November 19, 2020 (Second Notice). The Second Notice was issued only to Kochhar, and superseded the First Notice. In response, Kochhar requested for inspection of documents and information, which doesn’t appear to have been granted, and filed a preliminary reply on February 24, 2021. SEBI did not accede to Kochhar’s repeated requests for inspection, and instead, scheduled a hearing on May 04, 2024.
Thereafter, Kochhar appealed before the SAT, which directed SEBI to consider her requests for inspection. Consequently, as per Kochhar, SEBI “provided selective inspection of some of the documents and denied inspection of the remaining documents without any valid reason.” The matter reached the SAT once again, which directed SEBI to “furnish some of the requested documents.”
Finally, SEBI sent an email to Kocchar in February 2025, stating that all documents pertaining to the Second Notice had been provided to her, and called upon her to submit a reply by March 07, 2025. Kochhar then requested for copies of submissions made by ICICI in response to the Second Notice, and also provide data from ICICI’s secretarial portal and certain data that was stored on ICICI’s servers. SEBI refused, and issued a hearing notice, directing Kochhar to appear for a personal hearing.
In response, Kochhar appealed before the SAT, inter alia to “set aside the hearing notice dated March 12, 2025; to direct SEBI to grant inspection to provide copies of [the First and Second Notice] […] all replies, written submissions, documents filed by [ICICI] and data on [ICICI’s] servers, which form the basis of the [Second Notice]”
Arguments on behalf of Kochhar
Kochhar contended that she should be provided with ICICI’s submissions because the allegations against her are in respect of her conduct as MD and CEO of ICICI, and thus, the two cases (ICICI’s and Kochhar’s) are interwoven. Further, the adjudicating officer in both the matters was the same, and the information being sought by Kochhar formed the basis on which the Notices were issued.
Arguments on behalf of SEBI
On the other hand, SEBI contended that Kochhar’s challenge before the SAT was to the hearing notice, which is not an ‘order’ that can be appealed under Section 15T of the SEBI Act, 1992.2 Interestingly, while this submission was recorded by the SAT, the order does not deal with it.3
SEBI also contended that replies and submissions by co-noticees may be provided under exceptional circumstances, which have not been established by Kochhar. Pertinently, ICICI was not a party to the Second Notice and it was submitted that none of the “content submitted by ICICI Bank shall be relied upon” by SEBI, and that the charges and legal provisions alleged to have been violated by Kochhar and ICICI were different. SEBI also contended that material in ICICI’s servers was not in SEBI’s possession, and as such, it was not in a position to grant inspection of the same.
Reasoning of the SAT
After considering the above rival submissions, SAT arrived at the finding that the Second Notice pertained to Kochhar’s actions during her tenure at ICICI, and the proceedings against both of them emanate from the same set of facts and cause of action. Obviously, as Kochhar is no longer with ICICI, she won’t have access to material and documents. SAT held that the “fundamental principle is that any material which has not been brought to his notice, cannot be used against a delinquent.” It also observed that the adjudicating officer is the same in both ICICI’s case and Kochhar’s, and would be privy to ICICI’s submissions, and thus, “his findings qua [Kochhar] may be biased or exposed to the risk of bias. It is elementary that the human mind does not function in compartments. When it receives impressions from different sources, it is the totality of the impressions which goes into the making of the decision and it is not possible to analyse and dissect the impressions and predicate which impressions went into the making of the decision and which did not.”
Decision
In view of the above reasoning, the SAT allowed Kochhar’s appeal, and directed SEBI to grant Kochhar an opportunity to inspect the documents and information that had been sought by her, including ICICI’s secretarial portal and other data in ICICI’s servers.
Our view
The Order is welcome as it rightly takes an expansive and pragmatic view of reliance upon / relevance of information in SEBI proceedings, to include information from other proceedings on the same facts. However, the SAT does not seem to have settled the question whether an appeal against a hearing notice is maintainable or not.
[1] Kochhar is the former Chief Executive Officer and Managing Director of ICICI.
[2] Section 15T(1) of the SEBI Act, 1992 provides that:“15T. (1) Save as provided in sub-section (2), any person aggrieved,—(a) by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder; or(b) by an order made by an adjudicating officer under this Act[…] may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter.”
[3] In Vivek Mehrotra v. SEBI [2018 SCC OnLine SAT 160], wherein a hearing notice was challenged before the SAT, the appeal was disposed of without the SAT having considered the issue of the maintainability of an appeal against a hearing notice.
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