Supreme Court of India· 07 April 2025
Does the principle of res judicata apply to proceedings before SEBI under the Securities and Exchange Board of India Act, 1992?
SECURITIES AND EXCHANGE BOARD OF INDIA v. RAM KISHORI GUPTA & ANR
CIVIL APPEAL NO. 7941 OF 2019
Coram: K.V. Viswanathan; Sanjay Kumar
Answer
Yes. Section 15U(1) merely deals with the procedure and powers of the Tribunal and states that the Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908; it does not cover proceedings before SEBI and its Whole-Time Members, so SEBI cannot claim exemption from the applicability of the principle of res judicata. Section 11 of the Code is not exhaustive of the general doctrine, which applies equally in proceedings before administrative authorities and binds the adjudicating authorities, be they judicial, quasi-judicial or administrative.
Headnote
Securities and Exchange Board of India Act, 1992 — ss.11, 11B and 15U(1) — Code of Civil Procedure, 1908 — s.11 — Res judicata and constructive res judicata — Finality of orders — Disgorgement — Restitution —
Securities and Exchange Board of India Act, 1992 — s.11B — Fresh order on the same cause of action — Finality —
Held: Once an order under Section 11B on the same show-cause notices has attained finality and been fully given effect to, SEBI cannot pass a fresh order on the very same cause of action. Disgorgement was within its ambit and scope at the first instance and, not resorted to then, cannot be revisited without just cause. (¶25, 29)
Securities and Exchange Board of India Act, 1992 — s.15U(1) — Applicability of res judicata to SEBI —
Held further: Section 15U(1) deals only with the procedure and powers of the Tribunal and does not cover proceedings before SEBI, which cannot claim exemption from the principle of res judicata. These principles bind not merely the parties but the adjudicating authorities, judicial, quasi-judicial or administrative. (¶27, 28)
Code of Civil Procedure, 1908 — s.11 — Inherent lack of jurisdiction — Entities which did not appeal —
Held further: An order barred by res judicata suffers from an inherent lack of jurisdiction, and cannot be sustained even against entities which did not file any appeal against it. (¶31)
Securities and Exchange Board of India Act, 1992 — s.11B — Restitution to investors — Finality of the Tribunal's order —
Held further: The compensation claim against SEBI having been negated by an order that attained finality, it was not for the Tribunal to give its own earlier order a different colour contrary to its plain meaning. Disgorgement and restitution directions set aside, as are the exorbitant costs mulcted on SEBI. Appeals allowed in part. (¶31, 33)
In the Court's own words
Paragraph 27Though it was contended by SEBI that the principle of res judicata in Section 11 of the Code of Civil Procedure, 1908, cannot be imported into these proceedings, due to Section 15U(1) of the Act of 1992, we are not persuaded to agree. This provision merely deals with the procedure and powers of the Tribunal and states that the Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice and shall have the power to regulate its own procedure. Significantly, this provision does not cover proceedings before the SEBI and its WTMs under the Act of 1992. Therefore, SEBI cannot claim exemption from the applicability of the principle of res judicata thereunder.
Paragraph 28In Hope Plantations Ltd. vs. Taluk Land Board, Peermade and another[^2], a 3-Judge Bench of this Court affirmed that the principle of res judicata is based on public policy and justice. It was pointed out that the rule of res judicata prevents the parties to a judicial determination from litigating the same question over again, even though the determination may be demonstrably wrong. It was held that when proceedings attain finality, parties are bound by the judgment and are estopped from questioning it. They cannot litigate again on the same cause of action, nor can they litigate any issue which was necessary for decision in the earlier litigation. It was pointed out that Section 11 of the Code of Civil Procedure, 1908, contains provisions of res judicata but these are not exhaustive of the general doctrine of res judicata. It was observed that the principles of res judicata would be equally applicable in proceedings before administrative authorities. Further, in Amalgamated Coalfields Ltd. and another vs. Janapada Sabha Chhindwara and others[^3], a Constitution Bench observed that constructive res judicata is an artificial form of res judicata and it postulates that if a plea could have been taken by a party in a proceeding between him and his opponent, he would not be permitted to take that plea against the same party in a subsequent proceeding which is based on the same cause of action. Affirming this view in Devilal Modi vs. State Tax Officer, Ratlam, and others[^4], a Constitution Bench observed that this view is founded on the same considerations applicable to res judicata, because if the doctrine of constructive res judicata is not applied, it would be open to a party to take one proceeding after another and urge new grounds every time and that, plainly, would be inconsistent with considerations of public policy. Needless to state, these stellar principles would not only apply to the parties to a dispute but would also bind the adjudicating authorities seized of such dispute, be they judicial, quasi-judicial or administrative.
Acts & Sections
s.11B Securities and Exchange Board of India Act, 1992s.11 Securities and Exchange Board of India Act, 1992s.15U(1) Securities and Exchange Board of India Act, 1992s.11 Code of Civil Procedure, 1908s.19 Securities and Exchange Board of India Act, 1992s.77 Companies Act, 1956One judgment a day. That's the whole habit.
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