Notice Issued 10 years after investigation, SC Asks SEBI To Probe Its Own Process

The Supreme Court came down heavily on the Securities and Exchange Board of India (SEBI) for issuing a show cause notice to a company 10 years after conducting an investigation. The regulator had conducted an investigation into an alleged securities law violation related to the misuse of funds raised through preferential allotment of shares by Alps Motor Finance. The court has instructed SEBI to conduct an inquiry into the reasons behind this significant delay and submit a report.

Securities attorneys have noted that this marks the first instance in which the apex court has directed SEBI to investigate its own officers for the excessive delay in issuing show cause notices. Legal experts suggest that this case could set a precedent for several similar cases currently pending before the Supreme Court.

In 2013, SEBI initiated an investigation into six preferential allotments made by Alps Motor Finance to examine the potential misappropriation of funds. The investigation revealed that the company and its whole-time director, Brij Kishore Sabharwal, had violated the former listing agreement (now known as Listing Obligations and Disclosure Requirements Regulations).
On January 5, this year, SEBI issued a show cause notice against the company and its director. On May 23, SEBI issued an order imposing a penalty of ₹6 lakh on the company and ₹20 lakh on Sabharwal.

The company went to the Securities Appellate Tribunal, which ruled against SEBI. Thereafter, SEBI took the matter to the Supreme Court.