EX PARTE INTERIM ORDERS SHOULD BE PASSED ONLY IN ‘EXTREME CASES’: TRIBUNAL TO SEBI – MARKETS – BUSINESS LINE
Losses arising out of such orders mayhave substantial, serious consequences
Mumbai, March 12The Securities and Appellate Tribunal (SAT) has directed SEBI to use its powers to pass an “ ex parte interim order” sparingly and only in “extreme urgent cases.” On Tuesday, SAT set aside SEBI’s March 1 ex parte order against large commodity traders including North End Foods Marketing (NEFM), RK Commodities and 24 others and reprimanded the regulator “for not following the principals of natural justice by giving the parties a chance of hearing.”
An ex parte injunction is mainly a direction, command to restrain, granted after hearing only one party in matters of ‘urgency’, without a notice to the other parties involved. Full hearing is held at a later date.
SAT observed that although SEBI was empowered to take measures “as it deemed fit” for investor protection under Section 11A/11B, “it does not mean that in every case, an ex parte interim order should be passed on the pretext that it was imminent to pass such interim order to protect the interest of the investor or securities market.”
An interim order, however, temporary it may be, restraining an entity/person from pursuing his profession/trade may have substantial and serious consequences which cannot be compensated in terms of money, SAT observed. Legal experts involved with the case told BusinessLine that Section 11A/11B has been the most abused in SEBI as it is open-ended.