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Investigation of petitioner’s shell company by SEBI without any notice was unjustified: HC

March 13, 2019[2019] 103 taxmann.com 160 (Gauhati)
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SEBI : A finding of shell company de hors any notice or hearing would not be justified having regard to its negative implications and serious consequences

• Where petitioner which was an old and reputed company owning 14 tea estates in State of Assam producing 11 million kgs of tea every year and having a labour force of 20 thousand of its own was branded as a shell company by SFIO and SEBI investigated petitioner as a shell company, it was held that considering the negative implications of being branded as a shell company, it was not justified either on part of SFIO or SEBI to treat petitioner as a shell company straightaway and thereafter to initiate investigation to justify such branding. Principles of natural justice would require that before such branding, petitioner should have been put on notice and afforded a reasonable opportunity of hearing as to why and on what grounds it was being suspected to be a shell company and only if response was found to be not satisfactory, such a finding could have been recorded.

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