Holding

The Supreme Court dismissed the appeal, holding that Section 15Z allows review only of questions of law and the Tribunal's findings were factual; consequently, the Tribunal’s finding that a right to cross‑examination exists was set aside, while its other findings were affirmed.

Summary

The Securities and Exchange Board of India (SEBI) restrained Mega Corporation Ltd, a listed radio‑taxi company, from accessing the capital market after observing an unusual surge in its share price and alleged profit manipulation. SEBI issued a show‑cause notice alleging violations of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, and imposed a one‑year ban on the company and its directors. The Securities Appellate Tribunal (SAT) set aside SEBI's order, holding that the profit surge alone did not prove manipulation, that the advertisements were made in the ordinary course of business, and that the company was denied a right to cross‑examine a document, violating natural justice. The company appealed to the Supreme Court under Section 15Z of the SEBI Act, contending that the Tribunal erred on questions of law, especially the right to cross‑examination. The Supreme Court held that Section 15Z permits review only of questions of law, and the Tribunal's findings were factual, not legal, thus the appeal was dismissed and the Tribunal’s finding on cross‑examination was set aside while other findings were upheld.

Issues considered

What is the scope and ambit of a statutory appeal to the Supreme Court under Section 15Z of the SEBI Act against an order of the Securities Appellate Tribunal?
Do the advertisements dated 07.04.2005 and 20.04.2005 violate Regulations 3(a)-(d) and 4(1), 4(2)(k), 4(2)(r) of the PFUTP Regulations, amounting to misleading investors?
Has the company violated Regulations 3(a)-(d) and 4(1), 4(2)(k), 4(2)(r) by manipulating share prices and accounts?
Is there a right to cross‑examine the author of a document that SEBI relies upon, when such a document is adverse to the company?

Legislation cited

SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003s. Regulation 10, s. Regulation 11, s. Regulation 12, s. Regulation 3(a), s. Regulation 3(b), s. Regulation 3(c), s. Regulation 3(d), s. Regulation 4(1), s. Regulation 4(2)(k), s. Regulation 4(2)(r), s. Regulation 9
Securities and Exchange Board of India Act, 1992s. 11, s. 11B, s. 15K, s. 15L, s. 15M, s. 15T, s. 15U, s. 15Y, s. 15Z, s. 19, s. 30

Subjects

Securities and Exchange Board of India ActSection 15ZStatutory appealQuestion of lawNatural justiceCross‑examinationPFUTP RegulationsShare price manipulationListed companyTribunal jurisdictionRegulatory authority

Judgment

546 SUPREME COURT
[2022]REPORTS
2 S.C.R. 546 [2022] 2 S.C.R.

A SECURITIES AND EXCHANGE BOARD OF INDIA
v.
MEGA CORPORATION LIMITED
(Civil Appeal No. 2104 of 2009)
B MARCH 25, 2022
[L. NAGESWARA RAO AND
PAMIDIGHANTAM SRI NARASIMHA, JJ.]
Securities and Exchange Board of India Act, 1992 – ss 11,
11B, 19, 15T – SEBI (Prohibition of Fraudulent and Unfair Trade
C
Practices Relating to Securities Market) Regulations, 2003 –
Regulations 3(a), (b), (c) &(d) and 4(1), 4(2)k, 4(2)(r) – Listed
Company – Unusual Surge in Profits – In the instant case the listed
respondent-company was engaged in the business of radio taxi
service coupled with trading of shares in a small measure – The
D company’s share went unusually high from Rs 4.25 to Rs 43.85 and
resultantly there was increase in the average monthly volume of
shares to 1,56,22,583 shares – Looking at the sudden upward spurt,
SEBI carried out the investigation and after hearing the Company
and other noticees, it held that the Company has violated the
provisions of the Act and the PFUTP Regulations and hence
E
restrained the Company from accessing the capital market in any
manner and its directors from dealing in securities for one year –
The Company filed an appeal u/s 15T of the Act before the Securities
Appellate Tribunal, which set aside the SEBI’s order holding that
the extraordinary profits in itself cannot be the basis for concluding
F that the Company’s accounts are manipulated with a specific
objective to mislead the investors and the advertisement issued by
the company for inviting public in investing in the company was
done in ordinary course of the business and that there was no
foulplay and also that SEBI has misconstrued the alleged links with
the entities since SEBI did not give opportunity of cross-examination
G
to the Company to explain the matter thus violating principles of
natural justice – Aggrieved by the decision of the Tribunal, the
appellant filed instant appeal – Held: The issue in the instant appeal
as also the conclusions drawn by the Tribunal were factual in nature
and hence did not give rise to any question of law warranting
H interference of this court u/s.15Z of the Act – So far the observation
546
SECURITIES AND EXCHANGE BOARD OF INDIA v. MEGA 547
CORPORATION LIMITED

of the Tribunal with respect to the cross-examination was concerned, A
there was no necessity for the Tribunal to lay down as an inviolable
principle that there is a right of cross-examination in all cases and
the conclusion of the Tribunal based on evidence on record did not
require such a finding – The findings of the Tribunal to that extent
is set aside while decision on all other grounds is upheld.
B
Securities and Exchange Board of India Act, 1992 – s 15Z –
Jurisdiction of the Supreme Court – Scope of – The Court will
exercise jurisdiction only when there is a question of law arising
for consideration from the decision of the Tribunal which may arise
when there is erroneous construction of the legal provisions of the
statute or the general principles of law – Not every interpretation C
of the law would amount to a question of law warranting exercise
of jurisdiction u/s 15Z – The Tribunal while exercising jurisdiction
u/s 15T, also interprets the Act, Rules and Regulations made
thereunder and systematically evolves a legal regime – These very
principles are applied consistently for structural evolution of the D
sectorial laws – This freedom to evolve and interpret laws must belong
to the Tribunal to subserve the Regulatory regime for clarity and
consistency – These are policy and functional considerations which
the Supreme Court will keep in mind while exercising its jurisdiction
under Section 15Z.
E
Words and Phrases – Phrases such as, ‘question of law’, are
open textual expressions, used in statutes to convey a certain
meaning which the legislature would not have intended to be read
in a pedantic manner – When words of the Sections allow narrow
as well as wide interpretations, courts of law have developed the
art and technique of finding the correct meaning by looking at the F
words in their context – Interpretation of statutes.
Dismissing the appeal, the Court
HELD: 1. Phrases such as, ‘question of law’, are open
textual expressions, used in statutes to convey a certain meaning G
which the legislature would not have intended to be read in a
pedantic manner. When words of the Sections allow narrow as
well as wide interpretations, courts of law have developed the
art and technique of finding the correct meaning by looking at

H
548 SUPREME COURT REPORTS [2022] 2 S.C.R.

A the words in their context. The jurisdiction of the Supreme Court
under Section 15Z to consider any question of law arising from
the orders of the Tribunal should therefore be seen in the ‘context’
of the powers and jurisdiction of the Tribunal under Sections 15K,
15L, 15M, 15T, 15U and 15Y of the Act. It is in the functioning of
the Tribunal to re-examine all questions of fact at the appellate
B
stage while exercising jurisdiction under Section 15T of the Act.
The Supreme Court while exercising appellate jurisdiction under
Section 15Z of the Act would be measured in its approach while
entertaining any appeal from the decision of the Tribunal. This
freedom to evolve and interpret laws must belong to the Tribunals
C to subserve the regulatory regime for clarity and consistency and
it is with this perspective that the Supreme Court will consider
appeals against judgment of the Tribunals on questions of law
arising from its orders. [Paras 16, 17,18][558-D-E; 559-C-D,
F-G]
D Reserve Bank of India vs. Peerless General Finance
Investment Company Ltd. & Ors. (1987) 1 SCC 424 :
[1987] 2 SCR 1 – relied on.
2. The Supreme Court will exercise jurisdiction only when
there is a question of law arising for consideration from the
E decision of the Tribunal. A question of law may arise when there
is an erroneous construction of the legal provisions of the statute
or the general principles of law. In such cases, the Supreme Court
in exercise of its jurisdiction of Section 15Z may substitute its
decision on any question of law that it considers appropriate.
However, not every interpretation of the law would amount to a
F question of law warranting exercise of jurisdiction under Section
15Z. The Tribunal while exercising jurisdiction under Section 15T,
apart from acting as an appellate authority on fact, also interprets
the Act, Rules and Regulations made thereunder and
systematically evolves a legal regime. These very principles are
G applied consistently for structural evolution of the sectorial laws.
This freedom to evolve and interpret laws must belong to the
Tribunal to subserve the Regulatory regime for clarity and
consistency. These are policy and functional considerations which
the Supreme Court will keep in mind while exercising its
jurisdiction under Section 15Z. [Paras 20.1, 20.2][560-D-G]
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. MEGA 549
CORPORATION LIMITED

3. The submission relating to the allegation that the accounts A
are manipulated for the year 2004-05 to show inflated profits to
lure investors into buying shares of the company. SEBI has referred
to the efforts made by it to trace the devise by which the shares of
the Company were bought and sold in the market. It was alleged
that more than 2 crores shares were purchased by certain entities
B
in the physical form in ‘off-market’ deals and then transferred those
shares in subsequent ‘off-market’ deals to certain other outside
entities connected to the company. These allegations necessitated
proof of such ‘off- market’ transactions and the connectivity of the
‘outside entitles’ with the Company. The Tribunal in its appellate
jurisdiction came to the conclusion that the connectivity could not C
be established and that the conclusions drawn by the Board were
insufficient. It is evident from the above that the findings are based
on the Tribunal’s inferences drawn from the material available on
record. The conclusions drawn by the Tribunal do not give rise to
any question of law warranting interference of the court under
D
Section 15Z of the Act. [Paras 27, 28, 29][562-F-H; 563-D-E]
K.L. Tripathi v. State Bank of India and Ors. (1984) 1
SCC 43 : [1984] 1 SCR 184; Tara Chand Vyas v.
Chairman & Disciplinary Authority and Ors. (1997) 4
SCC 565 : [1997] 2 SCR 472; State Bank of India v.
Jah Developers Private Limited and Ors. (2019) 6 SCC E
787 : [2019] 7 SCR 701; M/s Vijay Textile v. Securities
and Exchange Board of India (2011) SCC Online SAT
50; Securities and Exchange Board of India v. Rakhi
Trading Private Limited (2018) 13 SCC 753 : [2018] 1
SCR 937; Securities and Exchange Board of India v. F
Kishore R. Ajmera (2016) 6 SCC 368 : [2016] 1 SCR
1118; Meenglas Tea Estate v. Workmen [1964] 2 SCR
165; Bareilly Electricity Supply Co. Ltd v. Workmen and
Ors. (1971) 2 SCC 617 : [1972] 1 SCR 241; Swadeshi
Cotton Mills v. Union of India (1981) 1 SCC 664 :
[1981] 2 SCR 533; Videocon International Ltd. v. G
Securities Exchange Board of India (2015) 4 SCC 33 :
[2015] 3 SCR 1; Clariant International Ltd. and Anr. v.
Securities and Exchange Board of India (2004) 8 SCC
524 : [2004] 3 Suppl. SCR 843; National Securities
H
550 SUPREME COURT REPORTS [2022] 2 S.C.R.

A Depository Ltd. v. Securities Exchange Board of India
(2017) 5 SCC 517 : [2017] 4 SCR 901; Aligarh Muslim
University v. Mansoon Ali Khan (2000) 7 SCC 529 :
[2000] 2 Suppl. SCR 684; A.S Motors Private Limited
v. Union of India (2013) 10 SCC 114 : [2013] 4 SCR
409; T. Takano v. Securities and Exchange Board of
B
India (2022) SCC OnLine SC 210 – referred to.
Case Law Reference
[1984] 1 SCR 184 referred to Para 7.2
[1997] 2 SCR 472 referred to Para 7.2
C
[2019] 7 SCR 701 referred to Para 7.2
[2018] 1 SCR 937 referred to Para 8.4
[2016] 1 SCR 1118 referred to Para 8.4
[1964] 2 SCR 165 referred to Para 8.5
D
[1972] 1 SCR 241 referred to Para 8.5
[1981] 2 SCR 533 referred to Para 8.5
[2015] 3 SCR 1 referred to Para 12
[1987] 2 SCR 1 relied on Para 16
E
[2004] 3 Suppl. SCR 843 referred to Para 17
[2017] 4 SCR 901 referred to Para 18
[2000] 2 Suppl. SCR 684 referred to Para 32
[2013] 4 SCR 409 referred to Para 34
F
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2104
of 2009.
From the Judgment and Order dated 15.10.2008 of the Securities
Appellate Tribunal, Mumbai in Appeal No.60 of 2008.
G Chander Uday Singh, Sr. Adv., Pratap Venugopal, Ms. Surekha
Raman, Akhil Abraham Roy, Vijay Valsal, Amjid Maqbool, M/s K. J.
John and Co., Advs. for the Appellant.
Vaibhav Gaggar, A. V. Rangam, Buddy A. Ranganadhan, Prerak
Khurana, Ketan Sarraf, Utkarsh Tiwari, Ms. Sumedha Dang, Advs. for
H the Respondent.
SECURITIES AND EXCHANGE BOARD OF INDIA v. MEGA 551
CORPORATION LIMITED

The Judgment of the Court was delivered by A
PAMIDIGHANTAM SRI NARASIMHA, J.
1. This is a statutory appeal under Section 15Z of the Securities
and Exchange Board of India Act, 19921 against the final order of the
Securities Appellate Tribunal2, by which the Tribunal has set aside the
order passed by the Securities and Exchange Board of India3 restricting B
the respondent-company from accessing the capital market for one year
and further restraining the promoter directors from buying, selling or
otherwise dealing with securities for India. While dismissing the appeal,
we have explained that the jurisdiction of the Supreme Court under
Section 15Z is confined to question of law. C
2. M/s Mega Corporation Limited, listed in the Bombay Stock
Exchange in 1996, is engaged in the business of radio taxi service, coupled
with trading of shares in a small measure till 2004. The attention of the
share market regulator, SEBI, was drawn to the unusual price movement
of the scrip of the Company between January 2005 to September 2005. D
The Company’s shares traded between Rs. 4.25/- to Rs. 43.85/-. This
upward spurt resulted in an increase in the average monthly volume of
shares to 1,56,22,583 shares. Having observed this activity, the SEBI
directed investigation while passing an ex partead interim order under
Section 11B, 11(4) (b) and 11(D) of the Act against 56 entities, being the
Company, its promoter-directors, some of its clients, stockbrokers and E
depositors. After hearing the objections, the interim orders were
confirmed, and a show-cause notice for violation of Regulations 3(a),
(b), (c)&(d) and 4(1), 4(2)(k) & 4(2)(r) of the SEBI (Prohibition of
Fraudulent and Unfair Trade Practices Relating to Securities Market)
Regulations, 20034 was issued on 10.10.2007. F
3. The show cause notice was premised on the information
obtained after investigation on the following:
3.1 The Company made huge profits from undeclared business
and sale of scrips and there is uncertainty about the source
of income. It is not known whether the Company had G
amended its Memorandum and Articles for undertaking the

1
hereinafter referred to as the ‘Act’.
2
hereinafter referred to as the ‘Tribunal’.
3
hereinafter referred to as ‘SEBI’ or ‘the Board’.
4
hereinafter referred to as ‘PFUTP Regulations’. H
552 SUPREME COURT REPORTS [2022] 2 S.C.R.

A activity of trading. The surge in the profits is unusual, and
there is no reasonable explanation for the same. This is
violative of Regulation 3 of the PFUTP Regulations.
3.2 Between April 2005 to September 2005, the Company and
other noticees issued public statements in the form of
B advertisements and other notifications to lure the public in
investing in the Company. This activity was undertaken to
create an artificial demand knowing fully well that this is
not the truth of the matter. This is in violation of Regulation
4(2)(k) and 4(2)(r) of the PFUTP Regulations.
C 3.3 The Company manipulated its profits by selling shares
through orchestrated deals which were detected in the
investigation. The manipulations led to an artificial increase
of the scrip to a phenomenal extent sub-serving the
fraudulent intention of the Company, and this is again
violative of Regulation 3 of the PFUTP Regulations.
D
4. The Company and other noticees filed their responses. After
hearing all parties, the SEBI passed the final order dated 28.02.2008
holding that the Company has violated the provisions of the Act and the
PFUTP Regulations. In the exercise of its powers under Sections 11
and 11B read with Section 19 of the Act and the PFUTP Regulations,
E SEBI restrained the Company from accessing the capital market in any
manner and its directors from dealing in securities for one year. The
operative portion of the order is as follows:
“4.1 Now, therefore, I in exercise of powers conferred upon
me under Section 11 and 11B read with Section 19 of the
F SEBI Act, 1992 further read with PFUTP Regulations 2003,
hereby restrain Mega Corporation Limited (PAN-AAC-CM-
9506-E) from accessing the capital market in any manner
whatsoever for a of period of one year (1 year) and Shri
Kunal Lalani (PAN-AAG-OPL-0992-C), Shri Himanshu Mehta
G (PAN-AAL-PM-5750-F) and Shri Surendra Chhalani (PAN-
ACI-PC2863-K) Directors of the company are hereby
restrained from buying, selling or otherwise dealing in
securities, in any manner, for a period of one year (1 year).”
5. The Company filed an appeal under Section 15T of the Act
being Appeal No. 60 of 2008 before the Tribunal. The Tribunal re-
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. MEGA 553
CORPORATION LIMITED [PAMIDIGHANTAM SRI NARASIMHA, J.]

examined the three circumstances which became the basis of SEBI A
decision and finally allowed the appeal, by its judgment dated 15.10.2008.
The Tribunal held:
5.1 The unusual profits, if any, made during the year 2004-05
by itself cannot constitute any transgression of law. The
powers vested in the Board are only to ensure that investors B
are not misled in making investments based on fraud and
allurement and that there is nothing unusual about investors
being attracted when the Company comes with positive
annual reports. The Tribunal held that extraordinary profits
in itself cannot be the basis for concluding that the
Company’s accounts are manipulated with a specific C
objective to mislead the investors.
5.2 On the issue of public statements in the form of
advertisements and notifications dated 07.04.2005 and
20.04.2005, the Tribunal concluded that there is nothing
wrong in the advertisements issued for entering into the D
business of foreign exchange with the launch of ‘Mega Forex
Brand’ and also the announcement relating to tour services
based on the agreement with Gems Tours and Travels
Private Limited. The Tribunal found that these
announcements were in the ordinary course of business,
and there was sufficient evidence to that effect. Having E
considered facts in detail, the Tribunal reversed the findings
of the SEBI.
5.3 Finally, the Tribunal also examined the allegation relating to
manipulation. It considered the findings of the SEBI that
the transactions were orchestrated through entities that had F
links with the Company. On reappreciation the Tribunal found
that the alleged links were not established and that the Board
had unnecessarily read into certain activities, a meaning which
could not be inferred in the ordinary course of events.
It is in this context that the Tribunal proceeded to accept
G
the submission made on behalf of the Company that the
Board could not have relied on the letter of the stockbroker
contradicting the stand taken by it without giving an
opportunity of cross-examination. Because such an
opportunity was not granted, the Tribunal held that the
principles of natural justice stood violated. H
554 SUPREME COURT REPORTS [2022] 2 S.C.R.

A 6. The present appeal under Section 15Z of the Act is against this
judgment of the Tribunal. We heard Shri C.U. Singh, Senior Advocate,
assisted by Shri Pratap Venugopal for SEBI and Shri Vaibhav Gaggar,
appearing on behalf of the Company.
7. On behalf of the Board, Shri C.U. Singh, Senior Advocate,
B submitted that:
7.1 The Tribunal examined the order passed by SEBI in a
disjointed manner by taking each incident as a standalone
event and gave its finding as if they were separate events.
In its approach to examine the events as independent
C episodes, the Tribunal misled itself in coming to the wrong
conclusions. Shri Singh took us through the orders passed
by SEBI and the final judgment of the Tribunal and submitted
that the findings of SEBI are correct and that the Tribunal
is wrong in each of its conclusions. He also submitted that
the events depicting manipulation are correctly identified,
D and they are based on the evidence available on record
and, therefore, the Tribunal was not justified in interfering
with findings of manipulation.
7.2 Disapproving the principle adopted by the Tribunal about
the right of cross-examination, he submitted that such an
E approach would virtually disable SEBI from performing its
functions. Reliance was placed on the judgments of this
Court in K.L Tripathi 5, Tara Chand Vyas 6 and Jah
Developers 7.
8. Shri Vaibhav Gaggar, in his reply, submitted that:
F
8.1 The appeal has to be dismissed as there is no question of
law involved in the case.
8.2 The approach adopted by SEBI in focusing on the sudden
spurt in profit of the Company, is itself, is wrong approach.
He sought to demonstrate that there is no unusual income
G
in the profit of the Company.

5
K.L. Tripathi v. State Bank of India and Ors. (1984) 1 SCC 43.
6
Tara Chand Vyas v. Chairman & Disciplinary Authority and Ors. (1997) 4 SCC 565.
7
H State Bank of India v. Jah Developers Private Limited and Ors. (2019) 6 SCC 787.
SECURITIES AND EXCHANGE BOARD OF INDIA v. MEGA 555
CORPORATION LIMITED [PAMIDIGHANTAM SRI NARASIMHA, J.]

8.3 On the issuance of advertisements, Shri Gaggar showed us A
the factual background leading to the advertisements and
stated that there is no indication of any intention to mislead
the public or lure the investors on the statements made
therein. He submitted that the findings of the Tribunal that
the advertisements were not in violation of the Regulations
B
are based on the correct facts as evidenced by the material
placed before the Board. Reliance was placed on the
judgment of the Tribunal in M/s Vijay Textile.8
8.4 Shri Gaggar submitted that the conclusions drawn by the
Board on the assumption that the sales were orchestrated
C
through artificial purchase and sale are incorrect. He
endeavoured to establish that the assumed link between
the parties is non-existent and only imaginary. Reliance was
placed on the decision of this Court in Rakhi Trading9 and
Kishore Ajmera 10.
D
8.5 A final submission was made on the ground that principles
of natural justice would be violated if an opportunity to cross-
examine is not granted in a case where a material adverse
to the party is taken cognisance by SEBI. In support of
this, decisions of this Court in the judgments in Meenglas11,
Bareilly Electricity12 and Swadeshi Cotton Mills13 were E
relied on.
9. In his rejoinder, Shri Singh has distinguished the cases cited by
Shri Gaggar and referred to precedents to establish that there is
no right to cross-examination of a witness and the principles of natural
F
justice would not require granting a right of cross-examination. He
reiterated that the functioning of the SEBI will be hampered if this formality
is to be followed in every case.

8
M/s Vijay Textile v. Securities and Exchange Board of India (2011) SCC Online SAT
50. G
9
Securities and Exchange Board of India v. Rakhi Trading Private Limited (2018) 13
SCC 753.
10
Securities and Exchange Board of India v. Kishore R. Ajmera (2016) 6 SCC 368.
11
Meenglas Tea Estate v. Workmen (1964) 2 SCR 165.
12
Bareilly Electricity Supply Co. Ltd v. Workmen and Ors. (1971) 2 SCC 617.
13
Swadeshi Cotton Mills v. Union of India (1981) 1 SCC 664.
H
556 SUPREME COURT REPORTS [2022] 2 S.C.R.

A 10. The following issues arise for consideration:
10.1 What is the scope and ambit of statutory appeal to the
Supreme Court under Section 15Z of the Act against an
order passed by the Securities Appellate Tribunal?
10.2 Whether the advertisements dated 07.04.2005 and
B 20.04.2005, are in violation of Regulations 3 (a), (b), (c),
(d) read with Regulation 4 (1), (2) (k) and (r) as amounting
to misleading and defrauding the investors?
10.3 Whether the Company has violated Regulations 3(a), (b),
(c) and (d) and Regulation 4(1), 4(2)(k) and 4(2) (r) of the
C SEBI (PFUTP) Regulations, 2003 by manipulating the share
prices and accounts?
10.4 Whether there is a right to cross-examine the author of a
document if SEBI seeks to rely on that document which is
against the interest of the company?
D
11. Before we consider the rival contentions based on the issues,
as formulated above, it is necessary to take note of certain statutory
provisions. Section 11 of the Act enumerates the functions of the SEBI
and empowers it to take measures for protecting the interests of investors
in securities. Section 11B empowers SEBI to issue necessary directions.
E In exercise of its powers under Section 30 the SEBI made the PFUTP
Regulations, of which, we are concerned with Regulations 3(a), (b), (c),
(d) and Regulations 4(1), 4(2)(k) and 4(2)(r).
ISSUE 1: What is the scope and ambit of statutory appeal to the
Supreme Court under Section 15Z of the Act against an order passed by
F the Securities Appellate Tribunal?
12. The power and jurisdiction of the Supreme Court to consider
the decisions of the Tribunal is provided in Section 15Z of the Act. The
said provision is as under:
15Z.Appeal to Supreme Court. Any person aggrieved by any
G decision or order of the Securities Appellate Tribunal may
file an appeal to the Supreme Court within sixty days from the
date of communication of the decision or order of the
Securities Appellate Tribunal to him on any question of law
arising out of such order;
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. MEGA 557
CORPORATION LIMITED [PAMIDIGHANTAM SRI NARASIMHA, J.]

Provided that the Supreme Court may, if it is satisfied that the A
applicant was prevented by sufficient cause from filing the
appeal within the said period, allow it to be filed within a
further period not exceeding sixty days.
In Videocon International14 this Court had an occasion to deal
with Section 15Z. Having considered the amendment to the Section, the B
Court observed as under:
“38. …..A right of appeal may be absolute, i.e., without any
limitations. Or, it may be a limited right. The above position is
understandable, from a perusal of the unamended and
amended Section 15-Z of the SEBI Act. Under the unamended C
Section 15-Z, the appellate remedy to the High Court, against
an order passed by the Securities Appellate Tribunal, was
circumscribed by the words “...on any question of fact or law
arising out of such order”. The amended Section 15-Z, while
altering the appellate forum from the High Court to the
D
Supreme Court, curtailed and restricted the scope of the
appeal, against an order passed by the Securities Appellate
Tribunal, by expressing that the remedy could be availed of
“...on any question of law arising out of such order.”. It is,
therefore apparent, that the right to appeal, is available in
different packages, and that, the amendment to Section 15-Z, E
varied the scope of the second appeal provided under the
SEBI Act.”
13. Though the Court observed that the appellate jurisdiction is
curtailed to determining only a question of law, the question still remains
as to which issues qualify as questions of law and which issue do not. F
We will examine this.
14. On a ‘textual’ interpretation, the expression ‘question of law’
is defined in the Black’s Law Dictionary as follows:
“1. An issue to be decided by the judge, concerning the G
application or interpretation of the law;
2. A question that the law itself has authoritatively answered,
so that the Court may not answer it as a matter of discretion;

14
Videocon International Ltd. v. Securities Exchange Board of India (2015) 4 SCC 33. H
558 SUPREME COURT REPORTS [2022] 2 S.C.R.

A 3. An issue about what the law is on a particular point; an
issue in which parties argue about, and the court must decide
what the true rule of law is;
4. An issue that, although it may turn on a factual point, is
reserved for the court and excluded from the jury; an issue
B that is exclusively within the province of the judge and not
the jury”15
15. Reference to Law Dictionary for the meaning of the expression
‘question of law’ is not to overlook the difficulty in drawing boundaries
between questions of law and fact. Under the subject, the malleable
C boundaries between law and fact, H.W.R Wade has commented:
“Much of the discussions of this chapter proceeds on the basis
that the distinction between a question of law and a question
of fact is self-evident. But this is not so; the boundary is often
elusive.” 16
D
16. Phrases such as, ‘question of law’, are open textual expressions,
used in statutes to convey a certain meaning which the legislature would
not have intended to be read in a pedantic manner. When words of the
Sections allow narrow as well as wide interpretations, courts of law
have developed the art and technique of finding the correct meaning by
E looking at the words in their context. In Reserve Bank of India v.
Peerless General Finance Investment Company Ltd. & Ors.17, Justice
O. Chinnappa Reddy, observed:
“33. Interpretation must depend on the text and the context.
They are the bases of interpretation. One may well say if the
F text is the texture, context is what gives the colour. Neither
can be ignored. Both are important. That interpretation is best
which makes the textual interpretation match the contextual.
A statute is best interpreted when we know why it was enacted.
With this knowledge, the statute must be read, first as a whole
G and then section by section, clause by clause, phrase by phrase

15
Black’s Law Dictionary, 10 th Edition p. 1442.
16
H.R.W. Wade & C.F Forsyth, Administrative Law, Chapter 8 (Oxford University
Publication, United Kingdom, 11th Edn, 2014).
17
Reserve Bank of India vs. Peerless General Finance Investment Company Ltd. &
H Ors. (1987) 1 SCC 424
SECURITIES AND EXCHANGE BOARD OF INDIA v. MEGA 559
CORPORATION LIMITED [PAMIDIGHANTAM SRI NARASIMHA, J.]

and word by word. If a statute is looked at, in the context of A
its enactment, with the glasses of the statute-maker, provided
by such context, its scheme, the sections, clauses, phrases
and words may take colour and appear different than when
the stature is looked at without the glasses provided by the
context. With these glasses we must look at the Act as a whole
B
and discover what each section, each clause, each phrase
and each word is meant and designed to say as to fit into the
scheme of the entire Act. No part of a statute and no word of
a statute can be construed in isolation. Statutes have to be
construed so that every word has a place and everything is in
its place……” C
17. The jurisdiction of the Supreme Court under Section 15Z to
consider any question of law arising from the orders of the Tribunal
should therefore be seen in the ‘context’ of the powers and jurisdiction
of the Tribunal under Sections 15K, 15L, 15M, 15T, 15U and 15Y of the
Act. It is in the functioning of the Tribunal to re-examine all questions of D
fact at the appellate stage while exercising jurisdiction under Section
15T of the Act. In Clariant18 and National Securities Depository19,
this Court had an occasion to examine the jurisdiction of the Tribunal
and explain that the Tribunal has wide powers. Being a permanent body,
apart from acting as an appellate Tribunal on fact, the Tribunal routinely
interprets the Act, Rules and Regulations made thereunder and evolves E
a legal regime, systematically developed over a period of time. The
advantage and benefit of this process is consistency and structural
evolution of the sectorial laws.
18. It is in the above-referred context that the Supreme Court
while exercising appellate jurisdiction under Section 15Z of the Act would F
be measured in its approach while entertaining any appeal from the
decision of the Tribunal. This freedom to evolve and interpret laws must
belong to the Tribunals to subserve the regulatory regime for clarity and
consistency and it is with this perspective that the Supreme Court will
consider appeals against judgment of the Tribunals on questions of law G
arising from its orders.

18
Clariant International Ltd. and Anr. v. Securities and Exchange Board of India (2004)
8 SCC 524, para 73, 74
19
National Securities Depository Ltd. v. Securities Exchange Board of India (2017) 5
SCC 517, para 9. H
560 SUPREME COURT REPORTS [2022] 2 S.C.R.

A 19. It is in this very context that the UK Supreme Court in the
case of Jones v. First Tier Tribunal,20 formulated certain principles for
appellate courts to interfere against the orders of Tribunals on the ground
of existence of questions of law. The Court held as under:
“16 … It is primarily for the tribunals, not the appellate courts,
B to develop a consistent approach to these issues [of law and
fact], bearing in mind that they are peculiarly well fitted to
determine them. A pragmatic approach should be taken to
the dividing line between law and fact, so that the expertise
of tribunals at the first tier and that of the Upper Tribunal
can be used to best effect. An appeal court should not venture
C too readily into this area by classifying issues as issues of
law which are really best left for determination by the specialist
appellate tribunals.”
20. The scope of appeal under Section 15Z may be formulated as
under:
D
20.1 The Supreme Court will exercise jurisdiction only when
there is a question of law arising for consideration from the
decision of the Tribunal. A question of law may arise when
there is an erroneous construction of the legal provisions of
the statute or the general principles of law. In such cases,
E the Supreme Court in exercise of its jurisdiction of Section
15Z may substitute its decision on any question of law that
it considers appropriate.
20.2 However, not every interpretation of the law would amount
to a question of law warranting exercise of jurisdiction under
F Section 15Z. The Tribunal while exercising jurisdiction under
Section 15T, apart from acting as an appellate authority on
fact, also interprets the Act, Rules and Regulations made
thereunder and systematically evolves a legal regime. These
very principles are applied consistently for structural
G evolution of the sectorial laws. This freedom to evolve and

20
Jones v. First Tier Tribunal [2013] UKSC 19. Para 16; followed in Regina (Privacy
International) v. Investigatory Powers Tribunal [2019] UKSC 22, para 134; See also,
Administrative Law by Paul Craig (8 th Ed. 2016 at p.492 and H.R.W. Wade & C.F
Forsyth, Administrative Law, Chapter 8 (Oxford University Publication, United
H Kingdom, 11th Edn, 2014).
SECURITIES AND EXCHANGE BOARD OF INDIA v. MEGA 561
CORPORATION LIMITED [PAMIDIGHANTAM SRI NARASIMHA, J.]

interpret laws must belong to the Tribunal to subserve the A
Regulatory regime for clarity and consistency. These are
policy and functional considerations which the Supreme
Court will keep in mind while exercising its jurisdiction under
Section 15Z.
21. We will now examine the other issues in the context of the B
scope and ambit of the appellate jurisdiction of the Supreme Court under
Section 15Z as discussed herein above.
ISSUE 2: Whether the advertisements dated 07.04.2005,
20.04.2005, are in violation of Regulations 3 (a), (b), (c), (d) read with
Regulation 4 (1), (2) (k) and (r) as amounting to misleading and defrauding C
the investors?
22. This issue should not detain us for long, as the facts involved
in this issue are relating to the merits of the case and, as such, do not
qualify as a question of law. We will however refer to the two instances
as Shri C.U. Singh has made detailed submissions before us. D
23. As per the first advertisement dated 07.04.2005, it was alleged
by SEBI that in violation of Regulation 4 (2) (k) and 4 (r) of the PFUTP
Regulations, the Company proceeded to announce on 07.04.2005 the
launch of the worldwide outbound package tour services. These services
were intended to operate across 25 cities in India and were expected to E
achieve a revenue of Rs. 1000 million with a net profit of Rs.200 million
in its first year. SEBI alleges that this announcement was made for the
sole purpose of misleading the investors. This finding is reversed by the
Tribunal based on an agreement between the Company and M/s Gem
Tours and Travels Private Limited to establish a subsidiary company F
called ‘Mega Holidays Ltd.’ to handle the tour services. The Tribunal
also noted the bank statement supporting the Company’s transaction
with M/s Gem Tours and Travels Private Limited.
24. We are mentioning these facts only to indicate that the Tribunal
has reversed the findings of SEBI on the basis of its own inferences G
drawn from the documents on record. The decision of the Tribunal is
fact-based and does not give rise to any question of law for invoking the
jurisdiction of the Supreme Court under Section 15Z. For this reason,
we are not inclined to interfere with the finding of fact, which must rest
with the conclusions drawn by the Tribunal.
H
562 SUPREME COURT REPORTS [2022] 2 S.C.R.

A 25. So far as the second announcement dated 20.04.2005 is
concerned, it relates to the allegation of announcing the commencement
of business in foreign exchange with the launch of ‘Mega Forex Brand’.
It was alleged that the Company made false statements such as that it is
expected to grab 5-10% of the market share in the forex market, “which
is at 5-6 billion dollars” in a span of one or two years. Here again, the
B
Tribunal concluded that the application for a license to deal with foreign
exchange which is alleged to have been made in September 2005 was
only a revised application. The revised application is said to have been
made in as a reply to the queries of the Reserve Bank of India on their
original application, which was in fact made on 14.04.2005, that is even
C before the announcement. The Tribunal, therefore, was of the opinion
that the announcement is not imaginary but is based on specific steps
taken before the date of announcement, lending credence to the said
activity.
26. The conclusion is drawn by the Tribunal, being factual, not
D giving rise to any question of law, the jurisdiction of this Court under
Section 15Z cannot be invoked. For this reason, we affirm the finding of
the Tribunal and there is no occasion for this court to interfere with the
decision of the Tribunal. The issue is answered against the appellant.
ISSUE 3:Whether the company has violated Regulations 3(a),
E (b), (c) and (d) and Regulation 4(1), 4(2)(k) and 4(2) (r) of the SEBI
(PFUTP) Regulations, 2003 by manipulating the share prices and
accounts?
27. The next submission relates to the allegation that the accounts
are manipulated for the year 2004-05 to show inflated profits to lure
F investors into buying shares of the company. SEBI has referred to the
efforts made by it to trace the devise by which the shares of the Company
were bought and sold in the market. It was alleged that more than 2
crores shares were purchased by certain entities in the physical form in
‘off-market’ deals and then transferred those shares in subsequent ‘off-
market’ deals to certain other outside entities connected to the company.
G These allegations necessitated proof of such ‘off-market’ transactions
and the connectivity of the ‘outside entitles’ with the Company.
28. The Tribunal in its appellate jurisdiction came to the conclusion
that the connectivity could not be established and that the conclusions
drawn by the Board were insufficient. On the basis of the inferences
H drawn from the facts, the Tribunal rendered the following findings:
SECURITIES AND EXCHANGE BOARD OF INDIA v. MEGA 563
CORPORATION LIMITED [PAMIDIGHANTAM SRI NARASIMHA, J.]

“There is no evidence in support of any definite sustainable A
link between the appellant company and any of the traders
who allegedly traded in the appellant company’s scrip with
the purpose of generating volumes and thereby raising its
price. The charge of manipulative trading in its own shares
by the appellant company, therefore, fails.
B
….
But it is another matter to say that a company has manipulated
its accounts with that specific object in view because there
can be a multitude of reasons why an unscrupulous
management may want to show inflated financial results in its C
accounts. In the present case, no material has been produced
by the Respondent to establish that the manipulation is the
annual accounts of the appellant for the year 2004-05, if
any, had been resorted to with the objective of luring investors
to buy the scrip of the company. Given the lack of any definite
evidence, this charge against the appellant also fails.” D

29. It is evident from the above that the findings are based on the
Tribunal’s inferences drawn from the material available on record. The
conclusions drawn by the Tribunal do not give rise to any question of law
warranting interference of this court under Section 15Z of the Act. This
issue is answered against the appellant. E

ISSUE 4: Whether there is a right to cross-examine the author of
a letter if the SEBI seeks to rely on that letter, adverse to the company?
30. The Board has, in its investigation, secured a letter from one
of the directors of M/S DPS Shares and Stock Brokers Pvt. Ltd., the F
stockbrokers of the company. This letter contradicts the stand taken by
the company in its defence. This happened in the following factual
background. When asked to explain the transaction relating to purchase
and sale of scrip in somewhat suspicious circumstances, the Company
took refuge by stating that the transactions were in the exclusive
knowledge of the stockbroker company. The Board, in its investigation, G
secured a letter from a stockbroker stating that their two directors, one
Shri Pratik Shah and one Shri Sujal Shah, had handled the transactions in
the alleged scrip by opening a current account by using dummy resolutions
without the knowledge of Shri Dinesh Masalia, the third director of the
stockbroker company. On this basis, it was concluded that the transaction
H
564 SUPREME COURT REPORTS [2022] 2 S.C.R.

A was fictitious. In defence, the Company sought permission to cross-
examine the said Shri Dinesh Masalia, but no permission was granted.
SEBI proceeded and gave its final orders on 07.01.2008. It is in this
context that the Company made its submission before the Tribunal that
principles of natural justice were violated because an opportunity to cross-
examine is not presented.
B
31. There is no dispute that the Company and the directors were
informed about the letter elicited from Shri Dinesh Masalia. The show-
cause notice explicitly mentions it. The Company’s reply to the show-
cause notice evidences objections raised by the Company with respect
to the stand taken by Shri Dinesh Masalia. To this extent, opportunity
C was given to the Company, in the sense that SEBI was relying on a
document which was disclosed to the Company. The only question is
whether there is a right to cross-examine the author of a letter while
SEBI is performing its regulatory role and deciding upon the allegation
of manipulation under Regulations 3 and 4 of the PFUTP Regulations.
D 32. Shri C.U Singh arguing for the Board has denied any right to
cross-examine while SEBI exercises its jurisdiction. In support of his
submissions, he has referred to the cases as indicated earlier. He has
also argued that there is no prejudice caused to the Company as an
opportunity was given by handing over the material relied on by the
E Board against which the Company gave its reply. He also referred to
judgments of this Court in Aligarh Muslim University 21 and A.S
Motors22 to press the point that the Court will not insist on examination
of witnesses merely as an empty formality.
33. On the other hand, Shri Gaggar submitted that the ground that
F principles of natural justice would clearly be violated if opportunity to
cross-examine is not granted.
34. Immediately after the parties were heard, and the judgment
was reserved on 17.02.2022, on the very next day, another Bench of this
Court delivered its judgment in T. Takano 23. The case relates to
G proceedings that arose under this very same Act and in fact concerning
allegations of fraudulent and unfair trade practices adopted by the
appellants therein under the PFUTP regulations. This Court considered

21
Aligarh Muslim University v. Mansoon Ali Khan (2000) 7 SCC 529.
22
A.S Motors Private Limited v. Union of India (2013) 10 SCC 114.
23
H T. Takano v. Securities and Exchange Board of India (2022) SCC OnLine SC 210
SECURITIES AND EXCHANGE BOARD OF INDIA v. MEGA 565
CORPORATION LIMITED [PAMIDIGHANTAM SRI NARASIMHA, J.]

the issue as to the statutory obligation of SEBI to follow the principles of A
natural justice. Having reviewed the entire case law on the subject, this
Court formulated the following principles:
“62. The conclusions are summarised below:
(i) The appellant has a right to disclosure of the material
relevant to the proceedings initiated against him. A deviation B
from the general rule of disclosure of relevant information
was made in Natwar Singh (supra) based on the stage of the
proceedings. It is sufficient to disclose the materials relied on
if it is for the purpose of issuing a show cause notice for
deciding whether to initiate an inquiry. However, all C
information that is relevant to the proceedings must be
disclosed in adjudication proceedings;
(ii) The Board under Regulation 10 considers the investigation
report submitted by the Investigating Authority under
Regulation 9, and if it is satisfied with the allegations, it could D
issue punitive measures under Regulations 11 and 12.
Therefore, the investigation report is not merely an internal
document. In any event, the language of Regulation 10 makes
it clear that the Board forms an opinion regarding the violation
of Regulations after considering the investigation report
prepared under Regulation 9; E

(iii) The disclosure of material serves a three-fold purpose of
decreasing the error in the verdict, protecting the fairness of
the proceedings, and enhancing the transparency of the
investigatory bodies and judicial institutions;
F
(iv) A focus on the institutional impact of suppression of
material prioritises the process as opposed to the outcome.
The direction of the Constitution Bench of this Court in
Karunakar (supra) that the non-disclosure of relevant
information would render the order of punishment void only
if the aggrieved person is able to prove that prejudice has G
been caused to him due to non-disclosure is founded both on
the outcome and the process;
(v) The right to disclosure is not absolute. The disclosure of
information may affect other third-party interests and the
H
566 SUPREME COURT REPORTS [2022] 2 S.C.R.

A stability and orderly functioning of the securities market. The
respondent should prima facie establish that the disclosure
of the report would affect third-party rights and the stability
and orderly functioning of the securities market. The onus
then shifts to the appellant to prove that the information is
necessary to defend his case appropriately; and
B
(vi) Where some portions of the enquiry report involve
information on third-parties or confidential information on
the securities market, the respondent cannot for that reason
assert a privilege against disclosing any part of the report.
The respondents can withhold disclosure of those sections of
C
the report which deal with third-party personal information
and strategic information bearing upon the stable and orderly
functioning of the securities market.”
35. As per the principles laid down in the above referred case,
there is a right of disclosure of the relevant material. However, such a
D
right is not absolute and is subject to other considerations as indicated
under paragraph 62(v) of the judgment above referred. In this judgment,
there is no specific discussion on the issue of a right to cross-examination
but the broad principles laid down therein are sufficient guidance for the
Tribunal to follow. There is no need for us to elaborate on this point any
E further.
36. Coming back to the facts of the present case, we have noticed
that the Tribunal has arrived at its conclusions based on independent
facts concerning (a) the allegations under Regulation 4 relating to the
issuance of misleading advertisements dated 07.04.2005 and 20.04.2005
F as well as (b) allegations relating to manipulation of scrip prices and
profits to lure investors. As indicated earlier, the Tribunal concluded that
the allegations could be proved. As we are not interfering in the findings
of fact arrived at by the Tribunal the Company’s claim for cross-examining
would pale into insignificance. This question presents itself merely as an
academic issue.
G
37. We are also of the opinion that, there was no necessity for the
Tribunal to lay down as an inviolable principle that there is a right of
cross-examination in all cases. In fact, the conclusion of the Tribunal
based on evidence on record did not require such a finding. We, therefore,
set aside the findings of the Tribunal to this extent while upholding its
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. MEGA 567
CORPORATION LIMITED [PAMIDIGHANTAM SRI NARASIMHA, J.]

decision on all other grounds. We would also leave the question of law A
relating to the right of cross-examination open and to be decided in an
appropriate case by this Court.
38. For the reasons stated above, while we dismiss Civil Appeal
No. 2104 of 2009 against the judgment of the Securities Appellate Tribunal
in Appeal No. 60 of 2008 dated 15.10.2008, the general observations of B
the Tribunal that there is a right of cross-examination is hereby set aside.
39. Parties to bear their own costs.

Devika Gujral Appeal dismissed.
C

D

E

F

G

H