SECURITIES AND EXCHANGE BOARD OF INDIAversusRAM KISHORI GUPTA & ANR.

                 [2025] 4 S.C.R. 2789 : 2025 INSC 454

              Securities and Exchange Board of India
                                v.
                     Ram Kishori Gupta & Anr.
                       (Civil Appeal No. 7941 of 2019)
                                  07 April 2025
            [Sanjay Kumar* and K.V. Viswanathan, JJ.]


                            Issue for Consideration
       Whether SEBI can pass multiple final orders on the same cause
       of action; applicability of principles of res judicata/constructive res
       judicata; whether the Appellate Tribunal was justified in setting
       aside the 2018 disgorgement order passed by SEBI holding that
       it was barred by the principle of res judicata in view of its earlier
       2014 order.

                                   Headnotes†
       Securities and Exchange Board of India Act, 1992 – ss.11,
       11B – Code of Civil Procedure, 1908 – s.11 – Principles of res
       judicata/constructive res judicata – Applicability of – SEBI
       issued show cause notices in 2012 to VCL, a public limited
       company in relation to alleged misleading advertisements
       issued by it – Respondents had allegedly purchased shares
       of VCL on the basis of misleading advertisements and
       suffered heavy loss – Eventually, in 2014, SEBI passed order
       u/ss.11 and 11B and the Regulations, finding VCL guilty of
       spreading misleading information to the public and imposed
       penalties however, no penalty of disgorgement was imposed –
       Subsequently, in 2018, SEBI passed a disgorgement order
       whereby VCL was held liable to disgorge the unlawful gains
       along with interest – Appeals filed before the Tribunal – Tribunal
       inter alia set aside the disgorgement order holding that it was
       barred by the principle of res judicata – Justification:
       Held: Tribunal was fully justified in setting aside the disgorgement
       order – SEBI cannot pass multiple final orders on the same cause
       of action – Having undertaken the exercise pursuant to its show-
       cause notices issued in 2012, SEBI passed the 2014 order, in
       exercise of power u/s.11B, with certain directions which attained


* Author
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    finality and were given full effect to – Thus, SEBI could not have
    reopened the entire exercise without just cause so as to pass a
    fresh order u/s.11B, once again, 4 years later – Imposition of the
    penalty of disgorgement was very much within the ambit and scope
    of SEBI even at the time the initial 2014 order was passed but, it
    chose not to resort to it – Once the said order attained finality, as
    it was neither challenged nor set aside, and was fully given effect
    to, passing of a fresh order once again, on the very same cause
    of action, trampled upon and reversed the finality that had already
    attached to the said order – Principles of res judicata/constructive
    res judicata not only apply to the parties to a dispute but also bind
    the adjudicating authorities, judicial, quasi-judicial or administrative,
    seized of such dispute – The entire exercise undertaken by SEBI
    after the passing of the final 2014 order resulting in the 2018
    disgorgement order is unsustainable. [Paras 25, 28, 29, 31, 33]

    Securities and Exchange Board of India Act, 1992 – s.15U(1) –
    Code of Civil Procedure, 1908 – s.11 – Principles of res judicata/
    constructive res judicata – Applicability of – SEBI contended
    that the principle of res judicata in s.11CPC, cannot be imported
    into these proceedings, due to s.15U(1) of the 1992 Act:
    Held: Not agreed – s.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, but shall be guided by the principles of natural justice and
    shall have the power to regulate its own procedure – Thus, it
    does not cover proceedings before the SEBI and its Whole-Time
    Members (WTMs) under the Act of 1992 – Therefore, SEBI cannot
    claim exemption from the applicability of the principle of res judicata
    thereunder – When the earlier 2014 order, on the same cause of
    action and based on the very same show-cause notices, remained
    intact and attained finality, the later 2018 order could not have been
    passed, supplementing it with additional directions – By the time
    this order was passed, the penalties of restraint and prohibition
    visited upon the 24 entities, under the earlier 2014 order, had
    already been suffered by them – Therefore, the order had worked
    itself out – While so, 22 out of the 24 entities were again visited
    with fresh penalties in the form of disgorgement coupled with much
    longer restraints/prohibitions, in the event of default in payment –
    Though, the illegalities committed by VCL and the other entities
    had financial implications warranting a direction for disgorgement,
[2025] 4 S.C.R.                                                              2791

 Securities and Exchange Board of India v. Ram Kishori Gupta & Anr.


     but once the SEBI chose not to issue such a direction in the first
     instance and was satisfied with lesser penalties in its 2014 order,
     the question of permitting it, without just cause, to revisit the said
     final order and pass fresh directions does not arise – Doing so
     would be violative of public policy, which attaches great value and
     sanctity to the finality of judicial determinations and the principle
     of res judicata. [Paras 25-27]

     Statutory Bodies – Laidback and indolent approach,
     deprecated – Unconscionable delay on part of SEBI though,
     its Whole-Time Member (WTM) passed the order on 01.04.2016,
     requiring an examination afresh and initiation of disgorgement
     proceedings, SEBI issued a show-cause notice only on
     19.01.2018 proposing disgorgement and then passed an order
     seven months later:
     Held: This laidback and indolent approach on the part of SEBI in
     dealing with the matter does not augur well for a statutory body
     enjoined with the duty of protecting investors and regulating the
     securities market which, by its very nature, is volatile, to drag its
     feet and indulge in unwarranted and unjustified delays. [Para 30]
     Securities and Exchange Board of India Act, 1992 – ss.11,
     11B – Scheme of s.11B. [Paras 21, 22]

                              Case Law Cited
     Amalgamated Coalfields Ltd. and Another v. Janapada Sabha
     Chhindwara and Others [1963] Supp. 1 SCR 172 : AIR 1964 SC
     1013; Devilal Modi v. State Tax Officer, Ratlam, and Others [1965]
     1 SCR 686 : AIR 1965 SC 1150 – followed.
     Hope Plantations Ltd. v. Taluk Land Board, Peermade and Another
     [1998] Supp. 2 SCR 514 : (1999) 5 SCC 590 – relied on.

                                 List of Acts
     Securities and Exchange Board of India Act, 1992; Code of
     Civil Procedure, 1908; Securities and Exchange Board of India
     (Prohibition of Fraudulent and Unfair Trade Practices relating
     to Securities Markets) Regulations, 1995; Companies Act,
     1956; Securities and Exchange Board of India (Prohibition of
     Fraudulent and Unfair Trade Practices relating to Securities
     Market) Regulations, 2003; Securities and Exchange Board of India
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    (Substantial Acquisition of Shares and Takeovers) Regulations,
    1997; Securities Contracts (Regulation) Act, 1956; Consumer
    Protection Act, 1986.

                              List of Keywords
    SEBI cannot claim exemption from the applicability of the principle
    of res judicata; Principles of res judicata/constructive res judicata
    bind adjudicating authorities, judicial, quasi-judicial or administrative;
    SEBI cannot pass multiple final orders on same cause of action;
    Disgorgement order; Principles of res judicata; Constructive res
    judicata; Multiple final orders; Multiple orders; Same cause of
    action; Earlier order attained finality; Misleading advertisements;
    Misleading or fraudulent advertisements; Compensation; Fraud
    on the investors; Refund of invested amount; Restitution; Vital
    Communications Limited; VCL; Section 11, 11 B, Securities and
    Exchange Board of India Act, 1992; Section 11, Code of Civil
    Procedure, 1908.

                             Case Arising From
    CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7941 of 2019
    From the Judgment and Order dated 02.08.2019 of the Securities
    Appellate Tribunal, Mumbai in AN No. 44 of 2019
    With
    Civil Appeal No(s). 1649-1652 of 2022 and Civil Appeal No. 5051
    of 2025

                          Appearances for Parties
    Advs. for the Appellant:
    Chander Uday Singh, Sr. Adv., Amarjit Singh Bedi, Ms. Surekha
    Raman, Shreyash Kumar, Yashwant Sanjenbam, Harshit Singh,
    Sidharth Nair, M/s. K.J. John And Co., Mrs. K. Sarada Devi, Ms.
    Kaveri Kalyana Ram.
    Advs. for the Respondents:
    Purvish Malkan, Chander Uday Singh, Sr. Advs., Prakash Shah,
    Mrs. Rekha Pandey, Raghav Pandey, Mrs. Dr. Keyur Shah, Mrs.
    K. Sarada Devi, Ms. Kaveri Kalyana Ram, H.C. Gupta, Amarjit
    Singh Bedi, Ms. Surekha Raman, Shreyash Kumar, Harshit Singh,
    Yashwant Sanjenbam, Sidharth Nair, M/s. K.J. John And Co.
[2025] 4 S.C.R.                                                         2793

    Securities and Exchange Board of India v. Ram Kishori Gupta & Anr.


                     Judgment / Order of the Supreme Court

                                          Judgment

       Sanjay Kumar, J.

1.     Delay in the filing of Civil Appeal (Diary) No. 42829 of 2019 is
       condoned.
2.     Considering the twists and turns that this litigation has taken since
       its inception in 2005, these appeals put to test the saying that the
       scales of justice may be slow to tip but when they do, let them tip
       in favour of what is right1.
3.     M/s. Vital Communications Limited, New Delhi (hereinafter, ‘VCL’), is
       a public limited company whose shares were listed on the Bombay
       Stock Exchange, the Delhi Stock Exchange and the National Stock
       Exchange. While so, the Securities and Exchange Board of India
       (hereinafter, ‘SEBI’) issued show-cause notice dated 24.05.2005
       to VCL and its promoters and directors under Section 11(4) read
       with Sections 11 & 11B of the Securities and Exchange Board of
       India Act, 1992 (for brevity, ‘the Act of 1992’), in relation to alleged
       misleading advertisements issued by VCL with regard to buyback of its
       shares, issue of bonus shares and preferential issue of shares within
       30 days. Details of the advertisements published in the newspapers
       between 27th May, 2002 and 24th June, 2002 were furnished therein
       and these advertisements were stated to be a ploy to mislead
       investors by benchmarking the price of the scrip at ₹30/-, when
       the share was trading at around ₹3/- to ₹12/-. SEBI further stated
       that its investigation had revealed that VCL had allotted 72 lakh
       equity shares of ₹10/- each at a premium of ₹2.50/-, amounting to
       ₹9,00,00,000/- , on 14.12.1999 to 15 companies which had all given
       the same address at the time of opening their demat accounts. That
       apart, these 15 companies were shown as suppliers of VCL. VCL’s
       funds were indirectly used for purchase of its own shares, inasmuch
       as it gave advances to M/s. Anupama Communications Pvt. Ltd. and
       M/s. CBS Systems Pvt. Ltd. which, in turn, gave trade advances to the
       15 companies. Thereby, the same money came back to VCL as share



1    Nancy Taylor Rosenberg, American author.
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     application money. It was also alleged that, between 2nd May, 2002 and
     31st July, 2002, 71.14 lakh shares were sold by promoter-related
     entities in the market, taking advantage of the artificial interest
     created by the misleading advertisements. SEBI asserted that the
     chain of events in respect of the buyback of shares, bonus issue
     and preferential allotment by VCL, along with the unwarranted
     advertisements, etc., suggested an orchestrated ploy on the part of
     VCL and its promoters to create an artificial demand for the shares
     of VCL and induce innocent investors into purchasing shares so
     as to absorb sales by the promoter-related entities. VCL and its
     promoters and directors were alleged to have violated Regulations
     3, 4, 5(1) & 6(a) of the Securities and Exchange Board of India
     (Prohibition of Fraudulent and Unfair Trade Practices relating to
     Securities Markets) Regulations, 1995, along with Section 77 of the
     Companies Act, 1956. SEBI, therefore, called upon the addresses of
     the notice to show cause as to why suitable directions, including a
     direction to restrain all of them from accessing the securities market,
     and prohibiting them from buying, selling or dealing in securities for
     a suitable period, should not be passed under Section 11(4) read
     with Sections 11 and 11B of the Act of 1992.
4.   Thereafter, SEBI, speaking through a Whole-Time Member (WTM),
     passed order dated 20.02.2008 in exercise of power under Section
     11B of the Act of 1992 and Regulation 11 of the aforestated
     Regulations of 1995. SEBI dropped the charges against Vinay Talwar,
     former Chairman-cum-Managing Director of VCL, and imposed a
     lesser penalty on Shubha Jhindal, Director of VCL, whereby she was
     restrained from accessing the securities market and prohibited from
     buying, selling and dealing in securities in any manner for a period
     of six months. As regards the remaining noticees, i.e., VCL and its
     other directors and promoters, SEBI restrained them from accessing
     the securities market and prohibited them from buying, selling and
     dealing in securities in any manner for a period of two years.
5.   Aggrieved by this order, VCL and its promoters and directors filed
     Appeal Nos. 61, 65 and 81 of 2008 before the Securities Appellate
     Tribunal, Mumbai (for brevity, ‘the Tribunal’). By common order dated
     28.08.2008, the Tribunal allowed their appeals. The Tribunal held that
     the impugned order passed by SEBI failed to deal with the issues
     properly and set aside the order dated 20.02.2008. The matter was
     remanded to enable SEBI to issue fresh show-cause notices, afford
[2025] 4 S.C.R.                                                       2795

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     an opportunity of hearing to the noticees and to pass an order in
     accordance with law.
6.   Parallelly, one Ram Kishori Gupta and her husband, Harishchandra
     Gupta, who allegedly purchased shares of VCL on the basis of the
     misleading advertisements, separately filed Appeal No. 207 of 2012
     before the Tribunal. They had purchased 1,71,773 shares of VCL from
     the Bombay Stock Exchange between 23.05.2002 and 25.06.2002.
     They claimed to have suffered huge losses and approached the
     forum constituted under the Consumer Protection Act, 1986, for
     redressal of their grievance. However, by order dated 17.01.2010,
     the National Consumer Disputes Redressal Commission, New Delhi,
     held that their complaint would not fall within the purview of the
     Consumer Protection Act, 1986, and left it open to them to approach
     SEBI. They, thereupon, preferred a petition on 21.08.2010 to SEBI,
     which was forwarded to the Bombay Stock Exchange, under letter
     dated 13.09.2010. However, SEBI finally declined their request
     for grant of compensation. In the meanwhile, as the order dated
     20.02.2008 passed by SEBI had been set aside by the Tribunal on
     28.08.2008, SEBI was again seized of the matter upon remand. They,
     therefore, sought a direction to SEBI to pay them compensation of
     ₹51,53,190/ , at the rate of ₹30/- per share. Alternatively, they sought
     such compensation after deducting ₹4,41,767/-, being the proceeds
     of the shares sold by them in May/June, 2005, at the average price
     of ₹2.37 per share.
7.   This appeal was disposed of by the Tribunal, vide order dated
     30.04.2013. The Tribunal found that there was no directive or
     mandate in any of the measures under Section 11(2) of the Act of
     1992, empowering SEBI to undertake the task of considering and
     granting compensation to investors for the losses that they may
     have suffered due to misleading or fraudulent advertisements by a
     company. The Tribunal, therefore, concluded that the prayer of the
     appellants for a direction to SEBI to grant them compensation of
     ₹51,53,190/- was totally misconceived and rejected the same. The
     Tribunal further observed that this aspect needed to be looked into
     by a Civil Court of competent jurisdiction and not by SEBI under the
     Act of 1992. The Tribunal directed SEBI to look into the appellants’
     complaint as to the alleged misleading and fraudulent advertisements
     issued by VCL. The outcome of such investigation was directed to
     be conveyed to the appellants on completion thereof. The Tribunal
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     further directed that, in case SEBI found VCL guilty of playing fraud
     on investors, it could consider directing the concerned entity or VCL
     to refund the actual amount spent by the appellants on purchasing
     the shares in question with appropriate interest and as per law.
8.   Review Application No. 8 of 2013 was moved by SEBI in Appeal
     No. 207 of 2012 filed by the aforestated two investors. This review
     petition was disposed of by the Tribunal on 19.12.2013. Therein, the
     Tribunal clarified as follows:
          ‘Similarly, we also clarify that while observing that
          consideration and imposition of penalties or the direction
          to a company to refund an amount collected by that
          company against the law is different matter and falls within
          the domain of SEBI, we have directed only consideration
          of such an issue, if any, as per the provisions of law and
          only if the circumstances so require. To this extent, the
          abovesaid order of this Tribunal dated April 30, 2013 in
          appeal no. 207 of 2012 stands clarified.’
9.   While so, pursuant to the remand by the Tribunal, fresh show-
     cause notices dated 06.07.2012 and 12.07.2012 were issued by
     SEBI. The noticees therein, including VCL, were 24 entities in all.
     Thereafter, through a WTM, SEBI passed order dated 31.07.2014
     in exercise of power under Sections 11 and 11B of the Act of 1992,
     read with Regulation 11 of the Securities and Exchange Board of
     India (Prohibition of Fraudulent and Unfair Trade Practices relating
     to Securities Market) Regulations, 2003, and Regulation 44 of the
     Securities and Exchange Board of India (Substantial Acquisition of
     Shares and Takeovers) Regulations, 1997. In effect, SEBI found
     therein that VCL had spread misleading information to the public. It
     was opined that some of the promoters and directors were involved
     in allotting shares to 15 companies, which were connected to VCL,
     and these 15 companies were provided funds by VCL, which then
     sold the shares in the open market. The WTM, in exercise of power
     conferred by Section 19 read with Sections 11 and 11B of the Act of
     1992 and the Regulations, cited supra, restrained the 24 noticees
     from accessing the securities market and prohibited them from buying,
     selling or otherwise dealing in securities, directly or indirectly or being
     associated with the securities market in any manner whatsoever,
     for the periods specified against each of them. The WTM further
[2025] 4 S.C.R.                                                      2797

 Securities and Exchange Board of India v. Ram Kishori Gupta & Anr.


     directed that the preferentially allotted shares of VCL, lying in the
     demat accounts of the allottees, shall remain frozen and VCL was
     not to give effect to the transfer of any shares acquired and held
     by the allottees in the preferential allotment dated 14.12.1999. The
     WTM also restrained the preferential allottees from exercising voting
     rights or other rights attached to the shares acquired and held by
     them in such preferential allotment.
10. After the passing of this order, Ram Kishori Gupta and Harishchandra
    Gupta filed Miscellaneous Application No. 145 of 2014 in Appeal No.
    207 of 2012. Their grievance therein was that, while passing order
    dated 31.07.2014, SEBI had failed to comply with the directions given
    in the Tribunal’s order dated 30.04.2013 in their Appeal No. 207 of
    2012. Thereupon, the learned counsel appearing for SEBI informed
    the Tribunal that SEBI would pass an additional order dealing with
    the directions set out in the order dated 30.04.2013 passed by the
    Tribunal. The Tribunal, vide order dated 17.11.2014, permitted SEBI
    to do so within a time frame, after giving a personal hearing to Ram
    Kishori Gupta and Harishchandra Gupta.
11. In consequence, a WTM of SEBI passed order dated 16.12.2014.
    Therein, he noted the grievance of Ram Kishori Gupta and
    Harishchandra Gupta to the effect that they had invested ₹18,25,041/-
    in the purchase of VCL’s shares, believing its false advertisements,
    and suffered a loss of ₹13,83,274/-. He also took note of their
    prayer to direct VCL to refund the actual amount spent by them on
    purchasing the shares in question along with appropriate interest and
    penalties. He found merit in their argument that SEBI was under a
    mandate to protect the interest of investors and should, therefore,
    take appropriate measures to exercise such mandate. He also opined
    that no person could be allowed unjust enrichment by way of wrongful
    gain made on account of fraudulent, manipulative and unfair trade
    practices, but noted that, in the instant case, the ill-gotten gains, if
    any, made by the entities mentioned in the order dated 31.07.2014
    had not been quantified during the investigation and, therefore, the
    same was not considered in the said order. He concluded that this
    was a fit case to examine the feasibility of quantifying the ill-gotten
    gains, if any, and disgorgement of the same and, thereafter, consider
    restitution to the complainants in accordance with the provisions of
    the Act of 1992 and the Regulations framed thereunder. He noted
    that, insofar as the relief of compensation was concerned, it could
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     only be given through the process of disgorgement, if justified by
     the facts and circumstances of the case. He, accordingly, directed
     the Investigation Department of SEBI to examine the feasibility of
     quantifying the ill-gotten gains, if any, and issue requisite notice(s)
     for disgorgement of the same within a time frame. Lastly, in such
     an event, he directed SEBI to consider restitution in the case of the
     complainants in accordance with the provisions of the Act of 1992
     and the Regulations framed thereunder. This order was purportedly
     passed in exercise of power under Sections 11, 11B and 19 of the
     Act of the 1992.
12. Significantly, the aforestated order dated 16.12.2014 failed to take into
    account the earlier order dated 30.04.2013 passed by the Tribunal
    in Appeal No. 207 of 2012, which categorically negated the prayer
    of Ram Kishori Gupta and Harishchandra Gupta to direct SEBI to
    grant them compensation. Therein, the Tribunal had clearly recorded
    that there is no mandate in law requiring SEBI to compensate an
    investor who suffered loss on account of trading in shares, as it
    would be in the nature of a claim for damages and would require to
    be looked into by a Civil Court of competent jurisdiction. It was only
    if VCL was found guilty of playing fraud on investors, that SEBI was
    required to consider directing the concerned entity or VCL to refund
    the amount spent by Ram Kishori Gupta and Harishchandra Gupta
    on the purchase of their shares along with appropriate interest. The
    clarificatory order dated 19.12.2013 passed by the Tribunal thereafter
    in the review application filed by SEBI puts it beyond the realm
    of doubt that SEBI was to ‘consider’ directing VCL to refund the
    amount collected by it in violation of law, only if the circumstances
    so required. In effect, SEBI’s WTM, while passing the order dated
    16.12.2014, virtually reviewed the earlier orders dated 30.04.2013
    and 19.12.2013 passed by the Tribunal in Appeal No. 207 of 2012.
13. However, acting upon the directions in the order dated 16.12.2014,
    the Investigation Department of SEBI conducted an enquiry and
    addressed Report dated 15.06.2015 to Ram Kishori Gupta and
    Harishchandra Gupta. Therein, it stated that, though VCL had
    published misleading advertisements, neither the promoter group
    nor the preferential allottees had made any gain out of it and, in the
    absence thereof, disgorgement was not possible. In consequence,
    it concluded that, in the absence of any disgorgement, SEBI could
    not order refund of their monies. Stating so, the Investigation Team
[2025] 4 S.C.R.                                                        2799

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     ended by requesting Ram Kishori Gupta and Harishchandra Gupta
     to inform SEBI if they wished to avail a personal hearing in the
     matter before the WTM.
14. Aggrieved by the Report dated 15.06.2015, Ram Kishori Gupta
    and Harishchandra Gupta again approached the Tribunal by way of
    Appeal No. 189 of 2015. However, on 27.08.2015, this appeal was
    disposed of by the Tribunal as withdrawn, noting that the appellants
    were afforded an opportunity of hearing before a WTM of SEBI in
    connection with the Report dated 15.06.2015. The WTM of SEBI
    was, accordingly, directed to pass appropriate orders on merits, after
    hearing the appellants, as expeditiously as possible.
15. Pursuant thereto, a WTM of SEBI, after giving due opportunity of
    hearing to all concerned, passed order dated 01.04.2016. Therein,
    noting the claim of Ram Kishori Gupta and Harishchandra Gupta
    that they had suffered a loss of ₹51,53,190/-, the WTM opined that
    SEBI had failed to consider the observations in the order dated
    16.12.2014 and failed to calculate the losses caused by the promoters/
    directors/concerned entities, as mentioned in the earlier order dated
    31.07.2014. He, accordingly, reviewed the entire matter in the light
    of the order dated 31.07.2014 and the investigation into the subject
    issue and opined that the acts of fraud, highlighted in the order dated
    31.07.2014, threatened market integrity and the orderly development
    of the market, calling for regulatory intervention to protect the interest
    of investors. He further opined that these entities could not be
    allowed to unjustly enrich themselves at the cost of investors. He
    noted that SEBI, while determining the ill-gotten gains in the scrip
    of VCL, proceeded on a hypothesis different from the findings in the
    order dated 31.07.2014 passed earlier and, in view of the above,
    as the ill-gotten gains were still to be arrived at, he opined that it
    would be appropriate to direct SEBI to look into the exact figure of
    ill-gotten gains by VCL, its promoters/directors/preferential allottees,
    Master Finlease Pvt. Ltd. (MFL), an entity owned by Vijay Jhindal, a
    director of VCL, and others. Thereafter, SEBI was directed to initiate
    disgorgement proceedings against those who perpetrated fraud on
    the investors. He further directed that it would be appropriate that the
    claims of Ram Kishori Gupta and Harishchandra Gupta be taken on
    record and be considered in accordance with the provisions of the
    Act of 1992 and the Regulations framed thereunder on disgorgement
    of the ill-gotten gains.
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16. Consequential to the above order dated 01.04.2016, SEBI issued
    show-cause notice dated 19.01.2018 to the 24 entities/noticees named
    in the earlier order dated 31.07.2014. They were called upon to show
    cause as to why appropriate directions for disgorgement of their ill-
    gotten gains should not be issued against them under Section 11B of
    the Act of 1992. SEBI then passed order dated 28.09.2018. This order
    was passed in exercise of power under Sections 11 and 11B of the
    Act of 1992. Thereby, Noticee Nos. 1,2,3,5 and 7 to 24, being VCL,
    its directors and other entities, were held jointly and severally liable
    to disgorge their unlawful gains of ₹4,55,91,232/-. They were also
    directed to pay interest thereon @ 10% per annum from 01.08.2002
    till the date of payment. The disgorgement was to be made, with
    applicable interest, within 45 days from the date of receipt of the
    order and if they failed to do so, they were restrained from buying,
    selling or dealing in the securities market in any manner whatsoever
    or accessing the securities market directly or indirectly for a period of
    5 years. Insofar as the issue of restitution is concerned, SEBI’s WTM
    noted the decision in the earlier order dated 30.04.2013 passed by
    the Tribunal and held that restitution of the losses suffered by Ram
    Kishori Gupta and Harishchandra Gupta was outside the scope of
    SEBI. Referring to the observation of the Tribunal therein that SEBI
    may pass a direction to compensate their losses either against VCL
    or the entity concerned, the WTM opined that such a direction was
    not feasible for a variety of reasons. The fraud committed had not
    only affected Ram Kishori Gupta and Harishchandra Gupta but also
    a large number of investors who had traded during the relevant time;
    and the shares held by the complainants were not directly issued to
    them by VCL but were purchased by them in the secondary market
    and it would be unfair to only compensate them selectively, as there
    would be many others who suffered similar losses by trading in the
    scrip. Lastly, the complainants could not deny the fact that investment
    in the securities market carried inherent risks, which an investor would
    be expected to factor in. Considering these circumstances in totality,
    the WTM deemed it appropriate not to issue any direction regarding
    restitution in favour of Ram Kishori Gupta and Harishchandra Gupta.
17. Several appeals came to be filed before the Tribunal against the
    aforestated order dated 28.09.2018 passed by the WTM of SEBI.
    Ram Kishori Gupta and Harishchandra Gupta filed Appeal No. 44 of
    2019, aggrieved by the denial of restitution, while Appeal Nos. 318
[2025] 4 S.C.R.                                                      2801

 Securities and Exchange Board of India v. Ram Kishori Gupta & Anr.


     of 2019, 321 of 2019, 444 of 2019 and 442 of 2021 were filed by
     VCL and others against the direction for disgorgement. Surprisingly,
     the Tribunal chose to separate the appeals and did not adjudicate
     them jointly. Appeal No. 44 of 2019, filed by Ram Kishori Gupta and
     Harishchandra Gupta, was independently disposed of by the Tribunal,
     vide order dated 02.08.2019, and Appeal Nos. 318 of 2019, 321 of
     2019, 444 of 2019 and 442 of 2021, filed in relation to disgorgement,
     were disposed of separately over two years thereafter, by common
     order dated 20.12.2021.
18. By the order dated 02.08.2019, the Tribunal disagreed with the
    reasoning of the WTM of SEBI in his order dated 28.09.2018 and
    opined that, the spirit of the order dated 30.04.2013 was to the effect
    that Ram Kishori Gupta and Harishchandra Gupta deserved to be
    compensated in case VCL was found to have violated securities laws.
    As such violation by VCL had been conclusively proved by the order
    dated 28.09.2018, the Tribunal directed SEBI to compensate them to
    the extent of ₹18,25,041/-, being the amount that they had invested
    in the shares of VCL in the year 2002. The Tribunal directed that
    no interest had to be paid thereon as they had to bear part of the
    risk of investing in the securities market. SEBI was directed to pay
    this compensation, either from the amount disgorged from VCL and
    the connected entities or from its Investor Protection and Education
    Fund, within a time frame.
     Challenging the above order dated 02.08.2019 passed by the Tribunal
     in Appeal No. 44 of 2019, SEBI filed Civil Appeal No. 7941 of 2019
     before this Court. While issuing notice therein on 18.10.2019, this
     Court stayed the operation and implementation of the impugned
     judgment dated 02.08.2019. Aggrieved by the denial of interest therein
     on the amount directed to be refunded to them, Ram Kishori Gupta
     and Harishchandra Gupta filed Civil Appeal (Diary) No. 42829 of 2019.
19. Two years later, by the order dated 20.12.2021, the Tribunal
    disposed of the other appeals. Therein, the Tribunal noted the
    contention of VCL and the other appellants that the disgorgement
    order dated 28.09.2018 was barred by the principle of res judicata.
    This argument was founded on the premise that the show-cause
    notices dated 06.07.2012 and 12.07.2012 had already culminated
    in the final order dated 31.07.2014, whereby they had been barred
    from accessing the securities market for specified periods and, as
2802                                                        [2025] 4 S.C.R.

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     this order had attained finality, there was no cause for the SEBI
     to pass a fresh order for disgorgement pursuant to the very same
     notices under the very same provisions, i.e., Sections 11 and 11B
     of the Act of 1992. The Tribunal then noted its earlier order dated
     30.04.2013, passed in the context of the prayer of Ram Kishori
     Gupta and Harishchandra Gupta, and observed that no direction
     had been issued to SEBI therein to consider the feasibility of
     quantifying ill-gotten gains or to initiate proceedings for disgorgement
     against the appellants and the other entities. Ergo, the Tribunal
     concluded that the direction, in SEBI’s order dated 16.12.2014, to
     the Investigation Department, to examine the feasibility of quantifying
     ill-gotten gains and to issue requisite notices for disgorgement,
     was wholly without jurisdiction. The Tribunal, accordingly, agreed
     with the appellants that no fresh proceedings on the same cause
     of action could have been initiated under Sections 11 and 11B of
     the Act of 1992 after the order dated 31.07.2014 attained finality.
     The order dated 28.09.2018 was, therefore, held to be barred by
     the principle of res judicata.
20. The Tribunal also rejected the contention of SEBI that the principle
    of res judicata in Section 11 of the Code of Civil Procedure, 1908,
    would not apply to proceedings initiated under the Act of 1992 and
    held that the finality attaching to a judgment would be imperative
    and great sanctity needed to be attached thereto. In consequence,
    the Tribunal held that it would not be permissible for SEBI to disturb
    such finality by passing a fresh order on the very same cause of
    action. The principle of res judicata was, therefore, held to be fully
    applicable in the instant case, notwithstanding Section 15U(1) of the
    Act of 1992, which left it open to the Tribunal to be guided by the
    principles of natural justice and to regulate its own procedure, as
    it was not bound by the procedure laid down by the Code of Civil
    Procedure, 1908. The appeals were, accordingly, allowed with costs
    of ₹2,00,000/- to be paid to each of the appellants.
     The common judgment dated 20.12.2021 passed by the Tribunal was
     assailed by SEBI, by way of Civil Appeal Nos. 1649-1652 of 2022.
21. At this stage, we may note that the Act of 1992 was promulgated
    for establishment of a Board to protect the interests of investors in
    securities and to promote the development of, and to regulate, the
    securities market and for matters connected therewith or incidental
[2025] 4 S.C.R.                                                          2803

 Securities and Exchange Board of India v. Ram Kishori Gupta & Anr.


     thereto. Section 3 thereof deals with the establishment of SEBI, a
     body corporate having perpetual succession and a common seal.
     Section 4 details the composition of SEBI and provides that it shall
     consist of a Chairman, two members from the concerned Ministry, one
     member from the Reserve Bank, and five other members, of whom
     at least three shall be whole-time members, all to be appointed by
     the Central Government. The powers and functions of SEBI are set
     out in Chapter IV of the Act of 1992, comprising Sections 11, 11A,
     11AA, 11B, 11C and 11D. Section 11(1) provides that it shall be the
     duty of SEBI to protect the interests of investors in securities and to
     promote the development of, and to regulate, the securities market,
     by such measures as it thinks fit. Section 11(2) details such measures
     under clauses (a) to (m). Section 11(4) details some more measures
     that can be taken by SEBI, either pending investigation or enquiry
     or on completion of such investigation or enquiry. Section 11A of
     the Act of 1992 empowers SEBI to specify, by way of Regulations,
     the matters relating to issue of capital, transfer of securities and
     others matters incidental thereto; and the manner in which such
     matters shall be disclosed by companies. SEBI is also empowered
     under Section 11A(b), by general or special orders, to prohibit any
     company from issuing a prospectus, offer document or advertisements
     soliciting money from public for the issue of securities; and specify
     the conditions subject to which the prospectus, offer document or
     advertisement, if not prohibited, may be issued. Section 11B of the
     Act of 1992 empowers SEBI to issue directions and levy penalty. It
     presently reads as under:
           ‘11B. Power to issue directions and levy penalty – (1) Save
           as otherwise provided in section 11, if after making or
           causing to be made an enquiry the Board is satisfied that
           it is necessary-
           (i)    in the interest of investors, or orderly development
                  of securities market; or
           (ii)   to prevent the affairs of any intermediary or other
                  persons referred to in section 12 being conducted
                  in a manner detrimental to the interests of investors
                  or securities market; or
           (iii) to secure the proper management of any such
                 intermediary or person,
2804                                                       [2025] 4 S.C.R.

                        Supreme Court Reports


         it may issue such directions -
         (a)   to any person or class of persons referred to in section
               12, or associated with the securities market; or
         (b)   to any company in respect of matters specified in
               section 11A,
         as may be appropriate in the interests of investors in
         securities and the securities market.
         (2) Without prejudice to the provisions contained in sub-
         section (1), sub-section (4A) of section 11 and section 15-I,
         the Board may, by an order, for reasons to be recorded in
         writing, levy penalty under sections 15A, 15B, 15C, 15D,
         15E, 15EA, 15EB, 15F, 15G, 15H, 15HA and 15HB after
         holding an inquiry in the prescribed manner.
         Explanation.- For the removal of doubts, it is hereby
         declared that the power to issue directions under this
         section shall include and always be deemed to have been
         included the power to direct any person, who made profit
         or averted loss by indulging in any transaction or activity
         in contravention of the provisions of this Act or regulations
         made thereunder, to disgorge an amount equivalent to the
         wrongful gain made or loss averted by such contravention.’
    However, at the relevant point of time when the show-cause notices
    were issued by SEBI in the year 2012, Section 11B of the Act of
    1992 read thus:
         ‘11B. Power to issue directions – Save as otherwise
         provided in section 11, if after making or causing to be
         made an enquiry the Board is satisfied that it is necessary-
         (iv) in the interest of investors, or orderly development
              of securities market; or
         (v)   to prevent the affairs of any intermediary or other
               persons referred to in section 12 being conducted
               in a manner detrimental to the interests of investors
               of securities market; or
         (vi) to secure the proper management of any such
              intermediary or person,
[2025] 4 S.C.R.                                                            2805

 Securities and Exchange Board of India v. Ram Kishori Gupta & Anr.


           it may issue such directions -
           (a)   to any person or class of persons referred to in section
                 12, or associated with the securities market; or
           (b)   to any company in respect of matters specified in
                 section 11A,
           as may be appropriate in the interests of investors in
           securities and the securities market.
22. The scheme of Section 11B of the Act of 1992 is that SEBI, in the
    interest of investors in securities and the securities market, may make
    or cause to be made an enquiry in that regard and, if it is satisfied
    that it is necessary to do so, SEBI may issue such directions, be
    it to a person or a class of persons, referred to in Section 12, or
    associated with the securities markets or to any company in respect
    of matters specified in Section 11A, as may be appropriate in the
    interest of investors in securities and the securities market. The
    Explanation, which was inserted therein with effect from 18.07.2013,
    makes it clear for the removal of doubts that the power to issue
    directions under Section 11B shall include and always be deemed
    to have included the power to direct disgorgement of an amount
    equivalent to the wrongful gain made or loss averted by indulging
    in any transaction or activity in contravention of the provisions of
    the Act of 1992 or the Regulations made thereunder. Section 11(5)
    of the Act of 1992, which was also inserted in the statute book with
    effect from 18.07.2013, provides that disgorgement may be affected
    pursuant to a direction issued under Section 11B of the Act of 1992 or
    the provisions of allied enactments, such as the Securities Contracts
    (Regulation) Act, 1956, or the Depositories Act, 1996, etc, and the
    amount disgorged pursuant to such direction shall be credited to
    the Investor Protection and Education Fund established by SEBI
    and shall be utilised by it in accordance with the Regulations made
    under the Act of 1992. Section 19 is titled ‘Delegation’ and states
    that SEBI may, by general or special order in writing, delegate to
    any of its members, officers or any other persons, subject to such
    conditions as may be specified in the order, such of its powers and
    functions as it may deem necessary.
23. It is in this statutory context, that the exercise of power by SEBI in
    the case on hand, at different points of time, requires to be examined.
    The chronology of events, set out hereinbefore, demonstrates that
2806                                                      [2025] 4 S.C.R.

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     the first show-cause notice issued on 24.05.2005 by SEBI to VCL
     and others resulted in the order dated 20.02.2008. However, this
     order was invalidated by the Tribunal on 28.08.2008, requiring SEBI
     to issue notices afresh and decide the matter again. This remand
     resulted in the order dated 31.07.2014 passed by SEBI. Notably,
     this order was passed in exercise of power under Sections 11 and
     11B of the Act of 1992 read with relevant Regulations. Conscious of
     the scope of such power, the WTM of SEBI deemed it sufficient to
     punish the entities concerned, including VCL, by only directing that
     they should not access the securities market and stood prohibited
     from buying, selling or otherwise dealing in securities, directly or
     indirectly, or being associated with the securities market, for the
     periods specified as against each of them. Out of the 24 entities so
     penalized, Shubha Jhindal was visited with such restraint/ prohibition
     for one year while the remaining 23 entities had to suffer such
     punishment for 3 years each. In addition, the preferentially allotted
     shares of VCL were directed to remain frozen with consequential
     restraints as regards transfer and exercise of voting rights. Perusal
     of the said order reflects that the WTM was well aware of the illegal
     and fraudulent actions of VCL, its promoters, directors and other
     entities, and the financial implications thereof. Despite the same, no
     order was passed by him in relation to disgorgement of any ill-gotten
     gains made by them as a consequence of such transgressions. The
     Explanation, inserted in Section 11B thereafter, puts it beyond the
     pale of doubt that the power to direct disgorgement was deemed
     have always been included in the general power of issuing directions
     thereunder.
24. In any event, it was only owing to Ram Kishori Gupta’s and
    Harishchandra Gupta’s complaint that the order dated 31.07.2014
    did not take into account the directions in the earlier order dated
    30.04.2013 in their Appeal No. 207 of 2012, that the Tribunal passed
    the order dated 17.11.2014 recording the concession of the learned
    counsel for SEBI that the WTM would pass an additional order
    dealing with such directions. This, in turn, led to the passing of a
    fresh order by SEBI on 16.12.2014, which reopened the exercise
    undertaken earlier that had culminated in the order dated 31.07.2014.
    This order completely ignored the negation by the Tribunal, in the
    earlier order dated 30.04.2013, of the prayer of Ram Kishori Gupta
    and Harishchandra Gupta against SEBI. The case then proceeded
    on a tangent and in a different direction altogether, resulting in the
[2025] 4 S.C.R.                                                        2807

 Securities and Exchange Board of India v. Ram Kishori Gupta & Anr.


     order dated 29.08.2018 passed under Sections 11 and 11B of the
     Act of 1992, visiting disgorgement and, in the event of their default,
     fresh and longer restraints/prohibitions upon VCL and the others.
25. When the earlier order dated 31.07.2014, on the same cause of action
    and based on the very same show-cause notices, remained intact and
    attained finality, as it was neither challenged nor set aside, the later
    order dated 29.08.2018 could not have been passed, supplementing
    it with additional directions. Be it noted that by the time this order
    came to be passed, the penalties of restraint and prohibition visited
    upon the 24 entities, under the earlier order dated 31.07.2014, had
    already been suffered by them. The order had, therefore, worked
    itself out. While so, 22 out of the 24 entities were again visited with
    fresh penalties in the form of disgorgement coupled with much longer
    restraints/prohibitions, in the event of default in payment. Imposition
    of the penalty of disgorgement was very much within the ambit and
    scope of SEBI even at the time the initial order dated 31.07.2014
    was passed but, in his wisdom, the WTM of SEBI did not choose to
    resort to it. Once the said order attained finality and was fully given
    effect to, passing of a fresh order once again, on the very same
    cause of action, trampled upon and reversed the finality that had
    already attached to the said order.
26. No doubt, the illegalities committed by VCL and the other entities
    had financial implications which may have warranted a direction for
    disgorgement, but once the SEBI did not choose to issue such a
    direction in the first instance and was satisfied with lesser penalties in
    its order dated 31.07.2014, the question of permitting SEBI, without
    just cause, to revisit the said final order and pass fresh directions does
    not arise. Doing so would be violative of public policy, which attaches
    great value and sanctity to the finality of judicial determinations and
    the principle of res judicata.
27. Though 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
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     SEBI and its WTMs under the Act of 1992. Therefore, SEBI cannot
     claim exemption from the applicability of the principle of res judicata
     thereunder.
28. In Hope Plantations Ltd. vs. Taluk Land Board, Peermade and
    another2, 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 others3, 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 others4, 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.



2   (1999) 5 SCC 590
3   AIR 1964 SC 1013
4   AIR 1965 SC 1150
[2025] 4 S.C.R.                                                       2809

 Securities and Exchange Board of India v. Ram Kishori Gupta & Anr.


29. In the light of these edicts, it is not open to SEBI to claim that it
    could pass multiple final orders on the same cause of action. Having
    undertaken the exercise pursuant to its show-cause notices issued
    in 2012, SEBI passed the order dated 31.07.2014, in exercise of
    power under Section 11B of the Act of 1992, with certain directions
    which attained finality and were given full effect to. That being so,
    SEBI could not have reopened the entire exercise without just
    cause so as to pass a fresh order under Section 11B, once again,
    4 years later.
30. In this regard, we may also note the unconscionable delay on the part
    of SEBI. Though the WTM of SEBI passed the order on 01.04.2016,
    requiring an examination afresh and initiation of disgorgement
    proceedings, it was only on 19.01.2018 that SEBI got around to
    issuing a show-cause notice proposing disgorgement and then passed
    an order seven months later. This laidback and indolent approach
    on the part of SEBI in dealing with the matter needs mention as it
    does not augur well for a statutory body enjoined with the duty of
    protecting investors and regulating the securities market which, by
    its very nature, is volatile, to drag its feet and indulge in unwarranted
    and unjustified delays.
31. Viewed thus, we are of the opinion that the entire exercise undertaken
    by SEBI after the passing of the final order dated 31.07.2014, resulting
    in the disgorgement order dated 28.09.2018, was unsustainable in
    law. Further, as the compensation claim of Ram Kishori Gupta and
    Harishchandra Gupta against SEBI stood decided by the Tribunal’s
    order dated 30.04.2013, which also attained finality, it was not open
    to them to reopen the same and seek to pin such liability upon SEBI
    once again. The directions in that regard by the WTMs of SEBI in the
    orders dated 16.12.2014 and 01.04.2016, culminating in the direction
    for restitution by the Tribunal in its judgment dated 02.08.2019 in
    Appeal No. 44 of 2019, cannot be sustained. It was not for the
    Tribunal to interpret its earlier order dated 30.04.2013 and give it
    a different colour, contrary to its plain meaning. Finally, it has been
    contented before us by SEBI that as only 4 entities, including VCL,
    out of 22 entities, filed appeals against the disgorgement order dated
    28.09.2018, the said order cannot be invalidated against those who
    had not chosen to file any appeal. We are informed that some of
    the individuals concerned have expired while most of the corporate
    entities have become defunct. In any event, as the order suffers
2810                                                       [2025] 4 S.C.R.

                            Supreme Court Reports


     from an inherent lack of jurisdiction, being barred by the principle of
     res judicata/ constructive res judicata, this argument cannot stand.
32. However, given the fact that VCL and the other entities, who were
    the appellants before the Tribunal, were held to have indulged in
    fraudulent acts and transactions and were not innocent or guileless,
    by any stretch of imagination, the direction of the Tribunal practically
    rewarding them with costs of ₹2,00,000/- each was entirely unjustified
    on facts.
33. On the above analysis, Civil Appeal 7941 of 2019 is allowed and
    the judgment dated 02.08.2019 passed by the Securities Appellate
    Tribunal, Mumbai, in Appeal No. 44 of 2019 is set aside. In
    consequence, Civil Appeal (Diary) No. 42829 of 2019 which seeks
    additional benefits, pursuant to the aforestated judgment dated
    02.08.2019 passed in Appeal No. 44 of 2019, must necessarily fail
    and the said appeal is dismissed. Lastly, as we find that the Tribunal
    was fully justified in setting aside the disgorgement order dated
    29.08.2018, SEBI’s attack against the Tribunal’s judgment dated
    20.12.2021, on that score, is held to be devoid of merit. However,
    as noted hereinabove, the direction of the Tribunal therein, mulcting
    SEBI with exorbitant costs payable to the appellants, is completely
    unsustainable and the same is, accordingly, set aside. Civil Appeal
    Nos.1649-1652 of 2022 are allowed to that extent.
     Parties shall bear their own costs.


     Result of the case: Appeals disposed of.




     †
         Headnotes prepared by: Divya Pandey