The Supreme Court of India has clearly ruled that the Securities and Exchange Board of India (SEBI) cannot issue more than one final order concerning the same cause of action. The ruling came while upholding the decision of the Securities Appellate Tribunal (SAT), which had earlier quashed a second order passed by SEBI against Vital Communications Ltd (VCL).
This case specifically addressed whether res judicata, a legal doctrine that prevents the same issue from being litigated multiple times, applies to SEBI's quasi-judicial proceedings.
The judgment was delivered by a bench of Justices Sanjay Kumar and K.V. Viswanathan. The Court invoked both the general rule of res judicata and the constructive res judicata principle under Explanation IV of Section 11 of the Code of Civil Procedure, 1908.
In this case, SEBI had initially taken action against VCL for publishing misleading advertisements, which led investors to buy shares based on false promises. Although penalties were imposed in 2014, no order for disgorgement was issued at that time.
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However, based on later investor complaints, SEBI revisited the matter and passed a new order in 2018 under Section 11B of the SEBI Act, directing VCL to return the ill-gotten profits through a disgorgement order.
VCL challenged the 2018 order before SAT, arguing that since SEBI’s 2014 order had already attained finality and did not mention disgorgement, the second order was barred by res judicata. SAT agreed and set aside the disgorgement order.
SEBI then approached the Supreme Court.
The Court firmly sided with SAT’s view. In its judgment, Justice Kumar stated:
“SEBI’s 2014 order under Sections 11 and 11B imposed penalties but did not order disgorgement. Since this order reached finality and was never appealed, SEBI had no authority to revisit the issue and pass a fresh disgorgement order on the same cause of action.”
The Court referred to key precedents to support this view. In Hope Plantations Ltd. vs. Taluk Land Board, Peermade, it was emphasized that once a judicial decision is final, the same issue cannot be relitigated, even if the earlier outcome was flawed.
“Parties are bound by the judgment and are estopped from questioning it. They cannot raise the same issue again, nor can they bring up any matter that could have been raised in the previous proceedings,”
the Court highlighted, adding that this principle applies even to administrative bodies.
It also cited Amalgamated Coalfields Ltd. vs. Janapada Sabha Chhindwara, where the doctrine of constructive res judicata was explained. The Court observed:
“If a party had the opportunity to raise an issue in earlier proceedings and did not do so, they cannot raise it again in a future proceeding on the same subject.”
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Based on these precedents, the Court found SEBI's second action — reopening the issue after four years — legally impermissible. The judgment made it clear:
“Once SEBI had already concluded the matter and passed a final order in 2014 under Section 11B, it could not reopen the issue to pass another final order in 2018 without any new cause.”
“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.”
Case Title: SECURITIES AND EXCHANGE BOARD OF INDIA VERSUS RAM KISHORI GUPTA & ANR.
Appearances:
For Appellant(s) : Mr. Chander Uday Singh, Sr. Adv. Mr. Amarjit Singh Bedi, Adv. Ms. Surekha Raman, Adv. Mr. Shreyash Kumar, Adv. Mr. Yashwant Sanjenbam, Adv. Mr. Harshit Singh, Adv. Mr. Sidharth Nair, Adv. M/s. K.J. John And Co., AOR
For Respondent(s) : Mr. Purvish Malkan, Sr. Adv. Mr. Prakash Shah, Adv. Mrs. Rekha Pandey, AOR Mr. Raghav Pandey, Adv. Mrs. Dr. Keyur Shah, Adv. 1 CA No. 7941/2019 etc. Mrs. K. Sarada Devi, AOR Ms. Kaveri Kalyana Ram, Adv. Mr. H.C. Gupta, Adv. Mr. Chander Uday Singh, Sr. Adv. Mr. Amarjit Singh Bedi, Adv. Ms. Surekha Raman, Adv. Mr. Shreyash Kumar, Adv. Mr. Harshit Singh, Adv. Mr. Yashwant Sanjenbam, Adv. Mr. Sidharth Nair, Adv. M/s. K.J. John And Co., AOR
