The Bom HC has passed a significant order setting aside the decision of the MPID Court, Mumbai, issuing process against Mr. Amit Anand Rathi and Anand Rathi Commodities Limited Ltd in the long-standing NSEL matter. The Court reaffirmed a foundational principle in law of summons: issuing process requires application of judicial mind and recorded satisfaction. A mechanical order, passed without evaluating the material on record, cannot be sustained.
๐๐๐๐ค๐ ๐ซ๐จ๐ฎ๐ง๐
The Petitioners had challenged the 4 March 2019 order of the Designated MPID Court, which issued process for various IPC offences and Section 3 of the MPID Act. The prosecution alleged involvement in paired contracts, inducement of clients, misleading confirmations, alteration of client codes and failure to verify warehouse stocks in the NSEL ecosystem.
๐๐๐ญ๐ข๐ญ๐ข๐จ๐ง๐๐ซ๐ฌโ ๐๐ฎ๐๐ฆ๐ข๐ฌ๐ฌ๐ข๐จ๐ง๐ฌ
They argued that the Court issued process mechanically, without examining whether the charge sheet contained any material linking them to the alleged offences. It was submitted that Petitioner No. 2, as a trading-cum-clearing member, had no role in designing or launching paired contracts, and Petitioner No. 1 was implicated solely due to his directorship, without any specific act or allegation demonstrating involvement.
๐๐จ๐ฎ๐ซ๐ญโ๐ฌ ๐๐๐ฒ ๐๐๐ฌ๐๐ซ๐ฏ๐๐ญ๐ข๐จ๐ง๐ฌ
1.ย ๐๐ก๐ ๐จ๐ซ๐๐๐ซ ๐ข๐ฌ๐ฌ๐ฎ๐ข๐ง๐ ๐ฉ๐ซ๐จ๐๐๐ฌ๐ฌ ๐ฐ๐๐ฌ ๐ฎ๐ง๐ซ๐๐๐ฌ๐จ๐ง๐๐ ๐๐ง๐ ๐ฆ๐๐๐ก๐๐ง๐ข๐๐๐ฅ: The Court held that the 4 March 2019 order was โwholly unreasoned and devoid of any indication of judicial application of mind,โ with no assessment of how the ingredients of the alleged offences were met.
2.ย ๐๐ฌ๐ฌ๐ฎ๐๐ง๐๐ ๐จ๐ ๐ฉ๐ซ๐จ๐๐๐ฌ๐ฌ ๐ซ๐๐ช๐ฎ๐ข๐ซ๐๐ฌ ๐๐จ๐ง๐ฌ๐๐ข๐จ๐ฎ๐ฌ ๐ฃ๐ฎ๐๐ข๐๐ข๐๐ฅ ๐ฌ๐๐ญ๐ข๐ฌ๐๐๐๐ญ๐ข๐จ๐ง: A Magistrate must briefly record the basis for forming the opinion that โsufficient ground for proceedingโ exists. A person cannot be summoned merely because their name appears in a charge sheet.
The High Court therefore quashed the order issuing process qua the Petitioners and directed the MPID Court to reconsider the matter afresh, evaluate all relevant aspects, and deliver a reasoned order strictly in accordance with law.
๐๐๐ ๐ฌ๐ญ๐ซ๐๐๐ญ ๐๐ข๐๐ฐ: This ruling has broader relevance. In practice, even though SEBI is not a court, summons issued by SEBI under Section 11C are also often drafted in a brief or cryptic manner, without indicating the basis for requiring a personโs attendance. The Bombay High Courtโs decision reinforces a key principle: every coercive step, whether by a court or a regulator, must reflect application of mind and recorded satisfaction. Due process is not procedural formality; it is central to fairness in both criminal and regulatory investigations.
A copy of the order is enclosed.