Inordinate delay in initiating adjudication proceedings for market manipulation vitiates the enforcement action.

SEBI conducted an investigation into the trading of the scrip of Shree Global Tradefin Limited (SGTL) for the period between August 29, 2011, and March 30, 2012

The investigation revealed that certain Noticees (appellants) placed 'buy' orders at prices higher than the Last Traded Price (LTP), leading to a 66% price surge followed by a sharp decline, indicating price manipulation

SEBI had previously issued two separate Show Cause Notices (SCNs) for different periods (2009 and 2010-2011) regarding the same scrip

For the current investigation period ending in March 2012, SEBI appointed an Adjudicating Officer (AO) in 2015 who took no action until his retirement; a successor issued the SCN only on February 12, 2021

The AO imposed penalties via an order dated May 31, 2022, which the appellants challenged primarily on the grounds of a 10-year delay

1. Whether the inordinate delay of 10 years in issuing the Show Cause Notice and completing adjudication proceedings vitiates the impugned order

The Tribunal applied the principle that inordinate and unexplained delay in initiating and concluding adjudication proceedings is a valid ground for setting aside a penalty order

It relied on the precedent set in Sanjay Jethalal Soni and Ors. v. SEBI (Appeal No. 102 of 2019), where a previous order regarding the same scrip was set aside due to delay

The Tribunal also noted the standards regarding prejudice and regulatory latitude discussed in SEBI v. Sunil Krishna Khaitan & Ors and SEBI v. Bhavesh Pabari, but distinguished them based on the specific "piece-meal" conduct of the regulator in this instance

The Tribunal found that SEBI conducted three separate investigations in a "piece-meal manner" for the same scrip covering 2009 to 2012

Despite the Tribunal having already set aside a 2018 adjudication order regarding the same scrip on the grounds of "inordinate delay," SEBI proceeded with a third SCN in 2021—nearly a decade after the investigation period

The Tribunal noted that the first AO appointed in 2015 "slept over the matter" until retirement, and the subsequent AO issued the SCN only in 2021

The Tribunal held that such conduct was in "flagrant disrespect" to the view previously expressed by the Tribunal in the Sanjay Jethalal Soni case and that the timeline of events demonstrated an unjustifiable delay that prejudiced the appellants

The Tribunal set aside the AO’s order dated May 31, 2022, and deprecated SEBI's conduct in issuing successive notices for the same scrip in a fragmented and delayed manner

All pending applications were disposed of with no order as to costs