Remanding the case back to the market regulator for "fresh decision on merits and in accordance with law", SAT said it hopes the adjudicating officers of Sebi would ensure that "the fresh order to be passed is in the interest of the securities market".

The sharp criticism by the three-member SAT bench, headed by the Tribunal's Presiding Officer Justice J P Devadhar, has been made in an order disposing of appeals filed by certain Krishna Enterprises and Rajesh Service Centre against an order passed by a Sebi Adjudicating Officer in November, 2013.

The two appellants were fined Rs 10 lakh each for allegedly "aiding and abetting Edserv Softsystems Ltd (ESL) in siphoning off its IPO proceeds and thereby cause loss to the investors who were already the shareholders of ESL or who applied and were allotted shares under the IPO".

SAT, however, said in its order dated April 20 that the "impugned order records that it is not established that the appellants were the actual beneficiary of the siphoned off amount.

"However, penalty is imposed on ground that the appellants in collusion, acted as channel to transfer the siphoned off IPO proceeds to other layers."

Setting aside the penalty imposed on the two entities and remanding the matter back to Sebi for a fresh hearing, SAT said there was "nothing on record to suggest that ESL has been held to be guilty of siphoning off the IPO proceeds, because, it is only if ESL is held guilty of siphoning off IPO proceeds, the question of considering the question as to whether the appellants had colluded with ESL arises".

The two appellants contended that they had received the amount from ESL for establishing Heal Laboratories/Head Office and supply of computers/accessories. They also contended that "the amount received by them from ESL was utilised for the purpose for which it was received and therefore, the allegation that the appellants acted as a channel for ESL to siphon off its IPO proceeds is devoid of any merit".

After hearing the appellants, SAT brought to the notice of the Sebi counsel that the impugned order was in conflict with various other orders passed by the Adjudicating Offers of Sebi under the same section of the Sebi (Securities and Exchange Board of India) Act.

In view of conflicting orders passed by the AOs of Sebi, the Tribunal then asked the Sebi counsel to "take instructions and accordingly adjourned the matter". After hearing Sebi's counsel, the Tribunal said in its order, "In spite of the fact that the impugned order is in conflict with orders passed by other AOs of SEBI, for example order passed in Appeal No 188 of 2014, Counsel for Sebi submitted that she has instructions to defend the order impugned in the present appeal."

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