The Bombay High Court has refused to intervene in proceedings initiated by the Securities and Exchange Board of India (SEBI) against two brokerage firms Crosseas Capital Services Pvt. Ltd. and PRB Securities Pvt. Ltd. over alleged irregularities in colocation trading.
The firms had challenged SEBI’s 2023 Show Cause Notices (SCNs), arguing that the matter had already been settled through earlier adjudication orders where minor penalties were imposed and paid. They contended that the fresh SCNs were barred by the principles of res judicata, lacked jurisdictional foundation, and amounted to harassment.
However, the Division Bench comprising Justice M.S. Sonak and Justice Jitendra Jain, while allowing the firms to raise these objections before SEBI’s quasi-judicial authority (QJA), declined to treat them as preliminary issues requiring threshold adjudication. The Court found no reason to delay the proceedings, observing that the objections involved mixed questions of fact and law that could be addressed during the ongoing hearings.
The controversy stems from SEBI’s investigation into brokers allegedly exploiting NSE’s colocation facility to gain unfair trading advantages between 2009 and 2016. Initial investigations resulted in adjudication orders in 2020 and 2021, which imposed penalties of â‚ą3 lakh and â‚ą6 lakh on Crosseas and PRB respectively orders that did not find any disproportionate gain or PFUTP violations at the time. The brokers paid the fines, believing the matter was closed.
However, after subsequent forensic reports by Deloitte, Ernst & Young, and the Indian School of Business pointed to significant profits made in violation of NSE guidelines, SEBI issued fresh SCNs in 2023 seeking disgorgement alleging unlawful gains of â‚ą13.46 crore by Crosseas and â‚ą119.97 crore by PRB.
The brokers sought to quash the SCNs or, alternatively, a direction that SEBI adjudicate their objections including those based on res judicata and jurisdiction as preliminary issues. SEBI countered that the earlier proceedings concerned minor regulatory violations under a different statutory framework, while the current action concerns serious violations and illegal gains.
The Court noted that both petitioners had actively participated in SEBI’s ongoing proceedings, including cross-examining expert witnesses and seeking document inspections. The Court also noted repeated attempts by the petitioners to delay proceedings, including seeking adjournments and filing and later withdrawing an appeal before the Securities Appellate Tribunal (SAT).
Holding that no case had been made out for bifurcating the proceedings, the Court emphasized that delaying tactics were contrary to public interest. The Bench clarified that the petitioners are free to raise all their objections before SEBI, which must adjudicate all issues comprehensively and expeditiously, without being influenced by any prima facie observations in the Court’s order.
Appearances:
Petitioner: Mr Janak Dwarkadas, Senior Advocate a/w Mr Ashim Sood, Mr Siddharth Satija, Ms Sowjhanya Shankaran, Ms Anuka Baehawat, Mr Deepak Sanchety, Mr Tamannam Tavadia, in WP/19221/2024.
Dr Birendra Saraf, Advocate General a/w Mr Ashim Sood, Mr Siddharth Satija, Ms Sowjhanya Shankaran, Ms Anuka Baehawat, Mr Deepak Sanchety, Mr Tamannam Tavadia, in WP/378/2025.
Respondent: Mr Mustafa Doctor, Senior Advocate a/w Ms Nidhi Singh, Mr Hubab Sayyed, Mr Nishin Shrikhande, Ms Komal Shah, Ms Nidhi Faganiya i/b Vidhi Partners in WP/19221/2024.
Mr Mustafa Doctor, Senior Advocate a/w Mr Manish Chhanagani, Mr Abhay Chauhan, Mr Atul Agrawal, i/b, The Law Point in WP/378/2025.
