VIABILITY OF ADJUDICATION PROCEEDINGS AGAINST A DECEASED INDIVIDUAL – SEBI’S STAND

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 INTRODUCTION:

The market regulator, Securities and Exchange Board of India (hereinafter “SEBI”) vide order dated November 6, 2020 constricted itself from continuing adjudication proceedings against Shri Anantharaman Nallaperumal (hereinafter “the Noticee / the deceased”) in the matter of M/s Wisdom Agro Tech India Limited (hereinafter "the Company"). The order passed by adjudicating authority elucidates the clarity on whether an adjudication proceeding would subsist on the deceased and his representatives considering the principles of equity and justice.

FACTUAL BACKGROUND:

The Noticee occupied the office as a director in the Company. It was established from the interim order passed by whole time member of SEBI dated December 10, 2014, that the Company was engaged in the conduct of channelizing funds from public that would come under purview of collective investment scheme. SEBI in this regard issued certain directions to the Company and its directors including the Noticee for further compliance. However, it was alleged that the Noticee did not comply with the directions issued by the whole time member and thus an adjudication proceeding was initiated against the Noticee. Accordingly, SEBI appointed an Adjudicating Officer (hereinafter “AO”) vide correspondence dated July 18, 2018 and show cause notice was issued to the Noticee against non-compliance of directions issued by whole time member.

SANCTITY OF PROCEEDINGS AGAINST DECEASED – SEBI’S VIEW:

The order issued outlines that the AO received a death certificate issued by Department of Municipal Administration and Water Supply, Nagercoil Municipality, Government of Tamil Nadu which stated that the Noticee died on January 28, 2019 i.e. during the course of adjudication proceedings. The AO decided that it would not be appropriate to sue the Noticee as he was deceased. The AO relied on the maxim actio personalis moritur cum persona through dictum of the Apex Court in “Girijandini v. Bijendra Narain (AIR 1967 SC 1124)” which inter alia stated that “in case of personal action, i.e. the actions where the relief sought is personal to  the deceased, the right to sue will not survive to or against the representatives, and in such cases, the maxim actio personalis moritur cum persona (personal action dies with the death of the person) would apply.”

Placing reliance on the above stated precedent, the AO held that adjudication proceedings against the deceased would not survive and accordingly the AO constricted not to levy any penalty against the deceased thereby abating the adjudication proceedings.

COMMENT:

SEBI vide this order from AO has postulated that adjudication proceedings shall not survive either against the deceased or the representatives of the deceased. The viability of the maxim actio personalis moritur cum persona was scrutinized and its application was elucidated by the Andhra High Court in “Anjilamma and Ors. v. Labour Court-iii, Hyderabad and Ors.” wherein the court inter alia categorically stated that “At Common Law by reason of the rule expressed in the maxim 'actio personalis moritur cum persona' most actions of tort die with the person, whether the person dying was the injured person or the wrong doer. The main exception to this common law rule was that an action could be sustained against a deceased person's personal representatives only in respect of property which had been appropriated by the deceased and added to his estate.”

The rationale of SEBI’s view could be attributed to the fact that an individual during his lifetime is the one solely responsible for his conduct and the burden of investigation arising out of any personal conduct after death of such individual cannot be bestowed on his representatives. This view of SEBI through the order passed by AO signifies that the position of a deceased with respect to a past conduct does not stand pari passu with that of an individual who exists, in light of continuation of adjudication proceedings against such deceased.


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