Introduction
In its recent decision in Neville Tuli v. Securities and Exchange Board of India & Anr. [Writ Petition No. 5242 of 2025: order dated 15th July 2026], the Bombay High Court held that the Special Court under the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) cannot take cognizance of an offence on a complaint filed by SEBI without first giving the accused an opportunity of being heard. This is because the pre-cognizance hearing right mandated by the first proviso to Section 223(1) of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”) is applicable to prosecutions under the SEBI Act.
Brief Facts
Osian’s Connoisseurs of Art Pvt. Ltd. (the “Company”) is a company incorporated under the Companies Act, 2013, of which the Petitioner was a director. The Company floated Osian Art Fund (“OAF”). SEBI held that OAF was an unregistered collective investment scheme and directed refund of investor monies with interest. After the refund directions were not complied with, SEBI filed a complaint against the Petitioner before the Special Court (SEBI), Mumbai, for an offence under Section 24(2) of the SEBI Act. The Special Court took cognizance and issued process without hearing the Petitioner. The Petitioner challenged the order on the ground that it breached the mandatory requirement under the first proviso to Section 223(1) of the BNSS of providing an opportunity of hearing to the accused before taking cognizance of the offence.
Question
The question before the Bombay High Court was whether the provisions contained in Section 223 of the BNSS would govern the prosecution of offences under the SEBI Act and is the Special Court under the SEBI Act bound to give the proposed accused an opportunity of hearing under the first proviso to Section 223(1) of the BNSS before taking cognizance of an offence on SEBI’s complaint?
Findings
The Court noted that the said proviso is peremptory in nature – once the manner of taking cognizance of the offence is found to be governed by Section 223 of the BNSS, then there can be no escape from the mandate of its first proviso.
Regarding the applicability of the BNSS to prosecutions under the SEBI Act, the Court analysed the relevant provisions of the SEBI Act. The Court noted that Section 26 of the SEBI Act only prescribes the mode of initiating prosecution (a complaint by the Board); it does not regulate the manner of taking cognizance. Section 26-D of the SEBI Act applies the general criminal code to Special Court proceedings “save as otherwise provided” and contains no non obstante clause. Thus, the Court noted that there is nothing in Section 26-D to suggest that the rest of the provisions of the BNSS in regard to taking cognizance of offences, do not apply to complaints under the SEBI Act.
Based on this and Section 4(2) of the BNSS, which states that the general criminal procedure applies to offences under special statutes except where the special law prescribes its own procedure, the Court answered the question before it in the affirmative. Accordingly, the Court held that the Special Court cannot take cognizance of offences punishable under the SEBI Act without compliance with the peremptory requirement of providing an opportunity of hearing to the accused, as provided under the first proviso to Section 223(1) of the BNSS. The Special Court’s order of taking cognizance and issuing process was accordingly quashed and set aside.
Analysis
This ruling extends the Supreme Court’s PMLA approach to prosecutions under securities law. It confirms that the pre-cognizance hearing under Section 223(1) of the BNSS will apply to complaint-based prosecutions under special statutes, unless that statute clearly says otherwise. As the Court noted, the first proviso to Section 223(1) of the BNSS marks a paradigm shift by enshrining the right of hearing at a pre-cognizance stage. This is integral to an accused’s constitutional right to a fair trial. The Court’s observations regarding the choice of saving clause versus non obstante clause are also significant. It reaffirms that as a matter of interpretation, a non obstante clause is included in a provision when such provision is intended to have an overriding effect. For regulators, it is important to note that the proviso to Section 223(1) of the BNSS does not merely regulate the manner in which proceedings are conducted but also protects the accused’s right to be heard.
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