SAT sets aside SEBI refund order against former Magnox Infraprojects director

The Securities Appellate Tribunal (SAT) on 15 October 2026 set aside a SEBI order of 20 February 2018 against a former director of Magnox Infraprojects Limited. The 2018 order had directed a refund of money that, according to SEBI, the company collected through redeemable preference shares in violation of the Companies Act, 1956 and securities laws. SAT held there was no material to show the former director was served with the show cause notice or the order.

What Happened

According to the SAT order, SEBI's investigation found that Magnox collected Rs 2.31 crore from 2,110 persons in 2012-13 by issuing redeemable preference shares, shares a company promises to buy back. In an order dated 13 August 2015 against the company and its directors, SEBI held that this offer was a "public issue" of securities. SEBI then passed an interim order on 20 November 2015 against earlier directors, including the appellant, followed by the 2018 order.

The appellant told SAT that they had resigned as director in September 2013, were never served the show cause notice, hearing notice or final order, and learnt of it only when recovery began and their bank accounts were frozen. SEBI argued that the appeal was filed after a delay of 2,948 days, that service was made at the address in company records, and that the appellant was a director when the money was collected.

SAT condoned the delay. It noted that the signature on the speed post acknowledgement produced by SEBI did not match the appellant's signature, and held that the 2018 order was passed in violation of the principles of natural justice, which require that a person be heard first.

What It Means

SAT set aside the 2018 order only as far as this appellant is concerned. The appellant must appear before SEBI on 16 November 2026, and SEBI must give a hearing and pass a fresh order in accordance with law. SAT kept all contentions open, so it has not decided whether the appellant is liable. SAT's order may be appealed to the Supreme Court.

The ruling shows that a SEBI direction must be properly served on a person. Readers offered deposit-like schemes by unlisted companies can report them on RBI's Sachet portal at https://sachet.rbi.org.in.

Source: SAT order