SEBI Special Courts Must Hear Accused Before Taking Cognizance Under BNSS: Bombay High Court Quashes Process Against Neville Tuli

"The Special Court cannot take cognizance of the offences punishable under the SEBI Act, 1992, without compliance of 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, 2023." High Court of Judicature at Bombay, in a significant ruling dated 15th July 2026, held that Special Courts established under the Securities and Exchange Board of India (SEBI) Act cannot take cognizance of a complaint without giving the accused a prior opportunity of being heard under Section 223 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023.

A single-judge bench of Justice N. J. Jamadar observed that the newly introduced proviso to Section 223(1) of the BNSS confers a substantive right on the accused, and taking cognizance without compliance renders the judicial order void ab initio.

SEBI had initiated prosecution against entrepreneur Neville Tuli, former director of Osian’s Connoisseurs of Art Pvt Ltd, for allegedly failing to refund investor monies under an unregistered Collective Investment Scheme. A Special Court at Mumbai took cognizance of the regulatory body's complaint and issued process against Tuli for an offence punishable under Section 24(2) of the SEBI Act. Tuli challenged this order before the High Court, contending that the Special Court completely bypassed the mandatory pre-cognizance hearing required under the general criminal procedural law.

The primary question before the court was whether it is incumbent upon a Special Court under the SEBI Act to give an opportunity of hearing to an accused under the first proviso to Section 223 of the BNSS before taking cognizance of the offences. The court was also called upon to determine if the provisions of the SEBI Act provide a special mechanism for the manner of taking cognizance that would override the general procedures laid down in the BNSS.

BNSS Functions As Default Procedure For Special Laws

The High Court first examined Section 4(2) of the BNSS, which mandates that offences under any special law shall be investigated and tried according to the BNSS, subject to any specific enactment regulating the manner of such proceedings. The bench explained that the provisions of the BNSS automatically apply as a default procedure unless a special law prescribes an inconsistent or specific procedural alternative.

Proviso To Section 223 Creates A Paradigm Shift

Delving into the legislative intent behind the BNSS, the court noted a departure from the historical rule of criminal jurisprudence where an accused had no right of audience before the issuance of process. The bench observed that the first proviso to Section 223(1) marks a paradigm shift by enshrining the right of hearing at a pre-cognizance stage. The court emphasised that the Parliament introduced this opportunity of hearing to ensure that individuals are not made to suffer the ordeal of facing prosecutions through private complaints indiscriminately.

SEBI Act Does Not Override General Procedure For Cognizance

SEBI heavily relied on Sections 26 and 26-D of the SEBI Act to argue that the Special Court acts as a Court of Session and is not bound by magisterial complaint procedures under Chapter XVI of the BNSS. Rejecting this contention, the High Court clarified that Section 26 merely restricts the initiation of prosecution to complaints made by the SEBI Board itself, interdicting other modes of taking cognizance. The court held that the SEBI Act does not outline any special procedure regarding the actual manner of taking cognizance that would exclude the BNSS.

Express Applicability Of Code To SEBI Proceedings

Justice Jamadar highlighted that Section 26-D of the SEBI Act explicitly applies the provisions of the criminal procedural code to proceedings before a Special Court, "save as otherwise provided in this Act". The court observed that the legislature consciously omitted a non-obstante clause in Section 26-D, which indicates that there was no intent to give an overriding effect to the SEBI Act over general criminal procedure in this specific context.

Supreme Court PMLA Rulings Apply To SEBI Act

Drawing a parallel with the Prevention of Money Laundering Act (PMLA), the High Court referenced recent Supreme Court pronouncements, including Tarsem Lal v. Directorate of Enforcement and Kushal Kumar Agarwal v. Directorate of Enforcement. The bench noted that the apex court has consistently applied the pre-cognizance hearing mandate of BNSS to PMLA complaints. The High Court found no significant textual difference between the PMLA and the SEBI Act regarding the manner of taking cognizance, making the Supreme Court's ratio fully applicable to SEBI prosecutions.

Right To Fair Trial Mandates Pre-Cognizance Hearing

Relying on the Supreme Court's interpretation in Parvinder Singh v. Directorate of Enforcement, the High Court ruled that the proviso to Section 223(1) of the BNSS is not merely a procedural regulation but a substantive right. The court stated that this right forms a part of an accused's right to a fair trial enshrined under Article 21 of the Constitution of India.

"Thus, the word, 'shall' occurring in the first proviso has to be construed to be mandatory in nature, which enures to the benefit of an accused. Resultantly, cognizance of an offence taken by a Court without due compliance of the aforesaid proviso would be void ab initio."

The High Court allowed the writ petition and quashed the impugned order of the Special Court taking cognizance and issuing process against the petitioner, citing the sole ground of non-compliance with the statutory proviso. The matter was remanded back, and the Special Court was requested to provide an opportunity of hearing to the petitioner before passing any fresh order regarding cognizance in accordance with the law.

Date of Decision: 15 July 2026