Bombay High Court
Ashok Dayabhai Shah And 16 Ors vs Securities And Exchange Board Of India ... on 1 December, 2023
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2023:BHC-OS:14026-DB
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PVR
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 530 OF 2023
Ashok Dayabhai Shah And Ors. ..Petitioners
Versus
Securities And Exchange Board of India And Ors. ..Respondents
WITH
WRIT PETITION NO.447 of 2023
Pina Pankaj Shah ..Petitioner
Versus
Securities And Exchange Board of India ..Respondents
_____________
Ms. Arti Raghavan, Mr. Vikram Raghani, Mr. Pulkit Sukhramani, Ms.
Vidhi Jhawar, Mr. Deepank Anand and Mr. Shourya Tanay i/b
JSAAdvocates & Solicitors, for Petitioner in WP/530/2023.
Mr. Gaurav Joshi, Sr. Adv. a/w Ms. Garima Mehrotra, for Petitioner in
WP/447/2023.
Mr. J. J. Bhatt, Sr. Adv. a/w Mr. Mihir Mody and Mr. Arnav Misra i/b K.
Ashar & Co. for Respondent No. 1 in WP/530/2023.
Mr. Vishal Kanade with Mr. Mihir Mody and Arnav Misra i/b K. Ashar &
Co., for Respondent No. 1 in WP/447/2023.
Mr. Ameya Gokhale, Mr. Vaibhav Singh, Ms. Radhika Indapurkar and
Mr. Manas Kotak i/b Shardul Amarchand Mangaldas & Co., for
Respondent No. 2 in WP/530/2023.
Mr. Ashish Kamat, Sr. Advocate with Mr. Ameya Gokhale, Mr. Vaibhav
Singh, Ms. Radhika Indapurkar and Mr. Manas Kotak i/b Shardul
Amarchand Mangaldas & Co., for Respondent No. 2 in WP/447/2023.
Mr. Rahul Narichania, Sr. Adv. a/w Mr. Ameya Gokhale, Mr. Vaibhav
Singh, Ms. Radhika Indapurkar and Mr. Manas Kotak i/b Shardul
Amarchand Mangaldas & Co., for Respondent No. 7 & 8 in
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WP/530/2023.
Mr. Janak Dwarkadas, Sr. Adv. a/w Mr. Ameya Gokhale, Mr. Vaibhav
Singh, Ms. Radhika Indapurkar and Mr. Manas Kotak i/b Shardul
Amarchand Mangaldas & Co., for Respondent No. 9 in WP/530/2023.
Mr. Ameya Gokhale, Mr. Vaibhav Singh, Ms. Radhika Indapurkar and
Mr. Manas Kotak i/b Shardul Amarchand Mangaldas & Co., for
Respondent No. 7, 8 & 9 in WP/447/2023.
______________________
CORAM : G. S. KULKARNI &
JITENDRA JAIN, JJ.
DATE : 01 DECEMBER, 2023.
ORAL ORDER : (Per G. S. Kulkarni, J.)
1. Today the proceedings are before us on the backdrop of our
detailed order dated 23 October 2023 by which we had directed the SEBI
to provide documents to the petitioners as prayed for in prayer clause (g)
of the petition.
2. Such order was assailed by respondent Nos.2 - Bharat Nidhi
Ltd. (for short, "BNL") and by respondent No.9 - Vineet Jain before the
Supreme Court. Such Special Leave Petitions [ (Civil) Diary No.45529 of
2023, Bharat Nidhi Ltd. Vs. Ashok Dayabhai Shah & Ors.] and [(Civil)
Diary No.45770 of 2023 (Vineet Jain Vs. Ashok Dayabhai Shah) ] were
dismissed by the Supreme Court by an order dated 6 November 2023.
3. Thereafter respondent no.1-SEBI had filed a Special Leave
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Petition before the Supreme Court [Petition(s) for Special Leave to Appeal
(C) Nos.25783-25784/2023, Securities and Exchange Board of India vs.
Ashok Dayabhai Shah & Ors.] assailing the said order, which also came to
be dismissed by the Supreme Court by an order dated on 28 November,
2023.
4. After our order dated 23 October 2023 passed against the
respondents which attained finality in view of the Special Leave Petitions
filed on behalf of the private respondents being dismissed by the Supreme
Court, there were substantive developments in the proceedings, which are
referred in the subsequent part of this order and on which we have
extensively heard the parties on 29 November 2023, as recorded by us in
our order passed on the even date, for the present order to be passed.
5. The petitioners in these two writ petitions are minority
shareholders of respondent no.2-Bharat Nidhi Ltd. (for short, "BNL").
They had made various complaints to respondent no.1-SEBI of violation
by BNL of various provisions of securities laws, including violations
pertaining to the Minimum Public Sharing Norms (MPS) as also serious
violations in respect of the promoter's disclosure in the BNL's
shareholdings. The petitioners contend that the complaints as made by
the petitioners were subject matter of investigation by the SEBI. It is the
petitioners case that neither the investigation report nor any other relevant
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documents in such regard were supplied to the petitioners, despite the fact
that the petitioners were shareholders of the BNL. It is the petitioners'
case that on such investigation, SEBI issued a show cause notice to
respondent no.2-BNL. However, copy of the same was not furnished to
the petitioners. It is their case that the SEBI at the behest of respondent
nos.2 to 9 there is a farce of proceedings against respondent Nos.2 to 9.
The approach of the SEBI is as if such proceedings are required to be held
'in camera' and that all materials / documents pertaining to such
proceedings as initiated by SEBI against respondent nos. 2 to 9 are
privileged documents. The petitioners contend that such approach can
never be adopted by a public body like SEBI.
6. The petitioners have contended that BNL was earlier listed
on the Delhi Stock Exchange and after the same ceased to be functional,
BNL had sought listing of its shares at the Calcutta Stock Exchange which
is also not functional. It is stated that BNL is now on the Dissemination
Board of the National Stock Exchange.
7. On such conspectus, the case of the petitioners is to the effect
that there is a severe prejudice caused to the petitioners due to several
illegalities committed by BNL, at the instance of the majority shareholders
who are respondent Nos.3 to 9. The petitioners have contended that they
are the victims of BNL not being listed on a recognized stock exchange,
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which has severely affected their interest as investors in BNL. The
petitioner contend that BNL is a majority shareholder of a reputed
company known as Bennett, Coleman & Co. Ltd. (for short 'BCCL') in
which BNL and respondent Nos.3, 4, 7 to 9 had approximately 68%
shareholding. It is also the case of the petitioners that there are several
reasons for BNL to resort to such illegalities of suppression, to the
prejudice of the petitioners and of the nature as complained by them,
namely, the violations of the Minimum Public Sharing Norms (MPS) and
violation of the promoter shareholding, as per the SEBI norms.
8. As noted above, SEBI considering such illegalities had issued
a show cause notice dated 28 October 2020 to respondent No.2 - BNL
and respondent Nos. 3 to 9, however, before the show cause notice(s)
could be taken to its logical conclusion, respondent No.2 to 9 had moved
an application for settlement of the show cause notice(s), by invoking the
provisions of the Securities and Exchange Board of India (Settlement
Proceedings) Regulation, 2018 (for short '2018 Regulations'). The
petitioners have contended that the complaints subject matter of the show
cause notice, could never have been subjected to any settlement as
according to the petitioners gross violation of the provisions of the rules
and regulations can never be settled. In such circumstances, the petitioners
interalia assailing the settlement order passed by the SEBI had filed these
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petitions, the prayers in which are similar.
9. The prayers as made in the writ petition No. 530 of 2023 can
be noted which read thus:-
"(a) This Hon'ble Court be pleased to issue a writ of certiorari
or a writ in the nature of certiorari or any other writ, order or
direction under Article 226 of the Constitution of India calling
for the records of the settlement proceedings in respect of
Respondent No.2 (culminating into the Impugned Settlement
Order passed in respect of Respondent Nos. 2 to 9), and after
going into the legality and validity of the same, to quash or set
aside the Impugned Settlement Order (Exhibit A).
(b) That this Hon'ble Court be pleased to issue a writ of
mandamus or a writ in the nature of mandamus or any other writ,
order or direction under Article 226 of the Constitution of India,
ordering and directing SEBI to withdraw and cancel the
Impugned Settlement Order passed in the matter of Respondent
No. 2 (Exhibit A).
(c) That this Hon'ble Court be pleased to issue a writ of
mandamus or a writ in the nature of mandamus or any other writ,
order or direction under Article 226 of the Constitution of India
ordering and directing SEBI to take the necessary and
appropriate steps to ensure that full and true disclosure as
required under the applicable securities laws is made in respect of
the actual promoter holding of Respondent Nos. 2; and further
ordering and directing SEBI to ensure all consequential
compliances with securities laws, including but not restricted to
compliance with MPS Norms by Respondent Nos. 2 to 9.
(d) That this Hon'ble Court be pleased to declare as illegal
and void, all actions taken by the Respondents (by themselves, or
through their subordinate officers, servants and agents) pursuant
to the Impugned Settlement Order, including the 2022 Postal
Ballot Notice (Exhibit B);
(d1) That, in respect of Respondent No.2, this Hon'ble Court
be pleased to declare that by virtue of Regulation 28(1) of the
Settlement Regulations the Impugned Settlement Order stands
statutorily and automatically revoked;
(d2) That this Hon'ble Court be pleased to issue a writ of
mandamus or a writ in the nature of mandamus or any other writ,
order or direction under Article 226 of the Constitution of India,
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ordering and directing SEBI to restore the regulatory proceedings
against Respondent No.2 with respect to which the Impugned
Settlement Order was passed (and conclude the same
expeditiously).
(e) That pending the hearing and final disposal of the present
Petition this Hon'ble Court be pleased to stay the effect and
operation of the Impugned Settlement Order (Exhibit A);
(f) That pending the hearing and final disposal of the present
Petition this Hon'ble Court be pleased to stay the 2022 Postal
Ballot Notice (Exhibit B);
(g) That pending the hearing and final disposal of the present
Petition, this Hon'ble Court be pleased to direct SEBI to produce
copies of the Investigation Report, Show Cause Notices, minutes
of meetings of the IC Committee, HPAC and Panel of WTMs,
order/communication/noting vide which the settlement
application filed by Respondent Nos. 2 to 9 was approved by
SEBI and all other documents relevant to the proceedings in
connection with the Impugned Settlement Order;
(g1) That pending the hearing and final disposal of the present
Petition, this Hon'ble Court be pleased to order and direct SEBI
to forthwith restore the regulatory proceedings against
Respondent No. 2 with respect to which the Impugned
Settlement Order was passed (and conclude the same
expeditiously).
(h) Ad-interim reliefs in terms of prayer clauses (f), (g) and
(g1) above.
(i) For costs; and
(j) For such further and other reliefs as the nature and
circumstances of the case may require."
10. As noted above during the course of adjudication
proceedings of these petitions, the petitioners had urged that the SEBI be
directed to provide documents to the petitioners as prayed for in prayer
clause (g). Such prayer made by the petitioners was met with vehement
opposition not only on behalf of the SEBI - respondent No.1 but also
respondent Nos.2 to 9. Considering the rival contentions as also the
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provisions of the 2018 Regulations, and considering the plea of
confidentiality as raised on behalf of the respondents under Regulation 29,
this Court in its order dated 23 October 2023 interalia observed, that by
no stretch of imagination, could it be said that the petitioners in the
present case, who were minority shareholders and in such capacity, being
part owners of the company (BNL), to the extent of their shareholding,
were not outsiders / alien to the company, and that they were integral to
the company, having an inextricable concern and interest in the
functioning and management of the company. The relevant observations
in that regard are required to be noted which read thus:-
"28. This apart what is further significant is that the bar as
contained in Regulation 29 is only for such information not to be
released, "to the public". By no stretch of imagination, can it be
said that the petitioners in the present case, who are minority
shareholders and in such capacity, being part owners of the
company to the extent of their shareholding, are persons who are
alien/outsiders to the company (BNL), moreover they are integral
to the company, having an inextricable concern and interest in
the functioning and management of the company. Thus the
word 'public' as used in Regulation 29 can in no manner be made
attributable to shareholders of BNL like the petitioners. This
apart, if such contention as urged on behalf of the respondents
that the petitioners are 'public' and therefore, they are not
entitled to receive information by the applicability of Regulation
29, if accepted, the same yardstick and parameters become
applicable to respondent Nos.3 to 9, who are also shareholders of
BNL, who are hence not a different class, than that of the
petitioners. The petitioners as also respondent Nos.3 to 9 belong
to the same species as shareholders. It thus cannot be
countenanced that some shareholders can take shelter under
Regulation 29 to plead confidentiality of settlement information,
against a group of other shareholders, so as to bring about an
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effect that information in relation to settlement be not supplied
to such persons of their own class who are similarly situated. No
shareholder can take a position that he cannot disclose any
information on the affairs of the company to other shareholders.
This would bring about a situation of disharmony, distrust
causing damage to the management and functioning of the
company. Also such proposition as urged by the private
respondent if accepted, would amount to doing violence to
Regulation 29 and would result in a patent absurdity.
29. Thus none of the contentions as urged on behalf
of respondent nos.2 to 9 in opposing the prayer of the petitioners
to furnish documents would persuade us to hold that there was
any embargo legal and/or factual for such documents not to be
furnished/supplied to the petitioners. The objection of such
respondents that the petitioner ought not to have raised such plea
on the documents at the midst of the final hearing, as this itself
would show that no prejudice was caused to the petitioners, in
our opinion, is certainly not a tenable contention, for more than
one reason. Firstly on such case the petitioners have made a
specific interim prayer as noted by us above. They have also
supported such prayer, by pleading a case of a serious prejudice
being caused to them in the capacity of being the shareholders of
BNL. It is also not the case that they had in any manner given up
their case on their necessity and entitlement to have such
documents. In any event, the petition is being heard finally at
the admission stage, which would not mean that a situation is
brought about, that the specific contentions on documents, as
urged by the petitioners and subject matter of specific prayers
would stand given up by the petitioners much less on the law
would understand. Moreover, as observed above, the case of the
petitioners is that the very basis of the SEBI undertaking
investigation on the complaints as made by the petitioners of
BNL violating the rules, regulations and norms as prescribed by
SEBI, being violated by BNL and the same forming subject
matter of investigation by SEBI and the resultant show cause
notice were foundational facts, hence, in such context, it was the
petitioners' entitlement to receive all the documents in that
regard. Such documents therefore have all relevancy as law
would contemplates in the present lis between the parties. Thus,
the impression of respondent nos.2 to 9 that the petitioners
should not be provided with such documents, is not acceptable.
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Once it is the entitlement of the petitioners in law to receive such
documents, they need to be furnished such documents, unless
furnishing of these documents would stand prohibited in law,
which is certainly not a situation in the present facts.
30. We may also add that the regulations are framed under
the SEBI Act, 1992. The avowed object and intention of the Act
is to protect the interests of investors in securities and to promote
the development of, to regulate the securities market. Thus, all
actions which are taken by the SEBI and through the various
bodies as constituted under the Act and the regulations are
required to act considering the paramount interest of the
investors. For such reasons as well, we do not find as to why the
petitioners ought not to be entitled to the documents. We do not
find that there is any impediment whatsoever in law or otherwise
for the documents, as demanded, to be supplied to the
petitioners."
11. Thus, on the aforesaid observations we had directed that the
documents, subject matter of prayer clause (g) of the petition be provided
to the petitioners.
12. As noted above, our order dated 23 October 2023 was
initially assailed before the Supreme Court by respondent no.2-BNL in the
proceedings of Special Leave Petition (Civil) Diary No.45529 of 2023
(Bharat Nidhi Ltd. Vs. Ashok Dayabhai Shah & Ors. ) and by respondent
no.9 Special Leave Petition (Civil) Diary No.45770 of 2023 ( Vineet Jain
Vs. Ashok Dayabhai Shah) which came to be dismissed by an order dated
6 November 2023 passed by the Supreme Court. The said order reads
thus:-
"Special Leave Petition (Civil) Diary No(s). 45770/2023
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(Vineet Jain Vs. Ashok Dayabhai Shah)
ORDER
1 Mr C A Sundaram, senior counsel, states that all material
which is directed to be disclosed by the High Court shall be used
only for the purpose of the proceedings pending before the High
Court and shall not be disseminated to any third party.
2 Since the impugned orders of the High Court are purely
of an interlocutory nature, we are not inclined to entertain the
Special Leave Petitions under Article 136 of the Constitution.
3 However, the parties would be at liberty to pursue their
remedies in accordance with law on all counts after the final
judgment of the High Court.
4 The Special Leave Petitions are dismissed.
5 Pending applications, if any, stand disposed of."
13. Thereafter, SEBI had also assailed our orders dated 23
October, 2023 before the Supreme Court in the proceedings of Petition(s)
for Special Leave to Appeal (C) Nos.25783-25784/2023 (Securities and
Exchange Board of India vs. Ashok Dayabhai Shah & Ors.). The Supreme
Court did not entertain the special leave petition and dismissed the special
leave petition by the order dated 28 November, 2023 which reads thus:-
" ORDER
1 An earlier Special Leave Petition by one of the promoters,
SLP(C) Diary No. 45529 of 2023 [Bharat Nidhi Limited vs
Ashok Dayabhai Shah and Others] has been dismissed by this
Court on 6 November 2023.
2 Mr Tushar Mehta, Solicitor General submits that the
order of settlement which gave rise to the institution of the
proceedings under Article 226 of the Constitution before the
High Court has been revoked by SEBI. Hence, it has been
submitted that the petition before the High Court is rendered
infructuous.
3 Mr C A Sundaram, senior counsel appearing on behalf of
the respondent, on the other hand, submits that the petition as
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such has not been rendered infructuous since, in particular,
prayer clauses (c) and (d) of the petition would survive for
determination.
4 This Court is apprised of the fact that the proceedings are
listed tomorrow (29 November 2023) before the High Court of
Judicature at Bombay. Hence, it is not necessary for this Court to
entertain the Special Leave Petition at this stage, particularly
bearing in mind what has been observed in paragraphs 2 and 3 of
the earlier order dated 6 November 2023, which read as follows:
"2 Since the impugned orders of the High Court are
purely of an interlocutory nature, we are not inclined to
entertain the Special Leave Petitions under Article 136 of
the Constitution.
3 However, the parties would be at liberty to pursue
their remedies in accordance with law on all counts after
the final judgment of the High Court."
5 Should it become necessary for SEBI to raise the issue of
interpretation of Regulation 29 at a future date, that issue is kept
open to be agitated.
6 The Special Leave Petitions are accordingly dismissed.
7 Pending applications, if any, stand disposed of."
14. It is on the above conspectus, the proceedings are before us
today. However, after the Special Leave Petition of respondent no.2 -
BNL and respondent no.9-Vineet Jain was dismissed by the Supreme
Court, as also a decision being taken by the SEBI to assail our order dated
23 October, 2023 before the Supreme Court, what has happened at SEBI's
end in regard to the SEBI's proceedings against BNL, is not only
interesting but quite intriguing.
15. Today, Mr. Bhatt, learned Senior Counsel for the SEBI had
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placed on record an affidavit dated 20 November 2023 of Shri. Sachin
Ashok Sonawane, Deputy General Manager, interalia placing on record an
order dated 10 November 2023 passed by the SEBI informing respondent
Nos.2 to 9 that the settlement order dated 12 September 2022 subject
matter of challenge in prayer clauses (a) and (b) of the petition, stands
revoked and withdrawn in terms of Regulation 28 of the SEBI (Settlement
Proceedings) Regulations, 2018, for failure to comply with the Settlement
Order and not on the ground as urged by the petitioners that there could
never have been a settlement on the gross violations of rules and
regulations by BNL and respondent Nos.3 to 9. The said order is required
to be noted which reads thus:-
"Enforcement Department - 2 Securities and Exchange
Settlement Division Board of India
Tel.: 022-2644 9302
E-mail: [email protected]
SEBI/HO/EFD2/EFD2-SD/P/OW/45453
November 10, 2023
Settlement Name of the Applicant Address
Application
No.
6348/2021 Bharat Nidhi Limited First Floor, Express Building 9-10,
Bahadur Shah Zafar Marg, New
Delhi 110002
6353/2021 Mr. Vineet Jain 15, Motilal Nehru Marg, New
Delhi - 110011
6332/2021 Ashoka Marketing Limited First Floor, Express Building 9-10,
Bahadur Shah Zafar Marg, New
Delhi 110002
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6338/2021 Arth Udyog Limited 16A, Lajpat Nagar-IV, New Delhi
110024
6342/2021 Matrix Merchandise Limited 101 Pratap Nagar, Mayur Vihar,
Phase-1, New Delhi 110091
6344/2021 Mahavir Finance Limited 101 Pratap Nagar, Mayur Vihar,
Phase-1, New Delhi 110091
6341/2021 TM Investment Limited Gulab Bhawan, MBD House, 6,
Bahadur Shah Zafar Marg, New
Delhi 110002
6345/2021 Sanmati Properties Limited Gulab Bhawan, MBD House, 6,
Bahadur Shah Zafar Marg, New
Delhi 110002
Ref: Settlement Order No. SO/EFD-2/SD/421/SEPTEMBER/2022
dated September 12, 2022 in the matter of Bharat Nidhi Limited in
respect of Settlement Application nos. 6348, 6353, 6332, 6338, 6342,
6344, 6341 and 6345 of 2021
Sir,
1. This is to inform you that the Settlement Order dated September
12, 2022 under reference, stands revoked and withdrawn in terms of
Regulation 28 of the SEBI (Settlement Proceedings) Regulations, 2018, for
failure to comply with the Settlement Order.
2. You may also note that upon revocation, no amount paid under the
SEBI (Settlement Proceedings) Regulations, 2018 shall be refunded and
the Board shall restore or initiate the proceedings, with respect to which
the Settlement Order was passed.
Regards,
Sd/-
Kajio Mao
Deputy General Manager"
(emphasis supplied to para. 1)
16. On such development and position being taken by SEBI, Mr.
Bhatt would submit that nothing further survives for adjudication in the
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present proceedings, as the settlement orders itself stand revoked by the
SEBI. He submits that the principal prayers of the petitioners in terms of
prayer clauses (a) and (b) are now rendered infructuous.
17. Mr. Bhatt's contention is also supported by Mr. Dwarkadas,
learned Senior Counsel for respondent No.9, Mr. Ashish Kamat, learned
Senior Counsel for Respondent No. 2 in Writ Petition No.447 of 2023
and Mr. Rahul Narichania, learned Senior Counsel for Respondent No. 7
& 8 in Writ Petition No.530 of 2023.
18. Learned Senior Counsel appearing for the respondents are
unanimous in their contention, that as the settlement orders dated 12
September 2022 stands revoked, the show cause notice issued to
respondent Nos.2 to 9 are now required to be taken forward and decided,
in which all contentions of the petitioners including on non compliance of
the security laws, rules and regulations as also the SEBI Act would be gone
into. It is submitted that this was also desired by the petitioners, as seen
from the prayers in the petitions. It is thus submitted that the present
petitions would not require further adjudication as it would cause
prejudice to respondent Nos.2 to 9 in the course of adjudication of the
show cause notice. It is, hence, submitted that even the plea of the
petitioners for the documents to be furnished to the petitioners, as per the
orders of this Court dated 23 October 2023, is now rendered
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inconsequential in view of the settlement order itself being revoked by the
SEBI. It is therefore, a common contention as urged on behalf of the
respondents that the petitions be disposed of by permitting the SEBI now
to take forward the show cause notice issued to respondent Nos.2 to 9.
19. On behalf of the petitioners, Mr.Joshi, learned Senior
Counsel and Ms. Raghavan have opposed the contentions as urged on
behalf of the respondents. Mr. Joshi has drawn our attention to prayer
clause (c) and (d) of the petition to submit that it may not be correct for
the respondents to contend that nothing survives in these petitions, as
prayer clause (c) being a substantive prayer, is now required to be
adjudicated in the present proceedings. It is also his submission that it is
not correct for the respondents to contend that the order dated 23
October 2023 passed by this Court is rendered inconsequential, merely for
the reason, that the settlement order stands revoked by the SEBI. It is his
submission that the petitioners as minority shareholders have an
independent legal right to have all the documents touching the affairs of
the BNL and relevant to the issues as raised by the petitioners. It is
submitted that such order passed by the Court was also certainly in aid of
the reliefs as prayed by the petitioners, which includes prayer clause (c)
and (d), which very well survive.
20. Mr. Joshi has next submitted that the approach of the
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respondents is ex-facie collusive. This, according to Mr. Joshi, can be seen
from the fact that initially on 5 September 2023 the SEBI had sought an
adjournment to consider as to whether a decision can be taken to
withdraw the impugned settlement orders, and when such decision was
not taken to withdraw the settlement order, the Court as per its order
dated 13 September 2023 had proceeded to hear the present proceedings.
He submits that it is during the course of the hearing, this Court passed a
substantive order dated 23 October 2023, directing the SEBI to furnish
the documents to the petitioners. It is submitted that some meaning would
have to be given to some of these events, and more particularly, being a
categorical case of the petitioners that SEBI in the present case, for some
reason, is acting at the behest of respondent Nos.2 to 9. To buttress this
submission, Mr. Joshi submits that initially the order dated 23 October
2023 was challenged by respondent Nos.2 and 9 before the Supreme
Court, after such Special Leave Petition came to be dismissed by the
Supreme Court by an order dated 6 November 2022, on 10 November
2023. It is submitted that thereafter SEBI filed its Special Leave Petition
assailing the said order, which was also rejected by the Supreme Court,
dismissing its SLP on 28 November 2023. It is Mr.Joshi's submission that
now SEBI is taking a stand that the present petitions have become
infructuous, as also a strange plea is being taken by SEBI and on behalf of
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the other respondents that the documents as ordered by this Court no
more are required to be provided to the petitioners, in view of the
settlement order being withdrawn, merely, because prayer clauses (a) and
(b) are rendered infructuous. Mr. Joshi's submission is that prayer clause
(c) and (d) certainly survives and would now be the subject matter of
adjudication in the present proceedings. It is, hence, his submission that
the plea as urged on behalf of the respondents to dispose of this petition
as infructuous, needs to be rejected.
21. We have given our anxious consideration to the rival
contentions.
22. We may note that prayer clauses (a) and (b) of the petitions
are in regard to the challenge to the settlement orders, which according to
the petitioners were patently illegal being beyond the authority and power
of the SEBI to accept any settlement. Prayer clause (c) of the petition is to
the effect that an order be passed, against the SEBI to take necessary and
appropriate steps to ensure that full and true disclosure as required under
the applicable Securities Laws is made in respect of the actual promoters
holding in respondent No.2 - BNL, and for further directions to the SEBI
to ensure all consequential compliances with Securities Laws, including
but not restricted, to compliance with MPS norms by respondent Nos. 2
to 9.
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23. In the context of such prayer, we may observe that on perusal
of the show cause notice, a copy of which is produced for perusal of the
Court on behalf of the SEBI, we find that non-compliance interalia of the
Rules and Regulations of SEBI are subject matter of the show cause notice,
and any plea in opposition as may be urged by BNL and respondent Nos.3
to 9 (the majority shareholders), would fall for consideration in the
adjudication of the show cause notice. This would, however, not mean that
the petitioners in their capacity as shareholders, would be dis-entitled or
would cease to have any locus to have information / documents in regard
to such affairs of BNL and to seek compliance of the Rules and
Regulations and the norms of the SEBI by respondent No.2 and those
controlling BNL.
24. In our opinion, considering the fact that the settlement order
itself has been revoked, the SEBI now needs to resort to a lawful course of
action, to adjudicate the show cause notice, so as to reach to a conclusion,
whether respondent Nos.2 to 9 have violated the provisions of the Act,
Rules and Regulations, as alleged in the show cause notice and the
complaints of the petitioners. We are thus of the opinion that in the facts
and circumstances of the case, it would be appropriate that the SEBI
expeditiously takes forward the show cause notice and comes to an
appropriate conclusion, in accordance with law, in regard to the allegations
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as made in regard to respondent Nos.2 to 9 in the show cause notice.
25. However, there is some substance in what has been urged on
behalf of the petitioners as noted by us above on the question of
petitioners entitlement to the documents as per our orders dated 23
October, 2023. It is quite intriguing to note the approach of the SEBI, as
clearly seen from the events which had transpired, and from the obstinate
stand taken by the SEBI in not furnishing the documents to the
petitioners in relation to respondent Nos.2 to 9. There has been persistent
non-compliance of such orders passed by the Court, despite the Special
Leave Petition of the SEBI being rejected, is too far to be imagined nay
totally unacceptable. SEBI is a public body, it is required to act in public
interest, it needs to comply with the orders passed by this Court, more
particularly, when the orders have attained finality in the facts and
circumstances of the present case, cannot be countenanced that SEBI
would resort to such actions only when and / or, as may be, commanded
by respondent Nos.2 to 9. Such approach of the SEBI, in our opinion,
would cause a dent to the confidence, the investors would repose in the
SEBI, which needs to function solely to further the object and purpose, for
which it is created by the Act of the Parliament. We are constrained to
make such observations being quite astonished by the stand taken by SEBI
from time to time, in relation to the present proceedings. Even assuming
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that the petitioners are not correct on their contentions on the different
stands being taken by the SEBI, however, the SEBI needs to be consistent
and firm in whatever it proposes to do in such eventuality, and above all,
such actions must inspire confidence of the investors as also of the Court.
In fact, in the varied stands taken by the SEBI, we are reminded of the
celebrated observations of Mr. Justice Y. V. Chandrachud in S. B.
Patwardhan & Ors. vs. State of Maharashtra & Ors. 1 when His Lordship in
the facts of the said case observed that the State was acting according to
the moods of the passing moment. The said observations needs to be
noted, which reads thus:-
"Evidently, the State governments did not know their own mind
and being unable to take up a firm and consistent stand, they
defended the various Writ petitions filed against them by their
employees according to the mood of the passing moment. That
must be deprecated."
26. The present case appears to be not different from what has
been observed by us in relation to the actions of the SEBI, further
discussion on this aspect would fortify our observations.
27. We may observe that when the final hearing of the present
proceedings was to commence on 5 September 2023, SEBI had taken a
position that the impugned settlement orders can be reconsidered as there
1 AIR 1977 SC 2051
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was a change in the Whole Time Members (WTM) of SEBI, and
accordingly, the proceedings can be put to an end. We had accordingly
passed the following order:-
1. We had placed this matter for final hearing today at 2.30 p.m.
2. Mr. Seervai, learned Senior Counsel for the Petitioners, has
commenced his arguments. At the midst of the hearing Mr. Bhatt,
learned Senior Counsel for the Respondent No.1-SEBI, has stated
before us that there was a change in the Whole Time Members (WTM)
of the SEBI. He states that SEBI would now be in a position to take a
decision as to whether the settlement order in question (Exhibit- "A")
has stood revoked. Mr. Bhatt would contend that if the settlement
order stands revoked, in such event, further adjudication of the present
petition would not be called for.
3. We are of the opinion that it would be appropriate to know the
stand of the SEBI. Depending as what the SEBI informs the Court on
the adjourned date of hearing, further course of action on the
proceedings can be decided.
4. Accordingly, stand over to 13th September 2023 at 2.30 p.m.
(emphasis supplied)
However, on the adjourned date of hearing, that is, on 13 September
2023, the Court was informed by SEBI that the settlement orders cannot
be revoked. The order dated 13 September 2023 reads thus:
"1. Today the matter is placed before us on the backdrop of our order
dated 5th September 2023. From what has been heard from the learned
Counsel for the parties, it appears that the issues as raised in the
petition cannot be resolved. The parties agree that the proceedings
would be required to be now heard and decided.
2. We, accordingly, place the proceedings for hearing on 4th October
2023 at 2.30 p.m. to be followed on 5th October 2023 and 9th October
2023."
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28. Now ultimately SEBI has revoked the settlement orders, by
its order dated 10 November 2023.
29. To our mind, it appears to be not meaningless, that the SEBI
from 23 October 2023 has not complied our order directing that the
documents be furnished to the petitioners. As pointed out on behalf of
the petitioners, SEBI has resorted to all possible efforts, not to comply with
the order dated 23 October, 2023. Even after the Special Leave Petitions
of BNL and Vineet Jain - respondent no.9 were dismissed by the Supreme
Court, the documents were not furnished to the petitioners. SEBI
thereafter assailed the orders dated 23 October 2023 before the Supreme
Court resulting in dismissal of its Special Leave Petition. Now the SEBI is
before the Court taking a stand that the documents need not be furnished
and the petitions be disposed of as they are rendered infructuous. We
wonder, as what can weigh with the SEBI, in not complying our order
dated 23 October, 2023 and not furnishing the documents to the
petitioners, except to benefit respondent Nos.2 to 9. Even such plea that
the SEBI would have a legal right or an entitlement, not to furnish
documents to the petitioners as ordered by us, was the core issue under
our orders, being urged by the SEBI before the Supreme Court, apart from
the plea of interpretation of Regulation 29 of the 2018 Regulation.
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30. Be that as it may, considering all these circumstances, we are
of the clear opinion that the entitlement of the petitioners to our order
dated 23 October 2023, would certainly subsist and the petitioners need
to be provided such documents by the SEBI. Moreover, not providing
such documents, merely on the ground of the subsequent development
that the settlement orders now stands revoked, would completely be an
untenable proposition and contrary to our orders dated 23 October 2023,
as confirmed by the Supreme Court. Although respondent Nos.2 to 9 in
their business interest may overlook the solemnity of the orders passed by
this Court, however, SEBI in its public character cannot take the same
approach. In these circumstances, the order dated 23 October 2023
cannot be rendered nugatory. The SEBI is required to holistically consider
such orders and not merely in the context of the settlement proceedings, as
such order considers the substantive rights of the petitioners, who are
shareholders of respondent No.2 - BNL, having equal rights to that of
respondent nos. 3 to 9. SEBI cannot have different yardstick between
shareholders. We therefore, direct that our order dated 23 October 2023,
which has attained finality, needs to be forthwith complied by SEBI.
31. However, on the issue whether the Court should adjudicate
prayer (c) and (d) of the petitions, taking an overall view of the matter, and
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that, now the show cause notice is required to be taken forward, we are of
the opinion that in so far as such reliefs are concerned, the same needs to
be kept open to be agitated by the petitioners at the appropriate time in
appropriate proceedings in the context of the decision which may be taken
by the SEBI on the show cause notice. We accordingly, propose to dispose
of these petitions by the following order:-
ORDER
(I)The petitioners are entitled to the benefits of the order dated
23 October 2023 as confirmed by the Supreme Court, by
rejection of the Special Leave Petitions of respondent Nos.2 and
9 and thereafter, by rejection of the Special Leave Petition filed
by the SEBI.
(II) The order dated 23 October 2023 passed by this
Court, be forthwith complied by SEBI.
(III) All the contentions of the petitioners and of the
respondents on issues in regard to prayer clauses (c) and (d) are
expressly kept open to be agitated at appropriate time in
appropriate proceedings.
(IV) The petitions stand disposed of in the above terms. No
costs.
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32. At this stage, Mr. Bhatt, learned senior counsel appearing for
the SEBI has prayed for stay of the order to the extent that it directs
compliance of our order dated 23 October 2023 for the documents to be
forthwith furnished by the SEBI to the petitioners. In the facts and
circumstance of the case and more particularly for the reasons as set out in
our order, we reject such prayer.
(JITENDRA JAIN, J.) (G. S. KULKARNI, J.)
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