Securities and Exchange Board of India Vs. Pan Asia Advisors Ltd. & ANR.
[Civil Appeal No.10560 of 2013]
Fakkir Mohamed Ibrahim Kalifulla, J.
This appeal at the instance of the Securities and Exchange Board of India (hereinafter called "SEBI") is directed against the majority judgment and final order dated 30.09.2013, passed by the Securities Appellate Tribunal, Mumbai, in Appeal No.126 of 2013.
The short question that arises in this appeal relates to the jurisdiction of SEBI under the Securities and Exchange Board of India Act, 1992, (in short "SEBI Act, 1992") to initiate proceedings against the respondents as Lead Managers to the Global Depository Receipts (in short "GDRs") issued outside India based on investigations held by it and on its conclusion that in relation to transaction of sale/purchase of underlying shares released on redemption of GDRs in the securities market in India, the Lead Managers had committed fraud on the investors in India and that such fraudulent intention existed at every stage of the GDR process till sale/purchase of underlying shares in the securities market in India.
The further question that arises for consideration is that if the said question is answered in the affirmative, whether the SEBI was justified in passing its impugned order dated 20.06.2013, debarring the respondents herein from rendering services in connection with instruments that are defined as securities under Section 2(h) of the Securities Contracts (Regulation) Act, 1956 (in short "SCR Act, 1956") and such debarment for a period of 10 years prohibiting the respondents from accessing the capital market directly or indirectly under SEBI Act, 1992 and the regulations framed there under was justified. When the order of SEBI dated 20.06.2013 was challenged by the respondents before the Securities Appellate Tribunal, Mumbai in Appeal No.126 of 2013, the Chairman of the Tribunal in his minority view upheld the order of the SEBI while the members of the Tribunal by way of their majority view set aside the order of SEBI debarring the respondents.
It was in the above stated background SEBI has come forward with this appeal before us. Therefore, for us, the only question to be decided is as to whether SEBI had jurisdiction in passing the impugned order dated 20.06.2013 debarring the respondents for a period of ten years in dealing with securities while considering the role played by the respondents as Lead Managers relating to the GDRs issued by six companies who issued such GDRs. In the counter affidavit filed on behalf of the first respondent, it is stated that the said respondent's name has been changed and is now known as Global Finance & Capital Limited, having its office International Corporate House, Monster House, 42 Mincing Lane, London and represented by its Executive Officer Ms. Neha Dua.
Therefore, whatever stated with reference to first respondent and applicable to it in this order shall mutatis mutandis apply to the said entity namely Global Finance & Capital Limited in all respects. In order to appreciate the issue raised, it will be necessary to explain the manner in which the respondents dealt with the GDRs issued by those six entities in the foreign market and the nature of allegation which according to SEBI was found true and which led SEBI to conclude that such manner of dealing of the GDRs of those companies by the respondents as Lead Managers did have a serious impact in the securities market of Indian origin and consequently it had jurisdiction to proceed against the respondents.
In the present appeal, according to SEBI the respondents as Lead Managers dealt with the GDRs issued by six entities viz.,
(1) Asahi Infrastructure & Projects Ltd (Asahi)
(2) IKF Technologies Ltd. (IKF)
(3) Avon Corporation Ltd (Avon)
(4) K Sera Sera Ltd (K Sera)
(5) CAT Technologies Ltd (Cat) and
(6) Maars Software International Ltd (Maars).
Mr. C.U. Singh, learned senior counsel who appeared for SEBI submitted that since the nature and manner of handling of the GDRs by the respondents as Lead Managers were identical relating to all the six companies, for the purpose of noting the nature of such dealings we can restrict it to the first company viz., Asahi and that the same can be applied mutatis mutandis in respect of the six other companies. We are therefore referring to the details of the GDRs issued by Asahi and the manner in which such issuance of GDRs were disposed of and ultimately converted into shares and sold out in the Indian Market. According to SEBI, Asahi issued equity shares of Rs.29,91,00,000/- of Rupee one each at the value of 2 USD on 29.04.2009. Such shares issued resulted in allotment of 29,91,000 GDRs containing 29,91,00,000 equity shares.
The total value of the GDRs issued was 5.98 million USD. Such GDRs issued were fully subscribed and closed on 29.04.2009 itself. Prior to the GDRs issue, Asahi had 3,71,96,000 fully paid equity shares and GDRs issued was about eight times of Asahi's outstanding share capital. The first respondent herein was appointed as the Lead Manager for the GDR issued and the entirety of the share capital of the first respondent was held by the second respondent. While referring to the GDR issued by Asahi and the appointment of the respondents as its Lead Managers, it will be necessary to refer to two other entities viz., Vintage and Euram. The second respondent is the Managing Director of Vintage and Euram is the foreign bank lender.
It was mainly stressed at the instance of SEBI that there was a loan taken from Euram by Vintage for subscribing to the GDRs of Asahi and that the same was managed by a loan and pledge agreement signed not only by Vintage and Euram but by Asahi as well. According to SEBI, the second respondent herein structured the loan and pledge agreement to which Asahi, Vintage and Euram were signatories and the terms of the loan agreement as well as the pledge agreement were intertwined and they were the keys to the alleged fraudulent issuance and subscription of GDRs.
It was pointed out that the loan agreement was dated 21/22.04.2009 between Euram and Vintage bearing agreement No.K210409-003 i.e. eight days before the issuance of GDRs themselves. The second respondent signed the loan agreement as Managing Director of Vintage under the loan agreement, Euram sanctioned a loan of 59,82,000 USD to Vintage, the borrower to enable Vintage to take Asahi's GDRs and thereafter to transfer to Euram A/c No.540030. However, as a matter of fact, it was found that A/c No.540030 in Euram was Asahi's account for depositing the proceeds of GDRs. Clause 6.1 of the loan agreement stipulated for creation of a pledge of
(A) the securities held in the borrower's account No.540030 (in reality it was Asahi's account) at Euram
(B) Pledge of that very account No.540030 (pledging of Asahi's account itself) for supporting the borrower under the loan agreement. The pledge agreement was dated 21.04.2009, between Asahi and Euram signed by Mr.Laxminarayan Rathi in his capacity as Managing Director of Asahi on 28.04.2009. It is relevant to note that family members of Mr.Rathi are the promoters of the Asahi. It was pointed out on behalf of SEBI that Mr.Rathi did not inform Bombay Stock Exchange (BSE) or the company or the shareholders about the signing of the pledge agreement in favour of Euram. Therefore, Asahi was the Pledgor with Euram Bank under the pledge agreement.
The preamble of the pledge agreement after referring to the loan agreement between Euram and Vintage stated that the pledgor agreed to the terms of loan agreement and a copy of the loan agreement was also delivered to pledgor and in effect having regard to such nature of agreement as between Asahi and Euram as pledgor and pledgee and the borrower made by Vintage from Euram for whom loan was advanced, Euram got it secured by the pledge of GDR themselves issued by Asahi. Further Clause 2.1 of pledge agreement provided for pledging of the pledgor's assets as collateral security for due repayment of the loan under the loan agreement for the value of 59,82,000 USD. Clauses 6.1, 6.2 and 6.3 of the pledge agreement gave full rights to the bank Euram to realise its loan agreement by realisation of pledged securities.
By virtue of the coalesce manner of the loan agreement and pledge agreement, the resultant position was found to be a common ownership of bank account by the borrower, subscriber and the issuing company added to a guarantee by the issuing company for the loan taken by the subscriber to its GDRs. According to SEBI such a nature of transactions as between Asahi, Vintage and Euram disclosed central and determining features of a scheme to fraudulently raise fake capital by the issuing company.
At this juncture, we want to make it very clear that we are not expressing any opinion as to the correctness or otherwise of the stand of SEBI at this moment. We are only concerned with the question as to the jurisdiction of SEBI to exercise its powers under the provisions of the SEBI Act, 1992 and SCR Act, 1956 read along with the regulations framed under the provisions of SEBI Act, 1992 to proceed against the respondent(s) as the Lead Manager for the so called fraudulent transaction indulged in by the respondents.
As far as the nature of fraud alleged is concerned, according to SEBI the investors of GDR of Asahi were found to be Messers Greenwich Management Inc and Tradetec Corporation. Greenwich was stated to have paid 29,82,000 USD for the purchase of 14,91,000 GDRs and Tradetec Corporation paid 30,00,000 USD for 15,00,000 GDRs. It is further pointed out that while Greenwich claimed to have its office at Hong Kong and Tradetec at Singapore, inspite of its best efforts, SEBI could not contact both the addresses furnished by the above investors as it turned out ultimately that the addresses were non- existent or the said addresses do not belong to them. It also came to the knowledge of SEBI that the said investors had investments in several other GDRs of Indian Companies.
Apart from the above, it was pointed out on behalf of SEBI that on 01.06.2009, Asahi informed BSE about allotment and creation of 29,91,00,000 equity shares and 29,91,000 GDRs to foreign entities viz., Greenwich and Tradetec for conversion. Based on such information, BSE made it public to retail investors. It was however found that in reality the GDRs were subscribed by Vintage in connivance with Asahi and the proceeds simultaneously pledged with Euram. On 15/16.07.2009, BSE stated to have authorised the trading of 29,91,000 GDRs in the Indian Market. After the issuance of GDRs, Vintage became the sole holder of the said GDRs and thereby it became majority share holder of Asahi i.e. 88.94 % shareholding. Vintage transferred the GDRs to two entities called IFCF (India Focus Cardinal Fund) and KII Limited between 17.08.2009 and 15.06.2011.
Another entity called Credo an associate company of KII limited had an agreement with Vintage for dealing with the GDRs of Asahi. As per the said agreement Vintage gave a loan of 20,00,000 USD to Credo to further lend it to KII Limited to enable KII limited to purchase the securities of several Indian companies including Asahi. The agreement enabled KII limited to convert GDRs into underlying shares and in fact shares were sold in the Indian market. Such sale effected and the proceeds collected were used to purchase further securities and to repeat the said process until KII limited decided to terminate the agreement. Credo was paid commission by Vintage and the agreement ensured Vintage to take full liability of the dealings of KII limited in the GDRs of Indian Companies and any loss by KII limited to be borne by Vintage.
The said agreement was also signed by the second respondent on behalf of Vintage. Cancellation of Asahi GDRs said to have started from 19.08.2009 and completed by 14.06.2011. The shares were released and credited to the Demat account of IFCF and KII limited. Between 20.08.2009 and 15.06.2011, 49.51 % of GDRs were cancelled by IFCF and KII limited. The underlying shares received by IFCF and KII limited were sold in the Indian Market. On behalf of SEBI it was also submitted that when the utilization of GDR proceeds by Asahi was investigated, it was found that most of the documents submitted by Asahi to SEBI were inconsistent with the statements that were available in public domain.
According to SEBI, it summoned Asahi to furnish details of the usage of proceeds of GDR issued by it, the bank statements, agreement copies etc., Based on the information furnished by Asahi, SEBI found that there were transfer of funds by Asahi to its subsidiary viz., Asahi FZE in Dubai, that Asahi transferred 26,73,000 USD to Asahi FZE by selling the GDRs, the total realisation came to 59,62,136 USD i.e. 99.66% of the total loan taken by Vintage from Euram.
By making further reference to the transactions as between Asahi FZE and Vintage and another entity called Ababil which belonged to the respondent, transfer of 44.68% of GDR issued in favour of the respondents which was suspected by SEBI as the modus operandi adopted by the respondents for repayment of loan taken by Vintage to Euram. It was further alleged that Asahi failed to provide vital information relating to Asahi FZE and other transaction details. It is claimed on behalf of SEBI that flow of funds post GDR revealed clandestine manner of GDR dealings by vintage and Asahi.
Reliance was also placed on false information about pledge and loan agreement and concealment of information regarding utilisation of funds by foreign subsidiary of Asahi which supported to great extent the suspicion of SEBI that part of proceedings of GDR issued were routed back to the entities belonging to the respondents. It was also alleged on behalf of SEBI that Asahi did not disclose details of outstanding GDRs in its quarterly disclosure of share holding pattern to Exchanges and that as per BSE website the enquiry held with custodians shows that nil for Asahi even after issuance of GDR issue.
It was therefore claimed that the falsification of information regarding pledge and loan agreement and concealment of information regarding utilisation of funds by foreign subsidiary fully supported the suspicion of SEBI that part of the proceeds of GDR issue were routed back to the entities belonging to the respondents.
In conclusion, it was said that Asahi having executed fraudulent transaction of claiming subscription of GDRs by two foreign investors, while it was only purchased by the Lead Managers viz., the respondents and their related entities and finding the proceeds having been encumbered due to the underlying loan taken by the respondent(s) finally received in India not more than 30% of the money raised and the remaining funds were paid out to various parties without any clear purpose of such transfers mentioned in the books of the company apart from highly material events not explaining clearly in the financial statement of the company which were not even disclosed to the market and therefore the share holders of Asahi were adversely affected and without warning impacted seriously which resulted in slide in prices on account of large sale of shares upon cancellation of GDRs.
It is on the above said basis, SEBI took the stand that it had every jurisdiction to proceed against the respondents for the alleged fraudulent manner of dealing with the GDRs issued by Asahi which had serious impact in the share holding pattern of Asahi in the Indian market which really hoodwinked the Indian investors. Mr. C.U. Singh the learned senior counsel appearing for the SEBI after making reference to the above facts and also the statutory provisions submitted that the respondents as Lead Managers were involved in the above alleged fraudulent transactions of GDRs whereby without any actual inflow of funds into the issuing company, the said company was successful in issuing large amount of GDRs which gave a false respectable appearance to the financial statement of the company while in reality by making few book entries it was shown as though large surge in the capital of the company was made.
It was contended that the so called initial investors to the GDRs were found to be fictitious which were created by respondent. It was contended that by making such fictitious book entries, the respondent(s) in reality ensured that the funds moved from one of its controlled company to another company also controlled by it and vice versa and ultimately the issuing company received post cancellation in Indian stock markets and the sale of such shares after its cancellation in the Indian market only resulted in reality the Indian investors and not the foreign investors who ultimately paid for the GDRs.
It was pointed out that as a consequence of such a fraudulent arrangement perpetuated by the respondents the Indian investors upon buying shares converted from GDRs unknowingly assisted the issuing companies to release the GDR subscription proceeds from encumbrance/pledge and thereby instead of capital being raised from foreign investors by way of issuance of GDRs, the Indian investors ultimately paid for part of the GDRs after the same were converted into underlying shares which were then sold in the Indian securities market to the investors. According to SEBI, this kind of transaction would defeat the purpose of issuance of GDRs which is to raise finance from foreign investors.
It was therefore contended that issuance of GDRs being sourced from authorised share capital of a company listed in the Indian Stock Exchanges, any structuring or manipulation related to GDRs will have a direct impact on the stocks of the company trading in Indian market, that the two way fungibility scheme for GDRs allow for conversion of GDRs in Indian market and vice versa and impact of such issuance, cancellation /conversion and sale/transfer of shares so converted will have a direct bearing on the securities market in India. It was further contended that the material issue was whether the arrangement by which the respondents as Lead Managers indulged in the transaction of GDRs of the issuing company of the Indian origin by creating a pledge on the proceeds thereof to enable a foreign bank to lend to foreign investors will have to be tested in the anvil of Indian law as the GDRs are always supported by the underlying Indian shares.
It was also pointed out that in the course of the hearing the respondents clarified that the disbursement of loan by the foreign financial institution actually occurred immediately subsequent to the execution of pledge agreement by Asahi and thereby made it clear that the loan agreement and pledge agreement drew strength from each other and were intricately connected to the transaction. It was also noted by SEBI based on the uncontroverted factual scenario that it took eight months for the issuing company viz., Asahi to utilise the GDR proceeds as till then the investor viz., Vintage could not repay the loan borrowed by it from Euram which borrowal was fully and mainly supported by the pledge agreement created by Asahi in favour of Euram.
In this context, heavy reliance was placed upon Section 77(2) of the Companies Act which prohibited any public company or private company which is subsidiary to a public company to give directly or indirectly by means of a loan, guarantee etc., any financial assistance for the purpose or in connection with purchase or subscription made or to be made by any person for any share in the company or in its holding company. Reliance was also placed upon the provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practice Relating to Securities Market) Regulations, 2003 (in short "2003 Regulations") which prohibited such transactions.
According to SEBI the existing share holders and prospective investors were projected of the positive dose that the issuing company had raised foreign capital through GDRs but were completely unaware of the activities of respondents as Lead Managers along with their connected entities in such GDR issues.
It was the case of SEBI that the very fact that the GDRs were issued pursuant to the alleged fraudulent arrangement entered into by the respondents through Vintage that the initial investors as declared by the respondents largely did not exist, as a result of which, the investors in India were made to believe (falsely) that the stocks of issuing companies were highly valued by foreign investors. Mr. C.U. Singh therefore contended that having regard to the nature of transaction of the GDRs of the issuing companies of Indian origin in the global market since had a direct bearing on the Indian investors and such transactions were found proved by SEBI had serious impact on the Indian market, SEBI was fully justified in assuming jurisdiction and thereby having passed the order of debarment in the order dated 20.06.2013.
To support his submissions, Mr. C.U. Singh learned senior counsel for SEBI also referred to various provisions of the SEBI Act, 1992, SCR Act, 1956 and the Regulations framed under the provisions of the SEBI Act, 1992. In particular he relied upon Section 2(i) of SEBI Act, 1992 read along with Section 2(h) of SCR Act, 1956 which defines "securities" and contended that GDRs are marketable securities as defined in Section 2(h)(i) and
(iii) of SCR Act, 1956. By referring to Section 2(j), the definition of Stock Exchange in SCR Act, 1956 as well as Section 11(2) and (4) of SEBI Act, 1992, learned counsel contended that SEBI has been invested with enormous powers to check buying, selling or dealing in securities through stock exchanges which power having regard to the vide definition of securities under the SCR Act, 1956 would include any fraudulent transactions relating to GRDs which are always supported by the underlying shares.
The learned senior counsel further pointed out that such powers of the Board have been clearly set out in Section 11B as well as 11C read along with Section 12 of the SEBI Act, 1992. The learned senior counsel by making reference to Section 12A of SEBI Act, 1992 which prohibits manipulative and deceptive devices relating to insider trading etc either directly or indirectly, SEBI have every jurisdiction to proceed against the respondents when once it came to light that respondents indulged in manipulative devices in dealing with the underlying shares of the GDRs by hoodwinking the investors and by making the issuing companies themselves to pledge their own investments for the purpose of advancing loan for the investment made by Vintage, which according to SEBI also belong to the respondents who are the Lead Managers who dealt with the GDRs of the issuing company Asahi.
According to the learned senior counsel by virtue of the alleged fraud played by the respondent(s) the Indian investors were the victims for whom SEBI is the custodian and the nature of transaction indulged in by the respondent resulted in more than 140 million USD of fraudulent transaction. The learned senior counsel, therefore, submitted that the action of the respondents was in total violation of stock market regulation, it was in violation of Section 77(2) of the Companies Act and was a rank fraud on the share holders apart from such violations attracting the provisions of the Foreign Exchange Management Act, 1999 (in short "FEMA") and Reserve Bank of India (in short "RBI") regulations.
In support of his submissions, the learned senior counsel relied upon GVK Industries Limited and another v. Income Tax Officer and another - (2011) 4 SCC 36 paras 3 to 6 and para 124, Republic of Italy through Ambassador and Others Vs. Union of India and Others - (2013) 4 SCC 721, paras 14, 130 and 139, Chairman, SEBI v. Shriram Mutual Fund and another (2006) 5 SCC 361 paras 15, 17, 19, 33 to 36 and Union of India and Others v. Dharamendra Textile Processors and Others - (2008) 13 SCC 369 paras 2, 3, 13 and 20. As against the above submissions Mr. Shyam Divan, learned senior counsel appearing for the respondents raised several points for consideration. The points raised by learned senior counsel for the respondents are:
a) SEBI is a creature of a Statute under Section 3 of SEBI Act, 1992 and its scope and powers are, therefore, defined by the Statute.
b) SEBI Act, 1992 extends to the whole of India and extra jurisdictional matters are not covered by it and as a creature of a Statute SEBI cannot operate beyond India.
c) PFUTP being delegated regulation/subordinate regulation under SEBI Act, 1992 cannot reach beyond its territorial jurisdiction.
d) SEBI functions as defined under Section 11(1) and controlled by the words in that Section which specifically use the expression "subject to the provisions of the Act".
e) Both the respondents are registered with the Financial Conduct Authority (UK) and therefore they are the authorities which can control the respondents and SEBI has no plenary jurisdiction over them.
f) SEBI has no subject matter jurisdiction over GDR though the powers under FEMA regulations/schemes and RBI directions and the authorities specified may have jurisdiction to act and certainly not SEBI on the subject matter. Negatively the office manual of SEBI has nothing to do with the subject matter of GDR.
g) Material on records placed before the Tribunal disclosed that the activities of respondents were fully in compliance of local statutes of Austria and U.K.
h) The directions issued by SEBI to the respondents are extremely prejudicial.
Mr. Shyam Divan drew our attention to the stand of respondents 1 and 2 in their respective counter statements filed in this appeal and submitted that while the first respondent is the Lead Manager second respondent is not a Lead Manager and that both of them were not registered with SEBI or any other authority for the purpose of dealing with GDRs. The learned senior counsel contended that there is no obligation either on the first respondent or the second respondent under SEBI Act, 1992 or regulations or under any other Indian law including FEMA to make or disclose any information.
It was contended that the first and second respondent have not filed any information in order to state that false information was furnished to the Indian authorities with an intention to mislead them. According to the learned senior counsel, the disclosure to be made were the obligations of the issuing company relating to GDRs including the details about the foreign bank, foreign exchange etc., under the statutes in India. It was further submitted that under no statutory prescription first and second respondent are obligated to inform about the fund flow into India to SEBI. The fact that no such obligation exists even as Indian issuing company. It was contended that as Lead Managers the role of respondents 1 and 2 end with the listing of GDRs. In so far as trading, conversion, redemption etc., they have no role to play.
It was further contended that there is no lock in period for the GDR which is freely convertible, which may be converted and may not be converted which depends upon the decision of the investor. According to the respondents, they had no control over issuing companies which function independently in India and except commercial contractual relationship pertaining to GDR, the respondents had no relationship with the issuing company. The learned senior counsel submitted that it is not the case of SEBI that these companies were all bogus companies. The learned senior counsel drew our attention to certain core features of the GDR issues dealt with by respondents as Lead Managers and listed them as under:
"Core features of the GDR issues
1) GDRs were issued and were subscribed in full.
2) GDRs were dollar denominated and the monies received at the time of subscription was in USD.
3) The dollars stood credited in the issuer company's bank account maintained with Euram Bank. 4) This account with Euram Bank was opened by the issuer company.
5) Dollars in the issuer company's account (GDR subscription proceeds) became available to the issuer companies, albeit according to SEBI after "repayment of loan".
There was an 8 months delay in respect of Asahi with respect to free utilisation of the GDR proceeds.
6) The loans have been repaid.
7) As on 30.06.2012, though all loans were paid, all GDRs were not cancelled and certain GDRs remained intact.
8) The issuer companies received US Dollars and utilised the US Dollars by transferring them to their respective overseas subsidiaries or repatriating the funds to India." The learned senior counsel further pointed out that there was no requirement to bring the GDR proceeds into India or there is no time frame for such repatriation which are supported by the RBI Master Circular apart from the fact that there was no allegation that the funds were used for prohibited activities, viz., stock exchange transactions or real estate transactions prescribed under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 (in short "1993 Scheme").
Mr. Shyam Divan further contended that SEBI's own documents established that the GDR issues were subscribed in USD and the proceeds were available to the issuing companies and that in that process no violation of any Indian or overseas law was alleged against either the issuing company or the respondents. Mr. Shyam Divan then referred to Section 2(o) the definition of "foreign security", Section 2(za) the definition of "security" and Section 3 and contended that the said provisions under the FEMA are relevant which control any transaction pertaining to foreign security which means shares, stocks, bonds, debentures etc., which are denominated expressed in foreign currency. He also made reference to Section 6(3) wherein the RBI has been empowered to formulate regulations for prohibiting, restricting or regulating matters relating to transfer etc., of foreign security by a person who is resident in India as well as outside India.
Further reference was made to Section 13 of the said Act which prescribed the penalties for contravention of the provision of the Act and Section 36 for the authorities who have been empowered under the said Act for the enforcement of the provisions of the Act The learned senior counsel therefore contended that the GDRs will definitely fall within the definition of "foreign security" as defined in section 2(o) and "security" as defined in Section 2(za) and consequently with reference to any violation in dealing with the GDRs can be exclusively dealt with under the provision of FEMA and the SEBI or any of the provision of SEBI Act, 1992 will not have any application relating to GDRs.
The learned senior counsel referred to master circular on foreign investment in India dated 01.07.2011 of the RBI with particular reference to paragraph 8(F) of the said circular which deals with issues of shares by Indian companies under ADR/GDR as well as the form prescribed under Annexure 11 of the said circular by which the quarterly return are to be filed by the issuing company. The learned senior counsel pointed out that such procedure has been prescribed under the master circular under the provisions of the FEMA which takes care of the issuance of GDRs including two way fungibility provided under the said circular.
The learned senior counsel submitted that even such prescriptions under the master circular issued by the Reserve Bank of India or with reference to the control which the Act prescribed on "foreign security" and "security" which includes GDRs as defined under FEMA as well as the manner in which such issuance of foreign security are to be controlled by the RBI. In this context, Mr. Shyam Divan brought to our notice the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (in short "2000 Regulations") in particular Regulation 4, 5.1 along with Schedule I (4B), 5 and 6 and submitted that the scheme viz., 1993 Scheme got statutory flavour by virtue of the 2000 Regulations referred to above. Learned senior counsel also referred to Clarification 23 in the RBI guidelines for the limited two way fungibility under the 1993 Scheme as well as the guidelines for ADR/GDR issues by the Indian companies under Euro issue and submitted that the issuance of GDR by the issuing company and dealt with by the respondent(s) as Lead Managers fulfil all the requirements under FEMA, RBI Guidelines, 2000 Regulations under FEMA as well as 1993 Scheme and, therefore, there was no scope for SEBI to proceed against the respondents under the provisions of the SEBI Act, 1992 or SCR Act, 1956.
The learned senior counsel also brought to our notice the Depositary Receipts Scheme 2014 (in short "2014 Scheme") notified by the Central Government which mandates the authorities under the RBI and SEBI as well as Ministry of Corporate Affairs in the Ministry of Finance to implement the provisions of the said scheme. The learned senior counsel fairly pointed out paragraph 10 of the scheme which refers to market abuse, which states that "market abuse" means any activity prohibited under Chapter VA of the SEBI Act, 1992. By making reference to the said scheme learned senior counsel submitted that even the said scheme notified in the year 2014 cannot be invoked to rope in the respondents though it may empower SEBI to proceed against the issuing company.
The sum and substance of the submissions of the learned senior counsel for the respondents is that GDR is statutorily defined under Clause 2(c) of 1993 Scheme and 2000 Regulations which shows that cradle to grave GDR is outside India. The said submission was made on the footing that issuance of GDR is outside India, investor is outside India, market is outside India, investor bank is outside India, therefore, everything relating to GDR is outside India.
The contention was that both as a matter of law and fact the GDR operates outside India and that the respondents are covered only till the GDR is listed in the overseas and therefore, GDR is not a security covered by SEBI Act, 1992 as well as SCR Act, 1956. Consequently, SEBI had no jurisdiction or role to protect the interest of GDR investors or to regulate the GDR market. It is also submitted that by virtue of Section 1(2) of the SEBI Act, 1992, the SEBI can have control over the operation in the whole of India but not outside the country. It was contended that the various provisions referred to on behalf of the respondents under different statutes do not make express mention of GDR which was advisably so, because there was no impediment for including in the definition, because GDR was from cradle to grave outside India, whereas SEBI Act, 1992 is exclusively for transactions within Indian territory.
By making specific reference to Section 12 of the SEBI Act, 1992, it was contended that while it refers to investment advisors, market bankers whose registration is statutorily required, respondents as Lead Managers are not required to be registered because they are not dealing with local Indian securities. It was also contended that even SEBI do not contend that the respondents are obliged to register with SEBI. It was further contended that even under Section 12(1A), the respondents are not required to get registered with SEBI. The learned senior counsel relied upon the decision reported in GVK Industries Limited (supra) paragraphs 6, 108 and 124 to 126, and also relied on Haridas Exports v. All India Float Glass Manufacturers' Assn. and Others - (2002) 6 SCC 600 paragraphs 3, 18, 29, 33 to 39, 43, 46, 57 and 61.
Reliance was also placed upon Vodafone International Holdings BV v. Union of India and Another - (2012) 6 SCC 613 paragraphs 83-93, 387 and 408. To appreciate the submissions made by the respective counsel for the appellant as well as the respondents, in the forefront, we feel the following questions need our attention viz., What is GDR and whether it will fall under the definition of 'Securities' under Section 2(h) of SCR Act 1956 ?
How is it created ?
Why is it created ? After its creation, how is it dealt with ? After the disposal of GDRs in the global market what are the rights of its investors ?
What is the role played by a Lead Manager while dealing with GDRs in a foreign market ?
Who are all the parties who are involved in the creation, ownership and the cancellation of GDR ? Dealing with GDR, is it regulated by the statutory prescription of India or only by foreign laws ?
Post cancellation of GDRs what impact it can create on the issuing company and the investors of the Indian market ? In the event of any misfeasance or malfeasance in dealing with the GDRs whether SEBI can effectuate its control over those who are involved in such misfeasance or malfeasance?
To find an answer to the above questions we can make reference to Regulation 5 (1) and (2) as well as Schedule I of the 2000 Regulations which has been framed in exercise of the powers conferred by Clause (b) of sub-section 3 of Section 6 and Section 47 of the FEMA.
Regulation 5 (1) and (2) and paragraph 4 (1), (2) & (3) and Paragraph 6 of Schedule I are relevant which are as under:--
"Regulation 5.
Permission for purchase of shares by certain persons resident outside India :-
(1) A person resident outside India (other than a citizen of Bangladesh or Pakistan or Sri Lanka) or an entity outside India, whether incorporated or not, (other than an entity in Bangladesh or Pakistan), may purchase shares or convertible debentures of an Indian company under Foreign Direct Investment Scheme, subject to the terms and conditions specified in Schedule 1.
(2) A registered Foreign Institutional Investor (FII) may purchase shares or convertible debentures of an Indian company under the Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 2.
* * * Paragraph 4. Issue of Shares by International offering through ADR and/or GDR
(1) An Indian company may issue its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing Global Depository Receipts (GDRs) and/ or American Depository Receipts (ADRs),
Provided the Indian company issuing such shares
(a) has an approval from the Ministry of Finance, Government of India to issue such ADRs and/or GDRs or is eligible to issue ADRs/ GDRs in terms of the relevant scheme in force or notification issued by the Ministry of Finance, and
(b) is not otherwise ineligible to issue shares to persons resident outside India in terms of these Regulations, and
(c) the ADRs/GDRs are issued in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Central Government thereunder from time to time.
(2) The Indian company issuing shares under sub-paragraph (1), shall furnish to the Reserve Bank, full details of such issue in the form specified in Annexure 'C', within 30 days from the date of closing of the issue.
(3) The Indian company issuing shares against ADRs/GDRs shall furnish a quarterly return in the form specified in Annexure 'D' to Reserve Bank within fifteen days of the close of the calendar quarter.
* * * Paragraph 6. Dividend Balancing Where a company is engaged in any of the industries in the consumer goods sector, specified in Annexure E, or in any other activity where the condition of dividend balancing has been stipulated in terms of the provisions of Industrial Policy and Procedures notified by Secretariat for Industrial Assistance, the cumulative outflow of foreign exchange on account of payment of dividend over a period of seven years from the date of commencement of commercial production to investors outside India shall not exceed cumulative amount of export earning of the company during those years.
Provided that
(a) the restriction under this paragraph shall not apply
i) in respect of shares held in such a company by International Finance Corporation (IFC), the Deustche Entwicklungs Gescelschaft (DEG), the Commonwealth Development Corporation (CDC) and Asian Development Bank (ADB).
ii) to a company that has completed a period of seven years from the date of commencement of commercial production,
(b) in case of an existing company that has issued fresh equity to persons resident outside India under these Regulations, the restriction shall apply to the fresh shares from the date of their issue." A reading of Regulation 5 read along with paragraphs (4) & (6) of Schedule I of 2000 Regulations, as rightly pointed out by Mr.Shyam Divan gives a statutory recognition to the 1993 Scheme which came into force w.e.f 01.04.1992. It is needless to state that the said Scheme came to be issued by the Central Government in exercise of its executive powers under Article 73 of the Constitution of India. Paragraph 4 (1), (2) & (3) and paragraph 6 of Schedule I of the 2000 Regulations in effect authorises the issuance of GDRs and the Statutory requirements to be fulfilled for the issuance of such GDRs to have a valid sanction under law of the Indian origin.
Having noted such provisions framed under the 2000 Regulations, when we refer to paragraph 2(a), (c), (d) and (e) of 1993 Scheme, one will get a clear idea about how GDRs are issued. Paragraph 2(a) defines "Domestic Custodian Bank" to mean a banking company which acts as a custodian for the ordinary shares or foreign currency convertible bonds of an Indian company which are issued by it against Global Depository Receipt or certificates. Paragraph 2(c) defines Global Depository Receipts to mean any instrument in the form of a depository receipt or certificate (by whatever name it is called) created by an Overseas Depository Bank outside India and issued to non-resident investors against the issue of ordinary shares or foreign currency convertible bonds of the issuing company.
Paragraph 2(d) defines an issuing company to mean an Indian company permitted to issue Foreign Currency Convertible Bond or ordinary shares of that company for the purpose of creation of Global Depository Receipts.
Paragraph 2(e) defines Overseas Depository Bank to mean a bank authorized by an issuing company to issue Global Depository Receipts against issue of ordinary shares of the issuing company. It will be necessary to refer to paragraph 3(1) and 3(1)(iii) and (iv) and 3(2) and 3(3) of 1993 Scheme in order to get a clear picture as to what is Global Depository Receipt and how it is issued. Under paragraph 3(1) any issuing company desirous of raising foreign funds by issuing Foreign Currency Convertible Bonds or ordinary shares for equity issues through Global Depository Receipt is required to obtain prior permission of the Department of Economic Affairs, Ministry of Finance, Government of India.
Under paragraph 3(1)(iii) an approved intermediary under the scheme would be an Investment Banker registered with the Securities and Exchange Commission in USA or under Financial Services Authority in UK or appropriate regulatory authority in Germany, France, Singapore or in Japan. Under paragraph 3(1)(iv) such issues would need to confirm to the Foreign Direct Investment Policy and other mandatory statutory requirement and detailed guidelines issued in this regard.
The provisions of paragraph 4(B) of Schedule I of 2000 Regulations as notified by the RBI vide Notification No.FEMA 41/2001-RB dated 02.03.2001 should also be adhered. Under paragraph 3(2), an issuing company seeking permission under sub-paragraph I should have a consistent track record of good performance (financial or otherwise) for a minimum period of three years on the basis of which an approval of finalizing the issue structure would be issued to the company by the Department of Economic Affairs, Ministry of Finance.
Under paragraph 3(3) on the completion of the finalization of the issue structure in consultation with the Lead Manager to the issue, the issuing company shall obtain the final approval for proceeding ahead with the issue from the Department of Economic Affairs. Under paragraph 3(4) the Foreign Currency Convertible Bonds shall be denominated in any convertible foreign currency and the ordinary shares of an issuing company to be denominated in Indian rupees. Under paragraph 3(5) when an issuing company issues ordinary shares or bonds under the 1993 Scheme, that company should deliver the ordinary shares or bonds to a Domestic Custodian Bank, who will in terms of the agreement instruct the Overseas Depository Bank to issue Global Depository Receipt or a certificate to non-resident investors against the shares or bonds held by the Domestic Custodian Bank.
A Global Depository Receipt may be issued in the negotiable form and may be listed on any international stock exchange enabling the investor for trading outside India under paragraph 3(6). Under paragraph 3(7) the provisions of any law relating to issue of capital by an Indian company would apply in relation to the issuance of Foreign currency convertible bonds or the ordinary shares of an issuing company and the issuing company should obtain necessary permission or exemption from the appropriate authority under the relevant law relating to the issue of capital. For this purpose, Sections 55A and 77(2) of the Companies Act are relevant which are to be followed. The issue structure of GDRs is governed by paragraph 5 of 1993 Scheme.
A Global Depository Receipt can be issued for one or more underlying shares held with the Domestic Custodian Bank. The GDRs may be denominated in any freely convertible foreign currency. The ordinary shares under the GDRs will be denominated only in Indian currency. The issues viz., public or private placement, number of GDRs to be issued, the issue price, rate of interest payable on foreign currency convertible bonds, the conversion price, coupon and the pricing of the conversion options would be decided by the issuing company with the Lead Manager to the issue.
There would be no lock-in period for the GDRs issued under this scheme. Under paragraph 6, the GDRs issued under this Scheme may be listed on any one of the Overseas Stock Exchanges or over the counter exchanges or through Book Entry Transfer System prevalent abroad and such receipts can be purchased, possessed and freely transferable by a person who is a non- resident within the meaning of Section 2(q) of the Foreign Exchange Regulation Act, 1973 and subject to the provisions of the said Act. Paragraph 7 of the Scheme deals with the transfer and redemption. Under paragraph 7(1), a non-resident holder of GDR may transfer those receipts or may ask the overseas Depository Bank to redeem those receipts. In the case of redemption Overseas Depository Bank should request the Domestic Custodian Bank to get the corresponding underlying shares released in favour of the non-resident investor for being sold directly on behalf of the non-resident on being transferred in the books of account of the issuing company in the name of non-resident.
Under paragraph 7(3), on redemption, the cost of acquisition of shares under lying the Global Depository Receipts should be reckoned as the cost on the date on which the Overseas Depository Bank advises the Domestic Custodian Bank for redemption. The price of the ordinary shares of the issuing company prevailing in the Bombay Stock Exchange or the National Stock Exchange on the date of advice of redemption should be taken as the cost of acquisition of the underlying ordinary shares.
A combined reading of paragraphs 2(a), (c), (d) and (e) shows that the Global Depository Receipts are issued by a company in India based on the ordinary shares deposited with the domestic custodian bank and issued by the corresponding overseas depository bank depending upon the extent of ordinary shares held by the Domestic Custodian Bank. Once such Global Depository Receipts are issued by the Overseas Depositary Bank, which has the approval of the appropriate authorities of the Indian origin as well as appropriate regulatory authority of registered agencies at the global level, the GDR becomes an approved registered authenticated instrument over which any non-resident can make an investment for possessing it as a valid holder of GDR. Under paragraph 3(1) it gives an indication as to why such Global Depository Receipts are sought to be created.
The said paragraph states that an issuing company desirous of raising foreign funds can by way of GDRs based on ordinary shares for equity issues can create such receipts. In other words, the issuance of GDRs based on ordinary shares deposited with the Domestic Custodian Bank depends upon the issuing companies desire for raising of foreign funds. In order to fulfill its desire, while issuing the GDRs based upon the underlying shares deposited with the Domestic Custodian Bank through the overseas Depository Bank, the prior permission of the Department of Economic Affairs, Ministry of Finance, Government of India has to be obtained. In that process, the Lead Manager plays a pivotal role as in consultation with the Lead Manager, the completion of finalization of issue structure by the issuing company is made subject however to the final approval for proceeding ahead with the issue from the Department of Economic Affairs.
After such creation, GDR which is governed by the agreement as between the Domestic Custodian Bank and the issuing company, instructions are given to the overseas Depository Bank to issue the GDRs to the extent of underlying ordinary shares held by the Domestic Custodian Bank. GDR is issued in the negotiable form and listed on any international stock exchange for trading outside India. On such listing, they are always issued for exchange of freely convertible foreign currency. It is significant to note that the ordinary shares underlying the GDRs are always denominated only in Indian currency.
Again the Lead Manager plays a key role in relation to the issues viz., public or private placement, number of GDR to be issued, the issue price etc., in consultation with the issuing company. This is how GDRs are dealt with after creation. Once the GDRs are listed on any of the overseas Stock Exchanges, the same can be purchased, possessed and freely transferred by a person who is a non- resident within the meaning of Section 2(q) of the Foreign Exchange Regulation Act, 1973. A holder of Global Depository Receipts viz., a non- resident can transfer those receipts or may ask the Overseas Depository Bank to redeem those receipts.
In the case of redemption, Overseas Depository Bank makes a request to the Domestic Custodian Bank to get the corresponding underlying shares released in favour of the non-resident investor for being sold directly on behalf of the non-resident or being transferred in the books of account of the issuing bank in the name of the non-resident. That is the manner in which GDR is dealt with after its creation and that is how the rights in favour of the holder of GDR is created after its transfer in his favour. The role of Lead Manager is thus prescribed under the scheme at the time of its creation as well as its disposal.
As far as applicable law is concerned, it must be stated that the underlying ordinary shares of a GDR which is held by the Domestic Custodian Bank prior to such shares being created in the form of GDR have to necessarily undergo a procedure to be followed by the issuing company and for certain purposes in consultation with the Lead Manager and before the GDRs are actually created by the corresponding Overseas Depository Bank, necessary prior permission of the Department of Economic Affairs, Ministry of Finance, Government of India have to be obtained.
It is based on such statutory sanction granted by the statutory authorities of Indian origin, a legally enforceable right for the purpose of creation of GDR comes into existence and based on such validity for issuance of GDRs, the Overseas Depository Bank will have the power to issue such GDR by way of negotiable form for the value to be determined by prescribing number of underlying shares that would be covered by each of the GDR. Once the GDR is thus created and issued by the overseas depository bank, again in consultation with the Lead Manager arrangements are made for being listed in the public or private listing of overseas Stock Exchanges.
Thereafter the creation, existence and subsequent dealing with the GDRs outside the country of India would be governed by the relevant laws applicable to such Receipts. Though it may appear that on the one hand underlying ordinary shares would be governed by the laws prevailing in India and the GDRs would be governed by the laws of the country in which such receipts are issued, the most relevant fact which is to be borne in mind is that the existence of GDRs is always dependent upon the extent of underlying ordinary shares lying with the Domestic Custodian Bank.
In this context, it will also be worthwhile to refer to Master Circular on Foreign Investment in India issued by the RBI, which gives detailed description about creation of GDRs which are negotiable securities issued outside India by a depository bank on behalf of an Indian company which represent the local rupee denominated equity shares of the company held as deposit by a Custodian Bank in India. The Master circular reiterates that GDRs are issued on the basis of the ratio worked out by the Indian company in consultation with the Lead Manager to the issuing company.
It also highlights as to how such of those Indian listed companies which have been restrained from accessing the securities market by SEBI will be ineligible to issue GDRs. The Master Circular also explains as to how under the two way fungibility scheme which was put in place by the Government of India for GDRs under which a stock broker in India registered with the SEBI can purchase shares of an Indian company from the market for conversion into GDRs based on instructions issued from overseas investors and also re-issuance of GDRs to be permitted to the extent of GDRs which are redeemed into underlying shares and sold in the Indian market.
On a consideration of the 2000 Regulations, the 1993 Scheme and the Master Circular issued by RBI periodically one can discern that for creation of GDRs which can be traded only at the global level, the issuing company should have developed a reputation at a level where the marketability of its investment creation potential will have a demand at the hands of the foreign investors.
Simultaneously, having regard to the development of the issuing company in the market and the confidence built up with the investors both internally as well as at global level, the issuing company's desire to raise foreign funds by creating GDRs should have the appreciation of investors for them to develop a keen interest to invest in such GDRs. Mere desire to raise foreign investments without any scope for the issuing company to develop a market demand for its GDRs by increasing the share capital for that purpose is not the underlying basis for creation of GDRs. In fact for creating of GDRs apart from the desire of the issuing company to raise foreign funds, the marketability of such shares in the form of GDRs should have an applicable potential at the global level.
To put it differently, by artificial creation of global level investment operation, either the issuing company on its own or with the aid of its Lead Manager cannot attempt to make it appear as though there is scope for trading GDRs at the global level while in reality there is none. The above fact has to be kept in mind when dealing with an issue relating to creation of GDRs, in as much as, when the GDRs gets fully subscribed at the global level providing scope for huge foreign investment, the same will have a serious impact at the internal investment market in the form of high appreciation of share value whereby the issuing company and the investor will be greatly benefited mutually. Such a real growth structurally and financially is the underlying principle in the creation and trading of GDRs at the global level. In order to further appreciate the status of a GDR of an issuing company, it will be necessary to consider the definition of 'securities' as defined under Section 2(1)(i) of SEBI Act, 1992 read along with Section 2(h) of SCR Act 1956.
In fact Section 2(1)(i) of the SEBI Act, 1992 simply defines 'securities' to mean the definition assigned to it in Section 2(h) of the SCR Act, 1956. Under Section 2(h) 'security' has been defined to mean as under in sub-clauses (i), (iia) and (iii): "2 (h) "securities" include-
(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; xxx xxx (iia) such other instruments as may be declared by the Central Government to be securities; and
(iii) rights or interest in securities;" The above definition is exhaustive and includes not only shares, scripts, stocks, bonds, debentures, debenture stocks or other marketable securities of a like nature in or any incorporated company. The further definition under sub-clause (iia) covers such other instruments as may be declared by the Central Government as Securities and under sub-clause
(iii) rights or interest in securities are also to be construed as securities. Going by the definition under Section 2(h)(i) 'security' would include other marketable securities of a like nature of any incorporated company. Therefore reading Section 2(h)(i) and 2(h)(iii) together and apply the same to GDRs, having regard to the fact that the issuance of GDRs are always based on the underlying Indian shares deposited with the Domestic Custodian Bank and thereby the GDRs possess in it right, as well as, interest in the shares, scripts etc., it will have to be straight away held that all GDRs would fall within the definition of 'securities' as defined under Section 2(h) of the 1956 Act. Further, under Section 2(2) of the SEBI Act, 1992, words and expressions used and not defined but defined under the SCR Act, 1956, the said meaning would respectively assign wherever used in the SEBI Act, 1992. Therefore for the expression 'stock exchange' one will have to fall back upon Section 2(j) of the SCR Act, 1956 which definition is as under:
"2(j) "stock exchange" means-
(a) any body of individuals, whether incorporated or not, constituted before corporatisation and demutualisation under sections 4A and 4B, or (b) a body corporate incorporated under the Companies Act, 1956 (1 of 1956) whether under a scheme of corporatisation and demutualisation or otherwise, for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities." The above definition makes it clear that a 'stock exchange' as formed under Section (2)(j)(a) & (b) are for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. It is true that GDRs have no time limit and can be possessed as GDRs for any number of years.
However, when the holder of the GDR apart from trading with the same as GDR in the global market at any point of time wish to redeem the same or go in for fungibility of the redeemed shares back into GDRs, necessarily the holder of a GDR will have to fall back upon the stock exchanges as per the definition under Section 2(j) of the SCR Act, 1956, who alone can assist, regulate or control the business of buying, selling or dealing with securities. Having examined the above statutory provisions, we find that a GDR is one form of 'security' as defined under Section 2(h) of SCR Act, 1956, which is created by the issuing company of Indian origin based on underlying shares deposited with the Domestic Custodian Bank and created by the Overseas Depository Bank. Such creation is at the instance of the issuing company in India with a desire to earn foreign investments.
Such investments made by the investors in the GDRs is facilitated by the Lead Manager at the time of its creation as well as its investment. Thereafter, the investors hold the GDRs either for further trading on it in the global market through the stock exchanges at global level and in the event of such investors interested in liquidating the GDR are entitled to liquidate the same through the Overseas Depository Bank, in which event the extent of underlying shares of the GDRs get transferred in the name of the investors themselves and thereby enabling such investors to trade on underlying shares in the Indian stock market or if so wish under the fungibility scheme once again get it redeemed in the form of GDR themselves.
Therefore, the creation of the GDR by the issuing company and after its creation in the fixation of price, value, marketing in the global market, the support of Lead Manager is involved and while dealing with such GDRs, the same is regulated in so far as it related to underlying shares deposited with the Domestic Custodian Bank by the laws regulating the same and prevalent in India and so far as the corresponding GDRs created based on such underlying shares are concerned, the same are governed by the laws prevailing in the respective market where such GDRs are being traded.
Post cancellation of GDRs, the underlying shares deposited with the Domestic Custodian Bank is made available for trading in India depending upon the wish of the holder of GDR in the local market or for holding it as such i.e as mere shares of the issuing company or by virtue of the fungibility scheme can once again be converted as GDRs for being traded in the global market. In order to find out as to what would happen in the event of any misfeasance or malfeasance in dealing with the GDRs, whether SEBI can effectuate its control over those who are involved in such misfeasance or malfeasance, it will be appropriate to further examine the provision available under the SEBI Act, 1992 and SCR Act, 1956. In order to assimilate the statutory functions of the Board its functions and the area of its operation, it will be necessary
