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2005 (11) TMI 261 - HC - Companies LawBar of civil court s jurisdiction - interim reliefs in a suit - seeking cancellation of allotment of shares - violation and/or breach of the Takeover Regulations - Whether this court has jurisdiction in the light of section 15Y and section 20A of the SEBI Act 1992 read with relevant rules and Regulations thereof ? - HELD THAT - Reading of the provisions of sections 15Y and 20A along with the provisions of the Takeover Regulations I have no doubt in my mind that there is an express bar as to the jurisdiction of this court for rectification of the register when it solely based on the contention that the allotment and/or transfer of shares is contrary to the Takeover Regulations. Though it is not necessary still I feel it is important to clarify that when the rectification of the share register is de hors the provisions of the Takeover Regulations or any other provisions of the SEBI Act and rules and regulations made thereunder then the court would certainly have jurisdiction to entertain and try such a suit u/s 9 of the CPC. It is because what is barred under sections 15Y and 20A is only those acts which falls either under the said Act or under the regulations framed thereunder. It is not possible to accept the contention of the learned counsel for the plaintiff that the provisions of sections 15Y and 20A should be so read down so as to exclude the cases of rectification of the share register by shareholder. If the provisions of the Act are such so as to cover all eventualities which arises under the statute then in that event it is not possible that a special exception be carved out only in the matter of one type of case as it is urged by the learned counsel for the plaintiffs. Reading of section 15Y read with section 20A of the Act all the cases arising out of the breach and Take- over Regulations must fall within the exclusive domain of SEBI and cannot be complained in the court of Law by virtue of express bar contained u/s 15Y and section 20A of the SEBI Act. I am also of the further opinion that there is no doubt that there is a common law right in a share- holder to apply for rectification of the share register even though it is not his own share in respect of which he is seeking rectification but still the said right if it flows from the provisions of Takeover Regulations then undoubtedly it would fall within the exclusive jurisdiction of SEBI and not within the jurisdiction of this court in view of the express bar contained under the aforesaid statute. I am of the further opinion that the enactment of the amendment of Takeover Regulations of amending provisions of SEBI (Substantial Acquisition of Shares and Takeover) Second Amendment Regulation 2002 with effect from 9-9-2002 by providing for the remedy under sub-clauses ( c ) and ( d ) of the regulation 44 the board has been empowered to give effective relief of Rectification of Share Register by declaring cancellation of the allotment and/or by directing the company not to give an effect to the transfer if they are found to be in contrary to the Takeover Regulations. Once the remedy is provided under the Rule itself then to read down the provisions of section 15Y and section 20A in such a narrow manner so as to exclude the case of the plaintiffs from within the purview of the said section is not permissible even on strict construction principle. I am of the opinion that provision of sections 15Y and 20A bars the suit which has been filed by the plaintiffs in the present court and the remedy of the plaintiffs is only before the SEBI. The view taken by the learned Single Judge and the Division Bench in the case of M. Srinivasulu Reddy 1999 (4) TMI 570 - HIGH COURT OF BOMBAY was in the light of the regulation 44 as stood unamended and therefore the court held that the board has no power to give relief of rectification. However in the light of subsequent amendment to the Regulation the said argument does not survive any further and therefore the reliance placed by the learned counsel on the aforesaid judgment of the Single Judge and Division Bench would not apply insofar as such finding is concerned in view of the amendment provisions referred to hereinabove. The entire suit is based on the sole ground of violation and/or breach of the Takeover Regulations and no other ground has been invoked for rectification of the Share Register. The Takeover Regulations has been enacted under the SEBI Act 1922 and the board is empowered to take cognizance of the breach thereof and therefore the right of the plaintiffs is to complain to the SEBI of such breach and seek necessary remedy. The contention of the learned counsel for the plaintiffs that to merely file complaint with the SEBI is not equivalent to the right of the plaintiffs to file a suit for substantial relief cannot be accepted because the nature of the right conferred by the Take- over Regulations provides for substantial nature of remedy thereunder. The plaintiffs must therefore seek relief as per the provision of law and cannot independently invoke any common law right of rectification of the share and file a suit independent to the provision of sections 15Y and 20A of the SEBI Act. Therefore the present suit as framed is not maintainable in this court and this court has no jurisdiction in view of the express bar conferred under the provision of section 15H and section 20A of the SEBI Act to entertain and try the present suit. I therefore answer the preliminary issue of jurisdiction in negative and I hold that this court has no jurisdiction to entertain and try the present suit under section 15Y and section 20A of the SEBI Act. Thus the suit is liable to be dismissed for want of jurisdiction and therefore dismiss the suit accordingly in view of the dismissal of the suit in both the motions being Notice does not survive and both the motions are dismissed as infructuous.
Issues Involved:
1. Jurisdiction of the High Court under Section 9A of the CPC in light of Sections 15Y and 20A of the SEBI Act, 1992. 2. Validity of the preferential allotment and subsequent transfer of shares. 3. Interpretation and application of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. 4. Rectification of the share register. Issue-Wise Detailed Analysis: 1. Jurisdiction of the High Court under Section 9A of the CPC in light of Sections 15Y and 20A of the SEBI Act, 1992: The court examined whether it had jurisdiction to entertain the suit considering the bar under Sections 15Y and 20A of the SEBI Act. Section 15Y states, "No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which an adjudicating officer appointed under this Act or a securities Appellate Tribunal constituted under this Act is empowered by or under this Act to determine." The court concluded that the jurisdiction of the civil court is expressly barred for matters that fall under the purview of SEBI's adjudicating officers or the Securities Appellate Tribunal, including breaches of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. 2. Validity of the Preferential Allotment and Subsequent Transfer of Shares: The plaintiffs challenged the preferential allotment of 8,10,77,500 C.R.C.P.S. to defendant No. 1 by defendant No. 7 in October 2000, alleging it was in violation of Regulation 12 of the SEBI Takeover Code. They argued that the subsequent transfer of shares to other defendants was also illegal. The court noted that the plaintiffs' claims were based on alleged breaches of the Takeover Regulations, which fall under the exclusive jurisdiction of SEBI as per Sections 15Y and 20A of the SEBI Act. 3. Interpretation and Application of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997: The court addressed the plaintiffs' contention that the acquisition and control over defendant No. 7 by defendant No. 1, and the subsequent transfers, were in violation of Regulations 10 and 12 of the SEBI Takeover Code. The plaintiffs sought a declaration that these actions were illegal and void. The court highlighted that SEBI has the authority to adjudicate such matters, including the power to issue directions under Regulation 44, such as canceling shares acquired in breach of the regulations. 4. Rectification of the Share Register: The plaintiffs sought rectification of the share register to remove the names of the defendants who allegedly acquired shares in violation of the SEBI regulations. The court emphasized that while shareholders have a common law right to seek rectification, when the grounds for rectification are based on breaches of the SEBI regulations, the jurisdiction lies exclusively with SEBI. The court referred to Regulation 44 of the Takeover Code, which empowers SEBI to direct the cancellation of shares or freezing of transfers that violate the regulations. Conclusion: The court concluded that it lacked jurisdiction to entertain the suit due to the express bar under Sections 15Y and 20A of the SEBI Act. The plaintiffs were directed to seek remedies through SEBI, which has the exclusive authority to adjudicate matters related to breaches of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Consequently, the suit was dismissed for want of jurisdiction, and the related motions were dismissed as infructuous.
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