2009 (7) TMI 1347 - HC - Companies Law

Summary

Issues involved: Challenge against SEBI order u/s 3(4) read with sections 11 and 11B of SEBI Act, 1992 and SEBI (Disclosure and Investor Protection) Guidelines, 2000 for directing refund of money collected under a share issue.

Summary:
1. The petitioners, a public limited company and its directors, challenged SEBI's order (exhibit P8) directing refund of money collected under a share issue. The company declared a right issue of shares to existing shareholders, allowing renunciation of shares to others, citing compliance with section 81(1)(c) of the Companies Act, 1956. Dispute arose over violation of section 67 of the Act by privately placing shares to more than 50 persons. SEBI contended that the offer of right shares with renunciation rights amounted to a public offer, leading to the order for refund. The company challenged the order on jurisdictional grounds, invoking section 55A of the Companies Act conferring powers on SEBI only for listed public companies or those intending to list shares.

2. The petitioners argued lack of jurisdiction for SEBI to issue the order, as the company did not fall within the categories specified under section 55A of the Companies Act. SEBI's contention that the offer of shares constituted a public issue was refuted, emphasizing the Central Government's authority for matters not covered under section 55A(a) and (b). The court held that SEBI could not assume jurisdiction based on a deemed public issue, as the Central Government had already considered and dropped the matter.

3. The court quashed SEBI's order (exhibit P8) for lack of jurisdiction, allowing the writ petition challenging the order. Despite SEBI's argument for an alternate remedy under section 15D of the SEBI Act, the court found the order to be issued without jurisdiction, thus upholding the petitioners' challenge on this ground.