2022 (5) TMI 1613 - HC - SEBI

Settlement applications under SEBI Act - Illegality and irregularities committed by Companies alleged - violations of certain norms and regulations issued by SEBI in relation to minimum public shareholding, disclosures of shareholding details, etc. identity of promoters, valuation, etc. - Petitioners are aggrieved by exit offers given by Respondent-Companies which is alleged to be contrary to the provisions of Securities Exchange Board of India Act, 1992, Rules and Regulations as well as exit circulars. Applicants filed settlement applications with SEBI in respect of the afore-said SCNs which is as currently pending before the Settlement Division of SEBI - as argued SEBI (Settlement Proceedings) Regulations, 2018 prohibit filing of settlement applications in respect of matters pending that are pending trial before any court. HELD THAT - On the perusal of previous orders, no directions are found which restrain SEBI from considering/ adjudicating the settlement applications. It appears that the instant applications have been filed by way of abundant caution at the instance of HPAC. The Court has considered the objection put forth by Appellant but finds no cogent reason to reject the application. The decision on the settlement applications is the prerogative of SEBI. It is for the SEBI to deliberate and decide the same, in accordance with applicable provisions of SEBI Act, Rules, Regulations, etc. Whether the applications are prohibited or not is not for this Court to determine. Accordingly, the applications are disposed of with a clarification that SEBI shall be free to deal/ adjudicate the settlement applications filed by the Applicants, on its own merits, in accordance with law. The decision on the settlement applications shall not prejudice the Petitioners and all rights and contentions of the parties herein are left open.

Summary

Issues:
1. Alleged inaction by SEBI in addressing irregularities by respondent companies.
2. Compliance with SEBI regulations regarding settlement applications.
3. Authority of SEBI to consider settlement applications pending trial.

Analysis:
1. The petition was filed by public shareholders aggrieved by alleged irregularities of respondent companies, including noncompliance with public shareholding norms, valuation issues, and improper exit offers. The petitioners questioned the actions of SEBI in addressing these irregularities and alleged violations of the Securities Exchange Board of India Act, 1992, and related regulations.

2. The respondents, including R-2, R-3, R-5, R-7, and R-8, filed settlement applications with SEBI concerning show cause notices issued for violations of SEBI norms. The High Powered Advisory Committee recommended that the entities inform the court about the settlement applications and seek specific permissions for consideration. Despite objections from the applicants, SEBI reiterated the recommendation, leading to the filing of applications seeking clarification on SEBI's power to consider these settlement applications.

3. The court considered the arguments presented, including the contention that SEBI regulations prohibit filing settlement applications for matters pending trial before any court. However, the court found no explicit directions restraining SEBI from considering or adjudicating settlement applications. The court emphasized that the decision on settlement applications falls under SEBI's prerogative, and it should be made in accordance with the SEBI Act, Rules, and Regulations. The court clarified that SEBI is free to deal with and adjudicate the settlement applications on their merits, leaving all rights and contentions of the parties open and unaffected by this decision.