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2024 (1) TMI 734 - HC - SEBIRights of the minority shareholders - Restoration of the Writ Petition - SEBI's Role and Response to Complaints The case involves the petitioners, who are minority shareholders of Bharat Nidhi Ltd. (BNL), filing a writ petition against BNL and the Securities and Exchange Board of India (SEBI) for various alleged violations of securities laws. The petitioners claimed that SEBI had not provided them with the investigation report or relevant documents related to their complaints against BNL, despite them being shareholders. They argued that BNL, along with majority shareholders (respondent nos. 3 to 9), committed several illegalities and violations of securities laws, including the Minimum Public Sharing Norms and disclosure issues. One key aspect of the case was SEBI's issuance of a show cause notice to BNL and others, which was later settled through the SEBI (Settlement Proceedings) Regulation 2018. The petitioners contended that the violations alleged in the show cause notice were serious and could not be settled. During the final hearing, the petitioners requested SEBI to provide documents relevant to their complaints. Despite opposition from SEBI and other respondents, the Court ordered SEBI to provide these documents, emphasizing that minority shareholders are integral to a company and entitled to such information. This order was challenged in the Supreme Court by both respondent nos. 2 and 9, and later by SEBI. However, the Supreme Court dismissed these challenges, upholding the High Court's order. Subsequently, SEBI revoked the settlement order it had passed, which led to the contention that the substantive prayers in the original petition (prayers a and b) had become infructuous. However, the petitioners opposed this view, asserting that prayers c and d of the petition still required adjudication. Ultimately, the High Court maintained its interim directions, requiring SEBI to furnish the documents and keeping open the contentions regarding prayer clauses c and d for future proceedings. The Court stressed that SEBI, as a public body, should act in public interest and comply with court orders. The petitioners later filed an interim application to restore the writ petition for a final hearing, arguing that respondent nos. 2 to 9 had engaged in forum shopping and deceit by not informing the Court about their steps to challenge SEBI's revocation order in the Delhi High Court. This was viewed as potentially fraudulent behavior, intended to secure the disposal of the writ petition in their favor. Respondent nos. 2 to 9 and SEBI, on the other hand, argued that the petitioners had no cause of action to seek restoration, that the reliefs in prayer clauses c and d could not be granted due to the completion of the buyback process, and that no prejudice was caused to the petitioners as these issues could still be agitated in appropriate proceedings. In conclusion, the Court decided to keep open the issues related to prayer clauses c and d for future action. The Court noted that the issue of the Postal Ballot Notice dated 22 September 2022, related to prayer clause (d) of the Writ Petition, became a moot point following the revocation of the Settlement Order by SEBI. The Court had previously decided to keep these matters open for future proceedings, allowing the petitioners to raise these issues at an appropriate time. The Court further observed that the conduct of respondent nos. 2 to 9, particularly in not disclosing their intention to challenge the revocation of the Settlement Order, did not reflect a fair, just, or upright approach. However, it did not constitute fraud or deceit in the legal sense. The Court emphasized that the situation had not materially changed since its order on 1 December 2023, as the revocation of the Settlement Order was still in effect. Therefore, there was no cause for the Court to review or reverse its previous orders and directions. In conclusion, the Court found no merit in the application to restore the writ petition and rejected it, maintaining its earlier orders and observations. The Court's decision was based on the principle that there was no material change in circumstances and that the substantive issues related to the revoked Settlement Order and subsequent actions remained open for future adjudication. Application rejected.
Issues Involved:
1. Restoration of the disposed writ petition. 2. Restraining BNL from taking steps pursuant to the Postal Ballot Notice and the Follow-Up Announcement. 3. Disclosure by BNL of actions taken in pursuance of the Postal Ballot Notice and Follow-Up Announcement. 4. Granting interim reliefs. Summary: Restoration of the Disposed Writ Petition: The petitioners filed an interim application to restore Writ Petition No. 530 of 2022, which was disposed of on 01 December 2023. They sought the restoration of the petition to hear it finally. The petitioners, minority shareholders of Bharat Nidhi Ltd. (BNL), had raised complaints with SEBI regarding violations of securities laws by BNL. The petitioners contended that SEBI had not provided them with the investigation report or relevant documents. SEBI had issued show cause notices to BNL and other respondents, but the petitioners argued that SEBI was not taking genuine action. The petitioners also claimed that BNL's listing on non-functional stock exchanges caused severe prejudice to their interests. Restraining BNL from Taking Steps Pursuant to the Postal Ballot Notice and Follow-Up Announcement: The petitioners sought to restrain BNL from taking any steps in pursuance of the Postal Ballot Notice dated 22 September 2022 and the Follow-Up Announcement dated 09 December 2023. They argued that the Postal Ballot Notice was a consequence of the Settlement Order dated 12 September 2022, which SEBI had revoked on 10 November 2023. The petitioners contended that the buyback offer proposed in the Postal Ballot Notice was ultra vires the Companies Act, 2013 and the Settlement Regulations. Disclosure by BNL of Actions Taken in Pursuance of the Postal Ballot Notice and Follow-Up Announcement: The petitioners requested that BNL disclose by way of an affidavit all actions and steps taken in pursuance of the Postal Ballot Notice and Follow-Up Announcement. The Court observed that the Postal Ballot Notice was a consequence of the revoked Settlement Order, and the petitioners' contentions on this issue were kept open to be agitated in appropriate proceedings. Granting Interim Reliefs: The petitioners sought interim and ad-interim reliefs in terms of restraining BNL from taking steps pursuant to the Postal Ballot Notice and Follow-Up Announcement. The Court noted that SEBI had revoked the Settlement Order, and the petitioners' entitlement to documents as per the Court's order dated 23 October 2023 was upheld. The Court directed SEBI to comply with the order and provide the documents to the petitioners. Conclusion: The Court rejected the petitioners' application for restoration of the writ petition, noting that the substantive issues related to the Settlement Order had been rendered infructuous due to its revocation. The Court emphasized that the petitioners' contentions regarding the Postal Ballot Notice and buyback offer could be agitated in appropriate proceedings. The Court also criticized SEBI's inconsistent approach and failure to comply with the Court's orders. The application was dismissed, and no costs were awarded.
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