2024 (9) TMI 1499 - HC - SEBI

Commercial transactions undertaken by and between private entities involving acquisition of shares of a life insurance company - Allegations of fraudulent acts and undue profits made by certain entities in the purchase and sale of equity shares of a life insurance company - HELD THAT - This Court is of the view that where a field is regulated and where an appropriate regulator has either already taken note of and addressed the transaction or is investigating the said transaction, the Court in writ jurisdiction should not interfere. In such a situation, the regulator must be allowed to do its job. Writ of Mandamus being a public law remedy may be issued against a private body discharging public functions, however, it cannot be used for enforcement of purely private contracts between parties. The tendency to examine commercial transactions from the perspective of reasonableness in Article 226 jurisdiction is to be eschewed as it would make every valuation, sale, purchase of shares or property or every merger, acquisition, de-merger, subject to judicial review. If according to the petitioner, there is a criminality involved in the aforementioned transactions, as seems to be unarticulated submission, the petitioner is always at liberty to file appropriate proceedings in accordance with law. This Court also finds that though a personal allegation has been made against Chairperson SEBI, yet neither the writ petition has been amended nor she has been impleaded as a respondent. This Court is of the view that even if the Chairperson of SEBI has had a professional relationship with Max group in the past, it will not take away the Regulator s obligation and duty to decide the matter in accordance with law. Also, if the final decision of SEBI is in any manner influenced or affected because of the alleged erstwhile professional relationship of its Chairperson, the Petitioner shall surely be entitled to agitate the said ground at that stage. Consequently, keeping in view the fact that the Petitioner challenges private commercial transactions between commercial entities as well as the fact that shareholders of the public limited company have approved the transactions and in addition insurance and banking sectors are regulated and the independent sectoral regulators, namely, SEBI and RBI are seized of the controversy, this Court is of the view that it should not act as a super regulator and interfere in exercise of Article 226 jurisdiction. Accordingly, this Court disposes of the present writ petition with a direction to SEBI and RBI to complete the investigation as expeditiously as possible. If, after completion of any investigation, any further action is required to be taken, the same shall be taken by independent sectoral regulators in accordance with law. This Court clarifies that the rights and contentions of all the parties are left open including with regard to the locus standi of the Petitioner and maintainability of the present writ petition.

Summary

Issues:
- Maintainability of the writ petition filed under Article 226 of the Constitution challenging commercial transactions involving private entities in the insurance sector.
- Locus standi of the petitioner in a public interest litigation.
- Allegations of fraudulent acts and undue profits made by certain entities in the purchase and sale of equity shares of a life insurance company.
- Regulatory actions taken by IRDAI, SEBI, and RBI in response to the allegations.
- Examination of the role of SEBI Chairperson in the matter.
- Jurisdiction of the court to interfere in commercial transactions regulated by independent sectoral regulators.

Detailed Analysis:
Issue 1: The court examined the maintainability of the writ petition challenging commercial transactions between private entities in the insurance sector. It held that where appropriate regulators are already addressing or investigating the transactions, the court should not interfere in writ jurisdiction to allow regulators to perform their duties effectively.

Issue 2: The locus standi of the petitioner in a public interest litigation was contested. The petitioner argued that the litigation would benefit the public exchequer and citizens, as those directly affected may not approach the court. The court acknowledged the constitutional right to intervene in such situations but emphasized the need for a valid public interest element.

Issue 3: Allegations of fraudulent acts and undue profits in the purchase and sale of equity shares of a life insurance company were raised. The petitioner accused certain entities of manipulating records and valuations for personal gain. The court noted the allegations but highlighted the importance of following proper legal procedures to address any criminality involved.

Issue 4: Regulatory actions by IRDAI, SEBI, and RBI were discussed. The court acknowledged penalties imposed by IRDAI and ongoing investigations by SEBI, directing them to complete the investigations promptly and take further actions as necessary in accordance with the law.

Issue 5: The role of the SEBI Chairperson in the matter was brought up. The court noted the professional relationship of the Chairperson with a relevant entity but emphasized that it should not affect the regulator's duty to decide matters impartially. The petitioner was advised to raise concerns if the Chairperson's past influences the final decision.

Issue 6: The court addressed its jurisdiction in interfering with commercial transactions regulated by independent sectoral regulators. It emphasized that the court should not act as a "super regulator" and interfere in transactions approved by shareholders and regulated sectors. The court disposed of the writ petition, directing SEBI and RBI to complete investigations promptly and take further actions if necessary.

Conclusion:
The judgment focused on the importance of regulatory bodies in addressing commercial transactions and fraud allegations in the insurance sector. It highlighted the need for proper legal procedures, the role of independent regulators, and the limitations of court interference in such matters. The court emphasized the completion of investigations by SEBI and RBI while leaving the rights and contentions of all parties open for future proceedings.