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TMI Blog2003 (8) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... rice that may be determined pursuant to a fair valuation of shares conducted after requiring an independent audit to be conducted into the accounts of the 2nd and the 3rd respondents and the monies diverted/siphoned off from the 3rd Respondent be brought back into the 3rd Respondent: ( iii )forthwith issue all necessary directions and orders including the initiation of investigations and/or inquires into the affairs of the 2nd and 3rd Respondents with respect to the charges of unfair and fraudulent trade practices, insider trading and violation of the regulations pertaining to Registrars to the issue." 2. The controversy arises in the following circumstances : The petitioners are shareholders of the 2nd respondent-company viz. Sesa Goa Limited (for short Sesa Goa ). Sesa Goa is the listed company. Its shares are listed on the Bombay Stock Exchange and National Stock Exchange amongst other Exchanges. The third respondent viz. Sesa Industries Limited (for short Sesa Industries ) is a subsidiary of Sesa Goa. It is petitioners case that Sesa Goa represented to its shareholders that for future expansion and diversification projects in the steel related areas, subsidiary c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up. 3. Mr. Shyam Diwan, the learned counsel appearing for the petitioners extensively referred to the averments made in the writ petition, the provisions of SEBI Act, 1992, SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995, SEBI (Prohibition of Insider Trading) Regulations, 1992 and the relevant provisions of the Companies Act. The thrust of the contention of the learned counsel for the petitioners is that the SEBI has jurisdiction to examine and look into the diverse grievances raised by the petitioners that the proposed offer (Exhibit "G") amounted to fraudulent and unfair trade practices relating to securities market and insider trading in securities. According to the learned counsel the material placed before SEBI was sufficient to indicate that Sesa Industries intended to get its securities listed on recognised Stock Exchange. The learned counsel in this regard referred to ( a ) statutory meeting/meetings at Sesa Goa Industries; ( b ) Chairman s speech in the first annual general meeting of Sesa Industries for the year 31st March, 1994; ( c ) Chairman s speech in the second annual general meeting of Sesa Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions relating to issue and transfer of securities may be administered by the Central Government. They have pointed out that the petitioners in fact have vide their letter dated 17th June, 2003 requested the department of Company Affairs to invoke their powers under Companies Act, 1956 for carrying out special audit and investigation into the affairs of the Sesa Goa and Sesa Industries. 5. On behalf of Sesa Goa and Sesa Industries initially two separate affidavits were filed on 15th July, 2003. Thereafter, further affidavit was filed on 21st July, 2003 and then yet another further affidavit was filed on 29th July, 2003. By the further affidavit dated 29th July, 2003, it is pointed out that Sesa Goa has changed the Registrar to the offer and appointed Karvy Consultants Limited which is duly registered with SEBI under the SEBI (Registrars to an issue and Share Transfer Agents) Rules, 1993. They have sought to set up the case that petitioners have not come to this Court with clean hands and suppressed the material facts. In this connection, they have referred to the earlier writ petition filed by some other shareholder (Ms. Krishna Bajaj) being writ petition No. 1280 of 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies which intend to get their securities listed on any recognized stock exchange in India. In other words SEBI does not have power in relation to the issue and transfer of securities and non-payment of dividend under the various provisions referred to in section 55A for the companies other than listed public companies and the public companies which intend to get their securities listed on any recognised stock exchange in India. Such power is vested in the Central Government. Sesa Industries is admittedly not a listed company on any recognised Stock Exchange. The question is whether SEBI erred in its opinion that Sesa Industries is not even covered under section 55A( b ) of Companies Act. It is the case of SEBI that Sesa Industries intention to get its securities listed is not manifested as it has not made any application to recognised stock exchange under Rule 19 of Contract (Regulation) Rules, 1957. The approach of SEBI cannot be faulted. Even the learned counsel for the petitioners did not dispute that the criteria applied by SEBI is not irrelevant. However, the learned counsel for the petitioners submitted that every year the Chairman in his speech in the annual general me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose, or in a manner oppressive of any of its members, or that the company was formed for any fraudulent or unlawful purpose; ( ii )that persons concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; or ( iii )that the members of the company have not been given all the information with respect to its affairs which they might reasonably expect, including information relating to the calculation of the commission payable to a managing or other director, [* * *] or the manager, of the company." As a matter of fact, the petitioners themselves, have, made an application to the Central Government requesting them to invoke their powers under the Companies Act for carrying out special audit and investigation into the affairs of Sesa Goa and Sesa Industries. Surprisingly and for the reasons best known, the petitioners have not impleaded Central Government as party respondent in the present writ petition, presumably because the petitioners feel that the Central Government would act on the application made by them in the near future. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e complaints. The petitioner seeks a writ of mandamus against the SEBI to carry out its duties. 2. Mr. Samdani, learned Counsel appearing on behalf of the Petitioner, has taken us to the provisions of the Securities and Exchange Board of India Act, 1992 (for short, the "SEBI Act") and the regulations made therein. Even assuming that there is a breach of the promise to list the securities of the 1st Respondent on the Mumbai Stock Exchange, we are not prima facie satisfied that it would, by itself, amount to a dereliction of a statutory duty of the SEBI as a watchdog of investors under the SEBI Act. 3. In our view, the Petitioner may have his remedy either under the Contract Act or under the provisions of the Companies Act, but we see no failure in discharge any statutory duties on the part of the SEBI. No relief can be granted in exercise of our powers under Article 226 of the Constitution of India. Hence, rejected." 13. It is true that at the time the Writ Petition No. 1280 of 1999 was filed the letter of offer dated 5th June, 2003 issued by Sesa Goa and now under challenge before us had not seen the light of the day and obviously, the said letter was not under challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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