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TMI Blog2017 (8) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... companies out of the 331 companies which were listed on their exchanges. Thus, it is apparent that SEBI passed the impugned order without any investigation. Even if the letter of MCA dated 09.06.2017 was considered by SEBI to be a direction given for implementation without investigation, very fact that SEBI took nearly two months to comply with the directions given by the MCA clearly shows that there was no urgency in issuing the impugned communication without even investigating the credentials/ fundamentals of those companies. In the facts of these two appeals, we are prima facie of the opinion, that the impugned communication issued by SEBI on the basis that the appellants are ‘suspected shell companies’ deserves to be stayed. Accordingly while staying the communication of SEBI dated 07.08.2017, qua the two appellants, we direct BSE and NSE to forthwith reverse their decisions both dated 07.08.2017 in case of these two appellants. - Appeal No. 174 of 2017 And Appeal No. 173 of 2017 - - - Dated:- 10-8-2017 - Mr. J.P. Devadhar, Mr. Jog Singh And Dr. C.K.G. Nair For The Appellant : Mr. Janak Dwarkadas, Senior Advocate with Mr. Ankit Lohia, Ms. Rishika Harish and Mr. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in these securities shall not be permitted beyond the last traded price and Additional Surveillance Deposit of 200% of trade value shall be collected from the Buyer which shall be retained with Exchanges for a period of five months. b) The shares held by the promoters and directors in such listed companies shall be allowed to be transferred by depositories only upon verification by concerned exchanges and they shall not be allowed to transact in the security except to buy securities in the said listed company until verification of credential/ fundamental by Exchanges is completed. c) Exchanges shall initiate a process of verifying the credentials/fundamental of such companies. Exchanges shall appoint an independent auditor to conduct audit of such listed companies and if necessary, even conduct forensic audit of such companies to verify its credentials/ fundamentals. d) On verification, if Exchanges do not find appropriate credentials/ fundamentals about existence of the company, Exchanges shall initiate the proceedings for compulsory delisting against the company, and the said company shall not be permitted to deal in any security on exchange platform and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... damentals of such companies and they shall not be allowed to transact in the securities except to buy securities in the said listed company until verification of credentials/ fundamentals of those companies are completed by the exchanges. 6. Thus, the impugned communication is not a general direction given by SEBI to the three stock exchanges in the interests of investors or securities market as contemplated under Section 11(1) of SEBI Act, but a specific direction given in respect of only 331 listed companies which MCA suspected to be shell companies. Moreover, specific direction given in the impugned communication prejudicially affects the interests of only those companies covered under the list of 331 companies identified by the MCA as suspected to be shell companies . Therefore, in the facts of present case, the impugned communication of SEBI which has serious civil consequences cannot be said to be an administrative order. In other words, the impugned communication which prejudicially impairs the rights and obligations of the appellants, its promoters and directors would fall in the category of a quasi judicial order and hence appealable before this Tribunal under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h and fundamentals of the company have been gone into by SEBI before issuing the impugned communication. Even BSE and NSE have not investigated as to whether appellants could be considered as shell companies. Counsel for the appellants submitted that the appellants have impeccable track record and their annual turnover in last 3 years is in excess of ₹ 1000 crore and in the last 3 years appellants have paid more than ₹ 100 crore per year as income tax/ excise duty. It is submitted that the orders in hand are also to the tune of several thousands crores of rupees. In these circumstances, considering the appellants as suspected shell companies has seriously prejudiced the reputation of the appellants in the securities market. Accordingly, it is submitted by counsel for appellants that the impugned decision of SEBI deserves to be quashed or stayed forthwith. 9. Counsel for SEBI on the other hand submit that in the present case SEBI has merely implemented the directions contained in the letter dated 09.06.2017 received from the Ministry of Corporate Affairs ( MCA ) and no independent investigation has been carried out by SEBI. Therefore, in the facts of present case, si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell companies, SEBI on 07.08.2017 (nearly after two months) sought to take action on the letter of MCA, by directing the three stock exchanges to suspend the trading in the securities of those companies on daily basis, by moving the securities of those companies under Stage VI of GSM against all those companies out of the 331 companies which were listed on their exchanges. Thus, it is apparent that SEBI passed the impugned order without any investigation. 15. Even if the letter of MCA dated 09.06.2017 was considered by SEBI to be a direction given for implementation without investigation, very fact that SEBI took nearly two months to comply with the directions given by the MCA clearly shows that there was no urgency in issuing the impugned communication without even investigating the credentials/ fundamentals of those companies. 16. In the facts of these two appeals, we are prima facie of the opinion, that the impugned communication issued by SEBI on the basis that the appellants are suspected shell companies deserves to be stayed. Accordingly while staying the communication of SEBI dated 07.08.2017, qua the two appellants, we direct BSE and NSE to forthwith reverse their d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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