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TMI Blog2023 (10) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... with Mr. Ameya Gokhale, Mr. Vaibhav Singh, Ms. Radhika Indapurkar and Mr. Manas Kotak i/b Shardul Amarchand Mangaldas & Co., For the Respondent No. 7 & 8 in WP/530/2023 : Mr. Rahul Narichania, Sr. Adv. a/w Mr. Ameya Gokhale, Mr. Vaibhav Singh, Ms. Radhika Indapurkar and Mr. Manas Kotak i/b Shardul Amarchand Mangaldas & Co., For the Respondent No. 9 in WP/530/2023 : Mr. Janak Dwarkadas, Sr. Adv. a/w Mr. Ameya Gokhale, Mr. Vaibhav Singh, Ms. Radhika Indapurkar and Mr. Manas Kotak i/b Shardul Amarchand Mangaldas & Co., For the Respondent No. 7, 8 & 9 in WP/447/2023 : Mr. Ameya Gokhale, Mr. Vaibhav Singh, Ms. Radhika Indapurkar and Mr. Manas Kotak i/b Shardul Amarchand Mangaldas & Co., ORAL ORDER (PER G.S. KULKARNI, J.).: 1. We had commenced the hearing of the present proceedings to be disposed of at the admission stage. 2. The petitioners in both these writ petitions are minority shareholders of respondent No. 2 - Bharat Nidhi Ltd. (for short 'BNL'). They had complained to the SEBI of violation by BNL of various provisions of the Securities laws, including violations pertaining to the minimum public sharing norms ("MPS") as also violations in respect of the promoters dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such settlement is impugned in the present proceedings, namely the Settlement order dated 12 September 2022 passed under the 2018 Regulations. 5. In so far as the issue relevant to the present order is concerned, as noted above, the same is in regard to the contention of the petitioners in relation to the documents which need to be made available to the petitioners, and being subject matter of prayer clause (g) of both the petitions. 6. Such relief as sought for by the petitioners in their capacity as shareholders is by prayers which are for interim reliefs to the effect that the SEBI be directed to produce copies of the Investigation Report, Show Cause Notices, minutes of meetings of the IC Committee, HPAC and Panel of WTMs, order/communication/ noting by which the settlement application filed by Respondent Nos. 2 to 9 was approved by the SEBI and all other documents relevant to the proceedings in connection with the impugned Settlement Order. 7. In support of such contention, we may refer to the petitioners' case as set out in paragraphs 41, 42, 43, 48 and 52 of Writ Petition No. 530 of 2023, and in the context of which prayer clause (g) has been made. The case in the compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons"). iii. SEBI prima facie observed the following violations in respect of Respondent Nos. 2 to 9: 8) Regulation 30(2) of the SAST Regulations and Regulation 7(1)(a) of the PIT Regulations in terms of which promoters of a company are required to disclose their shareholding as on date of becoming a Promoter; b) Clause 2(II) of SEBI Circular dated December 16, 2010 r/ w SEBI Circular dated November 30, 2015 which Prescribes the manner of achieving minimum public shareholding: c) Section 12A (a) and (b) of the SEBI Act r/w Regulation 3(b), (c) and 4(1) of the PFUTP Regulations. 42. Thus, admittedly, and as recorded in the Impugned Settlement Order, SEBI observed prima facie violations of (i) MPS Norms and (ii) Disclosure Requirements in respect of promoter shareholding of BNL against Respondent Nos. 2 to 9. 43. Bearing in mind the specific violations that have been purportedly settled vide the Impugned Settlement Order, the scheme of the Settlement Regulations has been set out below. A copy of the Settlement Regulations has been annexed hereto as Exhibit BB. 48. In the circumstances set out above, the Petitioners submit that this Hon'ble Court be pleased to issue a writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs. The submission is in relations to the documents as set out in prayer clause (g) of the petition not being supplied by the SEBI. 2. On such issue, the private respondents have taken a stand of confidentiality under Regulation 29 of the Securities and Exchange Board of India (Settlement Proceedings) Regulation, 2018. On such issue we have heard Mr. Dwarkadas, learned Counsel appearing for Respondent No. 9 in WP/530/2023, Mr. Dhond, learned Senior Counsel appearing for Respondent No. 2 in WP/530/2023, Mr. Narichania, learned Senior Counsel appearing for Respondent No. 7 & 8 in WP/530/2023 and Mr. Kamat, learned Senior Counsel appearing for Respondent No. 2 in WP/447/2023, on the objection to such prayer as made by the petitioners. They have concluded their submissions on this issue. We would now hear Mr. Seervai, learned Senior Counsel appearing for the petitioner in WP/530/2023 and Mr. Gaurav Joshi, learned Senior Counsel appearing for Petitioner in WP/ 447/2023 in response to the objections as urged on behalf of the private respondents, on the adjourned date of hearing. 3. We may observe that in pursuance of our request which was made to Mr. Bhatt, learned Senior Counsel fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the violations, such settlement could not have been brought about by BNL. The petitioners thus submit that for such reason, it was not only relevant, but of immense significance, that SEBI in its public character ought to have, at the outset, provided and/or made available the documents as demanded by the petitioners and subject matter of its prayers. 13. It is submitted that the petitioners challenge is to the decision making process leading to the impugned settlement order. It is for the very reason a prayer for a writ of certiorari has been made. It is submitted that it is a settled principle of law that documents cannot be withheld and/or not furnished to the petitioners, on the basic premise that there is no privilege claimed in a manner known to law so as to not produce / furnish the documents. It is submitted that in any event, once the SEBI has agreed to produce the documents before the Court, then there is no question of the documents being withheld and not furnished to the petitioners. The conduct of the respondent Nos. 2 to 9 in objecting to handing over of the documents to the petitioners even by the SEBI, is wholly untenable. It is submitted that in the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable. Hence, if the documents in relation to the settlement are provided, the whole purpose of settlement itself would be lost and it would create a chaotic situation. The sanctity of the settlement order would be lost. It is for such reason, Regulation 29 prohibits providing of any information / documents in regard to the proceedings of settlement. (v) The case of the petitioners is purely a case on the MPS norms and the disclosure requirement in respect of of the promoters shareholding of the BNL and hence, there is no requirement for any information as contained in the documents to be supplied to the petitioners. 15. The above rival contentions fall for our consideration on the question as to whether the interim prayers as made by the petitioners for furnishing of the documents can be granted. 16. At the outset, we may observe that Mr. J. J. Bhatt, learned Counsel for the SEBI in his usual fairness has stated, that if so directed the SEBI is ready and willing to furnish to the petitioners any documents as may be directed by the Court. 17. Now coming to the objections as urged on behalf of the private respondents. We may observe that on behalf of respondent Nos. 2 to 9, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (f) "specified proceedings" means the proceedings that may be initiated by the Board or have been initiated and are pending before the Board or any other forum, for the violation of securities laws, under Section 11, Section 11B, Section 11D, sub-Section (3) of Section 12 or Section 15-I of the Act or Section 12A or Section 23-I of the Securities Contracts (Regulation)Act, 1956 or Section 19 or Section 19H of the Depositories Act, 1996, as the case may be." 19. The provisions governing an 'application for settlement; are contained in Regulation 3 of the 2018 Regulations which reads thus:- "CHAPTER II APPLICATION FOR SETTLEMENT Application. 3. (1) A person against whom any specified proceedings have been initiated and are pending or may be initiated, may make an application to the Board in the Form specified in Part-A of the Schedule-I. 2. The application made under sub-regulation (1) shall be accompanied by a non-refundable application fee as specified in Part-B of Schedule I and the undertakings and waivers as specified in Part-C of Schedule-I: Provided that the rejection or withdrawal of the application shall not affect the continued validity of the undertakings an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mphasis supplied) 20. Chapter III of the 2018 Regulations pertain to Scope of Settlement. Chapter III providing for "Scope of Settlement Proceedings" which reads thus :- "CHAPTER III SCOPE OF SETTLEMENT 5. Scope of settlement proceedings. (1) No application for settlement of any specified proceedings shall be considered, if: (a) an earlier application with regard to the same alleged default had been rejected; (b) the audit or investigation or inspection or inquiry, if any, in respect of any cause of action, is not complete, except in case of applications involving confidentiality; or (c) monies due under an order issued under securities laws are liable for recovery under securities laws. 2. The Board may not settle any specified proceeding, if it is of the opinion that the alleged default, - i. has market wide impact,[or] ii. caused losses to a large number of investors, or iii. affected the integrity of the market. 3. Without prejudice to the generality of the foregoing provisions, for settling any specified proceeding the Board may inter alia take into account the following factors, - (a) whether the applicant has refunded or disgorged the monies due, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson, name of stock broker with whom affiliated and name of the stock exchange: 4. Name of the segment (Cash/derivative etc.): 5. Form of organization: corporate body/ sole proprietorship /partnership / LLP/ financial institution (if listed co., details of listing): 6. Names of promoters/directors/proprietors/partners: 7. Key management personnel(s): 8. Address/correspondence address, contact no./fax no. and email (any changes in aforesaid details shall be communicated to the Board promptly): 9. Name and contact details (including e-mail) of the contact person(s): 10. Other registration(s) with the Board, if applicable: (a) Trade name : (b) Registration type : (c) Registration no. : 11. Case(s) pending with the Board/SAT/Court (Pl. specify): 12. Case(s) pending under 11B/Adjudication/Enquiry/others (pl. specify): 13. Stage at which pending: 14. Interim order(s) in the pending proceedings (gist of the orders passed), if any: 15. Other actions pending with/concluded by the Board, if any (with their details): (a) Against the applicant : (b) Against its associates : (c) Against its key management personnel(s) : (d) Against its other promoters/direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs) Shri .........................................being the applicant/authorised representative (in case of body corporate) of ......................... do hereby verify and affirm on oath that this application and the contents thereof are true to my knowledge and belief and as per the records and that I have not suppressed any material facts and shall keep the Board informed without delay, of any other relevant information that may come to my notice. (Signature of the applicant) Date: Place : (emphasis supplied) Part-B Every applicant under Chapter II of these regulations shall pay a nonrefundable processing fee of fifteen thousand rupees, by way of a demand draft in favour of 'Securities and Exchange Board of India' payable at Mumbai or by way of direct credit in the bank account through NEFT/RTGS/IMPS or any other mode allowed by RBI. Provided that, where the applicant is a body corporate, the nonrefundable processing fee shall be Twenty-five thousand rupees. Part-C Undertakings and Waivers Format Undertaking to be submitted by each applicant, along with the application with stamp duty duly paid and duly notarized at the time of execution. I/We, ..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and agree to abide by the settlement order as may be passed in accordance with the Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018 and guidelines and circulars issued by the Board in that regard: Provided that, in relation to defaults related to disclosures other than relating to a prospectus or a letter of offer or a similar such document required to be made in relation to an issue of securities, I/we do not deny the alleged default. (11)I/We waive my/our right of taking any legal proceedings against the Securities and Exchange Board of India concerning any of the issue covered in the settlement order that may be passed. (12)I/We further waive the following: (a) the findings of fact and conclusions of law; (b) the proceedings before the Board or any officer of the Board; (c) the right to all post-hearing procedures; (d) appeal/review before the Tribunal/courts; (e) any plea relating to such provisions of the regulations or other requirements of law, including conflict of interest, as may be construed to prevent any member or officer of the Securities and Exchange Board of India from participating in the proceedings, including sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is a complete chapter on 'Terms of Settlement', being Chapter IV inter alia containing Regulation 9 providing for Settlement Terms, Regulation 10 providing for factors to be considered to arrive at the settlement terms. Chapter V provides for constitution of the Committees namely High Powered Advisory Committee as also Internal Committee to be constituted by the Board. Chapter VI providing for Procedure of Settlement which provides for proceedings before the Internal Committee, proceedings before the High Powered Advisory committee and actions on the recommendation of High Powered Advisory Committee. Chapter VII providing for Summary Settlement Procedure. Chapter IX provides for Settlement with Confidentiality. However, as agreed on behalf of respondent Nos. 2 to 9, the provisions of this chapter were not invoked, hence, they are not relevant for the present proceedings. Chapter X provides for Settlement Orders. Chapter XI provides for Miscellaneous provisions under which there is 'confidentiality of information' as contained in Regulation 29 (supra) which is the trump card of the private respondents, which can now be discussed. 25. Regulation 29 providing for 'Confidentiality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as urged on behalf of the respondents that the petitioners are 'public' and therefore, they are not entitled to receive information by the applicability of Regulation 29, if accepted, the same yardstick and parameters become applicable to respondent Nos. 3 to 9, who are also shareholders of BNL, who are hence not a different class, than that of the petitioners. The petitioners as also respondent Nos. 3 to 9 belong to the same species as shareholders. It thus cannot be countenanced that some shareholders can take shelter under Regulation 29 to plead confidentiality of settlement information, against a group of other shareholders, so as to bring about an effect that information in relation to settlement be not supplied to such persons of their own class who are similarly situated. No shareholder can take a position that he cannot disclose any information on the affairs of the company to other shareholders. This would bring about a situation of disharmony, distrust causing damage to the management and functioning of the company. Also such proposition as urged by the private respondent if accepted, would amount to doing violence to Regulation 29 and would result in a patent absurdity. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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