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TMI Blog2024 (1) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... ttlement 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent actions remained open for future adjudication. Application rejected. - G. S. KULKARNI JITENDRA JAIN, JJ. For the Applicants/Org. Petitioners : Mr. Navroz Seervai, Senior Advocate with Ms. Arti Raghavan, Mr. Kunal Katariya, Mr. Pulkit Sukhramani, Ms. Vidhi Jhawar, Mr. Deepank Anand and Mr. Shourya Tanay i/b JSA Advocates Solicitors. For the Respondent No. 1 : Mr. J. J. Bhatt, Senior Advocate with Mr. Vishal Kanade, Mr. Mihir Mody and Mr. Dhaval Patil i/b K. Ashar Co. For the Respondent No. 2 : Mr. Venkatesh Dhond, Senior Advocate with Mr. Ashish Kamath, Senior Advocate, Mr. Vaibhav Singh, Ms. Radhika Indapurkar, Bryan Pillai and Mr. Manas Kotak i/b Shardul Amarchand Mangaldas Co. For the Respondent Nos. 7 8 : Mr. Rahul Narichania, Sr. Adv. with Mr. Vaibhav Singh, Ms. Radhika Indapurkar, Bryan Pillai and Mr. Manas Kotak i/b Shardul Amarchand Mangaldas Co. For the Respondent No. 9 : Mr. Janak Dwarkadas, Sr. Adv. a/w Mr. Vaibhav Singh, Ms. Radhika Indapurkar, Bryan Pillai and Mr. Manas Kotak i/b Shardul Amarchand Mangala s Co. ORAL JUDGMENT (PER G. S. KULKARNI, J.):- 1. This interim appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved in perpetuating several illegalities in BNL, violating the securities laws and regulations. The petitioners contended that a copy of the show cause notice was also not furnished to the petitioners. 5. The assertion of the petitioners was also that SEBI, at the behest of respondent nos. 2 to 9, was making a farce of proceedings against respondent nos. 2 to 9 and in reality, no action whatsoever was taken although such violation by respondent nos. 2 to 9 was quite gross. 6. One of the significant contentions as urged by the petitioners was that BNL was earlier listed on the Delhi Stock Exchange and after the said stock exchange ceased to be functional, BNL had sought listing of its shares at the Calcutta Stock Exchange, which was also not functional. In these circumstances, BNL was stated to be on the Dissemination Board of the National Stock Exchange. The petitioners, hence, contended that there was a severe prejudice caused to the petitioners due to several illegalities committed by the BNL, at the instance of the majority shareholders who are respondent Nos. 3 to 9 and that the petitioners were the victims of BNL not being listed on a recognized stock exchange, which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of mandamus or any other writ, order or direction under Article 226 of the Constitution of India, ordering and directing SEBI to withdraw and cancel the Impugned Settlement Order passed in the matter of Respondent No. 2 (Exhibit A). (c) That this Hon ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other writ, order or direction under Article 226 of the Constitution of India ordering and directing SEBI to take the necessary and appropriate steps to ensure that full and true disclosure as required under the applicable securities laws is made in respect of the actual promoter holding of Respondent Nos. 2; and further ordering and directing SEBI to ensure all consequential compliances with securities laws, including but not restricted to compliance with MPS Norms by Respondent Nos. 2 to 9. (d) That this Hon ble Court be pleased to declare as illegal and void, all actions taken by the Respondents (by themselves, or through their subordinate officers, servants and agents) pursuant to the Impugned Settlement Order, including the 2022 Postal Ballot Notice (Exhibit B); (d1) That, in respect of Respondent No. 2, this Hon ble Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 2018 Regulations, and considering the plea as urged on behalf of the respondents on confidentiality falling under Regulation 29, passed a detailed order dated 23 October 2023. In such order, the Court inter alia observed, that by no stretch of imagination, could it be said that the petitioners, who were minority shareholders and in such capacity, being part owners of the company (BNL), to the extent of their shareholding, were outsiders / alien to the company, and being integral to the company, having an inextricable concern and interest in the functioning and management of the company, they were entitled to be provided with the documents as prayed for. This Court while making the following observations, granted to the petitioners interim prayers [prayer (g)], directing the SEBI to provide all the relevant documents to the petitioners:- 28. This apart what is further significant is that the bar as contained in Regulation 29 is only for such information not to be released, to the public . By no stretch of imagination, can it be said that the petitioners in the present case, who are minority shareholders and in such capacity, being part owners of the company to the exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lders of BNL. It is also not the case that they had in any manner given up their case on their necessity and entitlement to have such documents. In any event, the petition is being heard finally at the admission stage, which would not mean that a situation is brought about, that the specific contentions on documents, as urged by the petitioners and subject matter of specific prayers would stand given up by the petitioners much less on the law would understand. Moreover, as observed above, the case of the petitioners is that the very basis of the SEBI undertaking investigation on the complaints as made by the petitioners of BNL violating the rules, regulations and norms as prescribed by SEBI, being violated by BNL and the same forming subject matter of investigation by SEBI and the resultant show cause notice were foundational facts, hence, in such context, it was the petitioners entitlement to receive all the documents in that regard. Such documents therefore have all relevancy as law would contemplates in the present lis between the parties. Thus, the impression of respondent nos. 2 to 9 that the petitioners should not be provided with such documents, is not acceptable. Once it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Appeal (C) Nos. 25783-25784/2023 (Securities and Exchange Board of India vs. Ashok Dayabhai Shah Ors.) which also came to be rejected by the Supreme Court by an order dated 28 November, 2023 which reads thus:- ORDER 1. An earlier Special Leave Petition by one of the promoters, SLP(C) Diary No. 45529 of 2023 [Bharat Nidhi Limited vs Ashok Dayabhai Shah and Others] has been dismissed by this Court on 6 November 2023. 2. Mr Tushar Mehta, Solicitor General submits that the order of settlement which gave rise to the institution of the proceedings under Article 226 of the Constitution before the High Court has been revoked by SEBI. Hence, it has been submitted that the petition before the High Court is rendered infructuous. 3. Mr C A Sundaram, senior counsel appearing on behalf of the respondent, on the other hand, submits that the petition as such has not been rendered infructuous since, in particular, prayer clauses (c) and (d) of the petition would survive for determination. 4. This Court is apprised of the fact that the proceedings are listed tomorrow (29 November 2023) before the High Court of Judicature at Bombay. Hence, it is not necessary for thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 338/2021 Arth Udyog Limited 16A, Lajpat Nagar-IV, NewDelhi 110024 6342/2021 Matrix Merchandise Limited 101 Pratap Nagar, Mayur Vihar, Phase-1, New Delhi 110091 6344/2021 Mahavir Finance Limited 101 Pratap Nagar, Mayur Vihar, Phase-1, New Delhi 110091 6341/2021 TM Investment Limited Gulab Bhawan, MBD House, 6, Bahadur Shah Zafar Marg, New Delhi 110002 6345/2021 Sanmati Properties Limited Gulab Bhawan, MBD House, 6, Bahadur Shah Zafar Marg, New Delhi 110002 Ref: Settlement Order No. SO/EFD-2/SD/421/SEPTEMBER/2022 dated September 12, 2022 in the matter of Bharat Nidhi Limited in respect of Settlement Application nos. 6348, 6353, 6332, 6338, 6342, 6344, 6341 and 6345 of 2021 Sir, 1. This is to inform you that the Settlement Order dated September 12, 2022 under reference, stands revoked and withdrawn in terms of Regulation 28 of the SEBI (Settlement Proceedings) Regulations, 2018, for fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced for perusal of the Court on behalf of the SEBI, we find that non-compliance interalia of the Rules and Regulations of SEBI are subject matter of the show cause notice, and any plea in opposition as may be urged by BNL and respondent Nos. 3 to 9 (the majority shareholders), would fall for consideration in the adjudication of the show cause notice. This would, however, not mean that the petitioners in their capacity as shareholders, would be dis-entitled or would cease to have any locus to have information / documents in regard to such affairs of BNL and to seek compliance of the Rules and Regulations and the norms of the SEBI by respondent No. 2 and those controlling BNL. 24. In our opinion, considering the fact that the settlement order itself has been revoked, the SEBI now needs to resort to a lawful course of action, to adjudicate the show cause notice, so as to reach to a conclusion, whether respondent Nos. 2 to 9 have violated the provisions of the Act, Rules and Regulations, as alleged in the show cause notice and the complaints of the petitioners. We are thus of the opinion that in the facts and circumstances of the case, it would be appropriate that the SEBI expedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and being unable to take up a firm and consistent stand, they defended the various Writ petitions filed against them by their employees according to the mood of the passing moment. That must be deprecated. 26. The present case appears to be not different from what has been observed by us in relation to the actions of the SEBI, further discussion on this aspect would fortify our observations. 27. We may observe that when the final hearing of the present proceedings was to commence on 5 September 2023, SEBI had taken a position that the impugned settlement orders can be reconsidered as there was a change in the Whole Time Members (WTM) of SEBI, and accordingly, the proceedings can be put to an end. We had accordingly passed the following order:- 1. We had placed this matter for final hearing today at 2.30 p.m. 2. Mr. Seervai, learned Senior Counsel for the Petitioners, has commenced his arguments. At the midst of the hearing Mr. Bhatt, learned Senior Counsel for the Respondent No. 1-SEBI, has stated before us that there was a change in the Whole Time Members (WTM) of the SEBI. He states that SEBI would now be in a position to take a decision as to whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners as ordered by us, was the core issue under our orders, being urged by the SEBI before the Supreme Court, apart from the plea of interpretation of Regulation 29 of the 2018 Regulation. 30. Be that as it may, considering all these circumstances, we are of the clear opinion that the entitlement of the petitioners to our order dated 23 October 2023, would certainly subsist and the petitioners need to be provided such documents by the SEBI. Moreover, not providing such documents, merely on the ground of the subsequent development that the settlement orders now stands revoked, would completely be an untenable proposition and contrary to our orders dated 23 October 2023, as confirmed by the Supreme Court. Although respondent Nos. 2 to 9 in their business interest may overlook the solemnity of the orders passed by this Court, however, SEBI in its public character cannot take the same approach. In these circumstances, the order dated 23 October 2023 cannot be rendered nugatory. The SEBI is required to holistically consider such orders and not merely in the context of the settlement proceedings, as such order considers the substantive rights of the petitioners, who are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e this Court under Article 136 of the Constitution, the Special Leave Petition which was filed initially by the promoter was dismissed. The order of the High Court required SEBI to make a disclosure of documents. Subsequently, a companion Special Leave Petition filed by SEBI was also dismissed. However, this was without prejudice to the proceedings which were pending before the High Court. The High Court has, in the course of its impugned order, reiterated its interim order of directing a disclosure to be made. 2. The Solicitor General submitted that Regulation 29(1) of the Securities and Exchange Board of India (Settlement Proceedings) Regulations 2018 stipulates that all information submitted and discussions held in pursuance of the settlement proceedings under the Regulations shall be deemed to have been received or made in a fiduciary capacity and may not be released to the public, if the same prejudices the Board and/or the applicants. 3. There is no material before the Court to indicate that the disclosure would cause prejudice. It is common ground that the settlement itself has been revoked in which case the provisions of Regulation 29 are not attracted. In any eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not inform this Court that they had taken steps to challenge SEBI s order dated 10 November 2023 revoking the settlement, by filing of Writ Petitions, being Writ Petition (C) No. 1556 of 2023 (Bharat Nidhi Ltd. Vs. SEBI), Writ Petition No. 15557 of 2023 ( Ashoka Marketing Ltd. Earth Udyog Ltd. Vs. SEBI Ors) and Writ Petition No. 1558 of 2023 (Matrix Merchandise Ltd. Ors. Vs. SEBI Ors.) which in fact were already filed in the early hours of 1 December 2023 and before orders could be pronounced by this Court on the present proceedings, which were also listed for pronouncement of orders on 1 December 2023. 20. It is Mr. Seervai s submission that in fact what is seen from paragraph 18 of the orders passed by this Court is that, by suppressing such fact that respondent Nos. 2 to 9 had challenged the order dated 10 November 2023 passed by SEBI revoking settlement, respondent nos. 2 to 9 made the Court to believe that respondent Nos. 2 to 9 would participate in the adjudication of the show cause notice, and on such impression and/or the stand taken by them, they secured disposal of the writ petition by Court s order dated 1 December 2023. 21. In such context, it is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court of Judicature at Bombay, recording the submissions of the respondents therein, would indicate that an impression has been created in the mind of the court that the petitioners herein desired for the expeditious disposal of the SCN. However, the facts of the present cases exhibit that, at the same time, the petitioners herein were also in the process of challenging the Settlement Order as the affidavits for the present petitions were sworn during the interregnum period of passing of the orders i.e. 29.11.2023 and 01.12.2023. 117. In all fairness, the petitioners herein ought to have disclosed the said fact before the Hon ble High Court of Bombay regarding reserving the right to challenge the settlement order. Undoubtedly, they can challenge the same without prior intimation to the Hon ble High Court of Bombay, but the recourse must have been taken before an appropriate forum/court. The burden of a fair demeanour on the part of litigants considerably amplifies when they approach the courts under the extraordinary jurisdiction. Therefore, at times, it is the constitutional courts upon which falls the burden to prevent the abuse of jurisdiction and eliminate any susceptibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en drawn to paragraph 5 of the short reply affidavit as filed on behalf of respondent no. 2. 29. It is next submitted that in any event no prejudice whatsoever is caused to the petitioners in as much as, in its order dated 01 December, 2023 passed by this Court, disposing of the petition, all contentions of the petitioners in regard to prayer clauses (c) and (d) are expressly kept open, to be agitated in appropriate proceedings and at the appropriate time subject to the decision being taken by the SEBI on the show cause notice. It is, therefore, submitted that as on date, there can be nothing which could be called upon by the petitioners, to be adjudicated in the present proceedings. 30. In so far as the petitioners contention that there is a fraud as played by respondent no. 2 to 9 on the Court is concerned, according to Mr. Dhond, the same is totally untenable. It is submitted that the petition before the Delhi High Court was affirmed on 29 November 2023. In view of ensuing holidays namely on 25, 26 and 27 November 2023, the petition was filed in the early hours of 01 December, 2023. It is submitted that at the point of time when a decision was taken by respondent Nos. 2 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt dismissing their writ petitions for want of territorial jurisdiction, these respondents are in the process of filing a writ appeal before the Delhi High Court. 32. Mr. Dwarkadas, learned senior counsel for respondent no. 9 has supported the contentions as urged by Mr. Dhond. It is his submission that no prejudice would be caused to the petitioners in view of the clear observations of this Court in paragraph 31 of the order dated 01 December, 2023 disposing of the aforesaid writ petition, also as clearly seen from paragraph III of the operative part of the said order. Mr. Dwarkadas would submit that in so far as the prayer clauses (c) and (d) of the writ petition are concerned, nothing survives for adjudication in such prayers, in as much as in regard to a buy-back of the shares, there was a clear notice to the shareholders in terms of the public notice dated 09 December, 2023, which was independent to the settlement orders, which had stood revoked and as set out in the penultimate paragraph of the said public notice. It is submitted that the shareholders were put to a clear notice that the settlement orders have been revoked by the SEBI on 10 November, 2023 and in terms of wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs before the Delhi High Court, would be the correct factual position. It is his submission that the SEBI had opposed the said writ petitions before the Delhi High Court. In this regard, the Delhi High Court pronouncing its order on respondent Nos. 2 to 9 s writ petition on 18 December 2023 has made serious observations reflecting on the conduct of respondent Nos. 2 to 9. In so far as Mr. Dhond s submissions on Ms. Pina Shah approaching the Delhi High Court in her intervention application, Mr. Seervai would submit that she continued to pursue her petition (Writ Petition No. 447 of 2023) before this Court, as only an intervention application was filed by her before the Delhi High Court. Thus, the contention of Mr. Dhond of any forum shopping by the petitioners is untenable. It is Mr. Seervai s submission that it was false for respondent Nos. 2 to 9 to contend that the cause of action for the petitioners to move the Delhi High Court was SEBI fixing 5 December 2023, as a date for hearing of the show cause notice. It is submitted that, in fact, respondent Nos. 2 to 9 were aggrieved by revocation of the settlement order and therefore, the cause of action to them had accrued on 10 Novemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direction in that regard that all contentions of the petitioners and the respondents on such prayer clause were expressly kept open to be agitated in appropriate proceedings at the appropriate time. Such observations of the Court in paragraph 31 and the operative order in the context as discussed are required to be re-noted, which reads thus: 31 However, on the issue whether the Court should adjudicate prayer (c) and (d) of the petitions, taking an overall view of the matter, and that, now the show cause notice is required to be taken forward, we are of the opinion that in so far as such reliefs are concerned, the same needs to be kept open to be agitated by the petitioners at the appropriate time in appropriate proceedings in the context of the decision which may be taken by the SEBI on the show cause notice. We accordingly, propose to dispose of these petitions by the following order:- ORDER (I) The petitioners are entitled to the benefits of the order dated 23 October 2023 as confirmed by the Supreme Court, by rejection of the Special Leave Petitions of respondent Nos. 2 and 9 and thereafter, by rejection of the Special Leave Petition filed by the SEBI. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Settlement Order has been revoked and withdrawn. The Company has already adopted appropriate proceedings to challenge the revocation of the Settlement Order. Further, by an order dated December 01, 2023, the Hon ble High Court of Bombay has disposed of the Petitions. Kindly note that the Settlement Order, in compliance of which the Buy-back offer was initiated has been revoked. By virtue of Section 68 of the Companies Act, 2013 read with Rule 17(10)(d) of the Companies (Share Capital and Debentures) Rules, 2014, the Company is prohibited from withdrawing the Buy-back offer once it has been announced to the shareholders. Therefore, in accordance with its statutory obligations under the Companies At, 2013 read with the aforesaid rules, the Company will proceed with the Buyback offer and will take steps towards finalisation of the Buy-back offer within the statutory prescribed timelines. (emphasis supplied) 41. As pointed out on behalf of respondent no. 2 in its reply affidavit, the process of buyback of shares as undertaken by issuance of the said public notice (dated 9 December, 2023) published in all editions of the Financial Express and Delhi edition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the Court to pass orders dated 1 December, 2023 so as to dispose of the petition, would deserve acceptance. It is true that respondent nos. 2 to 9 on receipt of SEBI s order dated 10 November, 2023 revoking the Settlement Order had taken a decision to challenge such orders passed by SEBI and had accordingly affirmed their Writ Petitions on 29 November, 2023 to be filed before the Delhi High Court, which were actually filed in the early hours of 1 December, 2023. Thus, there was an opportunity available to respondent nos. 2 to 9 to inform this Court of such fact, on 29 November, 2023 when the arguments were heard on the petition and thereafter on 1 December, 2023, when the orders were to be pronounced on the writ petition. However, such disclosure was not made to the Court nor to the petitioner. This does not reflect a fair, just or an upright approach on the part of respondent nos. 2 to 9 when the parties were before the High Court. This more particularly, considering the solemnity of any Court proceedings. It also cannot be countenanced that any litigant who is aware about certain facts which are relevant and /or likely to have a bearing on the proceedings before the Court, wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there is no change in the circumstances, as no relief is granted to Respondent Nos. 2 to 9 in the proceedings filed before the Delhi High Court. We thus wonder, that when the situation is of no material change on the settlement order having stood revoked, as to what can be called upon to be adjudicated in the writ petition at such stage? 46. Thus, insofar as such issues as raised in the Writ Petition are concerned, we are of the clear opinion that there being no material change in the circumstances, the Court cannot review and in fact reverse its observations / directions as made in paragraph 31 of the Courts order dated 1 December 2023, in considering the prayer of the petitioners which is merely of restoration of the writ petition. 47. We would also not be persuaded to accept Mr. Seervai s contentions that the public notice dated 9 December 2023 for buyback of the shares of BNL would amount to a cause of action falling under the Writ Petition requiring adjudication. In our opinion, such contention is not well founded for the reason that such notice dated 9 December 2023 for buyback of the shares was an independent notice and under which actions have already been taken and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implicitor of restoration of the writ petition and adjudication of the proceedings and not to review/recall our order dated 1 December 2023 which not only makes substantive observations but also bears substantive orders. 49. In the circumstances as discussed by us above, we would accept the contentions as urged by Mr. Dhond that the present application is premature in as much as the revocation of the resettlement order has not been set aside, so as to bring about a situation that the status quo as on the date the writ petition was filed is restored, so as to confer a cause of action to the petitioners to pursue the present petition. 50. Insofar as the decisions as relied by Mr. Seervai to contend as to what can be regarded as a fraud on the Court, we may observe that the principles as laid down in such decisions are well settled. We do not wish to burden this order by discussing such principles, suffice it to observe that we have already concluded that although the conduct of respondent Nos. 2 to 9 was not of a fair litigant, however albeit such conduct, we would not accept such conduct to be any fraud played on the Court which would vitiate our order dated 1 December 2023. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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