Private commercial transactions involving acquisition of shares ...

Court Limits Role in Share Acquisition Fraud Case, Urges SEBI and RBI to Investigate Allegations, Rejects Mandamus Writ.

September 27, 2024

Case Laws     SEBI     HC

Private commercial transactions involving acquisition of shares in a life insurance company were challenged on allegations of fraudulent acts and undue profits. The court held that where a field is regulated and the regulator has addressed or is investigating the transaction, the court should not interfere in writ jurisdiction and allow the regulator to perform its duties. Writ of Mandamus cannot be used for enforcement of private contracts. Examining commercial transactions for reasonableness under Article 226 should be avoided as it would subject every valuation, sale, purchase, merger, acquisition, or demerger to judicial review. If criminality is alleged, appropriate proceedings can be filed. The court found no ground to implead the SEBI Chairperson despite allegations of past professional relationship with a party, as regulators must decide matters per law. Since shareholders approved the transactions and sectoral regulators SEBI and RBI are seized of the matter, the court should not act as a 'super regulator' under Article 226. SEBI and RBI were directed to complete the investigation expeditiously and take further action per law. The rights and contentions of all parties, including the petitioner's locus standi, were left open.

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