10 Landmark Corporate and Securities Case Laws | 2022 | Expert Analysis and Explanations

Get the inside scoop on the top 10 rulings on Company and Securities Law that everyone is talking about! Our team of experts at Taxmann has compiled a list of landmark rulings from 2022 that are trending among the stakeholders. From settled positions of law to practical insights for professionals, this is a must-read for anyone in the industry. Don’t miss out on the latest and greatest – the Gist of these cases is presented hereunder: 

1. SC sets aside insider trading orders against PCJ as SAT erred in inferring UPSI from only circumstantial evidence

Case Details: Balram Garg v. Securities and Exchange Board of India
Citation: [2022] 137 taxmann.com 305 (SC)

Judiciary and Counsel Details

• Vineet Saran & Aniruddha Bose, JJ.
• V. Giri, Sr. Adv., Krishna Dev Jagarlamudi, AOR, Ms Ankita Gupta, Ms Inderdeep Kaur Raina, Mehul M. Gupta, Advs. & Ms Arunima Dwivedi, AOR for the Appellant. 
• Dhaval Mehrotra & Sudhanshu Sikka, Advs. for the Respondent.

SEBI alleged that appellants traded in shares of company ‘PCJ’ on basis of unpublished price sensitive information received by them on account of their alleged proximity to Managing Director (MD) of company and thereby, violated PIT regulations, however, there were no materials to prima facie show any transfer of information by MD to appellants, mere being relative could not be a ground for offence of insider trading and, thus, impugned order passed by SEBI imposing penalties and debarring them for security market for violation of PIT Regulations was to be set aside

Facts of the Case

The SEBI had imposed a fine of Rs. 20 lakh on appellants and restrained them from accessing the securities market and buying, selling or dealing in securities directly or indirectly for a year. SEBI also restrained the appellants from dealing with the scrips of their company for two years.

The order was based on the finding of the SEBI that the family members concerned had traded on the basis of ‘Unpublished Price Sensitive Information’ (UPSI) received on account of their alleged closeness to the company and its Managing Director. The SAT upheld the same.

Supreme Court Held

On appeal, the Apex Court observed that the SAT was exercising jurisdiction of a First Appellate Court and was bound to independently assess the evidence and material on record, which it evidently failed to do.

It was observed that the charge of Insider Trading by communication of Unpublished Price Sensitive Information by an insider to other insiders or any other persons (Regulation 3 of SEBI(Prohibition of Insider Trading) Regulations, 2015), is required to established by adequate material on record and cannot be established from only circumstantial evidence of share trading timing/pattern. To raise the statutory presumption of communication of UPSI, there needs to be adequate material on record to show frequent communication between the parties. No presumption can be raised without proving foundational facts.

The Apex Court noted the entire case of the Respondents SEBI was premised on two important propositions, that firstly, there existed a close relationship between the appellants herein; and secondly, that based on the circumstantial evidence (trading pattern and timing of trading), it could be reasonably concluded that the appellants in C.A. No.7590 of 2021 were “insiders” in terms of Regulation 2(1)(g)(ii) of the PIT Regulations. However, the WTM and SAT wrongly rejected the claim of estrangement of the Appellants in C.A. No.7590 of 2021, without appreciating the facts and evidence as was produced before them.

The records and facts adequately establish that the there was a breakdown of ties between the parties, both at personal and professional level and that the said estrangement happened much prior to the two UPSI. Secondly, the SAT erred in holding the appellants in C.A. No.7590 of 2021 to be “insiders” in terms of regulation 2(1)(g)(ii) of the PIT Regulations on the basis of their trading pattern and their timing of trading (circumstantial evidence).

There is no correlation between the UPSI and the sale of shares undertaken by the appellants in C.A. No.7590 of 2021.

Moreover, in the absence of any material available on record to show frequent communication between the parties, there could not have been a presumption of communication of UPSI by the appellant.

The trading pattern of the appellants in C.A. No.7590 of 2021 cannot be the circumstantial evidence to prove the communication of UPSI by the appellant to the other appellants in C.A. No.7590 of 2021. There is no material on record for the WTM and the SAT to arrive at the finding that both late P.C. Gupta and the appellant communicated the UPSI to the other appellants in C.A. No.7590 of 2021.

The said appellants in C.A. No.7590 of 2021 were not “immediate relatives” and were completely financially independent of the appellant and had nothing to do with the him in any decision making process relating to securities or even otherwise.

The Apex Court held that the SAT order suffers from non-application of mind and the same is a mere repetition of facts stated by the WTM. The Appellate Tribunal was exercising jurisdiction of a First Appellate Court and was bound to independently assess the evidenced and material on record, which it evidently failed to do.

Accordingly, the appeals are allowed and the impugned judgement and final orders of WTM and SAT are set aside. The deposits made by the appellants in both the appeals in terms of the impugned orders or interim orders of this Court shall be refunded to the respective appellants.

2. SC upholds NCLAT order on winding up of DEVAS on the grounds of fraud

Case Details: Devas Multimedia (P.) Ltd. v. Antrix Corporation Ltd.
Citation: [2022] 134 taxmann.com 168 (SC)

Judiciary and Counsel Details

• Hemant Gupta & V. Ramasubramanian, JJ.
• Mukul Rohtagi, Arvind P. Datar, Sr. Advs. Ms Anuradha Dutt Adv., Ms B. Vijayalakshmi Menon, AOR Pawan Sharma, Ms Priyanka M.P., Chaitanya Kaushik, Ambar Bhushan, Haaris Fazili & Kunal Dutt, Advs. for the Appellant. 
• N. Venkataraman, ASG, V. Chandrashekara Bharathi, Ms Vanita Bhargava, Ajay Bhargava, Arvind Ray, Karan Gupta, Ms Vansha Sethi Suneja & Chinmoy Roy, Advs. for the Respondent.

Devas, a joint venture of US Corporation and ISRO’s commercial arm ‘Antrix’ was engaged in fraudulent activities and it estopped Antrix from seeking its winding-up on ground that application for winding-up was barred by limitation, in view of fact that fraud was unearthed by investigating agencies only in 2016 and subsequently in 2018 and 2019 and these were sources of information for Antrix to get knowledge on aspects of fraud and by time discovery was made, attempts to reap fruits of fraud had reached pinnacle and these attempts continue even till date and thus, winding up application was within period of limitation and therefore, impugned order passed by NCLT as well as NCLAT admitting application for winding-up was justified

Facts of the Case

Antrix, incorporated under the Companies Act, 1956, is the commercial arm of the ISRO. Antrix entered into the MOU with one of the advisors for business advisory purposes and otherwise. Advisors made a presentation proposing an Indian Joint venture, “DEVAS” (Digitally Enhanced Video and Audio Services), to provide multimedia services to mobile users using the leased S-band satellite spectrum.

Antrix entered into an agreement with Devas Multimedia Private Limited (Devas) for the lease of space segment capacity of ISRO/Antrix S-Band spacecraft. Antrix, later on, terminated the agreement on the ground of force majeure that GOI had taken a policy decision not to provide orbital slots in S-Band for commercial activities.

Meanwhile, CBI also filed an FIR on Devas under Section 420 read with Section 120B of IPC and Section 13(2) of the Prevention of Corruption Act, 1988. On 18-01-2021, Antrix filed the winding-up petition under Section 271(c) of the Companies Act, 2013 before NCLT, Bengaluru Bench. NCLT admitted the petition of Antrix and passed the order of winding up, saying that it was formed for “fraudulent and unlawful purposes.

Later on, Devas and its shareholder Devas Employees Mauritius Pvt Ltd challenged the order to wind up before the Chennai bench of the NCLAT, which also dismissed the petition. Later on, the matter went to the Supreme Court to set aside the NCLT/NCLAT order to wind up Devas.

Grounds taken by Devas

Devas contended on various grounds, including the following:

(a) Definition of ‘fraud’ for section 271(1)(c) purpose

(b) Auditors reported no frauds in CARO Report

(c) A statement by NCLAT in its order that “the allegations are prima facie made out” a company cannot be ordered to be wound up based on prima facie findings.

(d) Petition under Section 271(c) should have been preceded, at least by a report from the Serious Fraud Investigation Office, which has now gained statutory status under Section 211 of the Companies Act, 2013.

(e) Company cannot be wound up for fraud until criminal complaint filed for the offences punishable under Section 420 read with Section 120B IPC have been taken to a logical end

Supreme Court Held

The Supreme Court quashed the above grounds on the following basis.

The Supreme Court called the deal between Antrix and Devas to build the satellites as “fraud”.

“If the seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas, every part of the plant that grew out of those seeds, such as the Agreement, the disputes, arbitral awards, etc., are all infected with the poison of fraud,”

said the court. Fraud in section 271(1)(c) has a wider meaning than that assigned to it in Contract Act or Section 447 of the Companies Act, 2013. What is covered by Section 271(c) of the Companies Act, 2013 is a fraud that goes beyond what lies in the realm of contract or in the realm of the penal provisions of the Companies Act, 2013.

As far as the question of “No Fraud” reporting by the auditor is concerned, the auditor’s report can neither be taken as gospel truth nor act as estoppel against the company. The statement in the auditor’s report is as per the information given to them or as per the information culled out to the best of their ability.

The Supreme Court after analysing the judgements passed by NCLT and NCLAT observed that merely because NCLAT used an erroneous expression, those findings cannot become prima facie. The detailed findings recorded by the Tribunal show that they are final and not prima facie.

The outcome of one need not depend upon the outcome of the other, as the consequences are civil under the Companies Act, 2013 and penal in the criminal proceedings. The

Supreme Court dismissed the appeal filed against the order of NCLT/NCLAT orders and upheld the decision of winding up of the company.

“We do not find any merit in the above submission. If fraud, as projected by Antrix, stands established, the motive behind the victim of fraud, coming up with a petition for winding up, is irrelevant. If the seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas, every part of the plant that grew out of those seeds, such as the agreement, the disputes, arbitral awards etc., are all infected with the poison of fraud,”

the court ruled.

3. A person accused of fraud u/s 447 of CA 2013 has no right to bail if a charge sheet is filed within 60 days limit u/s 167(2) of Cr.PC

Case Details: Serious Fraud Investigation Office v. Rahul Modi
Citation: [2022] 135 taxmann.com 98 (SC)

Judiciary and Counsel Details

• L. Nageswara Rao & B.R. Gavai, JJ.
• Aman Lekhi, Ld. ASG, Zoheb Hossain, Kanu Agrawal, Udai Khanna, Ritwiz Rishabh, Advs., Gurmeet Singh Makker & Arvind Kumar Sharma, AOR’s for the Petitioner. 
• Ranjit Kumar Sharma, Dr Monika Gusain & E.C. Agrawala, AOR’s for the Respondent.

Facts of the Case

The directors of Adarsh Group of Companies and LLPs were accused of committing an offence under Section 447 of the Companies Act, 2013, Section 120-B read with Sections 417, 418, 420, 406, 463, 467, 468, 471, 474 of the Indian Penal Code, 1860.

The undisputed facts are that the complaint under Section 439(2) of the Companies Act, 2013 was filed on 18-05-2019, which was before the expiry of the 60 days from the date of the remand. The applications filed for statutory bail were dismissed by the Special Court on 22-05-2019, on the ground that the charge sheet was filed before the expiry of 60 days.

The question before the Apex Court was whether an accused is entitled to statutory bail under Section 167(2), CrPC, on the ground that cognizance has not been taken before the expiry of 60 days or 90 days, as the case may be, from the date of remand?

The accused contended that an accused has a right to seek statutory bail under the proviso to Section 167(2) even after the charge sheet is filed, till the court takes cognizance.

Supreme Court Held

The Apex Court held that the indefeasible right of an accused to seek statutory bail under Section 167(2), CrPC arises only if the charge sheet has not been filed before the expiry of the statutory period.

“Reference to cognizance in Madar Sheikh case is in view of the fact situation where the application was filed after the charge-sheet was submitted and cognizance had been taken by the trial court.

Such reference cannot be construed as this court introducing an additional requirement of cognizance having to be taken within the period prescribed under proviso (a) to Section 167(2), CrPC, failing which the accused would be entitled to default bail, even after filing of the charge-sheet within the statutory period.

It is not necessary to repeat that in both Madar Sheikh (supra) and M. Ravindran (supra), this court expressed its view that non-filing of the charge-sheet within the statutory period is the ground for availing the indefeasible right to claim bail under Section 167(2), CrPC. The conundrum relating to the custody of the accused after the expiry of 60 days has also been dealt with by this court.”

Court said.

4. SEBI was not justified in penalising a Co. by taking a hyper-technical view of the law on related party transactions: SC

Case Details: Securities and Exchange Board of India v. R.T. Agro (P.) Ltd.
Citation: [2022] 137 taxmann.com 496 (SC)

Judiciary and Counsel Details

• Dinesh Maheshwari & Aniruddha Bose, JJ.
• S. Niranjan Reddy, Sr. Adv. Abhishek Baid, Anup Jain, Ashok Kr. Jain & Praneet Das, Advs. for the Appellant. 
• Pesimodi, Sr. Adv. Lakshmeesh S. Kamath, AOR, Joby Mathew, Neville Lashkari & Ms Samriti Ahuja, Advs., for the Respondent.

Supreme Court upholds order of Securities Appellate Tribunal holding that bar of voting as per section 188 of Companies Act, 2013 as well as regulation 23 of LODR on related parties operates only at time of entering into contract or arrangement i.e. when resolution was passed and it does not prohibit related parties from voting for recalling rescinding said resolution

Facts of the Case

A company (R.T. Exports Limited) proposed to enter into a transaction with Neelkanth Realtors Private Limited for the purchase of 40,000 sq. ft. of residential space. This proposal was treated as a related party transaction and was required to be approved by the shareholders of the company.

Accordingly, a special resolution was approved by R.T. Exports Limited. In terms of Section 188 of the Companies Act, 2013, the related parties abstained from voting on this special resolution. Thereafter, an Extra-Ordinary General Meeting was convened to rescind the resolution in which the related parties also voted.

However, the appellant-SEBI took up the matter on a complaint and issued a notice alleging violation of Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Adjudicating Officer proceeded to penalise the present respondents with a cumulative sum of Rs. 35 lakhs for the alleged violation of the said regulation.

The Securities Appellate Tribunal dismissed the order passed by the Adjudicating Officer and allowed the appeal. The Tribunal held that the bar on voting by the related parties as per Section 188 of the Companies Act, 2013 operated only at the time of entering into a contract or arrangement, i.e., when the resolution was passed. The Tribunal found no fault in the said parties voting in the recalling/rescinding of the said resolution.

Supreme Court Held

On further appeal, the Apex Court held that the SEBI was not justified in taking a ‘hyper-technical’ stance imposing a penalty on the company for the related party voting on a resolution rescinding an earlier special resolution.

The Court held that the view taken by SAT in the given facts and circumstances of the case is to be upheld as it appeared to be a plausible view of the matter since no ill-intent on the part of the respondents (company) was established. It was held that the SAT had rightly disapproved of the hyper-technical stance of SEBI.

5. Appeal for restoration of Co.’s name can’t be maintained by a person whose status as its director is disputed: Supreme Court

Case Details: Nirendra Nath Kar v. Gopal Navin Bhai Dave
Citation: [2022] 142 taxmann.com 563 (SC)

Judiciary and Counsel Details

• Ajay Rastogi & B.V. Nagarathna, JJ.
• Kailash Pandey, Ranjeet Singh, Krishna Yadav, Advs. & Gaichangpou Gangmei, AOR for the Appellant. 
• Pankaj Jain, Adv., Bijoy Kumar Jain, AOR, Ashok Kumar Jain, Adv., Sanjay Jain, ASG, Padmesh Mishra, Anukalp Jain, Advs. & Arvind Kumar Sharma, AOR for the Respondent.

An application for restoration of company was made by one who was neither company nor a member nor a creditor, he could not be said to be a person aggrieved to question order of RoC striking off name of company from Register of Companies and, thus, he had no locus standi to file application for restoration of name of company

Facts of the Case

In the instant case, an appeal was filed against the order passed by the High Court of Calcutta, setting aside the order of the Registrar of Companies (RoC) striking off the name of the company under Section 560(5) of the Companies Act, 1956.

The RoC alleged that the company was not functioning properly and not carrying out any business, and the last annual return was filed for the year 2002-2003.

Aggrieved by order of ROC, a complaint was filed by the appellant, who was one of the company’s directors, in the year 2010 before the High Court. The High Court allowed the application on the ground that the procedure as prescribed under Section 560 was not followed before striking off the name of the company and passed an order to restore the name of the company.

Thereafter, an appeal was made to the Supreme Court against the order passed by the High Court.

Supreme Court Held

The Supreme Court held that an appeal for restoration of the name of the company struck off by RoC as defunct cannot be maintained by a person whose status as director of the defunct company was disputed and not evident from documents filed with RoC when the company’s name was taken out of the records of RoC.

The Supreme Court further held that the filings of the individual as a director after the company’s name is struck off cannot give the individual the right to file/maintain an appeal for restoration of the name of the company until the dispute as to his status was decided in his favour by the civil Court. Accordingly, the appeal was to be dismissed.

6. Director of a Co. can’t be prosecuted vicariously for cheque bounce if Co. is not charged as accused: Supreme Court

Case Details: Pawan Kumar Goel v. State of U.P.
Citation: [2022] 145 taxmann.com 57 (SC)

Judiciary and Counsel Details

• Krishna Murari & Bela M. Trivedi, JJ.

Prosecution against director for cheque bounce of company is to be quashed if company is not arraigned as accused & Director of company cannot be prosecuted vicariously for cheque bounce by company if company is not arraigned as accused and where the allegations in the complaint did not in express words or with reference to the allegations contained therein make out a case that at the time of commission of the offence, the director named in the complaint as accused was in charge of and was responsible to the company for the conduct of its business.

 Facts of the Case

 In the instant case, the following two main issues arose before the Apex Court:

(a) Whether a director of a company would be liable for prosecution under Section 138 of the Negotiable Instrument Act without the company being arraigned as an accused?

(b) Whether a complaint under Section 138 of the Negotiable Instrument Act would be liable to be proceeded against the director of the company without there being any averments in the complaint that the director arrayed as an accused was in charge of and responsible for the conduct and business of the company?

Supreme Court Held

The provisions of Section 141 of the Negotiable Instrument Act impose vicarious liability by deeming fiction that pre-supposes and requires the commission of the offence by the company or firm. Therefore, unless the company or firm has committed the offence as a principal accused, the persons mentioned in sub-sections (1) and (2) of Section 141 would not be liable to be convicted based on the principles of vicarious liability.

For maintaining the prosecution under Section 141 of the Negotiable Instrument Act, arraigning the company as an accused is imperative, and non-impleadment of the company would be fatal for the complaint.

Arguments advanced by learned counsel for the appellant that an additional accused can be impleaded after the filing of the complaint merits no consideration once the limitation prescribed for taking cognizance of the offence under Section 142 of the Negotiable Instrument Act has expired.

More particularly, in view of the fact that the petitioner neither made any effort at any stage of the proceedings to arraign the company as an accused nor any such circumstances or reason been pointed out to enable the Court to exercise power conferred by the proviso to Section 142, to condone the delay for not making the complaint within the prescribed period of limitation.

Vicarious liability of a person for being prosecuted for an offence committed under the Act by a company arises if, at the material time, he was in charge of and was also responsible to the company for the conduct of its business. Simply because a person is a director of a company, it does not necessarily mean that he fulfils both the above requirements to make him liable. Conversely, without being a director, a person can be in charge of and responsible to the company for the conduct of its business.

Where the allegations in the complaint did not, in express words or with reference to the allegations contained therein, make out a case that at the time of the commission of the offence, the individual named in the complaint as accused was in charge of and was responsible to the company for the conduct of its business, it was to be held that requirement of Section 141 was not met and the complaint against the accused was to be quashed.

7. Issuance of NCDs to a selected group via private placement couldn’t be termed as deposits u/s 2(2) of TNPID Act: HC

Case Details: Ravi Parthasarathy v. Deputy Superintendent of Police Economic Offence Wing-II
Citation: [2021] 133 taxmann.com 325 (Madras)

Judiciary and Counsel Details

• M. Dhandapani, J.
• B. Kumar, SC, Rahul Unnikrishnan, Manishankar, SC, A. Ashwini Kumar, M.K. Kabir, SC, Sunder Mohan, Nithyesh Natraj, C.E. Pratap, GA, P.S. Raman, SC, Sarath Chander, B. Vijay, Anand Sashidharan and Abdukumar Rajarathnamfor the Appearing Parties.

Company ITNL had floated non-convertible debentures through private placement basis only to select group of persons and no advertisement was made soliciting deposits from public to invest in ITNL, issuance of debentures by ITNL could not be termed as ‘deposits’ as defined under section 2(2) of TNPID Act nor company floating private placement scheme could be termed to be a ‘financial establishment’ as defined under section 2(3) of TNPID Act

Facts of the Case

In the instant case in the matter of Ravi Parthasarathy v. Deputy Superintendent of Police Economic Offence Wing-II – [2021] 133 taxmann.com 325 (Madras) , R2 being a purchaser of non-convertible debentures of company ITNL and having not received interest as undertaken by ITNL while issuing said debentures lodged a complaint before R1- Economic Offence Wing (EOW) under Tamil Nadu Protection of Investment of Depositors (in Financial Establishments) against company ITNL and its directors including petitioners.

Aggrieved by the said registration of the case against the petitioners, a criminal petition was filed on the ground that the invocation of the provisions of TNPID Act would not stand attracted to the debentures floated by ITNL as the said debentures were not ‘deposit’ and ITNL was not a ‘financial establishment’ as defined under section 2(2) and 2(3) of the TNPID Act.

It was the case of the petitioners that ITNL, which was a group company under the umbrella of IL&FS was involved in the infrastructural activities and not into finance and banking activities. ITNL had floated non-convertible debentures, to a select few, on which interest was to be paid. The petitioners were, till 21-1-2019 were paying interest on the said debentures, but in view of the moratorium issued by NCLAT, ITNL was not able to pay the interest, which defaults led to the registration of the complaint by the intervenors under the TNPID Act.

High Court Held

The High Court noted that neither there was any advertisement soliciting deposits from the public to invest in ITNL nor collection of any money from the public. The Debentures were issued on a private placement basis only to a selected group of persons. Such being the case, issuance of debentures would by no stretch of imagination be termed to be ‘deposits’ within the meaning of section 2(2) nor company floating private placement scheme could be termed to be a ‘financial establishment’ as defined under section 2(3) and therefore, provisions of TNPID Act could not be made applicable in the instant case and consequential registration of case for the investigation by EOW against ITNL and petitioners was beyond its legal domain.

It was also noted that investigation of the issue had already been entrusted with SFIO under section 212, thus, the jurisdiction of EOW under TNPID Act to conduct the parallel investigation was barred. Therefore, the crime registered with EOW against petitioners and ITNL deserved to be quashed.

8. Stockbroker has to obtain a registration certificate from SEBI for each SE where he operates & pay prescribed fee

Case Details: Securities and Exchange Board of India v. National Stock Exchange Members Association
Citation: [2022] 143 taxmann.com 192 (SC)

Judiciary and Counsel Details

• Ajay Rastogi & B.V. Nagarathna, JJ.
• Bhargava V. Desai, AOR for the Appellant. 
• Ninad Laud, Avinash Mathews, Ms Aditi Phatak, Advs. & Sahil Tagotra, AOR for the Respondent.

A stockbroker operates from several stock exchanges in country, he has to obtain a certificate of registration from SEBI for each of stock exchange where he operates and also has to pay ad valorem fee prescribed in terms of Part III annexed to Regulation 10 of the Securities and Exchange Board of India (Stockbrokers and Sub-Brokers) Regulations, 1992 in reference to each certificate of registration

Facts of the Case

 The Respondent no. 1 was an association of the trading members of the NSE and its members deal in sale and purchase of shares and securities in India and each stockbroker has been registered under the Act, 1992 and pay fee for registration in accordance with the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992.

The SEBI issued a Circular dated 28-3-2002 clarifying that every stock broker who has a certificate of registration has to pay the fees prescribed in Schedule III for each and every certificate of registration that he holds.

The association of trading members filed writ petition challenging the Circular dated 28-3-2002 to the extent that paragraph (vi) of Part A provides the fees payable by a composite corporate member and requires that the stockbroker who held more than one registration with SEBI, structured fee would be required to be paid for each registration.

Supreme Court Held

It was contended that even if a stock broker has more than one registration from SEBI, he was required to pay fees only with respect to the initial registration with SEBI irrespective of the number of cards held by the broker from the stock exchange and accordingly, it was prayed that the clarification made by SEBI under its Circular, dated 28-3-2002 was in contravention to the scheme of the Act, 1992 and deserved to be set aside.

The Single Judge of the High Court arrived at the conclusion that multiple registrations are envisaged under the scheme of Regulations, and upheld the impugned Circular dated 28-3-2002 holding that it only determines the mode and manner of the calculation and dismissed the petition.

On a Letters Patent Appeal being preferred by respondent No. 1, the Division Bench of the High Court viewed that the scheme only manifests one certificate of registration from SEBI even if a stockbroker operates from several stock exchanges in the country and was primarily influenced by the expression ‘a certificate’ as referred to in section 12(1) of the Act, 1992 and allowed the appeal by setting aside the finding returned by the Single Judge and declared paragraph (vi) of Part A of the Circular, dated 28-3-2002 to be inconsistent with section 12(1) of the Act, 1992.

On appeal to the Supreme Court, it was held that stockbroker who operates from several stock exchanges in country has to obtain a certificate of registration from SEBI for each of stock exchange where he operates.

The Court held that stock broker also has to pay ad valorem fee prescribed in terms of Part III annexed to regulation 10 of regulations, 1992 in reference to each certificate of registration from SEBI in terms of computation prescribed under Circular, dated 28-3-2002.

It was further held that fee is to be paid as a guiding principle by stockbroker, which is in conformity with scheme of Regulations

9. DIN can’t be automatically deactivated on grounds of automatic vacation of office of director u/s 164 (2) of Cos. Act

Case Details: Satya Narayan Banik v. Union of India
Citation: [2022] 135 taxmann.com 352 (Calcutta)

Judiciary and Counsel Details

• Rajasekhar Mantha, J.
• Rajarshi Dutta, Sayantan Bose, Rahul Podder, Ms A. Banerjee & Mrs Anyapurba for the Petitioner. 
• Avinash Kankani & Siddhartha Lahiri for the Respondent.

DIN of a disqualified director cannot be automatically deactivated on account of disqualification from his directorships in companies

Facts of the Case

In the instant case in the matter of Satya Narayan Banik v. Union of India 135 taxmann.com 352 (Calcutta) [11-02-2022], petitioners were aggrieved by cessation of office as directors of M/s. Hahnemann International Pvt. Ltd. The disqualification happened by operation of Section 164 (2) for not filing balance sheets and annual returns for a continuous period of three years from the year 2014-15. The ROC also deactivated the Director Identification Number (DIN) of the petitioner-directors.

The petitioners advanced a three-fold argument challenging such disqualification:

(a) That they were not permitted to avail the benefit of the “Company’s Fresh Start Scheme of 2020” despite applying by letter dated 11th November 2020.

(b) That the petitioners were not afforded a prior hearing before the disqua