SEBI’s Failure to Provide Docs Upheld By SC Keeps Petitioner’s Rights Open For Future Action In Light of HC’s Finality

Case Details: Ashok Dayabhai Shah v. Securities and Exchange Board of India - [2023] 157 taxmann.com 85 (Bombay)

Judiciary and Counsel Details

• • G.S. Kulkarni & Jitendra Jain, JJ.
  • Ms Aarti Raghavan, Vikram Raghani, Pulkit Sukhramani, Ms Vidhi Jhawar, Deepank Anand, Shourya Tanay, Advs. Gaurav Joshi, Sr. Adv. & Ms Garima Mehrotra, Adv. for the Petitioner. & Others.
  • J.J. Bhatt, Sr. Adv. Mihir Mody, Arnav Misra, Vishal Kanade, Ameya Gokhale, Vaibhav Singh, Ms Radhika Indapurkar & Manas Kotak for the Respondent. & Others.

Facts of the Case

In the instant case, the petitioners-minority shareholders of a company submitted grievances to the SEBI, citing breaches of minimum public sharing requirements and significant lapses in the disclosure of the promoter’s shareholdings in the company.

Consequently, the investigation was done by the SEBI into affairs of the company and a show cause notice was also issued to respondents/majority shareholders of the company.

The respondents moved an application for settlement of said show cause notice. Later on, the SEBI passed a settlement order. However, the settlement was revoked by the SEBI due to failure in compliance with the settlement order.

Since the investigation report or other relevant documents reflect that the said notice was not supplied to the petitioners, the instant writ petition was filed by the petitioner praying a direction to SEBI to provide documents to petitioners as prayed.

Subsequently, the respondents submitted that the plea of petitioners for documents to be furnished to petitioners and orders of instant Court was rendered inconsequential in view of the settlement order itself being revoked by SEBI.

Further, it was also noted that not providing such documents, merely on grounds of subsequent development that settlement orders now stand revoked, would completely be an untenable proposition and contrary to said orders as confirmed by the Supreme Court.

High Court Held

The High Court observed that the SEBI is required to holistically consider the order of the instant Court which has attained finality as such order considers substantive rights of petitioners, who are shareholders of the company. Further, the High Court held that the reliefs prayed were to be kept open to be agitated by petitioners in the context of the decision of SEBI on show cause notice.