Case BriefsSupreme Court

Supreme Court: The Court has ruled that administrative circulars issued by the Securities and Exchange Board of India (SEBI) cannot be challenged before the Securities and Appellate Tribunal (SAT).

The Supreme Court passed this judgment when it was hearing an appeal filed by SEBI against a SAT order in a case relating to National Securities Depository Ltd. (NSDL).


NDSL and SEBI were at odds over an administrative circular captioned ‘review of dematerialization charges’ issued in 2005, debarring the depository from levying fees/charges on rendering service to the investors who hold Demat accounts with the depository.  The grievance of the appellant (NDSL) was that it is a company and the law permits it to make profits and distribute the dividend to its shareholders. SEBI, without any justification, interfered with its functioning, NSDL had argued.

SAT in September 2006 had ruled that the term “order” in SEBI Act is extremely wide, and can be applied in all three types of orders— administrative orders, legislative orders, and quasi-judicial orders. Thus, it ruled in favour of NSDL.


SEBI challenged SAT’s verdict in the Supreme Court and secured a reversal. The Supreme Court, in the order passed on March 7, said that only “quasi-judicial” orders and decisions are a “subject of SAT”.

“Administrative orders such as circulars issued under the SEBI Act are obviously outside the appellate jurisdiction of the tribunal,” said the SC order.


The clarification and restriction to the scope of SAT will clearly bring down the number of cases before the Tribunal. One cannot approach SAT cause the same will now have jurisdiction only over orders passed by SEBI in a quasi-judicial capacity. [National Securities Depository Ltd. v. SEBI, 2017 SCC OnLine SC 256, decided on 07.03.2017]

Case BriefsSupreme Court

Supreme Court: Taking note of the list of properties submitted by the Sahara Group of Companies in furtherance of the order dated 06.02.2017, the Court directed Sahara to deposit Rs.5092.64 crores on or before 13.04.2017 in SEBI Sahara Refund Account.

The 3-Judge Bench of Dipak Misra, Ranjan Gogoi and A.K. Sikri, JJ had earlier ordered that the properties suggested for public auction shall be free from any encumbrance, hence, two separate lists of properties free from encumbrances and properties with some encumbrances, were submitted before the Court.  The properties to be sold include Sahara Hospital, Lucknow, Sahara City Homes situated at various cities across the country apart from the lands owned by the contemnors.

It was pleaded by Sahara that they need 6 months to sell the properties. The Court, however, refused to give 6 months to the contemnors and said that in case, the substantial amount is deposited by 13.04.2017, the Court may think of extending the time. The Court will next hear the matter on 17.04.2017. [SEBI v. SAHARA INDIA REAL ESTATE CORPN.LTD., 2017 SCC OnLine SC 178, order dated 28.02.2017]

Case BriefsSupreme Court

Supreme Court: Allowing SEBI to attach the properties belonging to Sahara Group, the Court directed Sahara to file a list of properties that can be put to public auction by 27.02.2017.

The 3-judge bench of Dipak Misra, Ranjan Gogoi and A.K. Sikri, JJ said that the properties suggested for public auction shall be free from any encumbrance which means that the properties should not be encumbered in any manner whatsoever.

Pratap Venugopal, appearing for SEBI had submitted that the property of the contemnors, situated at Aamby Valley City, Pune, Maharashtra, would be sufficient for realization of the whole amount. He insisted that the property should be attached so that the contemnors shall make all endeavour to deposit the amount with SEBI. Accepting the aforementioned submission, the Court directed for attachment of the Aamby Valley property. The matter is listed to be heard on 27.02.2017. [Sahara India Real Estate Corpn.Ltd v. SEBI, CONMT.PET.(C) Nos.412 & 413/2012, order dated 06.02.2017]


Case BriefsSupreme Court

Supreme Court: Refusing to extend the deadline to deposit the amount of Rs. 600 Crores before 06.02.2017, the 3-judge bench of Dipak Misra, Ranjan Gogoi and Dr. A.K. Sikri, JJ reiterated that if the Sahara India Real Estate Corporation Ltd., does not deposit the amount, the contemnors including Subrata Roy shall be committed to prison. The contemnors had sought the modification of the order dated 28.11.2016 where the 3-judge bench of T.S. Thakur, former CJ and Ranjan Gogoi and Dr. A.K. Sikri, JJ had directed that the said amount be deposited by 06.02.2017.

The Court, however, permitted the contemnors to transfer thirty-five million pounds equivalent to Rs.285 crores lying in Saharas account in London bank as no objection was raised to the same by SEBI and Union of India.

The matter has been listed to be heard on 07.02.2017. [SEBI v. SAHARA INDIA REAL ESTATE CORPN.LTD, CONMT. PET.(C) Nos.412/2012, order dated 12.01.2017]

Case BriefsSupreme Court

Supreme Court: The bench of T.S. Thakur, CJ and Ranjan Gogoi and Dr. A.K. Sikri, JJ directed the Saharas to deposit the amount of Rs. 600 Crores before the next date of hearing i.e. 06.02.2017. The Court made it clear that if the said amount is not deposited on the aforementioned date, the parole of Subrata Roy will come to an end and he will be committed to prison.

Kapil Sibal, appearing for Sahara, argued that since the money which the Saharas have to deposit has to be raised by selling immoveable assets and since this Court has imposed a restriction as to the consideration for which the properties can be sold namely 90% of the circle rate prescribed for such properties, the Saharas may not find purchasers if that condition remains operative. Refusing to modify the said condition as of now, the Court said that in any given case, if there is a proposal to sell any item at a price less than 90% of the circle rate, the Saharas shall be free to apply for permission of the Court in which event the Court would pass appropriate orders after hearing the counsels for SEBI. [SEBI v. SAHARA INDIA REAL ESTATE CORPN.LTD, CONMT.PET.(C) No. 412/2012, order dated 28.11.2016]

Case BriefsSupreme Court

Supreme Court: Looking into the matter reflecting the manner of getting excessive number of shares in an irregular manner, adversely affecting the small investors i.e. the Retail Individual Investors (RII), the Court held that Securities and Exchange Board of India Act, 1992 has been enacted to ensure that the Stock Exchanges of the country and the persons connected therewith do not indulge themselves into illegalities or irregularities and the functionaries under the Act have to see that no financial scams take place in the matters relating to issue or transfer of shares, management of Stock Exchange, etc.
In the present case, it was brought into the notice of SEBI that several serious irregularities/illegalities had been committed by some persons so as to corner shares of the said companies by adopting certain unscrupulous, immoral and improper methods not known to the law, which had not only affected the RII but had also an effect on the share market because such dealings by certain greedy persons would adversely affect the faith of a common man in the functioning of the share market. It was noticed that 553 demat account holders sold their shares through a broker or otherwise at a price below the market value. Considering that no man of prudence would enter into such transaction, the Whole Time Member of SEBI, upon investigation, came to the conclusion the demat accounts were signed by same persons with different spellings of their names and in different manners. It was also noticed that Number of demat account were having same address and that too, care of someone else and this makes genuineness of the account holders and the transactions doubtful.
The bench of A.R. Dave and R.Banumathi, JJ also rejected the contention that no Retail Individual Investor had made any complaint to the SEBI and held that the SEBI need not act only on the basis of a complaint received. If from its independent sources, the SEBI, after due enquiry comes to know about some illegality or irregularity, the SEBI has to act in the manner as it acted in the instant case. It was held that the entire case was decided by the Whole Time Member of the SEBI after keeping in mind the object of the Act. [SEBI v. Opee Stock-Link Ltd, 2016 SCC OnLine SC 687, decided on 11.07.2016]

Tribunals/Commissions/Regulatory Bodies

Securities and Exchange Board of India (SEBI): In its prima facia order the SEBI has directed Goldmine Agro Limited (GAL) that the company shall not mobilize funds from investors. Further, the company and its present and past directors are prohibited from issuing prospectus or any offer document or issue advertisement for soliciting money from the public for the issue of securities, in any manner whatsoever, either directly or indirectly.

The GAL Company is found guilty of issuing Non–Convertible Secured Redeemable Debentures (“NCDs”) to the public in the guise of private placement. It is found that by mobilizing fund through Offer to Issue NCDs, GAL has violated the provisions of the Companies Act, 1956 (Section 56, Section 60 read with Section 2(36), Section 73, Sections 117B–117C) read with the Debt Securities Regulations.

The SEBI relying on the Sahara case Sahara India Real Estate Corporation Limited v. SEBI, (2013) 1 SCC 1  ruled that the Offer of NCDs  is  prima facie  a public issue in accordance with the  provisions of the Companies Act, 1956, the same will attract the requirement of  compulsory listing before a recognized stock exchange in terms of Section 73(1); of the Companies Act, 1956 and also compliance with the provisions of Sections 73(2) and 73(3) of that Act and provisions of the SEBI (issue and Listing of Debt Securities) Regulations, 2008.  In re Goldmine Agro Limited and its Directors,  dated June 19, 2015

Supreme Court

Supreme Court: The 3-judge bench of TS Thakur, AR Dave and Dr. AK Sikri, JJ has, for a period of 10 working days commencing from 05.08.2014, with no intention to constitute a precedent, allowed Subrata Roy Sahara, the Sahara Group of Companies Chief to shift to the Conference room of the Tihar Jail in order to negotiate the sale of properties within and outside India. However the Court made it clear that the rules, regulations, procedures in regard to visitors/visiting hours shall continue to be applicable during the period    the   contemnors   are    lodged    in   Conference room.

Apart from allowing the contemnors to use video conferencing system and internet/wi-fi facility of the Conference Room at their own expense, the Court also allowed them to bring 1 Telephone line with STD/ISD Facility, 1 Mobile Phone, 2 Desktop computers with Printer and stationary. 2 Laptops subject to suitable check and verification from the security angle and also permitted 2 secretarial staff and 1 technician/operator to work in the premises from 6 a.m. to 8 p.m. for 10 the said 10 days. SEBI v. Sahara India Real Estate Corpn. Ltd, I.A.Nos.13-15/2014, decided on 01.08.2014

High Courts

Bombay High Court: The question before the Court was whether in view of Section 110 of the Companies Act, 2013 and SEBI Circular dated May 21, 2013, a resolution for approval of a Scheme of Amalgamation can be passed by a majority of the equity shareholders casting their votes by postal ballot, which includes voting by electronic means, in complete substitution of an actual meeting. A bench comprising of Gautam S. Patel, J. considered various aspects of the purpose and conduct of shareholders’ meetings, issues of corporate law and governance contained in the 2013 Act as well as various SEBI circulars to arrive at the conclusion that the mechanism of postal ballot, which includes electronic voting, ought to be offered as an additional facility for voting by shareholders and it cannot do away with the need for conducting a meeting. The Court was also confronted with procedural issues relating to the notification of various provisions of the 2013 Act as well as the Rules thereunder. It observed that the website of the Ministry of Corporate Affairs had a link to a single scanned PDF file entitled “Companies 2013 – Statement of Notification of Rules”. Some 21 rules were listed which were all said to be effective from 1st April 2014. However, several of these were not yet gazetted. The Court observed that they do not see how any such rules can be made effective on this basis where a ministry simply puts up some scanned document under the signature of one of its officers but sans any publication in the official gazette.  The Court observed that publication was not an idle formality and had a well-established legal purpose and such purpose cannot be achieved in this ad-hoc manner. Therefore, the Court held that till such time as these rules are gazetted, or there is some provision made for the dispensation of official gazette notification, none of the rules in the Ministry of Corporate Affairs PDF document that are not yet gazetted can be said to be in force. In re Godrej Industries Limited, Company Summons for Direction 256 of 2014, decided on May 8, 2014

To read the full judgment, refer to SCCOnLine

Hot Off The Press

Shri Rajeev Kumar Agarwal, Whole Time Member of SEBI, inaugurated the Local Office of SEBI at Lucknow on July 4, 2014. In order to facilitate better reach of investors and intermediaries to SEBI, it was decided to open Local Offices in major cities of the country. The jurisdiction of the Local Office at Lucknow extends to the State of Uttar Pradesh. The Local office of Lucknow is under the administrative control and jurisdiction of SEBI’s Regional Office at New Delhi.

The functions of the Lucknow Local Office includes facilitating the redressal of  investor grievances against listed companies and market intermediaries, spread investor education and financial literacy, processing the applications for Investment Advisors within its jurisdiction and such other functions as may be delegated from time to time to the Local Offices.

To read the full release, click here

Supreme Court

Supreme Court:  In the matter relating to Sahara group of companies, the bench of T.S. Thakur and Dr. A.K. Sikri, JJ declined the prayer for modification of the conditions for granting interim bail to the four directors and the prayer for shifting them to a guest house for further detention, on account that they had tried to adopt dilatory tactics and avoided to comply with the orders passed by the Court. However, the order passed by the Court regarding the restraint on sale and transfer of moveable and immoveable properties was modified to the extent that the maturity value of the fixed deposits, bonds and securities held by Sahara Group is to be deposited to the designated SEBI bank account and the immovable properties are to be sold to any party not related to the Sahara group, at price not less than the circle rates fixed for the area in which such properties are situated. Also, the Court referred the further proceedings to a three-Judge bench to be constituted by the Chief Justice of India keeping in view the importance of issues of the case and the fact that a three-judge bench order was sought to be enforced in the matter. (SEBI v. Sahara India Real Estate Corporation, I.A. NOs. 101-103, decided on 4 June, 2014)

To read the full judgment, click here