Bombay High Court pulls up SEBI for non-compliance with court order in complaint against Vineet Jain firm

The Bombay High Court Friday censured the Securities and Exchange Board of India (SEBI) for not complying with the Court's order of October 23 concerning the proceedings initiated against Bharat Nidhi Ltd (BNL), a company owned by Times Group owner Vineet Jain [Ashok Dayabhai Shah & Ors. v. SEBI and Ors and connected matters]..A division bench of Justices GS Kulkarni and Jitendra Jain held that as a public body, SEBI has to act in public interest and comply with court orders; otherwise people would lose confidence in the market regulator. "SEBI is a public body, it is required to act in public interest, it needs to comply with the orders passed by this Court, more particularly, when the orders have attained finality in the facts and circumstances of the present case, cannot be countenanced that SEBI would resort to such actions only when and/or, as may be, commanded by respondent Nos.2 to 9. Such approach of the SEBI, in our opinion, would cause a dent to the confidence, the investors would repose in the SEBI, which needs to function solely to further the object and purpose, for which it is created by the Act of the parliament," the Court said. .The division bench was hearing a writ petition filed by minority shareholders of BNL who had complained against the company to SEBI for allegedly violating securities laws on Minimum Public Sharing Norms. The complaint led to the initiation of an investigation by SEBI. After considering the illegalities, SEBI issued a show-cause notice to BNL and its management. However, before the notice could be taken to its logical conclusion, the notice recipients moved for settlement of the notice by invoking SEBI settlement regulations and the matter was settled. Aggrieved by the same, the petitioners approached the High Court assailing the settlement order by SEBI. .During the hearing of the petitions, the petitioners urged that SEBI provide the investigation documents to them, which SEBI had not done till date.On October 23, the High Court directed SEBI to provide documents to the petitioners.This was challenged by SEBI as well as BNL and Vineet Jain before the Supreme Court which upheld the High Court order. Despite this, the petitioners claimed that they have not been provide documents till date.Meanwhile, SEBI informed the High Court that it has revoked settlement order.It argued that given the revocation of the notice, the principal prayers in the petition stood nullified. It was also going to proceed with the hearing on the show cause notice issued to BNL and the management, the market regulator submitted. .However, the High Court did not agree with this contention since the petitioners were also seeking orders to SEBI to ensure full and true disclosure of all information about BNL. The Court concluded that the petitioners would not be disentitled to have information about the affairs of BNL notwithstanding the revocation of the settlement agreement. The bench added that while the company could overlook court order for business interest, SEBI could not and hence was bound to comply with the High Court order."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 October 23 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 shareholders of BNL, having equal rights to that of respondent nos. 3 to 9. SEBI cannot have different yardstick between shareholders," the 26 page order read. The Court thus ruled that its order of October 23 has to be complied with by SEBI..Senior Advocate Gaurav Joshi and advocate Arti Raghavan briefed by JSA Advocates & Solicitors appeared for the shareholders. Senior Advocate JJ Bhat with advocate Mihir Mody briefed by K Ashar & Co. appeared for SEBI. Senior advocates Janak Dwarkadas, Rahul Narichania and Ashish Kamat and advocate Ameya Gokhale briefed by Shardul Amarchand Mangaldas & Co appeared for BNL and Vineet Jain. [Read Order]