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2023 (12) TMI 186 - HC - SEBIViolation of SEBI Act - validity of settlement orders, which according to the petitioners were patently illegal being beyond the authority and power of the SEBI to accept any settlement - petitioners in writ petitions are minority shareholders - case of the petitioners is to the effect that there is a severe prejudice caused to the petitioners due to several illegalities committed by BNL, at the instance of the majority shareholders who are respondent Nos. 3 to 9 - petitioners have contended that they are the victims of BNL not being listed on a recognized stock exchange, which has severely affected their interest as investors in BNL - before the show cause notice(s) could be taken to its logical conclusion, respondent No. 2 to 9 had moved an application for settlement of the show cause notice(s), by invoking the provisions of 2018 Regulations - petitioners had urged that the SEBI be directed to provide documents to the petitioners as prayed for and directed that the documents, subject matter of prayer clause (g) of the petition be provided to the petitioners. This Court [2023 (10) TMI 1173 - BOMBAY HIGH COURT] observed, that by no stretch of imagination, could it be said that the petitioners in the present case, who were minority shareholders and in such capacity, being part owners of the company (BNL), to the extent of their shareholding, were not outsiders / alien to the company, and that they were integral to the company, having an inextricable concern and interest in the functioning and management of the company. Special Leave Petition of respondent no. 2 - BNL and respondent No. 9-Vineet Jain was dismissed by the Supreme Court, as also a decision being taken by the SEBI to assail our order dated 23 October, 2023 before the Supreme Court, what has happened at SEBI’s end in regard to the SEBI’s proceedings against BNL, is not only interesting but quite intriguing. HELD THAT:- On perusal of the show cause notice, a copy of which is produced for perusal of the Court on behalf of the SEBI, we find that non-compliance interalia of the Rules and Regulations of SEBI are subject matter of the show cause notice, and any plea in opposition as may be urged by BNL and respondent Nos. 3 to 9 (the majority shareholders), would fall for consideration in the adjudication of the show cause notice. This would, however, not mean that the petitioners in their capacity as shareholders, would be dis-entitled or would cease to have any locus to have information / documents in regard to such affairs of BNL and to seek compliance of the Rules and Regulations and the norms of the SEBI by respondent No. 2 and those controlling BNL. SEBI now needs to resort to a lawful course of action, to adjudicate the show cause notice, so as to reach to a conclusion, whether respondent Nos. 2 to 9 have violated the provisions of the Act, Rules and Regulations, as alleged in the show cause notice and the complaints of the petitioners. We are thus of the opinion that in the facts and circumstances of the case, it would be appropriate that the SEBI expeditiously takes forward the show cause notice and comes to an appropriate conclusion, in accordance with law, in regard to the allegations as made in regard to respondent Nos. 2 to 9 in the show cause notice. SEBI from 23 October 2023 has not complied our order directing that the documents be furnished to the petitioners. As pointed out on behalf of the petitioners, SEBI has resorted to all possible efforts, not to comply with the order dated 23 October, 2023. Even after the Special Leave Petitions of BNL and Vineet Jain - respondent No. 9 were dismissed by the Supreme Court, the documents were not furnished to the petitioners. SEBI thereafter assailed the orders dated 23 October 2023 before the Supreme Court resulting in dismissal of its Special Leave Petition. Now the SEBI is before the Court taking a stand that the documents need not be furnished and the petitions be disposed of as they are rendered infructuous. We wonder, as what can weigh with the SEBI, in not complying our order dated 23 October, 2023 and not furnishing the documents to the petitioners, except to benefit respondent Nos. 2 to 9. Even such plea that the SEBI would have a legal right or an entitlement, not to furnish documents to the petitioners as ordered by us, was the core issue under our orders, being urged by the SEBI before the Supreme Court, apart from the plea of interpretation of Regulation 29 of the 2018 Regulation. Considering all these circumstances, we are of the clear opinion that the entitlement of the petitioners to our order dated 23 October 2023, would certainly subsist and the petitioners need to be provided such documents by the SEBI. Moreover, not providing such documents, merely on the ground of the subsequent development that the settlement orders now stands revoked, would completely be an untenable proposition and contrary to our orders dated 23 October 2023, as confirmed by the Supreme Court. Although 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 23 October 2023 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 respondent No. 2 – BNL, having equal rights to that of respondent nos. 3 to 9. SEBI cannot have different yardstick between shareholders. We therefore, direct that our order dated 23 October 2023, which has attained finality, needs to be forthwith complied by SEBI. On the issue whether the Court should adjudicate prayer (c) and (d) of the petitions, taking an overall view of the matter, and that, now the show cause notice is required to be taken forward, we are of the opinion that in so far as such reliefs are concerned, the same needs to be kept open to be agitated by the petitioners at the appropriate time in appropriate proceedings in the context of the decision which may be taken by the SEBI on the show cause notice. We accordingly, propose to dispose of these petitions by the following order:- ORDER (I) The petitioners are entitled to the benefits of the order dated 23 October 2023 as confirmed by the Supreme Court, by rejection of the Special Leave Petitions of respondent Nos. 2 and 9 and thereafter, by rejection of the Special Leave Petition filed by the SEBI. (II) The order dated 23 October 2023 passed by this Court, be forthwith complied by SEBI. (III) All the contentions of the petitioners and of the respondents on issues in regard to prayer clauses (c) and (d) are expressly kept open to be agitated at appropriate time in appropriate proceedings.
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