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2021 (2) TMI 1177 - HC - SEBISEBI seeking information from the petitioner regarding alleged deemed public issue - HELD THAT:- Awareness Programme conducted by the SEBI during the year 2017, a few investors reported that the petitioner Company has been mobilising funds from the public and have issued bonus shares. As alleged that the petitioner subsequently stopped buying back the shares - A preliminary enquiry made by the SEBI, it was noticed that the petitioner-Company has passed resolutions authorising issue of equity shares to any person including existing members of the Company in any manner the board may deem fit. The language of the resolution indicated that what was intended by the Company was not strictly private placement. It was under the said circumstances that the SEBI issued notices to the petitioner-Company. Though the information sought for were expected to be maintained by the petitioner in their statutory records and registers, such information was not made available to the SEBI. It was under such circumstances that the SEBI has issued the show-cause notices impugned in the writ petition. The information sought for by the SEBI related back to the year 2001. However, the required information are those which are required by the petitioner to be statutorily maintained. Therefore, the delay in issuing these Show Cause Notices, cannot cause prejudice to the petitioner. Reasons for the delay in initiation of the proceedings, it is to be noted that under Section 11(2)(f) of the SEBI Act, 1992, promoting investor education is one of the functions of the Board. In one of such meetings of investors, allegations were raised against the petitioner. The SEBI made their own enquiry and noted that the annual reports of the Company indicated authorising issue of shares to any person including existing members of the Company in any manner the Board may deem fit. The language of the resolutions indeed gives rise to a suspicion or indication that the Company proposed to issue shares to the public. It is for the said reason that the SEBI sought explanation from the petitioner. Petitioner, instead of cooperating with the SEBI, providing requisite information, has approached this Court challenging the show-cause notices. Allegation against the petitioner and the information sought for by the SEBI would indicate that what was sought for by SEBI are information a Company is expected to maintain. Going through the show-cause notices impugned in the writ petition, it cannot be said that jurisdictional facts necessary to initiate proceedings do not exist. Prima facie, the delay in initiation of the proceedings will not cause prejudice to the petitioner, in the nature of the information sought for by SEBI. Even if the petitioner is incapacitated to provide any information required by the SEBI, the petitioner can very well give reasoned explanation for the same to the SEBI. The issue is presently only at a show-cause stage. It will be thoroughly inappropriate for this Court to interfere with the statutory proceedings at this stage.
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