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of <h1>SEBI's Jurisdiction Upheld: Refund Liability Clarified</h1> <h3>SVPCL Ltd. Versus Securities and Exchange Board of India</h3> SVPCL Ltd. Versus Securities and Exchange Board of India - [2011] 110 SCL 168 (AP), [2011] 167 COMP. CAS. 221 (AP) Issues Involved:1. Jurisdiction of SEBI to issue show-cause notice.2. Petitioner's liability under section 73(2) of the Companies Act.3. Applicability of section 15C of the SEBI Act.4. Interpretation of sections 11, 11A, and 11B of the SEBI Act.5. Role and responsibility of the lead merchant banker.Detailed Analysis:1. Jurisdiction of SEBI to Issue Show-Cause NoticeThe petitioner argued that SEBI does not have jurisdiction to issue the show-cause notice because the petitioner is neither a listed company nor an intermediary associated with the securities market. The court noted that SEBI's functions include protecting investors' interests and regulating the securities market under section 11 of the SEBI Act. The court held that SEBI does not inherently lack jurisdiction to issue the show-cause notice and must first decide whether the petitioner can be proceeded against under sections 11, 11A, and 11B of the SEBI Act.2. Petitioner's Liability Under Section 73(2) of the Companies ActThe petitioner was required to refund the application money along with interest at 15% as per section 73(2) of the Companies Act after the public issue failed. SEBI issued the show-cause notice stating the petitioner's failure to comply with this requirement. The court observed that it is the company's responsibility to pay interest to the applicants if the applications are not returned within eight days of rejection of the public issue.3. Applicability of Section 15C of the SEBI ActIt was conceded by SEBI's counsel that section 15C of the SEBI Act is not applicable to the facts of this case. The court directed that SEBI will not proceed against the petitioner with reference to section 15C of the SEBI Act.4. Interpretation of Sections 11, 11A, and 11B of the SEBI ActThe court noted that SEBI is empowered under sections 11, 11A, and 11B of the SEBI Act to regulate the securities market and protect investors' interests. Section 11B empowers SEBI to issue directions to any company in respect of matters specified in section 11A. The court stated that SEBI must first decide whether the petitioner, which is not a listed company, falls within the expression of 'persons who may be associated with the security market.'5. Role and Responsibility of the Lead Merchant BankerThe court acknowledged that the lead merchant banker has a supportive role in post-issue activities such as allotment, refund, and investor grievance redressal. However, it emphasized that the primary liability for refunding the application money with interest lies with the company as per section 73(2) of the Companies Act.ConclusionThe court permitted the petitioner to file objections to the show-cause notice within one month. SEBI is required to examine these objections in light of the SEBI Act, the Companies Act, and relevant regulations before proceeding against the petitioner. If aggrieved by SEBI's decision, the petitioner may invoke appropriate legal remedies. The writ petitions were disposed of with these directions, and any interim orders were vacated.
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