CLB rules SEBI exclusive jurisdiction over Takeover Code & Insider Trading breaches, emphasizes corporate democracy.

The Company Law Board (CLB) dismissed the petition, ruling that the Securities and Exchange Board of India (SEBI) holds exclusive jurisdiction over alleged breaches of the Takeover Code and Insider Trading Regulations. The CLB highlighted that the accusations were pending investigation and confirmation as legal violations. Referring to precedent, the CLB emphasized corporate democracy, declined interim relief, and permitted the annual general meeting to proceed without costs imposed.

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Issues Involved:
1. Breach of Takeover Code.
2. Breach of Insider Trading Regulations.
3. Violation of Section 372A of the Companies Act, 1956.
4. Violation of Sections 108A and 108G of the Companies Act, 1956.
5. Jurisdiction of the Company Law Board (CLB) versus SEBI.

Issue-wise Detailed Analysis:

1. Breach of Takeover Code:
The petitioner alleged that Respondent No. 9 illegally acquired 1,90,441 shares of the petitioner-company from Respondent Nos. 1 to 8, violating the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The petitioner argued that the acquisition was disguised as two separate transactions on 28-5-2008 and 29-5-2008 to avoid triggering the Takeover Regulations. The petitioner cited the case of *Aska Investments (P.) Ltd. v. Grob Tea Co. Ltd.*, where the CLB held that non-compliance with regulation 7 was mandatory and any act in violation was invalid. The respondent countered that SEBI has exclusive jurisdiction over such matters under regulation 44 of the Takeover Regulations and Sections 15Y and 20A of the SEBI Act.

2. Breach of Insider Trading Regulations:
The petitioner claimed that Respondent No. 1, an insider with access to unpublished price-sensitive information, violated the SEBI (Prohibition of Insider Trading) Regulations, 1992. The petitioner argued that Respondent No. 1 attended board meetings where sensitive information was discussed and thus breached regulations 3 and 3A. The respondent argued that the information discussed in the board meetings was made public within 15 minutes as per the listing agreement, negating any insider trading claims.

3. Violation of Section 372A of the Companies Act, 1956:
The petitioner contended that Respondent No. 9's acquisition of 1,90,441 shares exceeded the limits prescribed under Section 372A, which restricts a company from acquiring securities beyond 60% of its paid-up share capital or 100% of its free reserves. The petitioner argued that the acquisition was not within the permissible limits based on Respondent No. 9's balance sheet as of 31-3-2007.

4. Violation of Sections 108A and 108G of the Companies Act, 1956:
The petitioner argued that the acquisition required prior approval from the Central Government as it created a dominant undertaking, with the combined market share of Respondent No. 9 and the petitioner exceeding 25% in the "Rubefacient" product category. The petitioner supported this claim with statistical analysis from A.C. Nielsen.

5. Jurisdiction of the CLB versus SEBI:
The respondent argued that the CLB lacked jurisdiction over the matter as the SEBI has exclusive powers to regulate and take action on Takeover Code violations under Sections 15Y and 20A of the SEBI Act. The respondent cited the case of *Kesha Appliances (P.) Ltd. v. Royal Holdings Services Ltd.*, where it was held that SEBI has exclusive jurisdiction over matters arising from the Takeover Regulations.

Conclusion:
The CLB dismissed the petition, stating that the SEBI has exclusive jurisdiction over the alleged violations of the Takeover Code and Insider Trading Regulations. The CLB noted that the allegations were yet to be investigated and confirmed as violations of the law. The CLB also referred to the Hon'ble Calcutta High Court judgment in *Aska Investments (P.) Ltd.*, which held that the CLB could not direct forfeiture of shares for violations of the Takeover Regulations. The CLB emphasized that corporate democracy should prevail and declined to grant interim relief, allowing the annual general meeting to proceed as per rules. The petition was dismissed with no order to cost.

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