2023 (5) TMI 985 - HC - SEBI

SEBI & BSE Investor Protection Laws Upheld: Transparency & Fairness Ensured

Atul Agarwal Versus Uoi & Ors.

The court concluded that the statutory provisions under the SEBI Act and SCRA provide a robust mechanism for protecting investor interests. SEBI and BSE ... PIL - Suspension of Admission to Dealings on the Exchange - millions of investors who are being duped by the unscrupulous promoters of the companies - Petitioner holding a Bachelor’s Degree in Law stating that he is espousing the cause millions of investors who are being duped by the unscrupulous promoters of the companies as the promoters of the companies vanish after siphoning off the hard-earned money of the investors - Scope of Appeal to Securities Appellate Tribunal. HELD THAT:- It is the duty of the SEBI to protect the interest of the investor in securities and to promote the development of, and to regulate the securities market by such measures as it thinks fit. Meaning thereby, the SEBI is empowered to take all such measures in the interest of investors and such measures may include regulating the business in stock exchange, registering and regulating the working of stock brokers, performing such functions and exercising such powers under the Provisions SCRA, as may be delegated by the Central Government. The aggrieved investor can certainly prefer an Appeal before the Securities Appellate Tribunal (SAT) in case he is aggrieved in the matter of delisting of the security. Delisting regulations provide Provisions with respect to the rights of the share-holders and all kind of checks and balances are in place under the Regulations. It is pertinent to note that Section 23(2) of the SCRA gives a special power to SEBI to penalize any person who contravenes the Provisions inter alia Section 21 or Section 21A or Section 22, and a punishment upto 10 years or a fine which may extend up to Rs. 25 crores can be inflicted. Not only this, as stated in the written reply filed by the SEBI, for vanishing companies, the exercise was undertaken by the Registrars of companies and action has been initiated in the matter against them. Thus in short, the statutory provisions do provide a robust mechanism to safeguard the interest of investors and by no stretch of imagination, it can be said that the interest of investors is not at all protected. Appeal against any order/ decision for recognized stock exchange before the SAT and any person aggrieved in the matter by the order or decision of the recognized stock exchange or the adjudicating officer or any order made by the SEBI under Section 4B can prefer an Appeal, therefore, an efficacious remedy is also available under the statutory provisions. The statutory provisions governing the field make it very clear that a transparent mechanism of delisting the securities, adequate participation and/ or representation of public shareholders in the process of delisting is in place, and a remedy is also available to aggrieved investor in the matter of delisting. Not only this, even in case of compulsory delisting, which is a disciplinary mechanism, an aggrieved investor may file an Appeal before the SAT against the decision of the recognized stock exchange delisting the securities under Section 21A(2) of the SCRA. In the considered opinion of this Court, in view of the reply filed by the SEBI, Government of India and Bombay Stock Exchange, no further orders are required to be passed in the present PIL, and the interest of the investors is certainly protected under the Statutory Provisions governing the field. Issues Involved:1. Arbitrary Suspension and Delisting of Companies by BSE2. Protection of Investor Interests by SEBI and BSE3. Petitioner's Reliefs Sought for Investor ProtectionSummary:1. Arbitrary Suspension and Delisting of Companies by BSE:The petitioner, a law graduate, filed a public interest litigation claiming that Respondent No. 3 BSE arbitrarily suspended and delisted companies, affecting millions of investors. It was argued that BSE's actions were based on non-compliance with procedural disclosures and non-payment of listing fees, leading to the suspension and subsequent delisting of companies without ensuring investor protection.2. Protection of Investor Interests by SEBI and BSE:Respondent No. 2 SEBI, the apex regulatory body, stated that the SEBI Act, 1992, empowers it to protect investor interests and regulate the securities market. SEBI detailed measures under Section 11 of the SEBI Act to regulate stock exchanges, brokers, and other market intermediaries, and to prohibit fraudulent practices. SEBI also highlighted the statutory provisions under the Securities Contract (Regulations) Act, 1956 (SCRA) and the Securities Contracts (Regulation) Rules, 1957, which empower stock exchanges to list and delist securities, ensuring a complete mechanism for investor protection.3. Petitioner's Reliefs Sought for Investor Protection:The petitioner sought various reliefs, including mandatory provisions for promoters to buy back shares before suspension, stringent penal provisions against errant companies, and the establishment of a grievance redressal mechanism. SEBI responded by detailing the existing regulatory framework, including the SEBI (Delisting of Equity Shares Regulations, 2009), which provides for the rights of public shareholders in case of compulsory delisting and penalties for non-compliance. SEBI also mentioned the establishment of a Co-Ordination and Monitoring Committee to address vanishing companies and actions taken under Section 11B of the SEBI Act against defaulting companies.Judgment:The court, after hearing the parties, concluded that the statutory provisions under the SEBI Act and SCRA provide a robust mechanism for protecting investor interests. The SEBI and BSE have taken measures to ensure transparency and fairness in the delisting process, and an appeal mechanism is available for aggrieved investors. The court found that no further orders were required and disposed of the petition, affirming that the interests of investors are adequately protected under the existing legal framework.