Minority shareholders entitled to SEBI documents despite settlement order revocation under SEBI Act

Bombay HC held that minority shareholders of BNL were entitled to documents from SEBI despite settlement order revocation. The Court directed SEBI to comply with its October 23, 2023 order requiring document disclosure to petitioners, noting SEBI's repeated non-compliance despite SC dismissing appeals by BNL and majority shareholders. The Court emphasized minority shareholders' substantive rights and directed SEBI to expeditiously adjudicate the show cause notice against BNL for alleged SEBI Act violations, keeping certain reliefs open for future proceedings.

---

---

Issues Involved:

1. SEBI's obligation to provide documents to the petitioners.
2. Validity of SEBI's settlement orders.
3. Petitioners' rights as minority shareholders.
4. Compliance with securities laws and regulations by BNL and its promoters.

Summary:

Issue 1: SEBI's Obligation to Provide Documents:
The petitioners, minority shareholders of Bharat Nidhi Ltd. (BNL), contended that SEBI failed to provide documents related to their complaints about BNL's violations of securities laws, including Minimum Public Sharing Norms (MPS). The court, in its order dated 23 October 2023, directed SEBI to provide the requested documents. This order was challenged by BNL and its promoters before the Supreme Court, which dismissed their Special Leave Petitions (SLPs) on 6 November 2023. SEBI's subsequent SLP was also dismissed by the Supreme Court on 28 November 2023. The court emphasized that minority shareholders, being part owners of the company, are entitled to such documents and cannot be considered 'public' under Regulation 29.

Issue 2: Validity of SEBI's Settlement Orders:
SEBI had issued a show cause notice to BNL and its promoters for alleged violations of securities laws. Before the notice could be concluded, BNL and its promoters applied for settlement under SEBI's 2018 Regulations. The petitioners challenged the settlement, arguing that gross violations cannot be settled. During the proceedings, SEBI revoked the settlement order on 10 November 2023 for non-compliance by BNL and its promoters. The court noted that the revocation of the settlement order necessitates SEBI to proceed with the adjudication of the show cause notice.

Issue 3: Petitioners' Rights as Minority Shareholders:
The petitioners argued that BNL's delisting from recognized stock exchanges and subsequent listing on non-functional exchanges severely prejudiced their interests. They contended that BNL, controlled by majority shareholders, committed several illegalities, including suppression of information and non-compliance with MPS norms. The court acknowledged the petitioners' right to access documents related to the company's affairs and ordered SEBI to provide the documents, emphasizing the public body's duty to act in the investors' interest.

Issue 4: Compliance with Securities Laws:
The court directed SEBI to expeditiously adjudicate the show cause notice against BNL and its promoters, ensuring compliance with securities laws. The petitioners' substantive prayers for full disclosure of promoter holdings and compliance with MPS norms were kept open for future adjudication based on the outcome of SEBI's proceedings.

Conclusion:
The court ordered SEBI to comply with its 23 October 2023 order by providing the requested documents to the petitioners. It emphasized the need for SEBI to act transparently and in the interest of investors. The petitions were disposed of, with the petitioners' rights to pursue further legal remedies kept open. The court rejected SEBI's request to stay the order directing document disclosure.

---