Minority shareholders lose bid to restore securities law violation case after SEBI revoked settlement order

Bombay HC rejected minority shareholders' application to restore writ petition against company and SEBI regarding securities law violations. Court had previously ordered SEBI to provide investigation documents to petitioners, which was upheld by SC. After SEBI revoked settlement order, petitioners sought restoration claiming respondents engaged in forum shopping by challenging revocation in Delhi HC without disclosure. Court found no material change in circumstances warranting restoration, noting respondents' conduct was inappropriate but not fraudulent. Substantive issues regarding postal ballot notice and other prayers remained open for future proceedings.

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Issues Involved:
1. Restoration of the disposed writ petition.
2. Restraining BNL from taking steps pursuant to the Postal Ballot Notice and the Follow-Up Announcement.
3. Disclosure by BNL of actions taken in pursuance of the Postal Ballot Notice and Follow-Up Announcement.
4. Granting interim reliefs.

Summary:

Restoration of the Disposed Writ Petition:
The petitioners filed an interim application to restore Writ Petition No. 530 of 2022, which was disposed of on 01 December 2023. They sought the restoration of the petition to hear it finally. The petitioners, minority shareholders of Bharat Nidhi Ltd. (BNL), had raised complaints with SEBI regarding violations of securities laws by BNL. The petitioners contended that SEBI had not provided them with the investigation report or relevant documents. SEBI had issued show cause notices to BNL and other respondents, but the petitioners argued that SEBI was not taking genuine action. The petitioners also claimed that BNL's listing on non-functional stock exchanges caused severe prejudice to their interests.

Restraining BNL from Taking Steps Pursuant to the Postal Ballot Notice and Follow-Up Announcement:
The petitioners sought to restrain BNL from taking any steps in pursuance of the Postal Ballot Notice dated 22 September 2022 and the Follow-Up Announcement dated 09 December 2023. They argued that the Postal Ballot Notice was a consequence of the Settlement Order dated 12 September 2022, which SEBI had revoked on 10 November 2023. The petitioners contended that the buyback offer proposed in the Postal Ballot Notice was ultra vires the Companies Act, 2013 and the Settlement Regulations.

Disclosure by BNL of Actions Taken in Pursuance of the Postal Ballot Notice and Follow-Up Announcement:
The petitioners requested that BNL disclose by way of an affidavit all actions and steps taken in pursuance of the Postal Ballot Notice and Follow-Up Announcement. The Court observed that the Postal Ballot Notice was a consequence of the revoked Settlement Order, and the petitioners' contentions on this issue were kept open to be agitated in appropriate proceedings.

Granting Interim Reliefs:
The petitioners sought interim and ad-interim reliefs in terms of restraining BNL from taking steps pursuant to the Postal Ballot Notice and Follow-Up Announcement. The Court noted that SEBI had revoked the Settlement Order, and the petitioners' entitlement to documents as per the Court's order dated 23 October 2023 was upheld. The Court directed SEBI to comply with the order and provide the documents to the petitioners.

Conclusion:
The Court rejected the petitioners' application for restoration of the writ petition, noting that the substantive issues related to the Settlement Order had been rendered infructuous due to its revocation. The Court emphasized that the petitioners' contentions regarding the Postal Ballot Notice and buyback offer could be agitated in appropriate proceedings. The Court also criticized SEBI's inconsistent approach and failure to comply with the Court's orders. The application was dismissed, and no costs were awarded.

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