Personal liability of directors in regulatory proceedings: attachment challenge refused; pursue statutory appeal under SEBI Act

Personal liability of directors cannot be imposed merely by designation; specific averments or findings showing individual participation in company conduct are required, and collective management conduct may be relevant where violations arise from concerted action. Determination of individual culpability involves factual inquiry, appreciation of evidence and scrutiny of regulatory conclusions, which writ courts normally avoid when challenged orders are reasoned. Availability of an alternative statutory remedy under the SEBI Act for appeals against recoveries and attachments militates against exercise of Article 226 jurisdiction; petitioner directed to pursue the statutory appellate forum and contentions left open for that forum to decide.

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Issues: (i) Whether the writ petition under Article 226 challenging the SEBI final order dated 24.09.2018 and consequential attachment notices dated 13.04.2023 is maintainable, or whether the petitioner ought to be relegated to the statutory remedy under the SEBI Act, 1992.

Analysis: The impugned regulatory orders record findings against the company and its directors for alleged illegal issuance of Redeemable Preference Shares and consequent recovery proceedings under Section 28A of the SEBI Act, 1992. The dispute involves evaluation of regulatory findings of fact and the extent of individual involvement of a director. The statutory scheme provides an appellate remedy under Section 15T of the SEBI Act, 1992. Judicial interference under Article 226 is confined to cases of perversity, manifest arbitrariness, absence of reasons, or breach of principles of natural justice. Where reasoned regulatory orders exist and disputed factual questions and evidence appreciation arise, writ jurisdiction is ordinarily declined in favour of the statutory appellate process.

Conclusion: The writ petition is not maintainable; the petitioner is directed to pursue the alternative statutory remedy under the SEBI Act, 1992. The petition is dismissed and interim orders, if any, are vacated.

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