SEBI’s Circular dated 13.10.2020 shall not apply retrospectively to defaults committed prior: HC

Case Details: Securities & Exchange Board of India v. Rajkumar Nagpal - [2022] 137 taxmann.com 274 (Bombay)

Judiciary and Counsel Details

• • S.J. Kathawalla and Milind N. Jadhav, JJ.
  • Arvind Datar, Mustafa Doctor, Suraj Choudhary, Mihir Mody, Dhaval Patil and Arnav Misra for the Appellant. 
  • D.J. Khambatta, Ravi Kadam, Dr. Birendra Saraf, Janak Dwarkadas, Sr. Advs. Rohan Mathur, Prateek Sekseria, Subir Kumar, Ms. Disha Shah, Karan Rukhana, Nishant Chotani, Yash Chheda, Yohaann Limathwalla, Shahbaz Malbari, J. Sagar, Ms. Tine Abraham, Siddharth Ranade, Ms. Varuna Bhanral, Ms. Samrudhi Chothani and Raghav Bhargava, Tushad Kakalia, Ms. Anaisha Zachariah and Vidhi Dhanuka for the Respondent.

Facts of the Case

In the instant case, the question before the High Court was whether or not the SEBI circular Dated, 13.10.2020 can be applied retrospectively?

On 13th October 2020, the SEBI had issued a Circular concerning “Standardisation of procedure to be followed by Debenture Trustee(s) in case of ‘Default’ by Issuers of listed debt securities”.

High Court Held

The High Court observed that on a plain reading of Paras 1 and 10 of SEBI’s Circular, dated 13-10-2020, titled “Standardisation of procedure to be followed by Debenture Trustee(s) in case of ‘Default’ by Issuers of listed debt securities”, it was clear that the said SEBI Circular came into force with immediate effect on 13-10-2020 and prescribes the procedure to be followed by Debenture Trustees in case of default by the issuer on or after 13-10-2020. The SEBI Circular does not expressly provide for any retrospective application.

Therefore, the SEBI Circular, dated 13-10-2020, shall not apply to defaults committed before 13-10-2020 by Issuers of listed debt securities even though the SEBI Circular was incorporated in Debenture Trust Deeds subsequently by executing a Supplementary Trust Deed.