SEBI’s Order for a Public Offer & Non-compliances, Led to Further Directions with no Interference Grounds: SC

Case Details: Zafar Younus Sareshwala v. Securities and Exchange Board of India - [2023] 150 taxmann.com 355 (SC)

Judiciary and Counsel Details

• • Sanjiv Khanna & M.M. Sundresh, JJ.
  • Beni Chatterji, Sr. Adv., Ejaz Maqbool, AOR, Udayan Mukherjee, Ms Akriti Chaubey & Saif Zia, Advs. for the Appellant.
  • Justice Tarun Agarwala, Presiding Officer & Ms Meera Swarup, Technical Member
  • B.M. Chatterji, Sr. Adv., Ranit Basu, Ms Maitri Malde. Udayan Mukherjee, Advs & Ranit Basu for the Appellant.
  • Vishal Kanade, Ravishekhar Pandey & Nishit Dhruva, Advs. for the Respondent.

Facts of the Case

In the instant case, the appellants were promoters/directors of the company ‘P’. Later, the SEBI found that the appellants were engaged in fraudulent activities by way of issue of 80,800 false share certificates, forging signatures of genuine investors on transfer documents, verifying fake share certificates and forging signatures and approving fraudulent transfers etc.

The SEBI thus, passed an order directing the appellants to make a public offer through a merchant banker to acquire shares from public shareholders by paying them value determined as per regulation 23 of the SEBI (Delisting of Equity Shares) Regulations, 2009.

Since the said direction was not complied with by the appellants for more than 10 years, the SEBI later passed an order directing the appellants to take steps and complete the process of public offer within 60 days and pending completion of the open offer directed the appellants to deposit a sum of Rs. 38.65 crores along with an interest.

Consequently, the SAT upheld the order passed by the SEBI holding that SEBI’s order was an ex-parte ad interim order which had been passed in terms of section 11 in the interest of investors and the amount of open offer calculated by the SEBI was a tentative figure and could be modified provided an application was filed by the appellant objecting to calculation.

Supreme Court Held

Subsequently, being aggrieved by the order of the SAT, an appeal was preferred with the Supreme Court. The Supreme Court held that there was no good ground and reason to interfere with the impugned judgment of SEBI and hence, the instant appeal against the same was to be dismissed.

List of Cases Reviewed

• • Zafar Younus Sareshwala v. SEBI [2023] 150 taxmann.com 354 (ST – Mumbai) (para 1) affirmed. [See Annex]