Supreme Court: A Division Bench of Arun Mishra and Indira Banerjee, JJ., diluted certain adverse observations made by the Securities Appellate Tribunal (“SAT”) against the Securities and Exchange Board of India (“SEBI”) in para 20 of its order passed in Ashok Dayabhai Shah v. SEBI (Appeal No. 428 of 2019, dt. 14-11-2019).    

The matter relates to the disposal of the complaints filed by the minority shareholders of Bharat Nidhi Ltd. (“BNL”), PNB Finance & Industries Ltd. (“PNBF”) and Camac Commercial Co. Ltd. (“Camac”). These three entities together hold 47% shares in Bennett Coleman & Co. Ltd. (“BCCL”) commonly known as the Times Group, one of India’s largest media conglomerate. Vineet Jain and Samir Jain (“the Jains”) are the Managing Directors of BCCL. 

The minority shareholders had alleged that BNL, PNBF and Camac are under effective control of the Jains who also exercise control over BCCL by virtue of their ownership of the three above named entities and eight other entities who are shareholders of BCCL. The minority shareholders had filed approached SAT against SEBI alleging that since 2013, some of them have jointly or individually filed several complaints before SEBI urging it to investigate and take action in respect of two violations, namely: 

(i) Incorrect disclosures being made by BNL, PNBF and Camac regarding their promoter shareholding thereby failing to disclose the true promoters; and 

(ii) Consequently, failure by these companies to comply with Minimum Public Shareholding norms prescribed under applicable securities laws.    

The minority shareholders, in appeal before SAT, alleged that SEBI had time and again taken varying stands wherein it had either not responded to the complaints at all or adopted a position that investigation in the matter is underway or treated the complaints as market intelligence, without concluding such investigations or passing any reasoned order while disposing of the complaints filed by them. It was alleged that their complaints remained unaddressed except the complaints filed on the SCORES platform. The last complaint filed on 3-8-2019 on SCORES platform was disposed of by the order of SEBI against which the minority shareholders had preferred the appeal before SAT. 

Disapproving of the approach of SEBI, the SAT has held that the disposal of the complaints by SEBI on SCORES platform was no disposal in eyes of law. The written complaints made to SEBI from 2013 onwards had not been disposed of as yet but complaints filed on the SCORES platform had been disposed of without deciding/settling the issue that was raised in the complaints. This, according to SAT, was merely an eye wash. 

SCORES (SEBI Complaints Redress System) is an online platform designed to help investors to lodge their complaints pertaining to the securities market. These complaints are filed online with SEBI against listed companies and SEBI registered intermediaries. All complaints received by SEBI against listed companies are dealt through SCORES.

By the order against which appeal was filed by the minority shareholders before SAT, the SEBI had intimated to the minority shareholders that the information provided by the complainants would be treated as market intelligence and would also be treated as confidential. Why would the complaint be treated as market intelligence or be treated as confidential was not known, nor in SAT’s view the complaint was such which required SEBI to treat it as market intelligence or confidential. According to SAT, it was not a price-sensitive matter which required SEBI to keep such matters under wraps or confidential in nature. 

Finally, SAT had set aside the order passed by SEBI and directed the minority shareholders to file a consolidated complaint before SEBI which would then decide the matter by a reasoned and speaking order. 

However, while disapproving of the SEBI’s approach and setting aside the order passed by it, SAT made certain observations casting aspersions on the role of SEBI in disposing of the complaints. These observations were made in para 20 of SAT’s order, which is reproduced below:

20. We find the approach adopted by the respondents to be a strange one. Such computer-generated disposal of a serious complaint speaks volume on the conduct of the respondents in treating the minority shareholders in this shabby manner. It seems that the respondents have lost sight of the mandate provided to them under Section 11 of the SEBI Act which mandates SEBI to safeguard the interest of the investors. Disposal of the complaint in this manner in the instant case indicates non-application of mind and non-consideration of the interest of the investors. We have no hesitation in stating that the SEBI as a regulator in the instant case has not performed its duties and has kept the complaint pending for more than six years which speaks volumes by itself. The Tribunal fails to fathom as to why the complaint could not have been decided unless SEBI officials had a vested interest in not deciding the matter.” 

SEBI, aggrieved by the order of SAT, approached the Supreme Court. The Court heard Senior Advocate Chander Uday Singh appearing for SEBI and Senior Advocates C.A. Sundaram and Maninder Singh for the minority shareholders. 

The Supreme Court was of the opinion that certain observations made in para 20 of the impugned order passed by SAT were not called for, such as “the computer-generated disposal of a serious complaint speaks volume on the conduct of the respondents as well as the part of the order relating to “vested interest in not deciding the matter were not at all called for. It was observed by the Supreme Court that maybe there was some remiss on the part of SEBI to act as a regulator, but casting aspersion was not warranted in the facts and circumstances of the case. 

As such, the adverse observations against SEBI made by SAT in para 20 of its order passed in Ashok Dayabhai Shah v. SEBI (Appeal No. 428 of 2019, dt. 14-11-2019) were diluted. However, as the complaints were to be dealt by SEBI, the Court did not made any observation on the remaining part of the merits of the order passed by SAT in view of the limited relief pressed. [SEBI v. Ashok Dayabhai Shah,  2020 SCC OnLine SC 82, decided on 27-01-2020]

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