In Ashok Dayabhai Shah v. SEBI, the High Court criticized SEBI for failing to comply with its October order stating that SEBI must act in public interest. The Court had previously directed SEBI to provide specific investigation documents to the petitioners – minority shareholders of Bharat Nidhi Limited – following their complaints about various non-disclosures and securities law violations by the company. Both the company and SEBI had challenged the order before the Supreme Court, but the appeals were dismissed in November.
The minority shareholders had alleged that SEBI’s investigation into securities law violations by Bharat Nidhi Limited was a farce, also claiming that they were not provided with the investigation report or the relevant documents so as to ensure fair proceedings.
SEBI had quickly revoked the orders levelling such allegations against the company. It argued in the Bombay High Court that since the settlement order had been revoked, there was nothing left to address in the petitions. However, the High Court expressed dismay at the regulator’s “persistent non-compliance”, emphasizing that as a public body, SEBI must act in public interest and adhere to court orders.
The High Court found SEBI’s approach “astonishing” and suggested that it could erode investor confidence in the regulatory body. It was found that SEBI has resorted to all possible efforts not to comply with the Court’s order. It is relevant to see what exactly irked the High Court:
“…It is quite intriguing to note the approach of the SEBI, as clearly seen from the events which had transpired, and from the obstinate stand taken by the SEBI in not furnishing the documents to the petitioners in relation to respondent Nos.2 to 9. There has been persistent non-compliance of such orders passed by the Court, despite the Special Leave Petition of the SEBI being rejected, is too far to be imagined nay totally unacceptable. SEBI is a public body, it is required to act in public interest, it needs to comply with the orders passed by this Court, more particularly, when the orders have attained finality in the facts and circumstances of the present case, cannot be countenanced that SEBI would resort to such actions only when and / or, as may be, commanded by respondent Nos.2 to 9. Such approach of the SEBI, in our opinion, would cause a dent to the confidence, the investors would repose in the SEBI, which needs to function solely to further the object and purpose, for which it is created by the Act of the Parliament. We are constrained to make such observations being quite astonished by the stand taken by SEBI from time to time, in relation to the present proceedings. Even assuming that the petitioners are not correct on their contentions on the different stands being taken by the SEBI, however, the SEBI needs to be consistent and firm in whatever it proposes to do in such eventuality, and above all, such actions must inspire confidence of the investors as also of the Court….”
The High Court directed SEBI to expeditiously adjudicate the show cause notice issued to the company and ordered the immediate provision of documents to the petitioners, emphasizing SEBI’s obligation to comply with the court’s orders.
Source: Barandbench
