1. Petition for rectification of register of members under Section 111A, 1956 Act, alleging non-compliance with SEBI disclosure norms regarding share acquisition thresholds. (Para 3 , 4 , 5 , 6 , 7 , 8 )
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2023 Supreme(SC) 8
SUPREME COURT OF INDIA
A.S. BOPANNA, PAMIDIGHANTAM SRI NARASIMHA, JJ.
IFB AGRO Industries Limited – Appellant
Versus
SICGIL India Limited and Others – Respondents
Civil Appeal No. 2030 of 2019
Decided On : 04-01-2023
Important Points
IMPORTANT POINTS
(1) Rectificatory jurisdiction under Section 59 of Companies Act, 2013 is summary in nature and not intended to be exercised where there are contested facts and disputed questions.
(2) Public administration is dynamic and ever-evolving. Governance of certain sectors through independent regulatory bodies will be far more effective than being under direct control and supervision of Ministries or Departments of Government.
(1) Rectificatory jurisdiction under Section 59 of Companies Act, 2013 is summary in nature and not intended to be exercised where there are contested facts and disputed questions.
(2) Public administration is dynamic and ever-evolving. Governance of certain sectors through independent regulatory bodies will be far more effective than being under direct control and supervision of Ministries or Departments of Government.
Subject
Company Law - Rectification of Register of Members
Act Referred
COMPANIES ACT: S.59, S.111(a)
SECURITIES AND EXCHANGE BOARD OF INDIA SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVER REGULATIONS: Reg.7
SECURITIES AND EXCHANGE BOARD OF INDIA SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVER REGULATIONS: Reg.7
Headnote
Companies Act, 2013 – Section 59 – Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997 – Regulation 7 – Scope of the rectificatory jurisdiction of National Company Law Tribunal under Section 59 – Rectificatory jurisdiction under Section 59 of 2013 Act is summary in nature and not intended to be exercised where there are contested facts and disputed questions – Transactions falling within jurisdiction of Regulatory bodies created under a statute must necessarily be subjected to their ex-ante scrutiny, enquiry and adjudication – Important role of Regulator cannot be circumvented by simply asking for rectification under Section 111A of the 1956 Act – Such an approach is impermissible – Scrutiny and examination of a transaction allegedly in violation of SEBI (PIT) Regulations will have to be processed through regulations and remedies provided therein – When Constitutional Courts are called upon to interpret provisions affecting exercise of powers and jurisdictions of these regulatory bodies, it is duty of such Courts to ensure that transactions falling within province of regulators are necessarily subjected to their scrutiny and regulation. (Paras 27, 35 and 36)
Result : Civil Appeal dismissed.
Legal Category Hierarchy
- corporate law
- administrative law
Advocates appeared:
For the Appellant(s) : Mr. Soumya Ray Chowdhury, Adv. Mr. Mahesh Agarwal, Adv. Mr. Gaurav Gupta, Adv. Mr. Himanshu Satija, Adv. Mr. Nishant Rao, Adv. Mr. Rajesh Kumar, Adv. Mr. E.C. Agrawala, AOR
For the Respondent(s): Mr. S.S. Shroff, AOR
For the Appellant(s) : Mr. Soumya Ray Chowdhury, Adv. Mr. Mahesh Agarwal, Adv. Mr. Gaurav Gupta, Adv. Mr. Himanshu Satija, Adv. Mr. Nishant Rao, Adv. Mr. Rajesh Kumar, Adv. Mr. E.C. Agrawala, AOR
For the Respondent(s): Mr. S.S. Shroff, AOR
Table of Contents
2. Whether the Tribunal can order buy-back for SEBI regulation violations under Section 111A and if SEBI and NCLT exercise parallel jurisdiction. (Para 13 , 14 )
3. Rectificatory jurisdiction is summary and limited to evident errors; specialized regulatory bodies like SEBI possess comprehensive powers to adjudicate violations of their own regulations. (Para 17 , 18 , 19 , 20 , 21 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 37 )
4. Rectificatory jurisdiction under Section 59 is summary; violations of SEBI regulations must be adjudicated by SEBI, as NCLT lacks parallel jurisdiction for such regulatory breaches. (Para 1 , 19 , 21 , 35 , 37 )
5. Appeal dismissed; order of the Appellate Tribunal setting aside the Tribunal's direction for buy-back and rectification is upheld. (Para 38 , 39 )
6. What is the scope of the rectificatory jurisdiction of the Tribunal under Section 59 of the Companies Act, 2013?
The jurisdiction is summary in nature, intended for correcting evident errors in the register of members. It cannot be exercised where there are contested facts, disputed questions of title, or claims requiring serious enquiry. (Para 1 , 18 , 19 , 20 , 21 )
7. Which forum is appropriate for adjudicating violations of SEBI (SAST) and SEBI (PIT) Regulations?
SEBI is the appropriate forum. As a specialized regulator, it has comprehensive legislative, administrative, and adjudicatory powers to investigate, penalize, and provide restitution for violations of its regulations. (Para 1 , 27 , 29 , 30 , 31 , 32 , 34 , 35 , 37 )
8. Does the National Company Law Tribunal exercise parallel jurisdiction with SEBI for addressing violations of SEBI Regulations?
No. Transactions falling within the jurisdiction of regulatory bodies created under statute must be subjected to their ex-ante scrutiny and adjudication. The Tribunal's rectificatory power cannot short-circuit SEBI's comprehensive regulatory regime. (Para 1 , 35 , 37 , 38 )
JUDGMENT :
PAMIDIGHANTAM SRI NARASIMHA, J.
1. The short question for our consideration in this appeal relates to the scope of the rectificatory jurisdiction of the National Company Law Tribunal under Section 59 of the Companies Act, 20131 [hereinafter referred to as the ‘2013 Act’]. In this context, we are called upon to determine the appropriate forum for adjudication and determination of violations of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 19972 [hereinafter referred to as the ‘SEBI (SAST) Regulations’] and Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 19923 [hereinafter referred to as the ‘SEBI (PIT) Regulations’] framed under the Securities and Exchange Board of India Act, 19924 [hereinafter referred to as ‘the SEBI Act’]. We have answered both the questions. On the first issue, following the decision of this Court in Ammonia Supplies Corporation (P) Ltd. vs. Modern Plastic Containers Pvt. Ltd. and Others, (1998) 7 SCC 105, we have held that the rectificatory jurisdiction under Section 59 of the 2013 Act is summary in nature and not intended to be exercised where there are contested facts and disputed questions. On the second issue, we have held that transactions falling within the jurisdiction of Regulatory bodies created under a statute must necessarily be subjected to their ex-ante scrutiny, enquiry and adjudication. We have, therefore, rejected the contention that the National Company Law Tribunal under Section 59 exercises a parallel jurisdiction with Securities and Exchange Board of India5 [hereinafter referred to as ‘the SEBI’ or ‘the Board’] for addressing violations of the Regulations framed under the SEBI Act.
2. This is an appeal against the judgment of the National Company Law Appellate Tribunal6 [Companies Appeal (AT) 240 of 2017 of the National Company Law Appellate Tribunal dated 06.12.2018] (hereinafter referred to as ‘Appellate Tribunal’) whereby the Appellate Tribunal set aside the judgment of the National Company Law Tribunal (hereinafter referred to as the ‘Tribunal’), allowing the company petition filed by the Appellant under Section 111A of the Companies Act, 19567 [hereinafter referred to as the ‘1956 Act’] (which is Section 59 of the 2013 Act), for rectification of Members Register. The Tribunal while allowing the petition, directed the Appellant to buy-back its shares which were held by the Respondents. In appeal, the Appellate Tribunal set aside this direction on the ground that the Tribunal exceeded its jurisdiction. It is this order of the Appellate Tribunal which is impugned before us.
Relevant Facts:
3. The Appellant herein is a listed company engaged in the manufacture and sale of rectified spirit, country liquor, marine products, carbon dioxide gas etc. Respondent No. 1 is also a listed company which is engaged in the business of producing carbon dioxide gas and dry ice. Respondent No. 2 is the managing director of Respondent No. 1, Respondent No. 3 is the wife of Respondent No. 2, and Respondent Nos. 4-6 are close relatives of Respondent Nos. 2-3.
4. It is the contention of the Appellant that sometime in August 2003, Respondent No. 2 came up with a proposal for a business tie-up between the Appellant and Respondent No. 1. The Appellant is said to have rejected the proposal. It is alleged by the Appellant that after this rejection, the Respondents started acquiring shares of the Appellant from the open market with a view to eliminate competition and strengthen its own dominant position in the relevant market. As of 18.01.2004, the Respondents collectively held just under 5% of the Appellant’s total paid-up share capital.
5. On 19.01.2004, Respondent No. 1 acquired 600 equity shares of the Appellant and this resulted in the aggregate shareholding of the Respondents crossing 5% of the total paid-up share capital of the Appellant, thereby triggering Regulation 7(1)8 [Regulation 7(1): Any acquirer,
