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SABYASACHI BHATTACHARYYA
Mihir Mohan Pyne – Appellant
Versus
Calcutta Stock Exchange Limited – Respondent
What is the legality of freezing Demat Accounts without a prior promoter notice under SEBI Regulations and Circulars? What are the procedural requirements and notices mandated before freezing promoter/promoter group holdings under SEBI 2015 Regulations and Circular 2020? What are the remedies and potential consequences if a stock exchange or depository fails to issue notices to promoters under Annexure-I of the SEBI Circular 2020?
Key Points: - The court held that the freezing of the Demat Accounts was unlawful because the required notice to the promoters was not issued prior to the action (!) . - Annexure-I of the SEBI Circular dated January 22, 2020 prescribes a two-step notice process: first to the non-compliant entity, then to the promoters within ten days for compliance, before freezing (!) (!) (!) . - The decision sets aside the January 1, 2024 freezing notices and related emails, while allowing the respondent to issue a second-limb notice to promoters to ensure compliance and potential fines (!) (!) (!) . - The case confirms that procedural compliance and a reasoned procedure are required, even where non-compliance by a listed entity is established (!) (!) . - The Circular 2020 and Regulations empower the CSE to act against promoter/promoter group holdings in coordination with depositories, but only after proper notices are issued (!) (!) . - The court notes that no delisting had commenced and thus no panel under Section 32 of the 2021 Regulations was required at the time (!) . - The petitioners’ promoters’ holdings being joint accounts were encompassed under the freezing power when applicable per Regulations 98 and 98(1)(c) (!) . - The judgment leaves open the possibility of fresh action if the second-limb notices are issued and fines paid within ten days (!) (!) . - The decision states there will be no costs order in this petition (!) .
JUDGMENT :
SABYASACHI BHATTACHARYYA, J.
1. The petitioner no. 1 is one of the directors of the proforma respondent no. 5-Company that is Camperdown Pressing Co. Ltd and the petitioner no. 2 is his wife. Admittedly, the petitioner no. 1 forms a part of the “promoter group” as defined under regulation 2(1)(w) of the Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2015 (for short, “the 2015 Regulations”) and the family of the petitioners control the management and affairs of the proforma respondent no. 5-Company.
2. The present writ petition has been preferred against the act of the respondent no. 1, the Calcutta Stock Exchange (CSE) in freezing the Demat Accounts of the petitioners.
3. Learned counsel appearing for the petitioners takes the court through the provisions of Section 98 of the 2015 Regulations, Chapter V of SEBI (Delisting of Equity Shares) Regulations, 2021 (hereinafter referred to as the “2021 Regulations’’) and Circular No. SEBI/HO/CFD/CMD/CIR/P/2020/12 dated January 22, 2020.
4. It is argued that the petitioner is a listed entity under Section 2(1)(p) of the 2015 Regulations.
5. Section 98 of the same provides th
The court established that procedural compliance is essential in regulatory actions, and failure to follow mandated notice requirements invalidates such actions.
The ruling clarifies that freezing a promoter's demat account without involvement in the company's management violates constitutional rights and natural justice, reaffirming the necessity of procedur....
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Freezing of bank accounts under Section 102 Cr.P.C is lawful during investigations without prior notice, and challenges to such orders are not maintainable when alternative remedies exist.
The court emphasized a pragmatic approach in granting extensions for compliance with regulatory requirements, prioritizing shareholder interests and the absence of grievances.
The provisions of the Criminal Law (Amendment) Ordinance, 1944, for the continuation of attachment during an appeal apply only to assets attached under the Ordinance.
The central legal point established in the judgment is the incorrect application of Regulation 24 of Delisting Regulations, 2009 and the importance of ensuring the correctness of legal actions based ....
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