1998 Supreme(Del) 1012

High Court Of Delhi
Anil Dev Singh, J.
M.Z.KHAN - Appellant
Versus
SECURITIES AND EXCHANGE BOARD OF INDIA - Respondent
Decided On : 12/10/1998

Headnote:Securities and Exchange Board of India Act, 1992 - Section 20 — Stay of public offer — Prayer for suspension on account of irregularity and illegality in acquisition of shares of Company — Serious question arising in the mutter of acquisition — Violation of take over norms laid down by the Board — Directions given restraining transfer of shares and for inquiry into the matter.

       Held:

       it is clear that the Board has the power to carry out investigations and to take action in accordance with the Regulations against the one who violates the Take-over Regulations, namely, acquirer, the seller, the target company, the merchant banker, as the case may be. In this context a question also arises for consideration as to whether the Board has the power to pass interim orders. It seems to me that the SEBI has power to pass interim orders before and during the inquiry or investigation to effectuate the purpose of the SEBI Act and the Regulations. Under Section 11 of the SEBI Act, the SEBI has the power to protect the interests of the investors in securities and to promote the development of, and to regulate the securities market, by such measures as it thinks fit. The power is of a very wide nature and is not hedged in by any restrictions. This power will embrace the power to issue interim orders. The SEBI in a fit case can pass interim orders in the interests of investors and to promote the development of and to regulate the securities market. Under the same provision, it can frame regulations as well for the same purpose. The final orders after the inquiry are contemplated under Section 11B of the Act and at that stage it can issue such directions to any person referred to in the Section as may be appropriate in the interests of investors and securities market. Both under Sections 11 and 11B the duty is cast on the Board to protect the interests of the investors in securities and to promote and regulate the securities market. If at the initial stage it becomes necessary to pass an interim order, the SEBI has been endowed with such a power under Section 11 of the Act. In case the provisions of Section 11 are con-strued in a restrictive manner, the interests of the investors in securities and development and regulation of securities market will suffer. Mr.Raval, the learned Additional Solicitor General has also taken the same position on behalf of the Board. Though the SEBI is possessed of the power to pass an interim order, in the instant case it did not exercise that power on the ground that it was in the interest of the shareholders to allow them to receive the value of their shares at the rate of Rs.100/-per share which is the same rate at which the shares of SVCL held by the financial institutions were purchased by the nine companies. It cannot be said that the reason for not suspending the process set in motion by the public announcement was not adequate or was arbitrary or the reason suffered from illegality or irrationality. The grant of interim order was in the discretion of the SEBI. Such discretion cannot be interfered with even when serious and substantial questions have been raised by the petitioner and the third respondent. Those questions are for the SEBI to determine. I have no doubt that the SEBI will bestow its consideration on the issues which arise in the case. The determination of these questions will not be made by this Court sitting in writ jurisdiction when such determination lies in the domain of the authorities mentioned in the Regulations.

       All the pleas raised by the petitioners and respon- dent No.3 and the defenses which are available to respondents 4 to 13 arc to be considered by the SEBI. The SEBI, which is an expert body, is capable of securing the rights of the parties. Learned counsel for respondents 4 to 13 conceded that on completion of inquiry the SEBI can pass such orders as would be warranted in the circumstances of the case. He also stated that if ultimately the SEBI comes to the con-clusion that respondents 4 to 13 have violated the Takeover Code it can always pass orders to undo the wrong. For the purpose of illustration he submitted that the SEBI can even ask the respondents 4 to 13 to hand over shares to the finan-cial, institutions or such other persons as it would deem appropriate.

       I am not inclined to interfere with the order passed by the AAIFR except to the extent of issuing a direction to the respondents 4 to 13 to secure the availability of the shares of SVCL held by respondents 4 to 13 and those they will acquire as a result of the public announcement. Accordingly, respondents 4 to 13 are inter-dieted from selling, transferring, alienating or parting with the shares of SVCL so far acquired by them, and those which may be acquired by them as a result of the public offer until the decision by the SEBI. The respondents 4 to 13 shall also not create third party interests in these shares. The shares shall be kept available with the respondents 4 to 13 for carrying out any direction of the SEBI with regard thereto.