Shaffique, J.

1. This appeal is filed by the Security Exchange Board of India (SEBI), the first respondent in the writ petition challenging the judgment of the learned Single Judge quashing Ext.P8 order passed by SEBI.

2. SEBI initiated proceedings against the petitioners when the 1st petitioner company made allotment of 173995 equity shares of Rs.10/-each to 163 persons on 28.3.2001 which included members who were not the existing share holders. It is alleged that the Company has violated Ss.56, 60, 69, 72 and 73 read with the first proviso to S.67(3) of the Companies Act and the provisions of SEBI (Disclosure and Investor Protection) Guidelines, 2000 (hereinafter referred as 'SEBI Guidelines').

3. According to the petitioners, there is no power vested in SEBI either under the Companies Act, 1956 or the SEBI Guidelines to pass Ext.P8 order as the company is not a listed company and it had only offered rights issue.

4. Initially when Ext.P3, show cause notice dated 29.6.2001 was issued by SEBI, the petitioners objected to the same by filing an application before the Company Law Board but the same happened to be dismissed. Subsequently objection was filed and after considering the objection of the petitioners, Ext.P8 came to be passed.

5. In Ext.P8 order SEBI observed that, in the offer document circulated by the Company to the shareholders, it was indicated that the shareholders had a right to renounce the shares offered to them in favour of any other person but no provision was made in the said offer to provide information to the public about the company, its directors, financial position etc to enable the renouncee to take a decision in the matter. The Company had 296 shareholders and when the offer was made to issue right shares in the ratio of 1:4 with the right to renounce the shares, fresh allotment had been made in respect of 173995 shares in favour of 163 allottees of which several of them were not existing shareholders. This, according to SEBI is in violation of S.67 of the Companies Act. They specifically referred to S.67(3) of the Companies Act inserted by Companies (Amendment) Act, 2000 which provides that in the case of an offer made by a Company to 50 or more persons the same shall tantamount to be a public offer. Since the allotment was for more than 50 persons, it is regarded as a public issue and in that view of the matter the Company should have followed SEBI Guidelines. According to them, the effect of S.67 as amended is that all the provisions of the Companies Act and Articles of the Company relating to the offer or invitation to public will be applicable in a case where it is made to a section of the public in all cases where the number of offerees or invitees is 50 or more. Therefore according to them the offer document is deemed to be a prospectus as defined under S.2(36) of the Companies Act and hence the company and its directors have violated S.56 read with Schedule II, Ss.60, 70 and 73 of the Companies Act and the provisions of SEBI Guidelines, and in that view of the matter the impugned order was passed calling upon the petitioners to refund the money collected under the issue made by offer documents dated 15.2.2001 to the investors with interest not below the bank rate charged by the Commercial Banks for long term fixed deposit and failure to do so would invite penalty under section 15HB of the Securities Exchange Board of India Act, 1992 (hereinafter referred as the SEBI Act) and also prosecution under S.24 of the SEBI Act. In Ext.P8 order the source of power to pass order is described as section 3(4) read with sections 11 and 11B of the SEBI Act read with clause 17.1 of SEBI Guidelines.

6. The main ground raised by the petitioners is the lack of jurisdiction of SEBI, as according to them, in so far as the first petitioner company is an unlisted company SEBI has no jurisdiction and that offer or rights issue to more than 50 shareholders with the right of renunciation would not amount to a