REPORTABLE

2026 INSC 245 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 5209-5211 of 2022 Securities and Exchange Board of India … Appellant(s)

Versus Terrascope Ventures Limited Etc. … Respondent(s)

J U D G M E N T

K. V. Viswanathan, J.

1. The present appeals, under Section 15Z of the Securities and Exchange Board of India Act, 1992 (for short the “SEBI Act”), call in question the correctness of the order dated 02.06.2022 passed by the Securities Appellate Tribunal (for short the “SAT”), Mumbai in Appeal Nos. 116 of 2021, 114 of 2021 and 115 of 2021. The SAT set aside the orders of the Signature Not Verified CHANDRESH Date: 2026.03.17 Reason:

Officer had imposed monetary penalties on the respondent- company as well as on the respondent individuals who were the Managing Director (Mr. Manoharlal Saraf) and Director- (Mrs. Geeta Manoharlal Saraf) respectively, for violations of the provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (for short the “PFUTP Regulations”), and the Securities Contracts (Regulation) Act, 1956.

2. Though the respondents were duly served, they did not put in appearance. This Court, by order dated 22.08.2025, appointed Mr. Mahfooz A. Nazki, learned counsel, as amicus curiae to assist the Court.

BRIEF FACTS: -

3. On 03.09.2012, the respondent No.1-company, then known as Moryo Industries Limited, issued notice for an Extraordinary General Meeting (EoGM) and presented to its shareholders and the public, the purpose and object of allotment of equity shares on preferential basis to non- promoters. The number of proposed allottees was 49 and the total number of equity shares to be allotted was up to 74,50,000. In the explanatory statement appended pursuant to Section 173(2) of the Companies Act, 1956, dealing with the objects of the issue, it was set out as under:-

“The object of the issue is to fulfill the additional fund requirements for capital expenditure including acquisition of companies/business, funding long-term working capital requirements, marketing, setting up of offices abroad and for other approved corporate purposes.”

The disclosure was additionally as per Regulation 73(1) of the SEBI (ICDR) Regulations, 2009.

4. On 01.10.2012, a Special Resolution was passed and between 16.10.2012 and 08.11.2012 preferential allotment was made to 42 entities and a total sum of Rs. 15,87,50,000/-

was raised.

5. The appellant-SEBI contends that from 17.10.2012 itself, instead of using the proceeds for approved objects, funds were diverted to purchase shares of other companies and grant loans/advances. SEBI contends that this is an indication that from the very inception, there was no intention on the part of the respondent-company to use the proceeds of the preferential issue for the purpose for which it was made. According to SEBI, these transactions happened between

17.10.2012 and 09.11.2012.

AD-INTERIM ORDER OF WTM: -

6. On 04.12.2014, the Whole Time Member (WTM) SEBI passed ad interim orders restraining the company promoters, directors including the individual respondents herein, the preferential allottees and, certain group companies of the first respondent from buying, selling or dealing in the securities markets, either directly or indirectly, in any manner, till further directions. We are only concerned with the respondents herein. These orders were made by virtue of powers conferred under Section 19 read with Section 11(1), 11(4)(b) and 11B of the SEBI Act. In the said order, after setting out certain background facts and the movement of the share price in the market of the first respondent-company and the diversion of purpose, pursuant to the preferential allotment, it was recorded in para 26 as under:-

“In the facts and circumstances of this case, I am of the view that preferential allotment was used as a tool for implementation of the dubious plan, device and artifice of Moryo Group and allottees. One could argue