The Bombay High Court reprimanded the Securities and Exchange Board of India (SEBI) for not complying with its earlier order, stating that as a public body, it is obligated to act in the public interest. Such an approach by the regulatory body would dent the confidence investors place in it, remarked a division bench of Justices Girish Kulkarni and Jitendra Jain.
Probe against Bharat Nidhi Ltd (BNL)
In October, the high court directed SEBI to provide specific documents related to its probe against Bharat Nidhi Ltd (BNL) to its minority shareholders. The order faced challenges from both the company and SEBI before the Supreme Court, which dismissed it in November.
The high court was hearing a petition by the minority shareholders of BNL. They had filed complaints with SEBI, accusing the company of violating various provisions of securities laws, including Minimum Public Sharing Norms (MPS) and serious violations regarding the promoter’s disclosure in BNL’s shareholdings.
SEBI initiated a probe into the complaints and issued a show cause notice to the company. Later, it passed a settlement order which has now been revoked. The petitioners expressed grievance, stating they were not provided with the investigation report or relevant documents. They also alleged that SEBI’s investigation was a farce.
SEBI revokes settlement order
On Friday, SEBI informed the court that the settlement order has been revoked, asserting that nothing now survives in the petition.
However, the judges noted "persistent" non-compliance with the court's order, deeming it "too far to be imagined, nay, totally unacceptable." They emphasised that SEBI, as a public body, is obligated to act in the public interest and must comply with the court's orders.
Expressing astonishment at SEBI's stance, the high court stated, "Such an approach by SEBI, in our opinion, would dent the confidence investors would repose in SEBI, which needs to function solely to further the object and purpose for which it is created by the Parliament."
The bench remarked that, in its view, SEBI has made every effort to avoid complying with the order, and this does not appear to be without significance. Now that the settlement order has been revoked, the HC directed SEBI to adjudicate the show cause notice issued to the company expeditiously. It also mandated SEBI to provide documents to the petitioners.
