D.B. Realty Ltd vs Sebi

1. For the reasons stated in the application, the delay

in the filing of the appeal is condoned. The application

is allowed.

2. The appellant has challenged the order dated 10th

November, 2022 wherein Independent Directors of the

appellant Company have been issued a warning

directing them to be careful in further while complying

with the Securities and Exchange Board of India

(Listing Obligations and Disclosure Requirements)

Regulations, 2015 (hereinafter referred to as 'LODR

Regulations').

3. The brief facts leading to the filing of the present

appeal is, that based on a complaint filed on the

SCORES platform, SEBI started investigation with

regard to a loan taken by a subsidiary of the Company

in the year 2013. The allegation was that the

subsidiary Company did not use the loan amount for

the purpose for which the loan was taken and that the

loan was siphoned off for clearing the dues of the other 4

group companies. It was alleged that as on June, 2020,

a loan amount alongwith interest had reached Rs.516

crores. The investigation was to ascertain the possible

violation under the Securities and Exchange Board of

India Act, 1992, Securities and Exchange Board of

India (Securities Contracts (Regulations) Act, 1956,

LODR Regulations, and the Securities and Exchange

Board of India (Prohibition of Fraudulent and Unfair

Trade Practices Relating to Securities Markets)

Regulations, 2003.

4. Based on the investigation report, SEBI issued an

administrative warning by the impugned

communication dated 10th November, 2022 to the

Independent Directors intimating the deficiencies on

the part of the Independent Director who were part of

the audit committee in overlooking the financial

reporting process and disclosures of its financial

information. SEBI, accordingly, directed them to 5

ensure strict compliance of the LODR Regulations in

future.

5. This communication dated 10th November, 2022 has

been challenged by the appellant contending that it

would have an adverse effect in its meeting of the

Board of Directors which is going to be held on 14th

February, 2023. It was contended that the respondent

has already taken a decision with regard to the

deficiencies under the LODR Regulations and that it

would be a futile exercise to contest the show cause

notice which was issued subsequently on 2nd January,

2023 to the Company and other directors. It was

contended that the principles of natural justice as

embodied under Article 14 of the Constitution of India

has not been considered nor followed. In support of

the submission the learned senior counsel for the

appellant has placed reliance upon the decision of the

Supreme Court in Swadeshi Cotton Mills vs. Union of 6

India (1981) 1 SCC 664 and Oryx Fisheries Pvt. Ltd.

vs. Union of India (2010) 13 SCC 427.

6. Having heard the learned senior counsel for the

appellant, we are of the opinion that the appellant has

no locus to challenge the order dated 10th November,

2022 which has been passed against the Independent

Directors. In fact only an administrative warning

issued to these Independent Directors directing them to

be careful in future which order has no bearing insofar

as the appellant is concerned. Assuming that the

appellant is aggrieved by the communication dated 10th

November, 2022 we are of the confirmed opinion that

the appellant will have ample opportunity to rebut the

allegations which are also contained in the show cause

notice dated 2nd January, 2023 and which has been

issued to the Company on the same charges.

7. We find that a show cause notice has been issued to

the Company. The appellant will have ample

opportunity to file its reply and contest the matter on 7

merits and, therefore, the principles of natural justice

will be adhered. The question of violation of

principles of natural justice at this stage does not arise.

8. In view of the aforesaid, we do not find any error

with regard to the impugned order. The appeal fails

and is dismissed summarily at the admission stage with

no order as to costs. All the misc. applications are

accordingly disposed of.

9. This order will be digitally signed by the Private

Secretary on behalf of the bench and all concerned

parties are directed to act on the digitally signed copy

of this order. Certified copy of this order is also

available from the Registry on payment of usual

charges.

Justice Tarun Agarwala Presiding Officer

Ms. Meera Swarup RAJALAK Digitally signed SHMI by Technical Member RAJALAKSHMI

13.2.2023 HARISH HARISH NAIR NAIR Date: 2023.02.14 17:54:26 +05'30' RHN