Mahendra G. Wadhwani vs Sebi

Date of Decision: 23.11.2017

Appeal No. 97 of 2015

Mahendra G. Wadhwani 15, Linking Road, Opposite Arya Samaj, Santacruz (West), Mumbai- 400 054 ...Appellant

Versus

1.

Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai -400 051

2. BSE LIMITED Phiroze Jeejeebhoy Towers Mumbai- 400 001

3. National Stock Exchange of India Limited Exchange Plaza, C-1, Block G, Bandra Kurla Complex, Bandra (E), Mumbai- 400 051 ...Respondents

Mr. Somasekhar Sundaresan, Advocate with Mr. Dhaval Kothari, Mr. Ashok Chhabra and Mr. Devul Dighe, Advocates i/b S.D. Israni Law Chambers for the Appellant.

Mr. Mustafa Doctor, Senior Advocate with Mr. Pulkit Sukhramani and Ms. Vidhi Jhawar, Advocates i/b The Law Point for Respondent No. 1.

Ms. Amrita Joshi, Advocate i/b The Law Point for Respondent No. 2.

Ms. Charmi Chhadva, Advocate i/b Manilal Kher Ambala & Co. for Respondent No. 3.

CORAM: Justice J.P. Devadhar, Presiding Officer Jog Singh, Member Dr. C.K.G. Nair, Member 2

Per: Justice J.P. Devadhar (Oral)

1. This appeal is filed basically to challenge two circulars issued by

the Securities and Exchange Board of India ("SEBI" for short) on May

22, 2014 and on April 17, 2015 respectively. Apart from the above, the

appellant seeks an order directing SEBI to ensure that the companies

listed exclusively on regional stock exchanges get listed either on the

Bombay Stock Exchange or on the National Stock Exchange

automatically.

2. Appellant is an investor and has been investing in various

companies listed on various stock exchanges in the country including

several regional stock exchanges which are now de-recognized. Basic

grievance of the appellant is that the impugned circulars do not provide

any exit route for the shareholders of the companies exclusively listed on

de-recognized/ non-operational stock exchanges.

3. Counsel for SEBI, however, raised a preliminary objection

regarding the maintainability of the appeal. He submitted that the present

appeal was filed by the appellant under Section 15T of SEBI Act by

relying on a decision of this Tribunal in case of NSDL v/s SEBI reported

in 2006 SCC online SAT 251 wherein it was held that the circulars issued

by SEBI could be challenged before this Tribunal. Since the said

decision of this Tribunal is reversed by the Apex Court in the case of

SEBI v/s NSDL reported in (2017) 5 SCC 517 it is submitted that the

appeal is not maintainable before this Tribunal. 3

4. Counsel for the appellant, however, submitted that the decision of

the Apex Court in the case of the SEBI v/s NSDL (Supra) is not

applicable to the facts of the present case. In support of the above

contention counsel for the appellant relied on a decision of this Tribunal

in the case of J. Kumar Infraprojects Ltd. v/s SEBI & Ors. (Appeal No.

174 of 2017 decided on 10.08.2017). Counsel for the appellant further

submitted that the impugned circulars are nothing but the orders passed

by SEBI under regulation 28(2) of the SEBI (Delisting of Equity Shares)

Regulations, 2009 ("Delisting Regulations" for short). Merely because

SEBI has referred the orders passed under regulation 28(2) of the

Delisting Regulations as 'circulars' cannot be a ground to deny the

appellant his right to file an appeal against the said circulars which are in

fact orders passed under the Delisting Regulations.

5. In our opinion, the argument advanced on behalf of the appellant is

wholly misconceived.

6. Impugned circulars issued by SEBI contain administrative

directions given by SEBI to the stock exchanges in relation to all

companies which are exclusively listed on de-recognized / non-

operational stock exchanges. Since the directions contained in the said

circulars are not restricted to any particular company but are generally

applicable to all the companies exclusively listed on de-recognized/ non-

operational stock exchanges, it is abundantly clear that the impugned 4

circulars are nothing but the administrative circulars issued in the interest

of the investors in the securities market.

7. It is equally important to note that none of the companies to whom

the directions contained in the impugned circulars apply have deemed it

appropriate to challenge the impugned circulars and the appellant who is

an investor in those companies has deemed it appropriate to challenge the

impugned circulars. Assuming that the appellant has any grievance

against the impugned circulars, in view of the decision of the Apex Court

in case of NSDL (Supra) proper course to be adopted by the appellant is

to take appropriate steps in judicial review proceedings and not by way of

an appeal before this Tribunal.

8. Reliance placed by the counsel for the appellant on the decision of

this Tribunal in case of J. Kumar Infraprojects Ltd. (Supra) is wholly

misplaced. In that case, the Ministry of Corporate Affairs (MCA) had

addressed a letter calling upon SEBI to investigate as to whether the 331

companies named therein which were suspected to be Shell Companies

were in fact Shell Companies and whether the said companies had any

credentials/ fundamentals. Without conducting any investigation SEBI

had inter alia directed the stock exchanges to suspend the trading in the

securities of those companies on daily basis. In that context this Tribunal

held that the communication of SEBI which had serious Civil

Consequences and prejudicially impaired the rights and obligations of the

companies specified therein could not be said to be an administrative

circular but would fall in the category of a quasi judicial order and hence 5

appealable before this Tribunal. In the present case, the impugned

circulars are the general circulars issued to the stock exchanges in

relation to all the companies exclusively listed on de-recognized/ non-

operational stock exchanges and the said circulars do not in any

prejudicially affect the rights of any particular company whose shares are

exclusively listed on de-recognized/ non-operational stock exchanges. Thus, reliance placed by the appellant on the decision of this Tribunal in

case of J. Kumar Infraprojects Ltd. (Supra) is totally misplaced.

9. Argument of the appellant that the impugned circulars constitute

orders under regulation 28(2) of the Delisting Regulations is totally

frivolous to say the least. By circular dated 22.05.2014 SEBI directed the

stock exchanges to give various options specified therein to the

companies exclusively listed on de-recognized/ non-operational stock

exchanges to get listed on the nationwide exchanges. In view of the

representation made by some of the companies exclusively listed on de-

recognized/ non-operational exchanges, SEBI issued circular dated

17.04.2015 thereby giving extension of time to all the companies

exclusively listed on de-recognized non-operational stock exchanges to

get listed on nationwide stock exchanges. Thus, the appellant is wholly

unjustified in arguing that the impugned circulars constitute orders under

regulation 28(2) of the Delisting Regulations. Conduct of the appellant

in pursuing the appeal by raising such frivolous grounds inspite of the

decision of the Apex Court in NSDL (Supra) is reprehensible. 6

10. For all the aforesaid reasons, the appeal is dismissed with costs

quantified at ` 10,000/- to be paid by the appellant to SEBI within four

weeks from today.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member 23.11.2017 Prepared & Compared By: PK