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Wednesday, July 15, 2015

Jurisdiction of SEBI debarring the respondents as Lead Managers relating to GDRs , for 10 years

Jurisdiction of SEBI debarring the respondents as Lead Managers relating to GDRs , for  10 years

whether  SEBI
had jurisdiction in passing the impugned order  dated  20.06.2013  debarring
the respondents for a period of ten years in dealing with  securities  while
considering the role played by the respondents as Lead Managers relating  to
the GDRs issued by six companies  who  issued  such  GDRs. =

The short question that arises in this appeal relates  to  the  jurisdiction
of SEBI under the Securities and Exchange Board  of  India  Act,  1992,  (in
short “SEBI Act, 1992”) to initiate proceedings against the  respondents  as
Lead Managers to the Global Depository Receipts  (in  short  “GDRs”)  issued
outside India based on investigations held by it and on its conclusion  that
in relation to transaction of sale/purchase of  underlying  shares  released
on redemption of GDRs in the securities market in India, the  Lead  Managers
had committed fraud on the investors  in  India  and  that  such  fraudulent
intention existed at every stage of the GDR process  till  sale/purchase  of
underlying shares in the securities market in India.  The  further  question
that arises for consideration is that if the said question  is  answered  in
the affirmative, whether the SEBI was  justified  in  passing  its  impugned
order dated 20.06.2013, debarring  the  respondents  herein  from  rendering
services in connection with  instruments  that  are  defined  as  securities
under Section 2(h) of the Securities Contracts (Regulation)  Act,  1956  (in
short “SCR Act,  1956”)  and  such  debarment  for  a  period  of  10  years
prohibiting the respondents from accessing the capital  market  directly  or
indirectly under SEBI Act, 1992 and the regulations framed there  under  was
justified.

When the order of SEBI dated 20.06.2013 was challenged  by  the  respondents
before the Securities Appellate Tribunal, Mumbai in Appeal No.126  of  2013,
the Chairman of the Tribunal in his minority view upheld the  order  of  the
SEBI while the members of the Tribunal by way of  their  majority  view  set
aside the order of SEBI debarring the respondents.   It  was  in  the  above
stated background SEBI has come forward with this appeal before us.=
Held that 

SEBI had jurisdiction in passing the impugned  order  dated
20.06.2013 debarring the respondents for a period of  10  years  in  dealing
with the securities while considering the role played by the respondents  as
Lead Managers relating to the GDRs issued  by  six  companies  which  issued
such GDRs.
We, therefore, hold that the Tribunal is bound  to  examine  the
correctness or otherwise of the  order  of  SEBI  dated  20.06.2013  in  the
appeal  preferred  by  the  respondents  in  Appeal  No.126  of  2013.  
We,
therefore, set aside the impugned order by the majority and  hold  that  the
minority view of the Chairman of the Tribunal is perfectly  in  order.   The
appeal stands allowed and the impugned order of the majority is  set  aside.
The appeal No.126 of  2013  before  the  Securities  Appellate  Tribunal  at
Mumbai shall stand restored and the same shall be disposed of on merits  and
in accordance with law expeditiously preferably  within  three  months  from
the date of production of a copy of this order.-2015 S.C.MSKLAWREPORTS

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