SC Dismisses SEBI Petition, Asks the Regulator to Deal with Investors Complaint within 4 Months
While refusing to go in to merits of a case, the Supreme Court directed market regulator Securities and Exchange Board of India (SEBI) to deal with complaints of investors of Bharat Nidhi Ltd positively and objectively within four months in accordance with law. SEBI has approached the apex court against an order passed by the Securities Appellate Tribunal (SAT).
In November last year, the SAT had rapped the market regulator for poor handling of investor complaints on its online complaints platform called SCORES (SEBI Complaints Redressal System) and had termed the 'platform as a mere eyewash'.
In an order passed on 27 January 2020, the SC bench of Justice Arun Misra and Justice India Banerjee while diluting adverse observations made by the SAT, says, "May be there was some remiss on the part of SEBI to act as a regulator, but casting aspersion was not warranted in the facts and circumstances of the case."
"Since we have not gone into the merits of the case, as the complaints are to be dealt with by the SEBI, we have not made any observation on the remaining part of the merits of the order in view of the limited relief pressed," the apex court says.
The apex court opined that certain observations made in Paragraph No20 of the SAT order were not called for, such as “the computer generated disposal of a serious complaint speaks volume on the conduct of the respondents” as well as the part of the order relating to “vested interest in not deciding the matter” were not at all called for.
A set of investors had complained to the SAT that the SEBI had simply converted their complaint into ‘market intelligence’ and refused to investigate or provide satisfactory information on action taken.
In its November 2019 order, a SAT bench comprising Justice Tarun Agarwala, Dr CKG Nair and Justice MT Joshi, had stated, "Disposal of the complaint in this manner in the instant case indicates non-application of mind and non-consideration of the interest of the investors. We have no hesitation in stating that the SEBI as a regulator in the instant case has not performed its duties and has kept the complaint pending for more than six years, which speaks volumes by itself. The Tribunal fails to fathom as to why the complaint could not have been decided unless SEBI officials had a vested interest in not deciding the matter."
"We find the approach adopted by the respondents (SEBI) to be a strange one. Such computer-generated disposal of a serious complaint speaks volume on the conduct of the respondents in treating the minority shareholders in this shabby manner. It seems that the respondents have lost sight of the mandate provided to them under Section 11 of the SEBI Act which mandates SEBI to safeguard the interest of the investors," the bench had said. (Read: SAT Says SEBI’s Investor Complaint Handling on SCORES is a Mere Eyewash
The case is related with complaints filed by 22 minority shareholders of Bharat Nidhi Ltd, which held 24.41% stake in Bennett, Coleman & Co Ltd (BCCL) that runs Times of India newspaper among other publications and TV channels. PNB Finance and Industries Ltd (PNBF) and Camac Commercial Co Ltd, also own 9.29% and 13.30% stake in BCCL.
Several times, the minority shareholders had filed complaints with SEBI and stock exchanges about incorrect disclosures on promoter shareholding by BCCL, PNBF and Camac.
SEBI had either not responded to the complaints at all or adopted a position that investigation in the matter is underway or treated the complaints as market intelligence, without concluding such investigations or passing any reasoned order while disposing of the complaints.
The minority shareholders had contended that BNL, PNBF and Camac are companies, which are owned and controlled by Vineet Jain, Samir Jain and their family members, who are the managing directors of BCCL, more commonly known as the Times Group. These shareholders also contended that the minimum public shareholding of 25% by a listed company was not followed by these three companies.
The minority shareholders further contended that both the Jain brothers "exercise total control over these three companies and are the ultimate beneficial owners of the company and have wrongly classified themselves as public shareholders of these companies which facts are so glaring but for the reasons best known, SEBI has turned a blind eye and has disposed of the complaints in a cursory manner".
In its submission, the Calcutta Stock Exchange had told the SAT bench that "this issue was submitted to SEBI, which prima facie showed that the three companies had violated the SEBI Listing Obligations and Disclosures Requirements (LODR), which provides for requirement of maintaining minimum public shareholding of 25% by a listed company (MPS Norms) and the company wrongly had shown it as public shareholders."
The respondents objected on using an order or communication from SCORES platform for filing an appeal. The SAT bench, however, said, "If the complainants are aggrieved by the disposal of the complaint on the SCORES platform the said complainants have a right to file an appeal under Section 15T of the SEBI Act. We are further of the opinion that the computer generated communication by the respondent on the SCORES platform, even though it may be an administrative communication is nonetheless an order since it disposes of the lis (litigation) between the parties and disposes of the complaint and the issues raised by the complainants."
The bench observed that since 2013, these shareholders were filing complaints before SEBI and on the SCORES platform. While the complaints filed with SEBI are still pending, those on SCORES were disposed without deciding or settling the issue raised in the complaint. "...disposal of the complaints by the respondents on the SCORES platform is no disposal in the eyes of law. It is merely an eye wash without disposing of the complaints and without settling the controversy involved in the complaints," the SAT had said in its November 2019 order.