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SEBI taking ‘obstinate stand’ and ‘persistent non-compliance’ gets pulled by Bombay High Court and separately from SAT for ‘lackadaisical approach’

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This week witnessed significant legal scrutiny of the SEBI for its ‘obstinate stand’ and ‘persistent non-compliance’, resulting in rebukes from both the High Court of Bombay and the Securities Appellate Tribunal (SAT) regarding a perceived ‘lackadaisical approach’.

I. Bombay High Court’s Verdict (Case: Ashok Dayabhai Shah v. SEBI) In the case of Ashok Dayabhai Shah v. SEBI (https://bitly.ws/34u8b), the Bombay High Court criticized SEBI for failing to comply with its October order, emphasizing the necessity for SEBI to act in the public interest. The court had previously instructed SEBI to provide specific investigation documents to minority shareholders of Bharat Nidhi Limited, who had raised concerns about non-disclosures and securities law violations. Despite challenges in the Supreme Court, the High Court expressed dismay at SEBI’s ‘persistent non-compliance’, describing its approach as astonishing. The court highlighted SEBI’s potential erosion of investor confidence and directed swift adjudication of the show cause notice, emphasizing SEBI’s obligation to comply with court orders.

II. Securities Appellate Tribunal’s Critique (Case: Kirloskar Brothers Limited) In October 2020, SEBI imposed a six-month market access restriction on appellants in the Kirloskar Brothers Limited case. Despite SAT quashing SEBI’s order on October 12, 2022, the appellants’ Kirloskar Industries Limited (KIL) shareholding remained frozen for months. SAT, this week (https://bitly.ws/34uga), criticized SEBI for its lack of follow-up, raising concerns about potential neglect of investor interests. SAT found SEBI’s approach inconsistent with the investor protection purpose of the SEBI Act, imposing a cost of INR 5 Lakhs. This incident mirrored Cynthia Pinto De Andrade v. SEBI, where SAT imposed a cost of INR 10 Lakhs, prompting SEBI to appeal to the Supreme Court, resulting in a stay being granted.

III. Regulatory Accountability Concerns The frequent disputes between SEBI and SAT, with SEBI appealing every order to the Supreme Court, raise apprehensions about regulatory accountability. The ongoing tussle, detailed by Regstreet Law Advisors (https://bitly.ws/34ueu), underscores the need for a comprehensive re-evaluation of SEBI’s actions and regulatory structural changes to ensure accountability.

Readers are welcome to send their views to Regstreet Law Advisors at info@regstreetlaw.com.

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