Holding

The rectificatory jurisdiction under Section 59 of the Companies Act, 2013 is summary in nature and cannot be exercised for disputes involving alleged violations of SEBI regulations; such matters fall within SEBI's exclusive jurisdiction.

Summary

IFB Agro Industries, a listed company, alleged that SICGIL India Ltd. and related persons acquired more than 5% of its shares from the open market without making the disclosures required under SEBI's Substantial Acquisition of Shares and Takeover (SAST) Regulations and Insider Trading (PIT) Regulations. The appellant filed a petition under Section 111A of the Companies Act, 1956 (now Section 59 of the Companies Act, 2013) seeking rectification of the register of members and a buy‑back of the shares held by the respondents. The National Company Law Tribunal (NCLT) allowed the petition and ordered the buy‑back, but the NCLAT set aside that order, holding that the NCLT had exceeded its jurisdiction. The Supreme Court held that the rectificatory jurisdiction under Section 59 is a summary power and cannot be exercised where there are contested facts or alleged violations of SEBI regulations; such matters must be dealt with by SEBI, the appropriate regulator. Consequently, the NCLT’s order was beyond its jurisdiction and the appeal was dismissed.

Issues considered

The scope and ambit of Section 59 of the Companies Act, 2013 (formerly Section 111A of the 1956 Act) for rectification of the register of members.
Whether a petition under Section 59 can be used to adjudicate alleged violations of SEBI (SAST) and SEBI (PIT) Regulations.
The appropriate forum for determination of breaches of SEBI regulations – the NCLT or the SEBI.

Legislation cited

Companies Act, 1956s. 111A
Companies Act, 2013s. 59
SEBI (Prohibition of Insider Trading) Regulations, 1992s. Regulation 11, s. Regulation 13, s. Regulation 14, s. Regulation 38, s. Regulation 39, s. Regulation 41, s. Regulation 42, s. Regulation 44, s. Regulation 45, s. Regulation 4A, s. Regulation 5
SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997s. Regulation 13, s. Regulation 14, s. Regulation 7(1)
Securities and Exchange Board of India Act, 1992s. 11, s. 11B, s. 11D, s. 15-I, s. 15-JB, s. 30

Subjects

rectification of registerSection 59 Companies ActSEBI regulationssubstantial acquisition of sharesinsider tradingjurisdictionNCLTregulatory authoritybuy‑backdisclosure requirement

Judgment

[2023] 1 S.C.R. 527 527

IFB AGRO INDUSTRIES LIMITED A
v.
SICGIL INDIA LIMITED AND OTHERS
Civil Appeal No. 2030 of 2019
JANUARY 04, 2023 B
[A. S. BOPANNA AND
PAMIDIGHANTAM SRI NARASIMHA, JJ.]
Companies Act, 2013 : s. 59 – Rectification of register of
members – Scope of Rectificatory jurisdiction of National Company
Law tribunal-NCLT – Violation of – On facts, respondent No.1 C
acquired shares of the appellant exceeding 5% of its total shares
from the open market and failed to make disclosure as per Reg.7(1)
of SAST Regulations and Reg. 13 of PIT Regulations – Appellant
filed petition before NCLT u/s 111A of the 1956 Act (now s. 59 of
the 2013 Act) for rectification of members register by deleting the
name of the respondents as the owners of shares which are over D
5% – Allowed by NCLT holding that the acquisition of shares in
excess of 5% was in violation of the SEBI (PIT) Regulations and
the SEBI (SAST) Regulations and directed the appellant to buy back
its shares which were held by the respondent – However, the appellate
court set aside this direction on the ground that the tribunal exceeded
its jurisdiction – On appeal, held: Appellant is not justified in E
invoking the jurisdiction of the CLB (now NCLT) u/s. 111A for
violation of SEBI regulations – Rectificatory jurisdiction u/s. 59 is
summary in nature and cannot be exercised where there are
contested facts and disputed questions – If a petition seeks an
adjudication under the garb of rectification, then the NCLT would F
not have jurisdiction, and it would be duty-bound to re-direct the
parties to approach the relevant forum – Further, the SEBI has a
comprehensive role in regulating the securities market – Regulator
cannot be circumvented by asking for rectification – It is only for
the regulator to determine a violation of the provisions of the SEBI
Act and the Regulations – NCLT exceeded its jurisdiction – Thus, G
the appellant was correct in setting aside the order of the NCLT –
Securities and Exchange Board of India (Substantial Acquisition
of Shares and Takeover) Regulations, 1997 – reg. 7(1) – Securities
and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 1992 – reg. 13 – Companies Act, 1956 – s. 111A.
H
527
528 SUPREME COURT REPORTS [2023] 1 S.C.R.

A Dismissing the appeal, the Court
HELD: 1.1 The rectificatory jurisdiction under Section 59
of the Companies Act,2013 is summary in nature and not intended
to be exercised where there are contested facts and disputed
questions. Transactions falling within the jurisdiction of Regulatory
bodies created under a statute must necessarily be subjected to
B their ex- ante scrutiny, enquiry and adjudication. Therefore, the
submission that the National Company Law tribunal under Section
59 exercises a parallel jurisdiction with Securities and Exchange
Board of India for addressing violations of the Regulations framed
under the SEBI Act is rejected. The scope and ambit of Section
C 155 of the 1956 Act, as it then existed, fell for consideration in a
decision of this Court in Ammonia Supplies’s case. In Ammonia’s
case it was held that the jurisdiction exercised by the court for
rectification of the register of members is essentially limited. [Para
1 and 19][533-B-C, D-E; 542-E-F]
1.2 While interpreting Section 155, it was held in Ammonia’s
D case that the power of CLB is narrow and can only consider
questions of rectification. If a petition seeks an adjudication under
the garb of rectification, then the CLB would not have jurisdiction,
and it would be duty-bound to re-direct the parties to approach
the relevant forum. The words ‘sufficient cause’ cannot be
interpreted in a manner which would enlarge the scope of the
E provision. The decision in Ammonia was followed by this Court
even after the deletion of Section 155 and insertion of Section
111A. [Paras 20 and 21][544-F-H]
1.3 The principle enunciated in Ammonia’s case relating to
the jurisdiction of a tribunal with respect to the rectification of
the register is well-recognized and consistently followed. Sub-
F
section (3) of Section 59 recognizes the overarching right to hold
and transfer securities with the concomitant entitlement of voting.
This is a precious right, and that is the reason why the Parliament
found it necessary to caution that the provision of this Section
shall not restrict the right of a holder of securities, to transfer
G such securities. This is another feature which is indicative of the
limited scope and extent of the power of rectification of the
register. Thus, the company petition under Section 111A of the
1956 Act for a declaration that the acquisition of shares by the
Respondents as null and void is misconceived. The tribunal should
have directed the appellant to seek such a declaration before the
H appropriate forum. The appellate tribunal is, thus, justified in
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 529
OTHERS

allowing the appeal and setting aside the order of the tribunal. A
[Paras 24 and 25][547-A-D]
1.5 In the exercise of its adjudicatory powers under Section
15-I, the SEBI has the power to appoint officers for holding an
inquiry, give a reasonable opportunity to the person concerned
and determine if there is any transgression of the rules prescribed. B
The Board has the power to impose penalties for violations and
also restitute the parties. The adjudicatory power also includes
the power to settle administrative and civil proceedings under
Section 15JB of the SEBI Act. [Para 31][549-B-C]
1.6 The regulatory jurisdiction of the Board also includes
ex-ante powers to predict a possible violation and take preventive C
measures. The exercise of ex-ante jurisdiction necessitates the
calling of information as provided in Sections 11(2)(i), 11(2)(ia)
and 11(2)(ib) of the SEBI Act. Where the Board has a reasonable
ground to believe that a transaction in the securities market is
going to take place in a manner detrimental to the interests of D
the stakeholders or that any intermediary has violated the
provisions of the Act, it may investigate into the matter under
Section 11(C) of the SEBI Act. In other words, being the real-
time security market regulator, the Board is entitled to keep a
watch, predict and even act before a violation occurs. It is in this
context, that the SEBI (SAST) Regulations and the SEBI (PIT) E
Regulations, are to be understood. [Para 32][549-C-F]
1.7 The SEBI (PIT) Regulation prohibits dealing,
communicating etc., on matters relating to insider trading. Even
if there is a suspicion about the transgression of the prohibition,
the Board has the power to inquire (Regulation 4A) and come to F
a prime facie conclusion about the need to investigate (Regulation
5). Chapter III of the said Regulations provides for the entire
procedure to be followed in the inquiry process. For an effective
exercise of its ex-ante powers, the Board has provided the policy
on disclosures in Chapter IV of the said Regulations. Under
G
Regulation 13, any person holding more than 5% shares or voting
rights in a company, shall disclose to the company within four
working days, the number of shares or the extent of voting rights
held by such person. Regulation 13 places a continual obligation
of disclosure. Regulation 14 provides that any person violating
H
530 SUPREME COURT REPORTS [2023] 1 S.C.R.

A the said Regulations shall be liable for action under Sections 11,
11B, 11D, 24 and Chapter VI-A of the SEBI Act. [Para 33][549-
F-H; 550-A-B]
1.8 The regulatory regime is all-encompassing. It prescribes
the prohibition, which is normative. The Regulation also provides
for the method of detecting the violation, the methods of
B investigation, the manner of appointment of the investigating
authority, the timeline within which the report is to be submitted,
the opportunity for an insider to respond to the report as well as
the final decision to be taken by the SEBI, and lastly, the
consequential orders and restitutionary directions which the
C Board is entitled to pass. The SEBI has the power under
Regulation 11 to pass necessary directions to remedy an act of
insider trading in order to have a complete and comprehensive
control over the securities market. [Para 34][550-C-E]
1.9 Having considered the comprehensive role of the SEBI
in regulating the securities market with respect to insider trading,
D the important role of the Regulator cannot be circumvented by
simply asking for rectification under Section 111A of the 1956
Act. Such an approach is impermissible. The scrutiny and
examination of a transaction allegedly in violation of the SEBI
(PIT) Regulations will have to be processed through the
regulations and remedies provided therein. [Para 35][550-E-F]
E 1.10 When Constitutional Courts are called upon to
interpret provisions affecting the exercise of powers and
jurisdictions of these regulatory bodies, it is the duty of such
Courts to ensure that transactions falling within the province of
the regulators are necessarily subjected to their scrutiny and
regulation. This will ensure that the regulatory body, charged
F
with the duty to protect the consumers has real time control over
the sector, thus, realizing the purpose of their constitution. [Para
36][550-G-H]
1.11 The position with respect to the SEBI (SAST)
Regulations is similar to that of the SEBI (PIT) Regulations.
G Regulation 7 of Chapter III obligates the acquirer of more than
5% shares in a company to disclose the same to the company
and the stock exchange. This is the prohibition, and non-disclosure
is punitive. Chapter V deals with investigation and action by the
Board, which includes the power of the Board to appoint an
investigating officer (Regulation 38), the issuance of show-cause
H
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 531
OTHERS

notice to the acquirer (Regulation 39), the obligation of the A
investigating authority to submit a report at the earliest
(Regulation 41), the duty to supply the report to the acquirer and
give him an opportunity of hearing before passing penal orders
(Regulation 42) and lastly, the powers of the Board to take action/
pass directions under Chapter VI-A and Section 24 of the SEBI
Act (Regulation 44). Regulation 45 provides for penalties for non- B
compliance with the said Regulations. The liability will be in terms
of the Regulations and the SEBI Act. The SEBI (SAST)
Regulation is a comprehensive scheme providing for inquiry,
investigation, submission of report by the investigating officer,
procedural safeguards in favor of the acquirer, and finally, the
restitutionary order/directions to be passed by the Board. This C
whole procedure cannot be short-circuited by making an
application under Section 111A of the 1956 Act on the ground
that there exists parallel jurisdiction with the SEBI and CLB/
tribunal. The transaction complained of must suffer scrutiny by
the regulator, and it is only for the regulator to determine a
violation of the provisions of the SEBI Act and the Regulations. D
[Para 37][551-A-E]
1.12 Having considered the matter from a different
perspective, the appellant is not justified in invoking the
jurisdiction of the CLB under Section 111A of the Act for violation
of SEBI regulations. The tribunal committed an error in
E
entertaining and allowing the company petition filed under Section
111A of the 1956 Act. Though the reasoning adopted by the
appellate tribunal in the impugned order is not concurred with,
the conclusion that the tribunal exceeded its jurisdiction is
accepted and therefore, the appellate tribunal was correct in
setting aside the judgment passed by the tribunal. [Para 38][551- F
F-H]
Ammonia Supplies Corporation (P) Ltd. v. Modern
Plastic Containers Pvt. Ltd. & Ors. (1998) 7 SCC 105
: [1998] 1 Suppl. SCR 413 – relied on.
Mannalal Khetan & Ors. v. Kedar Nath Khetan & Ors.
(1977) 2 SCC 424 : [1977] 2 SCR 190; Chairman, SEBI G
v. Shriram Mutual Fund & Another (2006) 5 SCC 361
: [2006] 2 Suppl. SCR 833; Standard Chartered Bank
v. Andhra Bank Financial Services Ltd. & Ors. (2006)
6 SCC 94 : [2006] 2 Suppl. SCR 1; Jai Mahal Hotels
(P) Ltd. v. Devraj Singh & Ors. (2016) 1 SCC 423 :
[2015] 11 SCR 323; Kesha Appliances (P) Ltd. & Ors. H
532 SUPREME COURT REPORTS [2023] 1 S.C.R.

A v. Royal Holdings Services Ltd. & Ors. (2006) 1 Bom
CR 545; Zandu Pharmaceutical Works Ltd. v.
Devkumarvaidya & Ors. (2009) 89 CLA 65; B.S.E
Brokers’ Forum, Bombay & Ors. v. Securities and
Exchange Board of India & Ors., (2001) 3 SCC 482;
Sahara India Real Estate Corporation Ltd. & Ors. v.
B SEBI & Anr., (2013) 1 SCC 1 : [2012] 12 SCR 1;
Securities and Exchange Board of India v. Kishore R
Ajmera, (2016) 6 SCC 368 : [2016] 1 SCR 1118;
Securities and Exchange Board of India v. Ajay Agarwal,
(2010) 3 SCC 765 : [2010] 3 SCR 70; Prakash Gupta
v. Securities and Exchange Board of India, (2021) SCC
C OnLine SC 485 – referred to.
Case Law Reference
[1998] 1 Suppl. SCR 413 relied on Para 1
[1977] 2 SCR 190 referred to Para 13
[2006] 2 Suppl. SCR 833 referred to Para 13
D
[2006] 2 Suppl. SCR 1 referred to Para 21
[2015] 11 SCR 323 referred to Para 21
(2006) 1 Bom CR 545 referred to Para 22
(2009) 89 CLA 65 referred to Para 23
E (2001) 3 SCC 482 referred to Para 29
[2012] 12 SCR 1 referred to Para 29
[2016] 1 SCR 1118 referred to Para 29
[2010] 3 SCR 70 referred to Para 29
CIVIL APPELLATE JURISDICTION : Civil Appeal No.2030
F of 2019.
From the Judgment and Order dated 06.12.2018 of the National
Company Law Appellate Tribunal at New Delhi in Company Appeal
(AT) No.240 of 2017.
P. Chidambaram, Sr. Adv., Soumya Ray Chowdhury, Mahesh
Agarwal, Gaurav Gupta, Himanshu Satija, Nishant Rao, Rajesh Kumar,
G E. C. Agrawala, Advs. for the Appellant.
Shyam Divan, Sr. Adv., Dhruv Dewan, Ms. Reena Choudhary,
Ms. Yashna Mehta, Ravilochan Daliparthi, Prayuj Sharma, S. S. Shroff,
Advs. for the Respondents.

H
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 533
OTHERS

The Judgment of the Court was delivered by A
PAMIDIGHANTAM SRI NARASIMHA, J.
1. The short question for our consideration in this appeal relates
to the scope of the rectificatory jurisdiction of the National Company
Law Tribunal under Section 59 of the Companies Act, 20131. In this
context, we are called upon to determine the appropriate forum for B
adjudication and determination of violations of the Securities and
Exchange Board of India (Substantial Acquisition of Shares and Takeover)
Regulations, 19972, and Securities and Exchange Board of India
(Prohibition of Insider Trading) Regulations, 19923, framed under the
Securities and Exchange Board of India Act, 19924. We have answered C
both the questions. On the first issue, following the decision of this Court
in Ammonia Supplies Corporation (P) Ltd. v. Modern Plastic
Containers Pvt. Ltd. & Ors.5, we have held that the rectificatory
jurisdiction under Section 59 of the 2013 Act is summary in nature and
not intended to be exercised where there are contested facts and disputed
questions. On the second issue, we have held that transactions falling D
within the jurisdiction of Regulatory bodies created under a statute must
necessarily be subjected to their ex- ante scrutiny, enquiry and
adjudication. We have, therefore, rejected the contention that the National
Company Law Tribunal under Section 59 exercises a parallel jurisdiction
with Securities and Exchange Board of India6 for addressing violations E
of the Regulations framed under the SEBI Act.
2. This is an appeal against the judgment of the National Company
Law Appellate Tribunal7 (hereinafter referred to as ‘Appellate Tribunal’)
whereby the Appellate Tribunal set aside the judgment of the National
Company Law Tribunal (hereinafter referred to as the ‘Tribunal’), F
allowing the company petition filed by the Appellant under Section 111A
of the Companies Act, 19568, (which is Section 59 of the 2013 Act), for
rectification of Members Register. The Tribunal while allowing the petition,
1
hereinafter referred to as the ‘2013 Act’.
2
hereinafter referred to as the ‘SEBI (SAST) Regulations’
3
hereinafter referred to as the ‘SEBI (PIT) Regulations’
G
4
hereinafter referred to as ‘the SEBI Act’.
5
(1998) 7 SCC 105
6
hereinafter referred to as ‘the SEBI’ or ‘the Board’.
7
Companies Appeal (AT) 240 of 2017 of the National Company Law Appellate
Tribunal dated 06.12.2018
8
hereinafter referred to as the ‘1956 Act’. H
534 SUPREME COURT REPORTS [2023] 1 S.C.R.

A directed the Appellant to buy-back its shares which were held by the
Respondents. In appeal, the Appellate Tribunal set aside this direction
on the ground that the Tribunal exceeded its jurisdiction. It is this order
of the Appellate Tribunal which is impugned before us.
Relevant Facts:
B 3. The Appellant herein is a listed company engaged in the
manufacture and sale of rectified spirit, country liquor, marine products,
carbon dioxide gas etc. Respondent No. 1 is also a listed company which
is engaged in the business of producing carbon dioxide gas and dry ice.
Respondent No. 2 is the managing director of Respondent No. 1,
C Respondent No. 3 is the wife of Respondent No. 2, and Respondent
Nos. 4-6 are close relatives of Respondent Nos. 2-3.
4. It is the contention of the Appellant that sometime in August
2003, Respondent No. 2 came up with a proposal for a business tie-up
between the Appellant and Respondent No. 1. The Appellant is said to
D have rejected the proposal. It is alleged by the Appellant that after this
rejection, the Respondents started acquiring shares of the Appellant from
the open market with a view to eliminate competition and strengthen its
own dominant position in the relevant market. As of 18.01.2004, the
Respondents collectively held just under 5% of the Appellant’s total
paid-up share capital.
E
5. On 19.01.2004, Respondent No. 1 acquired 600 equity shares
of the Appellant and this resulted in the aggregate shareholding of the
Respondents crossing 5% of the total paid-up share capital of the
Appellant, thereby triggering Regulation 7(1)9 of the SEBI (SAST)
Regulations. Regulation 7(1) mandates that when an acquirer, either by
F himself or with any person acting in concert with the acquirer, acquires
9
Regulation 7(1) –
Any acquirer, who acquires shares or voting rights which (taken together with shares or
voting rights, if any, held by him) would entitle him to more than five per cent or ten per
cent or fourteen per cent or fifty four per cent or seventy four per cent shares or voting
rights in a company, in any manner whatsoever, shall disclose at every stage the
G aggregate of his shareholding or voting rights in that company to the company and to
the stock exchanges where shares of the target company are listed.
Regulation 2(b) ¯
acquirer means any person who, directly or indirectly, acquires or agrees to acquire
shares or voting rights in the target company, or acquires or agrees to acquire control
over the target company, either by himself or with any person acting in concert with the
H acquirer.
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 535
OTHERS [PAMIDIGHANTAM SRI NARASIMHA, J.]

5% or more of the total paid-up share capital of a company, then a A
disclosure has to be made to the acquiree company and the stock
exchange. In compliance with this Regulation, the Respondents are said
to have sent an intimation to the Appellant on the very next day i.e., on
20.01.2004. This intimation was received by the Appellant on 22.01.2004.
The Appellant contends that the disclosure under Regulation 7(1) was
B
not in the prescribed format.
6. Four months later, on 27.05.2004, Respondent No. 1 acquired
additional shares of the Appellant, as a result whereof, its individual
shareholding exceeded 5% of the total paid-up share capital of the
Appellant. This individual crossing of 5% by Respondent No. 1 triggered
the SEBI (PIT) Regulations. Regulation 1310 thereof provides that if C
any person acquires more than 5% shares of a company, then it shall
make a disclosure to the acquiree Company. Respondent No. 1 admits
to having failed to make this disclosure within the prescribed time. It is
the stand of Respondent No. 1 that the failure to issue a notice was not
an intentional mistake. The Appellant claims that it got to know about D
the said acquisition on 04.06.2004 when it carried out an internal
investigation into the total number of shares held by the Respondents in
the Appellant company.
Company Petition under Section 111A of the 1956 Act:
7. It is in the above referred factual background that on 19.07.2004, E
the Appellant filed a petition before the Company Law Board11 under
Section 111A of the 1956 Act praying for rectification of its register by
deleting the name of the Respondents as the owner of shares which are
over and above the 5% threshold. As of the date of filing of the Section
111A petition, the Respondents collectively held around 8.22% of the F
Appellant’s paid-up share capital.
8. Upon receiving notice of the aforesaid petition, Respondent
No. 1, on 16.08.2004, issued an intimation to the Appellant as mandated
under Regulation 13 of the SEBI (PIT) Regulations. Two days later, on
10
Regulation 13 –
G
(1) Any person who holds more than 5% shares or voting rights in any listed company
shall disclose to the company in Form A, the number of shares or voting rights held by
such person, on becoming such holder, within 2 working days of: (a) the receipt of
intimation of allotment of shares; or (b) the acquisition of shares or voting rights, as the
case may be.
11
hereinafter referred to as ‘the CLB’. H
536 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 18.08.2004, Respondent No. 1 allegedly sold a few shares of the Appellant
and brought down its individual shareholding to 4.91%. This fact is
contested, as the Appellant claims that Respondent No. 1 never reduced
its shareholding. On 24.08.2004, Respondent No. 1 also wrote to the
SEBI that its individual shareholding in the Appellant had crossed 5% on
27.05.2004 and that there was a delay in disclosing this to the Appellant.
B
SEBI was informed that the individual shareholding of Respondent No.
1 in the Appellant now stands below 5%. It has been submitted before
us that SEBI has not taken any regulatory action.
9. During the pendency of the petition under Section 111A, the
2013 Act came into force, and the matter stood transferred to the Tribunal.
C The Tribunal framed just one question - Whether the acquisition of
shares by the Respondents without complying with the statutory
provisions of disclosure norms under SEBI Regulations is valid?
Judgment of the Tribunal:
D 10. By its judgment dated 05.07.2017, the Tribunal held that the
intimation dated 16.08.2004 is in violation of the SEBI (PIT) Regulations
since the said declaration had to be filed within four working days of the
receipt of intimation of allotment of shares or the acquisition of shares or
voting rights, as the case may be. The Tribunal also held that the term
‘person’ in the SEBI (PIT) Regulations can be construed to include all
E other Respondents, besides Respondent No. 1, as persons acting in
concert. The reason for this was that the exercise of control in the
management of the Appellant would be done jointly by all the
Respondents. Further, the Tribunal also held that there has been a violation
of the SEBI (SAST) Regulations as the Respondents did not make the
F disclosure in the proper format.
11. In so far as the exercise of power under Section 111A of the
1956 Act is concerned, the Tribunal held that in case of violation of
SEBI regulations, Section 111A empowers a company to apply for
rectification, and in such cases, the Tribunal is entitled to pass an order
G to undo the mischief. The Tribunal opined that the regulatory jurisdiction
of SEBI would not bar the Tribunal from exercising its power under
Section 111A of the 1956 Act. However, the Tribunal held that the powers
exercised by the CLB and SEBI fall in different and distinct jurisdictional
fields and therefore, the present order will not preclude SEBI from
deciding any violation of its regulations. Allowing the company petition,
H
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 537
OTHERS [PAMIDIGHANTAM SRI NARASIMHA, J.]

the Tribunal held that the acquisition of shares in excess of 5% was in A
violation of the SEBI (PIT) Regulations and the SEBI (SAST)
Regulations. The final order passed by the Tribunal is as follows:
“The present Company Petition is allowed. The Respondents
having furnished the declaration at a later
point of time are hereby barred from exercising their rights as B
to the shares acquired by them in the Petitioner Company in
excess of 5% the company is hereby authorised to buy back
the shares that the Respondents hold in excess of 5% of the
shareholding in the Company at the rate which was prevailing
on the date of presentation of the Petition or market value, C
whichever is higher. The Respondents are directed to hand
over the share certificates and share transfer forms within 30
days of the order to the Company and in response to that the
Petitioner will be liable to pay the buyback price which shall
be the value of shares which was prevailing on the date of
presentation of the petition or market value whichever is D
higher.
It is clear that the power exercised by the Company Law Board
and the powers exercised by the SEBI fall in different and
distinct jurisdictional fields. Therefore, the present order shall
not preclude the jurisdiction of SEBI as an adjudicating E
authority for deciding on the violation of SEBI Regulations
as have been laid down in the present petition.”
Judgment of the Appellate Tribunal:
12. The Respondents herein carried the matter to the Appellate F
Tribunal in appeal. The limited question before the Appellate Tribunal
was whether the Tribunal was empowered to pass an order of buyback
while entertaining a petition under Section 111A of the 1956 Act. The
Appellate Tribunal, by its order dated 06.12.2018, allowed the appeal
and set aside the order of the Tribunal. Unfortunately, there is neither
analysis nor any reasoning in the order of the Appellate Tribunal. In the G
normal course, we would have set aside the judgment of the Appellate
Tribunal and remanded the matter for reconsideration. However, as a
period of four years has already lapsed since the passing of the impugned
order, we considered it appropriate to dispose of the present appeal finally.
It is in this context that the matter was heard in detail. We will now refer
H
538 SUPREME COURT REPORTS [2023] 1 S.C.R.

A to the submissions made by the learned counsel appearing on behalf of
the parties.
Submissions of the Parties:
13. Mr. P. Chidambaram, learned Senior Advocate on behalf of
the Appellant, contended that – (i) no timely intimation in the prescribed
B format was given by the Respondents when Regulation 7(1) of the SEBI
(SAST) Regulations got triggered; (ii) Respondent Nos. 1 – 6, as
“connected persons” (as per 2(c) of the SEBI (PIT) Regulations) were
“acting in concert” (as per 2(e) of the SEBI (SAST) Regulations)
thereby violating Regulations 13 and 14 of the SEBI (PIT) Regulations.
C He emphasized that the Respondents have admitted to the non-disclosure,
and (iii) as Securities and Exchange Board of India Act, 1992 12, must be
read in addition to, and not in derogation of the Companies Act. The
Appellant is entitled to approach the Tribunal under Section 111A of the
1956 Act for rectification of the register. In support of these submissions,
reliance was placed on the decisions of this Court in Mannalal Khetan
D & Ors. v. Kedar Nath Khetan & Ors.13, Chairman, SEBI v. Shriram
Mutual Fund & Another14.
14. Mr. Shyam Divan, learned Senior Advocate appearing for the
Respondents, contended that – (i) filing of a petition under Section 111A
is an abuse of process; (ii) there is no violation of the SEBI (SAST)
E Regulations as the Respondents had given a timely intimation in the
prescribed format; (iii) the Section 111A Petition did not allege any violation
of the SEBI (SAST) Regulations, and no attempt was made to make
any amendment to the same; (iv) the SEBI (PIT) Regulations are not
applicable to Respondent Nos. 2-6 as their individual shareholding never
F crossed 5%. It was only Respondent No. 1 whose shareholding crossed
5%, which it inadvertently failed to disclose; (v) the SEBI (PIT)
Regulations are not applicable to Respondent Nos. 2-6 as there is no
concept of ‘persons acting in concert’ under the said Regulations; (vi)
under section 111A (3), the Tribunal has no power to annul the transfer
or to direct the buy-back of the shares.
G
15. Having heard both sides, we formulate the following questions
for our consideration.

12
hereinafter referred to as ‘the SEBI Act’.
13
(1977) 2 SCC 424
14
(2006) 5 SCC 361
H
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 539
OTHERS [PAMIDIGHANTAM SRI NARASIMHA, J.]

What is the scope and ambit of Section 111A of the 1956 Act, A
as amended by Section 59 of the 2013 Act, to rectify the register of
members? Which is the appropriate forum for adjudication and
determination of violations and consequent actions under the SEBI
(SAST) Regulations 1997 and the SEBI (PIT) Regulations 1992?
Re: Interpretation and scope of Section 111A of the 1956 B
Act as replaced by Section 59 of the 2013 Act:
16. The reliefs claimed by the Appellant in its Company Petition
under Section 111A of the 1956 Act is as under: -
“(a) Declaration that the acquisition of shares of and in the
company by the Respondent Nos.1 to 6 are illegal, null and C
void and of no effect;
(b) Necessary directions be given for rectifying the records
by deleting the names of the Respondents as owners of all
shares of and in the company acquired by the Respondents;
D
(c) Permanent injunction restraining the Respondents whether
by themselves or their servants or agents or assigns or
otherwise howsoever from exercising any rights or receiving
any benefit in respect of the shares held by the Respondents
in the company in any manner whatsoever;
E
(d) …….
(e) …….”
17. The declaration to hold the acquisition of shares by the
Respondents as null and void in a petition under Section 111A has to be
examined in the context of the scope and ambit of the rectificatory F
jurisdiction of the Tribunal and, in particular, the specific wordings of the
said provision.
18. The rectificatory powers of a Board/Company Court under
Section 38 of the Companies Act, 1913, then under Section 155 of the
1956 Act, followed by Section 111A introduced by the 1996 Amendment G
to the 1956 Act, and finally, Section 59 of the 2013 Act, demonstrate that
its essential ingredients have remained the same. It is a summary power
to carry out corrections or rectifications in the register of members. The
rectification must relate to and be confined to the facts that are evident
and need no serious enquiry. The following is a comparative table
H
540 SUPREME COURT REPORTS [2023] 1 S.C.R.

A indicating the legislative changes. For the purpose of the present
proceeding, we can confine the examination between the 1956 Act with
its 1996 amendment and the 2013 Act.

B

C

D

E

F

G

H
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 541
OTHERS [PAMIDIGHANTAM SRI NARASIMHA, J.]

A

B

C

D

E

F

G

H
542 SUPREME COURT REPORTS [2023] 1 S.C.R.

A

B

C

D

19. The scope and ambit of Section 155 of the 1956 Act, as it then
existed, fell for consideration in a decision of this Court in Ammonia
E Supplies (supra). The application for rectification in Ammonia’s case
was filed under Section 155, and it was submitted that the scope for
rectification under Section 155 is enlarged in comparison with the position
as it were under Section 38 of the 1913 Act. Rejecting the argument,
this Court in Ammonia held that the jurisdiction exercised by the court
F for rectification of the register of members is essentially limited. The
comparative analysis in Ammonia assumes importance as a similar
submission is made before us by Mr. Chidambaram that the scope and
jurisdiction of the Tribunal under Section 59 of the 2013 Act is wide
when compared with Section 111A of the 1956 Act as amended in 1996.
The relevant portion of the judgment in Ammonia is as under: -
G
“26. …. There could be no doubt any question raised within
the peripheral field of rectification, it is the court under Section
155 alone which would have exclusive jurisdiction. However,
the question raised does not rest here. In case any claim is
based on some seriously disputed civil rights or title, denial
H
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 543
OTHERS [PAMIDIGHANTAM SRI NARASIMHA, J.]

of any transaction or any other basic facts which may be the A
foundation to claim a right to be a member and if the court
feels such claim does not constitute to be a rectification but
instead seeking adjudication of basic pillar some such facts
falling outside the rectification, its discretion to send a party
to seek his relief before the civil court first for the adjudication
B
of such facts, it cannot be said such right of the court to have
been taken away merely on account of the deletion of the
aforesaid proviso. Otherwise under the garb of rectification
one may lay claim of many such contentious issues for
adjudication not falling under it. Thus in other words, the
court under it has discretion to find whether the dispute raised C
is really for rectification or is of such a nature that unless
decided first it would not come within the purview of
rectification. The word “rectification” itself connotes some
error which has crept in requiring correction. Error would
only mean everything as required under the law has been
D
done yet by some mistake the name is either omitted or wrongly
recorded in the Register of the company.
27. In other words, in order to qualify for rectification, every
procedure as prescribed under the Companies Act before
recording the name in the register of the company has to be
stated to have been complied with by the applicant…. The E
Court has to examine on the facts of each case whether an
application is for rectification orsomething else. So field or
peripheral jurisdiction of the court under it would be what
comes under rectification, not projected claims under the garb
of rectification. So far exercising of power for rectification F
within its field there could be no doubt the Court as referred
under Section 155 read with Section 2 (11) and Section 10, it
is the Company Court alone has exclusive jurisdiction…But
this does not mean by interpreting such “court having
exclusive jurisdiction to include within it what is not covered
under it, merely because it is clocked under the nomenclature G
rectification does not mean the court cannot see the substance
after removing the cloak.
28. Question for scrutiny before us is the peripheral field
within which the Court could exercise its jurisdiction for
H
544 SUPREME COURT REPORTS [2023] 1 S.C.R.

A rectification. As aforesaid, the very word “rectification”
connotes something what ought to have been done but by
error not done and what ought not to have been done was
done requiring correction. Rectification in other words is the
failure on the part of the company to comply with the directions
under the Act.
B
…
31. Sub-section (1)(a) of Section 155 refers to a case where
the name of any person is without sufficient cause entered or
omitted in the Register of Members of a company. The word
C “sufficient cause” is to be tested in relation to the Act and the
Rules. Without sufficient cause entered or omitted to be entered
means done or omitted to do in contradiction of the Act and
the Rules or what ought to have been done under the Act and
the Rules but not done. Reading of this sub-clause spells out
D the limitation under which the court has to exercise its
jurisdiction. It cannot be doubted that in spite of exclusiveness
to decide all matters pertaining to the rectification it has to
act within the said four corners and adjudication of such
matters cannot be doubted to be summary in nature. So,
whenever a question is raised the court has to adjudicate on
E the facts and circumstances of each case. If it truly is
rectification, all matters raised in that connection should be
decided by the court under Section 155 and if it finds
adjudication of any matter not falling under it, it may direct a
party to get his right adjudicated by a civil court.….”
F 20. It is evident from the above that while interpreting Section
155, this Court has held that the power of CLB is narrow and can only
consider questions of rectification. If a petition seeks an adjudication
under the garb of rectification, then the CLB would not have jurisdiction,
and it would be duty-bound to re-direct the parties to approach the relevant
G forum. The Court also held that the words ‘sufficient cause’ cannot be
interpreted in a manner which would enlarge the scope of the provision.
21. The decision in Ammonia was followed by this Court even
after the deletion of Section 155 and insertion of Section 111A. This
Court, in Standard Chartered Bank v. Andhra Bank Financial Services
H
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 545
OTHERS [PAMIDIGHANTAM SRI NARASIMHA, J.]

Ltd. & Ors.15 and Jai Mahal Hotels (P) Ltd. v. Devraj Singh & Ors.16, A
held that even though Section 111(7) of the 1956 Act17 seemingly enlarges
the power of the CLB, the power of rectification continues to remain
summary in nature and if any seriously disputed questions arise, the
Company Court should relegate the parties to a forum which is more
appropriate for investigation and adjudication of such disputed questions.
B
22. In Kesha Appliances (P) Ltd. & Ors. v. Royal Holdings
Services Ltd.& Ors.18, the High Court of Bombay has held that:
“41. .....The contention of the learned counsel for the plaintiff
that there was a pre-existing common law right under section
9 of the CPC and that pre-existing common law right is not C
taken away by the provisions of Section 15Y and 20A also
cannot be accepted. It is because the common law right of
rectification which is sought to be enforced and exercised by
the plaintiff in the present case arises out of the right conferred
on the basis of Take Over Regulations and once the provisions
D
of the Take Over Regulations are invoked then the entire
jurisdiction by virtue of the provisions of Section 15Y and
20A is exclusively conferred on the SEBI authorities. Learned
counsel’s argument that under Section 15Y the only jurisdiction
conferred on an adjudicating officer is to penalise the party
and not for rectification also cannot be accepted because E
the provisions of Section 15Y are to be read together with
Section 20A of the SEBI Act which inter-alia confers a power
on the board to pass any order which includes direction as
contemplated under Regulation 44 of the Takeover
Regulations.....
F
…
43. I am of the opinion that on plain and simple reading of
section 15Y read with section 20A of the Act all the cases
15
(2006) 6 SCC 94
16
(2016) 1 SCC 423
G
17
Section 111(7) - On any application under this section, the Tribunal - (a) may decide
any question relating to the title of any person who is a party to the application to have
his name entered in, or omitted from, the register; (b) generally, may decide any question
which it is necessary or expedient to decide in connection with the application for
rectification.
18
(2006) 1 Bom CR 545 H
546 SUPREME COURT REPORTS [2023] 1 S.C.R.

A arising out of the breach and Take Over Regulation must fall
within the exclusive domain of SEBI and cannot be complained
in the court of Law by virtue of express bar contained under
section 15Y and section 20A of the SEBI Act. I am also of the
further opinion that there is no doubt that there is a common
law right in a shareholder to apply for rectification of the
B
share register even though it is not his own share in respect
of which he is seeking rectification but still the said right if it
flows from the provisions of Take Over Regulations then
undoubtedly it would fall within the exclusive Jurisdiction of
SEBI and not within the Jurisdiction of this court in view of
C the express bar contained under the aforesaid statue. I am of
the further opinion that the enactment of the amendment of
Take Over Regulation of Amending provisions of SEBI
(Substantial Acquisition of Shares and Take Over) Second
Amendment (Regulation 2002) w.e.f. 9.9.2002 by providing
for the remedy under sub clause (c) and (d) of the Regulation
D
44 the board has been empowered to give effective relief of
Rectification of Share Register by declaring cancellation of
the Allotment and/or by directing the company not to give an
effect to the transfer if they are found to be in contrary to the
Take Over Regulation.”
E 23. Zandu Pharmaceutical Works Ltd. v. Devkumarvaidya &
Ors.19, is another instance where it has been held that in a case of
violation of the SEBI Regulations, the CLB cannot exercise rectificatory
jurisdiction unless and until the SEBI, in the very first instance, decides if
there has been a violation or not. The CLB held that:
F “11. Most of the allegations made by the petitioner are yet to
be investigated and to be crystallised/confirmed as violations
of the law. The allegations of violation of Takeover Code
and Insider Trading is to be decided by the SEBI and similarly
the allegations of investment beyond the limit under section
G 372A of the Act and acquisition of shares creating thereby a
dominant undertaking under section 108A of the Act are to
be investigated and crystallised/confirmed as violations by
the Central Government. Unless it is confirmed as a violation
of law, the CLB has no power to issue orders for rectification
19
(2009) 89 CLA 65
H
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 547
OTHERS [PAMIDIGHANTAM SRI NARASIMHA, J.]

of register of members and further this Bench has no power A
to declare these allegations as violations of law.”
24. The principle enunciated in Ammonia’s case relating to the
jurisdiction of a Tribunal with respect to the rectification of the register
is well-recognized and consistently followed. Sub-section (3) of Section
59 recognizes the overarching right to hold and transfer securities with B
the concomitant entitlement of voting. This is a precious right, and that is
the reason why the Parliament found it necessary to caution that the
provision of this Section shall not restrict the right of a holder of securities,
to transfer such securities. This is another feature which is indicative of
the limited scope and extent of the power of rectification of the register.
C
25. For the reason stated above, we are of the opinion that the
company petition under Section 111A of the 1956 Act for a declaration
that the acquisition of shares by the Respondents as null and void is
misconceived. The Tribunal should have directed the Appellant to seek
such a declaration before the appropriate forum. The Appellate Tribunal
is, therefore, justified in allowing the appeal and setting aside the order D
of the Tribunal.
Re: appropriate forum for enquiry and adjudication of
violations of the SEBI Regulations:
26. There is another perspective in which the legality and propriety E
of the company petition under Section 111A for declaring the acquisition
of shares as null and void for violation of SEBI Regulations could be
judged - Which is the appropriate forum for adjudication and determination
of violations and consequent actions under the SEBI (SAST) Regulations
and the SEBI (PIT) Regulations?
F
27. Public administration is dynamic and ever-evolving. It is now
established that governance of certain sectors through independent
regulatory bodies will be far more effective than being under the direct
control and supervision of Ministries or Departments of the Government.
Regulatory control by an independent body composed of domain experts
enables a consistent, transparent, independent, proportionate, and G
accountable administration and development of the sector. All this is
achieved by way of legislative enactments which establish independent
regulatory bodies with specified powers and functions. They exercise
powers and functions, which have a combination of legislative, executive,
and judicial features.
H
548 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 28. Another feature of these regulators is that they are impressed
with a statutory duty to safeguard the interest of the consumers and the
real stakeholders of the sector. Telecom Regulatory Authority of India 20,
Insurance Regulatory and Development Authority21, Insolvency and
Bankruptcy Board of India22, Central23 and State24 Electricity Regulatory
Commissions and Airport Economic Regulatory Authority25, are some
B
of the regulators established under their respective statutes. The SEBI26
is one such regulator.
29. SEBI was established in 1988 to protect the interest of
investors in securities and to promote the development of, and to
regulate, the securities market. This Court had the occasion to consider
C the regulatory role of the SEBI in maintaining an orderly and stable
securities’ market so as to protect the interests of investors27.
30. The statutory provisions contained in Chapters-IV, VI-A, read
with Section 30, delineate the legislative 28, administrative 29 and
adjudicatory30 functions of the Board. In its normative or legislative
D
functions, the SEBI can formulate regulations encompassing various
aspects having a bearing on the securities market. It should be noted
that the SEBI Act, Rules, Regulations and Circulars made or issued
under the legislation, are constantly evolving with a concerted aim to
enforce order in the securities market and promote its healthy growth
E while protecting investor wealth. In so far as its administrative/executive
power goes, it has the power to regulate the business of stock exchanges
and securities market. The Board provides for the registration and
20
Section 3, The Telecom Regulatory Authority of India Act, 1997.
21
Section 3, The Insurance Regulatory and Development Authority of India Act,
1999.
F 22
Section 188, The Insolvency and Bankruptcy Code, 2016.
23
Section 76, The Electricity Act, 2003.
24
Section 82, The Electricity Act, 2003.
25
Section 3, The Airports Economic Regulatory Authority of India Act, 2008.
26
Section 3, Securities and Exchange Board of India Act, 1992.
27
B.S.E Brokers’ Forum, Bombay & Ors. v. Securities and Exchange Board of India &
G Ors., (2001) 3 SCC 482 (Para 17); Sahara India Real Estate Corporation Ltd. & Ors.
v. SEBI & Anr., (2013) 1 SCC 1 (Para 298); Securities and Exchange Board of India v.
Kishore R Ajmera, (2016) 6 SCC 368 (Para 25); Securities and Exchange Board of
India v. Ajay Agarwal, (2010) 3 SCC 765 (Para 33-34); Prakash Gupta v. Securities and
Exchange Board of India, (2021) SCC OnLine SC 485 (para 102).
28
Section 30, Securities and Exchange Board of India Act, 1992.
29
Chapter IV, Securities and Exchange Board of India Act, 1992.
30
H Chapter VI-A, Securities and Exchange Board of India Act, 1992.
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 549
OTHERS [PAMIDIGHANTAM SRI NARASIMHA, J.]

regulation of stock brokers, share transfer agents, depositories, venture A
capital funds, collective investment schemes etc. It also has the power
to prohibit various transactions which interfere with the health of the
securities market.

31. In the exercise of its adjudicatory powers under Section 15-
B
I, the SEBI has the power to appoint officers for holding an inquiry, give
a reasonable opportunity to the person concerned and determine if there
is any transgression of the rules prescribed. The Board has the power to
impose penalties for violations and also restitute the parties. The
adjudicatory power also includes the power to settle administrative and
civil proceedings under Section 15JB of the SEBI Act. C

32.The regulatory jurisdiction of the Board also includes ex-ante
powers to predict a possible violation and take preventive measures.
The exercise of ex-ante jurisdiction necessitates the calling of information
as provided in Sections 11(2)(i), 11(2)(ia) and 11(2)(ib) of the SEBI Act. D
Where the Board has a reasonable ground to believe that a transaction
in the securities market is going to take place in a manner detrimental to
the interests of the stakeholders or that any intermediary has violated
the provisions of the Act, it may investigate into the matter under Section
11(C) of the SEBI Act. In other words, being the real-time security E
market regulator, the Board is entitled to keep a watch, predict and even
act before a violation occurs. It is in this context, that the SEBI (SAST)
Regulations and the SEBI (PIT) Regulations, with which we are
concerned in this case, are to be understood.

33. The SEBI (PIT) Regulation prohibits dealing, communicating F
etc., on matters relating to insider trading. Even if there is a suspicion
about the transgression of the prohibition, the Board has the power to
inquire (Regulation 4A) and come to a prime facie conclusion about the
need to investigate (Regulation 5). Chapter III of the said Regulations
provides for the entire procedure to be followed in the inquiry process. G
This includes – procedural safeguards to be afforded to the insider
(Regulation 6), submission of the report by the investigating authority
(Regulation 8), communication of findings to the insider (Regulation 9),
and the final orders/directions to be passed by the Board (Regulation
H
550 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 11). For an effective exercise of its ex-ante powers, the Board has
provided the policy on disclosures in Chapter IV of the said Regulations.
Under Regulation 13, any person holding more than 5% shares or voting
rights in a company, shall disclose to the company within four working
days, the number of shares or the extent of voting rights held by such
B person. Regulation 13 places a continual obligation of disclosure.
Regulation 14 provides that any person violating the said Regulations
shall be liable for action under Sections 11, 11B, 11D, 24 and Chapter
VI-A of the SEBI Act.

34. The above-referred regulatory regime is all-encompassing. It
C prescribes the prohibition, which is normative. The Regulation also
provides for the method of detecting the violation, the methods of
investigation, the manner of appointment of the investigating authority,
the timeline within which the report is to be submitted, the opportunity
for an insider to respond to the report as well as the final decision to be
D taken by the SEBI, and lastly, the consequential orders and restitutionary
directions which the Board is entitled to pass. It is also important to note
that the SEBI has the power under Regulation 11 to pass necessary
directions to remedy an act of insider trading in order to have a complete
and comprehensive control over the securities market.
E
35. Having considered the comprehensive role of the SEBI in
regulating the securities market with respect to insider trading, we are
of the opinion that the important role of the Regulator cannot be
circumvented by simply asking for rectification under Section 111A of
the 1956 Act. Such an approach is impermissible. The scrutiny and
F
examination of a transaction allegedly in violation of the SEBI (PIT)
Regulations will have to be processed through the regulations and
remedies provided therein.

36. When Constitutional Courts are called upon to interpret
G provisions affecting the exercise of powers and jurisdictions of these
regulatory bodies, it is the duty of such Courts to ensure that transactions
falling within the province of the regulators are necessarily subjected to
their scrutiny and regulation. This will ensure that the regulatory body,
charged with the duty to protect the consumers has real time control
H over the sector, thus, realizing the purpose of their constitution.
IFB AGRO INDUSTRIES LTD. v. SICGIL INDIA LTD. AND 551
OTHERS [PAMIDIGHANTAM SRI NARASIMHA, J.]

37. The position with respect to the SEBI (SAST) Regulations is A
similar to that of the SEBI (PIT) Regulations. Regulation 7 of Chapter
III obligates the acquirer of more than 5% shares in a company to disclose
the same to the company and the stock exchange. This is the prohibition,
and non-disclosure is punitive. Chapter V deals with investigation and
action by the Board, which includes the power of the Board to appoint B
an investigating officer (Regulation 38), the issuance of show-cause notice
to the acquirer (Regulation 39), the obligation of the investigating authority
to submit a report at the earliest (Regulation 41), the duty to supply the
report to the acquirer and give him an opportunity of hearing before
passing penal orders (Regulation 42) and lastly, the powers of the Board C
to take action/pass directions under Chapter VI-A and Section 24 of the
SEBI Act (Regulation 44). It is significant to note that Regulation 45
provides for penalties for non-compliance with the said Regulations. The
liability will be in terms of the Regulations and the SEBI Act. Here
again, the SEBI (SAST) Regulation is a comprehensive scheme providing
D
for inquiry, investigation, submission of report by the investigating officer,
procedural safeguards in favor of the acquirer, and finally, the
restitutionary order/directions to be passed by the Board. This whole
procedure cannot be short-circuited by making an application under
Section 111A of the 1956 Act on the ground that there exists parallel
E
jurisdiction with the SEBI and CLB/Tribunal. The transaction complained
of must suffer scrutiny by the regulator, and it is only for the regulator to
determine a violation of the provisions of the SEBI Act and the
Regulations.

38. Having considered the matter from a different perspective, F
we are of the opinion that the Appellant is not justified in invoking the
jurisdiction of the CLB under Section 111A of the Act for violation of
SEBI regulations. We are also of the opinion that the Tribunal committed
an error in entertaining and allowing the company petition filed under
Section 111A of the 1956 Act. Though we are not in agreement with the G
reasoning adopted by the Appellate Tribunal in the impugned order, we
are in agreement with its conclusion that the Tribunal exceeded its
jurisdiction and therefore, the Appellate Tribunal was correct in setting
aside the judgment dated 05.07.2017.
H
552 SUPREME COURT REPORTS [2023] 1 S.C.R.

A 39. For the reasons stated above, Civil Appeal No. 2030 of 2019
arising out of the judgment dated 06.12.2018 in Company Appeal (AT)
No. 240 of 2017 of the National Company Law Appellate Tribunal, New
Delhi stands dismissed. There shall be no order as to costs.

B Nidhi Jain Appeal dismissed.
(Assisted by : Shashwat Jain, LCRA)

C

D

E

F

G

H