Whether NCLT can decide issues of SEBI Regulations in a rectification jurisdiction under section 59 of the companies act, 2013?

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Shubham Budhiraja[1]

 

Mr. A with his family acquired more than 5% shareholding in the Company B but the disclosure as per SEBI Takeover code was not made. Company B filed petition before NCLT for: (1) to declare the acquisition as illegal because of non-compliance of SEBI takeover code and (2) to rectify the shareholder/ member register accordingly. Hon’ble NCLT allowed the petition but Hon’ble NCLAT set aside the same. The Hon’ble Supreme Court held that section 59 of companies act, 2013 doesn't permit the NCLT to decide compliance of SEBI Regulations particularly when their inquiry and adjudication jurisdiction is within realm of SEBI under SEBI Act. The NCLT cannot such issues in a rectification jurisdiction under section 59.[2]

 

(i)                    Having regard to the comprehensive role of the SEBI in regulating the securities market the important role of the Regulator cannot be circumvented by simply asking for rectification under Section 56 of the 2013 Act.

 

(ii)                   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.


[1] Advocate, Delhi High Court [LLB, ACS, BCOM(H)], Budhirajalawchambers@gmail.com , +91-9654055315

[2] CIVIL APPEAL No. 2030 of 2019, Judgment dated 04/01/2023

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