CLARIANT INTERNATIONAL LTD. AND ANR. versus SECURITIES AND EXCHANGE BOARD OF INDIA

Citation: [2004] SUPP. 3 S.C.R. 843 · Decided: 25-08-2004 · Supreme Court of India · Bench: N. SANTOSH HEGDE · Disposal: Disposed off

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Judgment (excerpt)

CLARIANT INTERNATIONAL LTD. AND ANR. 
v. 
SECURITIES AND EXCHANGE BOARD OF INDIA 
AUGUST 25, 2004 
(N. SANTOSH HEGDE, S.B. SINHA AND A.K. MATHUR, JJ.] 
Securities and Exchange Board of India Act, 1992: 
Section 2(2)-"Shareholders "-Rights of-Held: Purely contractual 
in nature. 
Section 1 I-Interest of investors in security-Power of Board-Held: 
Board has wide power to issue directions both in the interest of the 
securities market as well as for protection of interest of investors-Such 
A 
B 
c 
power includes a direction to pay interest. 
D 
Sections 11to11-D, 15-A to 15-JA, 15-T. 15-U, 15-V and 15-Z-
Securities Appellate Tribunal-Powers and function of-Jurisdiction-
Nature and scope of-Held: Not in any way fettered by the statute-The 
Tribunal which is an expert body must, therefore, be allowed to exercise E 
its own jurisdiction conferred on it by the statute without any limitation-
Had it been the intention of the Parliament to limit the jurisdiction of the 
Tribunal it could have done so explicitly as has been done in terms of S. 
15-Z in the case of Supreme Court. 
Sections 11to11-D, 15-A to 15-J, 15-T, 15-U and 15-V-Security F 
and Exchange Board-Powers and functions of-Doctrine of separation 
of powers-Nature and scope of-Held: The Board exercises legislative, 
executive and judicial powers-The only check on such wide-ranging 
power is that the Board must comply with the Constitution and the Act-
Hence, where an expert body such as the Securities Appellate Tribunal is G 
constituted, the scrutiny at its end must be held to be of wide import. 
Securities and Exchange Board of India (Substantial Acquisition of 
Shares and Takeovers) Regulations, 1997: Regulation 44(i) [as inserted 
in 2002}. 
H 
843 
844 
SUPREME COURT REPORTS (2004] SUPP. 3 S.C.R. 
A 
Public offer-Delay in making of-Expression "interest of investors"-
Import of-Held: Such an expression did not occur in Regulation 44 as 
it stood in 1997-Hence, its insertion in Regulation 44 in 2002 shows that 
the Board has wide powers to issue directions including award of interest-
However, Regulation inserted in 2002 has curtailed the discretionary 
B jurisdiction of the Board-The Board, in terms of the 1997 Regulations, 
could award interest by way of damages-But by reason of the 2002 
Regulations, its power is limited to grant of interest to compensate lhe 
shareholders for the loss suffered by them arising out of the delay in making 
the public offer-However, the shareholders have no say in the matter-
C As a necessary concomitant they have no legal right therein-The discretion 
so exercised is subject to appeal as also judicial review and, thus, must 
also answer the test of reasonableness-Further, payment of interest for 
delay in making the public offer is not a commercial transaction-Interest 
awarded reduced from 15% to 10%. 
D 
"Interest of investors"-Directions issued to safeguard-Nature and 
E 
scope of Held: Regulation 44(i) inserted in 2002 not of penal consequence 
but only a civil consequence-But a direction in terms of Regulation 44 
of 1997, which was "in the interest of the securities market"; would 
indisputably have caused civil consequences to the defaulters. 
Interest-Award of-Principles-Held: In the absence of any 
agreement or statutory provision or mercantile usage, interest payable can 
be only at the market rate-Such interest is payable upon establishment 
of the totality of circumstances justifYing exercise of such equitable 
F jurisdiction-In such matters, courts of law can take judicial notice of both 
inflation as also fall in bank rate of interest. 
Compensation and interest-Held: Only those shareholders whose 
shares have been accepted upon public announcement of offer and who 
have suffered loss owing to blockage of amount by not being able to sell 
G the shares held by them are entitled to compensation and interest-
Moreover, such shareholders must be those who were shareholders on the 
triggering date i.e. the date of takeover/acquisition. 
Interest awarded to shareholders-Dividend received by 
H shareholders-Effect of-Held: The dividend received by shareholders 
CLARIANT INTERN A TI ON ALL TD. v. SECURITIES k EXCHANGE BOARD OF INDIA 845 
should be set-off against interest awarded. 
A 
Administrative Law: 
Delegated legislation-Duties of authority-Held: When any criterion 
is fixed by a statute or by a policy, an attempt should be made by the B 
authority making the delegated legislation to follow the policy formulation 

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