IFB AGRO INDUSTRIES LIMITED versus SICGIL INDIA LIMITED AND OTHERS

Citation: [2023] 1 S.C.R. 527 · Decided: 04-01-2023 · Supreme Court of India · Bench: A.S. BOPANNA · Disposal: Dismissed

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Judgment (excerpt)

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   [2023] 1 S.C.R. 527
527
IFB AGRO INDUSTRIES LIMITED
v.
SICGIL INDIA LIMITED AND OTHERS
Civil Appeal No. 2030 of 2019
JANUARY 04, 2023
[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
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
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
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
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,
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.
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SUPREME COURT REPORTS
[2023] 1 S.C.R.
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
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
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
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
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-
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
such securities. This is another feature which is indicative of the
limited scope and extent of the po

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