N. NARAYANAN versus ADJUDICATING OFFICER, SEBI

Citation: [2013] 6 S.C.R. 391 · Decided: 26-04-2013 · Supreme Court of India · Bench: K.S. RADHAKRISHNAN · Disposal: Dismissed
Cited by 2 judgment(s) · see the full citation network in Lexace
Open in Lexace · Ask the AI about this case
Judgment (excerpt)

[2013] 6 S.C.R. 391 
N. NARAYANAN 
v. 
ADJUDICATING OFFICER, SEBI 
(Civil Appeal Nos. 4112-4113 of 2013) 
APRIL 26, 2013 
[K.S. RADHAKRISHNAN AND DIPAK MISRA, JJ.] 
Securities and Exchange Board of India Act, 1992 - s.12A 
A 
B 
& s. 15HA rlw s. 15J - Securities and Exchange Board of India 
(Prohibition of Fraudulent and Unfair Trade Practice Relating C 
to Securities Market) Regulations, 2003 - Regulation 3(b}, 
3(c), 3(d}, 4(1), 4(2)(a}, 4(2)(e), 4(2)(f), 4(2)(k), 4(2)(r) -
· Securities Market - Market abuse - Allegations of, against the 
appellant, who was promoter as well as whole time Director 
of the company in question - Held: Disclosure and · D 
transparency are the two pillars on which mafket integrity rests 
- Disclosure of information about companies whose securities 
are traded on a public market is crucial for accurate pricing 
of the companies' securities and also for efficient operation 
of the market - On facts, investors' confidence was eroded and 
E 
the market was abused for personal gains and attainments -
Directors of the company in question failed in their duty to 
exercise due care and diligence and allowed the company to 
fabricate figures and making false disclosures - The Directors 
"created artificiality" and manipulated financial results of the 
F 
company resulting in price rise of the scrip of the company 
and then pledged their shares at artificially inflated prices to 
raise substantial funds from financial institutions - Clear 
violation of s. 12A of the SEBI Act rlw Regulations 3 and 4 of 
the 2003 Regulations which essentially intends to preserve 
G 
'market integrity' and to prevent 'market abuse' - Conduct of 
appellant-Director and other Directors was fraudulent and the 
practices they adopted, relating to securities, were unfair, 
which attracted the penalty provisions contained in s. 15 HA 
391 
H 
392 
SUPREME COURT REPORTS 
[2013] 6 S.C.R. 
A rlw s. 15J of the SEBI Act - SEBI rightly restrained the 
appellant-Director for two years from buying, selling or dealing 
with any securities, in any manner, or accessing the securities 
market, directly or indirectly and from being Director of any 
liste<i company - Adjudicating officer rightly imposed penalty 
B of Rs.50 lakhs uls.15HA of the SEBI Act - Maxims - acta 
exteriora indicant interiora secreta" (meaning external actions 
reveals inner secrets). 
Company Law - Listed companies - Corporate 
Governance and Directors -Obligations of the Directors -
C Held: Obligations of the Directors in listed companies are 
particularly onerous - Over-riding obligation of the Directors 
to approve the accounts only if they are satisfied that they give 
true and fair view of the profits or loss for the relevant period 
and the correct financial position of the company. 
D 
Company Law - Disclosure and Transparency -
Requirement of - Held: The Companies Act casts an 
obligation on the company registered under the Companies 
Act to keep the Books of accounts to achieve transparency -
E Disclosure of information about the company is crucial for the 
accurate pricing of the company's securities and for market 
integrity - Records maintained by the company should show 
and explain the company's transactions, it should disclose 
with reasonable accuracy the financial position, at any time -
F Accounts to give a true and fair view. 
Shares & Securities - Market abuse - What is - Effect of 
'market abuse' - Discussed. 
Shares and Securities - Securities market - SEBI, the 
G market regulator - Duty of the SEBI to protect investors-
individual and collective, against opportunistic behavior of 
Directors and Insiders of the listed companies so as to 
safeguard market's integrity - Duty of Print and Electronic 
Media. 
H 
I 
N. NARAYANAN v. ADJUDICATING OFFICER, SEBI 393 
The appellant was the promoter as well as a whole A 
time Director of a company registered under the 
Companies Act, 1956. The company had nine Directors, 
including the appellant and was involved in the business 
of Exhibition (Theatre), Film and Television, Content 
Production, Distribution, Hospitality, Food & Beverage, B 
Animation and Gaming and Cine Advertising etc. The 
shares of the company were listed on Bombay Stock 
Exchange Ltd. (BSE) and National Stock Exchange (NSE) 
at the relevant time. 
The investigation department of SEBI noticed that the C 
company had committed serious irregularities in its 
books of accounts and showed inflated profits and 
revenues in the financia
Excerpt shown. Read the full judgment & AI analysis in Lexace.