SECURITIES AND EXCHANGE BOARD OF INDIA versus V SHANKAR

Citation: [2023] 6 S.C.R. 419 · Decided: 08-02-2023 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Appeal(s) allowed

Judgment (excerpt)

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SECURITIES AND EXCHANGE BOARD OF INDIA
v.
V SHANKAR
(Civil Appeal No. 527 of 2023)
FEBRUARY 08, 2023
[DR. DHANANJAYA Y CHANDRACHUD, CJI,
PAMIDIGHANTAM SRI NARASIMHA AND
J B PARDIWALA, JJ.]
SEBI (Buyback of Securities) Regulations, 1998 – Regulation
19(3) – Interpretation of – Notice to show cause was issued by the
Whole Time Member (WTM) of SEBI to Deccan Chronicle Holdings
Limited (DCHL), its Chairperson, Vice-chairperson and Company
Secretary-respondent herein – A penalty of Rs.10 lakhs was imposed
on the respondent – Respondent was held liable on the ground that
he was the Company Secretary when a buyback offer worth Rs.270
crores was made by the company in violation of regulatory provisions
– Order set aside by the Securities Appellate Tribunal – On appeal,
held: Regulation 19(3) requires the company to nominate a
compliance officer and an investors’ service centre – The purpose
of the nomination is twofold- to ensure compliance with the buyback
Regulations; and to redress the grievances of investors – There is a
patent error on the part of the Tribunal in interpreting the
Regulations – The Tribunal held that the role of the respondent,
who was a Company Secretary, compliance officer, was limited to
redressing the grievances of investors – In arriving at the finding,
the Tribunal relied upon the latter part of Regulation 19(3) which
deals with redressal of the grievances of investors – However, the
Tribunal missed the crucial point that the compliance officer is also
required to ensure compliance with the buyback regulations, as
expressly stipulated in Regulation 19(3) – Interpretation of
Regulation 19(3) by the Tribunal is contrary to its plain terms –
Impugned order set aside – Proceedings remitted back to the Tribunal
for fresh consideration in the light of the interpretation as aforesaid–
Securities and Exchange Board of India Act 1992 – s.12A(a), (b) &
(c), s.15HA – Companies Act 1956 – ss.68, 77A – Securities and
Exchange Board of India (Prohibition of Fraudulent and Unfair
[2023] 6 S.C.R. 419
419
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SUPREME COURT REPORTS
[2023] 6 S.C.R.
Trade Practices relating to the Securities Market) Regulations 2003
– Regulations 3(a)-(d), 4(1), 4(2)(f), (k) and (r).
Mr Bhuwaneshwar Mishra v. SEBI (decision of
Securities Appellate Tribunal dtd. 31st July 2014 in
Appeal No 7 of 2014); Brooks Laboratories Limited &
Ors v. SEBI (decision of Securities Appellate Tribunal
dtd. 21 March 2018 in Appeal No 266 of 2016) –
referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 527 of
2023.
From the Judgment and Order dated 01.11.2022 of the Securities
Appellate Tribunal, Mumbai in Appeal No. 283 of 2022.
Arvind P. Datar, Sr. Adv., Pratap Venugopal, Ms. Surekha Raman,
Akhil Abraham Roy, Abhishek Anand, Ms. Unnimaya S., M/s. K J John
and Co., Advs. for the Appellant.
Somasekhar Sundaresan, Lakshmeesh S. Kamath, Ms. Samriti
Ahuja, Advs. for the Respondent.
The Judgment of the Court was delivered by
DR. DHANANJAYA Y CHANDRACHUD, CJI
1. Admit.
2. The appeal by the Securities and Exchange Board of India1
under Section 15Z of the Securities and Exchange Board of India Act
19922 arises from a judgment dated 1 November 2022 of the Securities
Appellate Tribunal3.
3. The Tribunal, while allowing the appeal by the respondent, set
aside an order dated 22 March 2022 of the Whole Time Member4 under
Section 15HA of the SEBI Act by which a penalty of Rs Ten lakhs was
imposed on the respondent for violating of Sections 68 and 77A of the
Companies Act 1956 and Regulations 3(a), (b), (c), (d), 4(1), 4(2)(f), (k)
and (r) of the Securities and Exchange Board of India (Prohibition of
Fraudulent and Unfair Trade Practices relating to the Securities Market)
1 “SEBI”
2 “SEBI Act”
3 “Tribunal”
4 “WTM”
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Regulations 20035 read with Sections 12A (a), (b) and (c) of the SEBI
Act.
4. The respondent was a Company Secretary of Deccan Chronicle
Holdings Limited6 for two years, 2009-10 and 2010-11.
5. On 3 August 2017, a notice to show cause was issued by the
WTM of SEBI to DCHL, its Chairperson, Vice-chairperson and the
respondent to show cause as to why an enquiry should not be held against
them, followed by the imposition of a penalty. The respondent participated
in the enquiry. The WTM proceeded to hold the respondent liable on the
ground that he was a Company Secretary during the Financial Year
2010-11 when a buyback offer worth Rupees 270 crores was made by
the company in violation of regulatory pr

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