Case Note & Summary
The Supreme Court of India heard an appeal concerning the rectificatory jurisdiction of the National Company Law Tribunal under Section 59 of the Companies Act, 2013 and the appropriate forum for adjudicating violations of SEBI regulations. The appellant, a listed company, filed a petition under Section 111A of the Companies Act, 1956 (equivalent to Section 59 of the 2013 Act) seeking rectification of its members' register, alleging that the respondents, another listed company and its associates, acquired shares in violation of SEBI's Substantial Acquisition of Shares and Takeover Regulations, 1997 and Prohibition of Insider Trading Regulations, 1992 by crossing disclosure thresholds without proper compliance. The National Company Law Tribunal allowed the petition, directing a buyback of shares held by the respondents in excess of 5%, but the National Company Law Appellate Tribunal set aside this order, finding that the Tribunal exceeded its jurisdiction. The Supreme Court was tasked with resolving the scope of Section 59 and the jurisdictional conflict between the Tribunal and SEBI. The appellant argued that the Tribunal had authority to rectify the register due to SEBI regulation violations, while the respondents contended that SEBI had exclusive jurisdiction. The court analyzed the nature of rectificatory jurisdiction, citing precedent to hold that it is summary and not suited for contested facts. It further reasoned that regulatory bodies like SEBI must have exclusive ex-ante scrutiny over transactions under their purview, rejecting any parallel jurisdiction. Consequently, the court upheld the Appellate Tribunal's decision, clarifying that violations of SEBI regulations should be adjudicated by SEBI, not the Tribunal under Section 59.
Headnote
A) Company Law - Rectificatory Jurisdiction - Scope of Section 59 Companies Act, 2013 - Companies Act, 2013, Section 59 - The court considered whether the rectificatory jurisdiction under Section 59 is summary in nature and applicable to contested facts. Following Ammonia Supplies Corporation (P) Ltd. v. Modern Plastic Containers Pvt. Ltd. & Ors., the court held that this jurisdiction is summary and not intended for cases with contested facts and disputed questions. (Paras 1-2) B) Securities Law - Regulatory Jurisdiction - Appropriate Forum for SEBI Regulation Violations - Securities and Exchange Board of India Act, 1992, SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, SEBI (Prohibition of Insider Trading) Regulations, 1992 - The court addressed whether the National Company Law Tribunal has parallel jurisdiction with SEBI for violations of SEBI regulations. Held that transactions within the jurisdiction of regulatory bodies must be subjected to their ex-ante scrutiny, enquiry, and adjudication, rejecting the contention of parallel jurisdiction. (Paras 1-2)
Issue of Consideration
The scope of the rectificatory jurisdiction of the National Company Law Tribunal under Section 59 of the Companies Act, 2013 and the appropriate forum for adjudication and determination of violations of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 and SEBI (Prohibition of Insider Trading) Regulations, 1992
Final Decision
The Supreme Court answered both issues, holding that rectificatory jurisdiction under Section 59 is summary and not for contested facts, and that SEBI has exclusive jurisdiction over violations of its regulations, thereby rejecting the appeal.
Law Points
- Rectificatory jurisdiction under Section 59 of the Companies Act
- 2013 is summary in nature and not intended for contested facts
- Regulatory bodies under a statute have exclusive jurisdiction for ex-ante scrutiny and adjudication of violations of regulations framed under that statute
- The National Company Law Tribunal does not have parallel jurisdiction with SEBI for addressing violations of SEBI regulations
