SEBI required to act in public interest: Bombay HC raps regulatory body

The Securities and Exchange Board of India (SEBI) is required to act in the public interest, the Bombay High Court said on Friday castigating the regulatory body for not complying with an order passed by the court in October.

A division bench consisting of Justices G S Kulkarni and Jitendra Jain expressed concern that the SEBI's approach could erode the trust investors place in the public body. In October, the High Court had instructed SEBI to furnish specific investigation documents to minority shareholders of a company. Both the company and SEBI contested this directive in the Supreme Court, but their appeals were dismissed in November.

The petitioners are minority shareholders of Bharat Nidhi Limited and had made various complaints to SEBI accusing the company of violation of securities laws. The SEBI had then initiated investigations into the same, issued a show cause notice to the company and later passed a settlement order, which has now been revoked. The petitioners’ case is that neither the investigation report nor any relevant documents were supplied to them.

The petitioners claimed that the SEBI was conducting a sham investigation. On Friday, SEBI informed the High Court that with the revocation of the settlement order, the grounds for the current petitions no longer exist.

SEBI is a public body, it is required to act in public interest, it needs to comply with the orders passed by this Court, HC said. The court said it was constrained to make such remarks as it was quite “astonished” by the stand taken by the SEBI in the present case.

Such approach of the SEBI, in our opinion, would cause a dent to the confidence the investors would repose in the SEBI, which needs to function solely to further the object and purpose, for which it is created by the Parliament, the bench said.