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Synopsis

A Special SEBI Court in Mumbai has declined to quash the case filed by the Securities Exchange Board of India against the late former Sahara Group Chairperson Subrata Roy, who passed away on 14th November 2023 due to a cardiac arrest.

Special Judge AA Kulkarni, in the order dated November 1, noted that the Securities Exchange Board of India (SEBI) is not a central or state investigating agency but a regulatory body established under the law.

“In my humble opinion Securities and Exchange Board of India is not central or state investigation agency, it is regulatory body established by the law. It is body incorporated with object to protect interest of investors and security market. In view of powers conferred to complainant SEBI vide Section 11C of SEBI act, complainant SEBI cany can investigate, in present case investigation is completed under it and on the basis of conclusion and recommendation of board present case is filed for the offence in respect of affairs relating to securities,” the order states.

The Special SBEI Court was considering an application filed by Sahara India Real Estate and Sahara Housing Investment Corporation Ltd.

The application sought to dismiss the complaint filed by SEBI, which led to the special court taking cognizance. Additionally, the application sought a stay on the proceedings and sought to call for a report from the Serious Fraud Investigation Agency.

The accused argued that the Registrar of Companies Mumbai had submitted a report to the Central Government, leading to the exercise of the Central Government’s powers under Section 212 of the Companies Act 2013. This resulted in the Central Government directing an investigation by the Serious Fraud Investigation Agency (SFIO) into the company's affairs.

Due to the ongoing SFIO investigation, SEBI handed over documents to SFIO. The accused, however, contended that according to Section 212(2) of the Companies Act 2013, investigations by any other agency of the central or state government should be stayed when the SFIO is conducting an investigation.

The accused further argued that despite being aware of the SFIO investigation, SEBI continued its own investigation without informing the special court about the concurrent SFIO’s investigation.

SEBI argued that Section 212(2) is not applicable to SEBI, and it merely requires the handing over of documents to the SFIO. SEBI maintained that no proceedings or ongoing investigations were in progress against the two Sahara Group companies.

Furthermore, SEBI asserted that, according to Section 55A of the Companies Act, 1956, and Section 24 of the Companies Act, 2013, exclusive administrative powers are granted to SEBI concerning the issue and transfer of securities and non-payment of dividends. Therefore, violations falling within the provisions to be administered by SEBI, it is within the exclusive domain of SEBI.

Therefore, the special court proceeded to reject the application of the accused. The bench added that the court did not have supervisory power to call for a report from the SFIO about the ongoing investigation.

Advocates Ashok Saraogi, Dhananjay Dubey, Amir Arshiwala appeared for the Sahara Companies.

Advocate Suddep Pasbola and Special Public Prosecutor Omprakash Jha appeared for SEBI