Summary
IFB Agro sought rectification of its register of members under Section 111A of the Companies Act, 1956 (now Section 59 of the 2013 Act). It wanted the respondents' holdings above 5% struck off for late or defective disclosure under the SEBI takeover and insider-trading regulations. The Tribunal allowed the petition and ordered a buy-back of the excess shares, but the Appellate Tribunal set that order aside. The Supreme Court dismissed the appeal. Following Ammonia Supplies, rectification is a summary power to correct evident errors. It does not extend to contested questions such as whether an acquisition is void. SEBI's regulations form a comprehensive scheme of inquiry, adjudication and restitution, so alleged violations must first be scrutinised by SEBI. The NCLT has no parallel jurisdiction under the rectification provision.
Issues
- What is the scope of the rectificatory jurisdiction under Section 111A of the Companies Act, 1956 (Section 59 of the 2013 Act).
- Which is the appropriate forum to adjudicate alleged violations of the SEBI (SAST) Regulations, 1997 and the SEBI (PIT) Regulations, 1992.
Provisions considered
- Section 111A; Section 59, Companies Act, 1956; Companies Act, 2013Rectification is a summary power to correct evident errors in the register without serious enquiry; contested claims, such as a declaration that acquisitions are void, belong to the appropriate forum, and Section 59(3) protects the right to transfer securities. (¶¶ 18, 19, 20, 21, 24, 25)
- Sections 11, 11B, 11C, 15-I, 15JB, 15Y and 20A, Securities and Exchange Board of India Act, 1992SEBI's legislative, administrative, investigative and adjudicatory powers, including ex-ante powers, enable it to detect, investigate and remedy violations of its regulations. (¶¶ 30, 31, 32)
- Regulation 7 and Chapter V; Regulations 13 and 14 and Chapter III, SEBI (SAST) Regulations, 1997; SEBI (PIT) Regulations, 1992The disclosure obligations come with a self-contained scheme of inquiry, show-cause, report, hearing and directions, including restitutionary orders. (¶¶ 33, 34, 37)
Held
- Following Ammonia Supplies, Standard Chartered Bank and Jai Mahal Hotels, the rectificatory jurisdiction is summary and confined to evident errors; a petition seeking a declaration that share acquisitions are void is misconceived, and the Tribunal should have relegated the appellant to the appropriate forum. (¶¶ 19, 20, 21, 24, 25)
- Transactions within the domain of a statutory regulator must be subjected to its ex-ante scrutiny; SEBI's comprehensive regime under the SAST and PIT Regulations cannot be circumvented through a rectification petition, and it is for SEBI alone to determine violations. (¶¶ 27, 28, 34, 35, 36, 37)
- Though the Appellate Tribunal gave no reasons, its conclusion that the Tribunal exceeded its jurisdiction in ordering a buy-back was correct, and given the lapse of four years the matter was decided finally rather than remanded. (¶¶ 12, 38)
Result
Civil Appeal No. 2030 of 2019 against the NCLAT judgment dated 06.12.2018 in Company Appeal (AT) No. 240 of 2017 dismissed; no costs.