The Securities Appellate Tribunal (SAT) has struck down the Securities and Exchange Board of India's (Sebi) order on Arun Bajoria and his associates - which barred them from accessing the capital market and dealing directly or indirectly in securities for a year.
The takeover regulations of 1997 and other provisions used by Sebi to deal with failure on part of Bajoria and Associates to disclose their holding to Bombay Dyeing and Manufacturing Ltd does not empower the market regulator to totally ban dealing in securities, SAT said in its order.
According to the ruling, "The direction debarring the appellant (Mega Resources Ltd of Arun Bajoria) from accessing the market and dealing in securities on the ground that it had failed to make the disclosure of its shareholding to Bombay Dyeing as required under regulation 7(1) is held untenable...". The regulation 44(a) under which Sebi has passed its directive does not empower it to debar the Bajorias from the market or putting a total ban on dealing in securities, the order said.
The Sebi order also does not lay down how debarring the Bajorias from further dealing in securities would be in the interests of the market, the SAT ruling said. According to the Tribunal Sections 11 and (B) of the Sebi Act which have been invoked to debar the Bajorias from dealing in securities is also untenable as "it tantamounts to penalty which cannot be imposed under Sections 11 or 11B of the Act."
The SAT ruling has also held that Sebi has wrongly concluded that the acquisition of the shares of Bombay Dyeing by Bajorias to be in violation of the 1997 takeover regulations, "little realising that compliance of the requirement of regulation 7(1) is only a post acquisition requirement and failure to comply with such a requirement by itself will not make the acquisition of the shares violative of the regulations."
