NCLT not empowered to handle Violations of SEBI Regulations.

In the IFB Agro Industries Limited vs SICGIL India Limited case, the Appellant filed a petition before Company Law Board praying for rectification of its Members Register. The Appellant here was a listed company engaged in different sectors of manufacturing and sale of rectified spirit, country liquor, marine products, carbon dioxide gas etc. Herein, Respondent No. 1 was also a listed company which was engaged in the business of producing Carbon dioxide gas and dry ice. The Respondents started acquiring shares of the Appellant from the open market with a view to eliminate competition and strengthen its own dominant position in the relevant market. Respondents crossed 5% of the total paid-up share capital of the Appellant, thereby triggering Regulation 7(1)9 of the SEBI (SAST) Regulations. As per Regulation 7(1), it is mandatory for an acquirer, either by himself or with any person acting in concert with the acquirer, acquire 5% or more of the total paid-up share capital of a company, then a disclosure has to be made to the acquiree company and the stock exchange.

The matter was transferred to the Tribunal under Section 59 of the Companies Act, 2013, which stated that the intimation violates the SEBI (PIT) Regulations since the said declaration had to be filed within four working days. Further determining that there was a violation of the SEBI (SAST) Regulations as the Respondents did not disclose in the proper format. They also directed the petitioner to buy back the shares held by SICGIL India Ltd.

The Appellate Tribunal allowed the appeal and set aside the order of the Tribunal. The petitioner then approached the Supreme Court. The top Court stated that “The company petition under Section 111A of the 1956 Act for a declaration that the acquisition of shares by the Respondents as null and void is misconceived”. In addition, contended that if a petition seeks an adjudication under the garb of rectification, then the CLB would not have jurisdiction which would be duty-bound to re-direct the parties to approach the relevant forum.

The Apex Court stated that the “NCLT cannot exercise parallel jurisdiction with Securities and Exchange Board of India (SEBI) for addressing violations of the Regulations framed under the SEBI Act. Further stating that it was the duty of such Courts to ensure that transactions falling within the province of the regulators were necessarily subjected to their scrutiny and regulation. While addressing the case, it was analyzed that the SEBI has the power to appoint officers for holding an inquiry and determine if there was any transgression of the rules prescribed. SEBI has the power to take preventive measures against the violation. Moreover, the scrutiny and examination of a transaction allegedly in violation of the SEBI (PIT) Regulations had to be processed through the regulations and remedies provided therein. Therefore, the appeal was dismissed.