Bombay High Court
Bharat Nidhi Limited vs Securities And Exchange Board Of India on 11 June, 2025
Author: Bharati Dangre
Bench: Bharati Dangre
2025:BHC-OS:8793-DB
SEBI MATTER_.doc
Andreza
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 3977 OF 2024
WITH
INTERIM APPLICATION NO. 2566 OF 2024
IN
WRIT PETITION NO. 3977 OF 2024
WITH
WRIT PETITION NO. 4828 OF 2024
WITH
INTERIM APPLICATION (L) NO. 9433 OF 2024
IN
WRIT PETITION NO. 4828 OF 2024
AND
WRIT PETITION (L) NO. 2325 OF 2024
WITH
INTERIM APPLICATION (L) NO. 9266 OF 2024
IN
WRIT PETITION (L) NO. 2325 OF 2024
--------------------------
WRIT PETITION NO. 3977 OF 2024
WITH
INTERIM APPLICATION NO. 2566 OF 2024
IN
WRIT PETITION NO. 3977 OF 2024
Bharat Nidhi Limited through its
'Authorised Representative having its
registered office at First floor, Express
Building 9-10, Bahadur Shaah Zafar Marg,
New Delhi- 110002 ... Petitioners
Page 1 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
Versus
1. Securities and Exchange Board of India,
having its headquarters at SEBI Bhavan, Plot
No. C4-A, G Block, Near Bank Of India,
Bandra Kurla Complex, Bandra East,
Mumbai -- 400051.
2. Ashoka Marketing Limited, through its
Authorised Representative having its office
at First floor, Express Building 9-10,
Bahadur Shah Zafar Marg, New Delhi --
110002.
3. Arth Udyog Limited, through its
Authorised Representative having its
registered office at 16A, Lajpat Nagar-IV,
New Delhi-- 110024.
4. Matrix Merchandise Limited, through .
its Authorised Representative having its
_registered office at 101, Pratap Nagar,
Mayur Vihar, Phase -- 1, East Delhi, New
Delhi-- 110091.
5. Mahavir Finance Limited, through its
Authorised Representative having its
registered office at 101, Pratap Nagar, Mayur
Vihar, Phase -- 1, East Delhi, New Delhi --
110091.
6. TM Investments Limited, through its
Authorised Representative having its
registered office at 814, Plot No. 7, Roots
Tower, Laxmi Nagar, District Centre, East
Delhi, New Delhi - 110092.
7. Sanmati Properties Limited, through its
Authorised Representative having its
registered office at 814, Plot No. 7, Roots
Tower, Laxmi Nagar, District Centre, East
Delhi, New Delhi - 110092.
8. Vineet Jain, 15, Motilal Nehru Marg, New
Page 2 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
Delhi - 110002.
Rider 'A'
9. Ashok Dayabhai Shah, Indian inhabitant,
having permanent address at 20, Alli
Chambers, 2nd Floor, Tamarind Lane, Fort,
Mumbai - 400 023.
10. Rupal Ashok Shah, Indian inhabitant,
having permanent address at 20, Alli
Chambers, 2nd Floor, Tamarind Lane, Fort,
Mumbai - 400 023
11. Kuntal Hasmukhlal Shah, Indian
inhabitant, having permanent address at
104, 1st Floor, Panchsheel, Plot No. 53,
Road, P.M. Shukla Marg, Churchgate,
Mumbai - 400020
12. Hasmukhlal Vrijlal Shah, Indian
inhabitant, having permanent address at
104, 1st Floor, Panchsheel, Plot No. 53,
Road, P.M. Shukla Marg, Churchgate,
Mumbai -- 400020
13. Shilpa Ajay Shah, Indian inhabitant,
having permanent address at 107 /4 Natwar
House, V.P. Road, Near Girgaon P.O
Mumbai - 400004
14. Gautam Kantilal Pandhi, Indian
inhabitant, having permanent address at
Royal Garden, Flat No. 303, 3 Floor, 203
New Palasia Indor, Madhya Pradesh,
Indore-452001
15. Madan Lal Narula, Indian inhabitant,
having permanent address at 162, Venus
Apartment, Cuffe Parade, Near President
Hotel, Colaba, Mumbai - 400005.
16. Sneha Anil Whabi, Indian inhabitant,
having permanent address at Krishna Kunj,
Page 3 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
P no. 41, Parkland Society, Near Bajaj
Finserv Viman Nagar, Pune - 411014
17. Anil Vithaldas Whabi, Indian inhabitant,
having permanent address at Krishna Kunj,
P no. 41, Parkland Society, Near Bajaj
Finserv Viman Nagar, Pune - 411014
18. Pravin Hiralal Jain, Indian inhabitant,
having permanent address at Flat no. 301,
Queens Court Housing Society Ltd., Narangi
Baugh Road, Off Boat Club Road, Pune -
411001.
19. Jain Pravinlal Biralal HUF, Indian
inhabitant, having permanent address at
Flat no. 301, Queens Court Housing Society
Ltd., Narangi Baugh Road, Off Boat Club
Road, Pune- 411001
20. Lokesh Pravin Jain, Indian inhabitant,
having permanent address at Flat no. 301,
Queens Court Housing Society Ltd., Narangi
Baugh Road, Off Boat Club Road, Pune -
411001.
21. Asha Manik, Indian inhabitant, having
permanent address at 12 A II Palazzo Little
Gibbs Road, Mumbai 400006.
22. Rohan Manik, Indian inhabitant, having
permanent address at 12 A II Palazzo Little
Gibbs Road, Mumbai 400006.
23. Jayshree Gokal, Indian inhabitant,
having permanent address at 12 A II, Palazzo
Little Gibbs Road, Mumbai 400006.
24. Prasham Shah, Indian inhabitant, having
permanent address at 10/12, 4 th Floor Jolly
Center, Tilak Road, Santacruz West,
Mumbai - 400054.
25. Gandhi Securities and Investment Pvt
Page 4 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
Ltd., Indian inhabitant, having permanent
address at 9, Haji Kasam Building, 66,
Tamarind Lane, Fort, Mumbai - 400 001.
26. Pina Pankaj Shah, Indian inhabitant
residing at Flat 10, 4th Floor, Jolly Center,
Tilak Road, Santacruz West, Mumbai
400054.
27. Pankaj Shah, Indian inhabitant residing
at 10/12, 4th Floor Jolly Center, Tilak Road,
Santacruz West, Mumbai - 400054. ... Respondents
INTERIM APPLICATION NO. 2566 OF 2024
IN
WRIT PETITION NO. 3977 OF 2024
Bharat Nidhi Limited through its
'Authorised Representative having its
registered office at First floor, Express
Building 9-10, Bahadur Shaah Zafar Marg, ... Applicant
New Delhi- 110002
IN THE MATTER OF :
Bharat Nidhi Limited, a company
incorporated under the Companies Act,
1956, having its registered office at First
Floor, Express Building, 9-10, Bahadur Shah ... Petitioners
Zafar Marg, New Delhi - 110002.
Versus
1. Securities and Exchange Board of India,
having its headquarters at SEBI Bhavan, Plot
No. C4-A, G Block, Near Bank Of India,
Bandra Kurla Complex, Bandra East,
Mumbai -- 400051.
2. Ashoka Marketing Limited, through its
Authorised Representative having its office
at First floor, Express Building 9-10,
Bahadur Shah Zafar Marg, New Delhi --
Page 5 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
110002.
3. Arth Udyog Limited, through its
Authorised Representative having its
registered office at 16A, Lajpat Nagar-IV,
New Delhi-- 110024.
4. Matrix Merchandise Limited, through .
its Authorised Representative having its
_registered office at 101, Pratap Nagar,
Mayur Vihar, Phase -- 1, East Delhi, New
Delhi-- 110091.
5. Mahavir Finance Limited, through its
Authorised Representative having its
registered office at 101, Pratap Nagar, Mayur
Vihar, Phase -- 1, East Delhi, New Delhi --
110091.
6. TM Investments Limited, through its
Authorised Representative having its
registered office at 814, Plot No. 7, Roots
Tower, Laxmi Nagar, District Centre, East
Delhi, New Delhi - 110092.
7. Sanmati Properties Limited, through its
Authorised Representative having its
registered office at 814, Plot No. 7, Roots
Tower, Laxmi Nagar, District Centre, East
Delhi, New Delhi - 110092.
8. Vineet Jain, 15, Motilal Nehru Marg, New
Delhi - 110002.
Rider 'A'
9. Ashok Dayabhai Shah, Indian inhabitant,
having permanent address at 20, Alli
Chambers, 2nd Floor, Tamarind Lane, Fort,
Mumbai - 400 023.
10. Rupal Ashok Shah, Indian inhabitant,
having permanent address at 20, Alli
Chambers, 2nd Floor, Tamarind Lane, Fort,
Page 6 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
Mumbai - 400 023
11. Kuntal Hasmukhlal Shah, Indian
inhabitant, having permanent address at
104, 1st Floor, Panchsheel, Plot No. 53,
Road, P.M. Shukla Marg, Churchgate,
Mumbai - 400020
12. Hasmukhlal Vrijlal Shah, Indian
inhabitant, having permanent address at
104, 1st Floor, Panchsheel, Plot No. 53,
Road, P.M. Shukla Marg, Churchgate,
Mumbai -- 400020
13. Shilpa Ajay Shah, Indian inhabitant,
having permanent address at 107 /4 Natwar
House, V.P. Road, Near Girgaon P.O
Mumbai - 400004
14. Gautam Kantilal Pandhi, Indian
inhabitant, having permanent address at
Royal Garden, Flat No. 303, 3 Floor, 203
New Palasia Indor, Madhya Pradesh,
Indore-452001
15. Madan Lal Narula, Indian inhabitant,
having permanent address at 162, Venus
Apartment, Cuffe Parade, Near President
Hotel, Colaba, Mumbai - 400005.
16. Sneha Anil Whabi, Indian inhabitant,
having permanent address at Krishna Kunj,
P no. 41, Parkland Society, Near Bajaj
Finserv Viman Nagar, Pune - 411014
17. Anil Vithaldas Whabi, Indian inhabitant,
having permanent address at Krishna Kunj,
P no. 41, Parkland Society, Near Bajaj
Finserv Viman Nagar, Pune - 411014
18. Pravin Hiralal Jain, Indian inhabitant,
having permanent address at Flat no. 301,
Queens Court Housing Society Ltd., Narangi
Baugh Road, Off Boat Club Road, Pune -
Page 7 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
411001.
19. Jain Pravinlal Biralal HUF, Indian
inhabitant, having permanent address at
Flat no. 301, Queens Court Housing Society
Ltd., Narangi Baugh Road, Off Boat Club
Road, Pune- 411001
20. Lokesh Pravin Jain, Indian inhabitant,
having permanent address at Flat no. 301,
Queens Court Housing Society Ltd., Narangi
Baugh Road, Off Boat Club Road, Pune -
411001.
21. Asha Manik, Indian inhabitant, having
permanent address at 12 A II Palazzo Little
Gibbs Road, Mumbai 400006.
22. Rohan Manik, Indian inhabitant,
having permanent address at 12 A II Palazzo
Little Gibbs Road, Mumbai 400006.
23. Jayshree Gokal, Indian inhabitant,
having permanent address at 12 A II, Palazzo
Little Gibbs Road, Mumbai 400006.
24. Prasham Shah, Indian inhabitant,
having permanent address at 10/12, 4 th Floor
Jolly Center, Tilak Road, Santacruz West,
Mumbai - 400054.
25. Gandhi Securities and Investment Pvt
Ltd., Indian inhabitant, having permanent
address at 9, Haji Kasam Building, 66,
Tamarind Lane, Fort, Mumbai - 400 001.
26. Pina Pankaj Shah, Indian inhabitant
residing at Flat 10, 4th Floor, Jolly Center,
Tilak Road, Santacruz West, Mumbai
400054. ... Respondents
27. Pankaj Shah, Indian inhabitant residing
at 10/12, 4th Floor Jolly Center, Tilak Road,
Page 8 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
Santacruz West, Mumbai - 400054.
WITH
WRIT PETITION NO. 4828 OF 2024
WITH
INTERIM APPLICATION (L) NO. 9433 OF 2024
IN
WRIT PETITION NO. 4828 OF 2024
1. Matrix Merchandise Limited, 101, Pratap
Nagar, Mayur Vihar, Phase 1, East Delhi,
New Delhi - 110091.
2. Mahavir Finance ·Limited, 101, Pratap
Nagar, Mayur Vihar, Phase 1, East Delhi,
New Delhi - 110091.
3. TM Investments Limited, 814, Plot No. 7,
Roots Tower, Laxmi Nagar, District Centre,
East Delhi, New Delhi - 110092.
4. Sanmati Properties Limited, 814, Plot No.
7, Roots Tower, Laxmi Nagar, District
Centre, East Delhi, New Delhi - 110092.
5. Vineet Jain, 15, Motilal Nehru Marg, New
Delhi - 110002. ... Petitioners
Versus
1. Securities And Exchange Board of India,
having its headquarters at SEBI Bhavan, Plot
No. C4-A, G Block, Near Bank Of India,
Bandra Kurla Complex, Bandra East,
Mumbai - 400051.
2. Bharat Nidhi . Limited, through its
Authorised Representative having its
registered, office at First floor, Express
Building 9-10, Bahadur Shah Zafar Marg,
Page 9 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
New Delhi- 110002.
3. Ashoka Marketing Limited, through its
Authorised Representative having its office
at First floor, Express Building 9-10,
Bahadur Shah Zafar Marg, New Delhi-
110002.
4. Arth Udyog Limited, through its
Authorised Representative having its
registered office at 16A, Lajpat Nagar-IV,
New Delhi- 110024. ... Respondents
WITH
INTERIM APPLICATION (L) NO. 9433 OF 2024
IN
WRIT PETITION NO. 4828 OF 2024
1. Matrix Merchandise Limited, through its
authorized representative having its
registered office at 101, Pratap Nagar, Mayur
Vihar, Phase 1, East Delhi, New Delhi -
110091.
2. Mahavir Finance Limited, through its
authorized representative having its
registered office at 101, Pratap Nagar, Mayur
Vihar, Phase 1, East Delhi, New Delhi -
110091.
3. TM Investments Limited, through its
authorized representative having its
registered office address at 814, Plot No. 7,
Roots Tower, Laxmi Nagar, District Centre,
East Delhi, New Delhi - 110092.
4. Sanmati Properties Limited, through its
authorized representative having its
registered office address at 814, Plot No. 7,
Roots Tower, Laxmi Nagar, District Centre,
Page 10 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
East Delhi, New Delhi - 110092.
... Applicants /
5. Vineet Jain, 15, Motilal Nehru Marg, New Original Petitioners
Delhi - 110002.
IN THE MATTER OF
1. Matrix Merchandise Limited, through its
authorized representative having its
registered office at 101, Pratap Nagar, Mayur
Vihar, Phase 1, East Delhi, New Delhi -
110091.
2. Mahavir Finance Limited, through its
authorized representative having its
registered office at 101, Pratap Nagar, Mayur
Vihar, Phase 1, East Delhi, New Delhi -
110091.
3. TM Investments Limited, through its
authorized representative having its
registered office address at 814, Plot No. 7,
Roots Tower, Laxmi Nagar, District Centre,
East Delhi, New Delhi - 110092.
4. Sanmati Properties Limited, through its
authorized representative having its
registered office address at 814, Plot No. 7,
Roots Tower, Laxmi Nagar, District Centre,
East Delhi, New Delhi - 110092.
5. Vineet Jain, 15, Motilal Nehru Marg, New
... Petitioners
Delhi - 110002.
Versus
1. Securities And Exchange Board of India,
having its headquarters at SEBI Bhavan, Plot
No. C4-A, G Block, Near Bank Of India,
Bandra Kurla Complex, Bandra East,
Mumbai - 400051.
2. Bharat Nidhi Limited, through its
Authorised Representative having its
registered, office at First floor, Express
Page 11 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
Building 9-10, Bahadur Shah Zafar Marg,
New Delhi- 110002.
3. Ashoka Marketing Limited, through its
Authorised Representative having its office
at First floor, Express Building 9-10,
Bahadur Shah Zafar Marg, New Delhi-
110002.
4. Arth Udyog Limited, through its
Authorised Representative having its
registered office at 16A, Lajpat Nagar-IV,
New Delhi- 110024.
5. Ashok Dayabhai Shah, Indian Inhabitant,
having permanent address at 20, Alli
Chambers, 2nd Floor, Tamarind Lane, Fort,
Mumbai - 400 023
6. Rupal Ashok Shah, Indian Inhabitant,
having permanent address at 20, Alli
Chambers, 2nd Floor, Tamarind Lane, Fort,
Mumbai - 400 023.
7. Kuntal Hasmukhlal Shah, Indian
Inhabitant, having permanent address at
104, 1st Floor, Panchsheet, Plot No. 53,
Road, P. M. Shukla Marg, Churchgate,
Mumbai - 400020.
8. Hasmukhlal Vrijlal Shah, Indian
Inhabitant, having permanent address at
104, 1st Floor, Panchsheet, Plot No. 53,
Road, P. M. Shukla Marg, Churchgate,
Mumbai - 400020.
9. Shilpa Ajay Shah, Indian Inhabitant,
having permanent address at 107/4, Natwar
House, V. P. Road, Near Girgaon,P. O.
Mumbai 400004.
10. Gautam Kantilal Pandhi, Indian
inhabitant, having permanent address at
Royal Garden, Flat No. 303, 3 rd Floor, 203
Page 12 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
New Palasia Indore, Madhya Pradesh, --
Indore- 452001.
11. Madan Lal Narula, Indian Inhabitant,
having permanent address at 162, Venus
Apartment, Cuffe Parade, Near President
Hotel, Colaba, Mumbai - 400005.
12. Sneha Anil Whabi, Indian Inhabitant,
having permanent address at Krishna Kunj,
P. no. 41, Parkland Society, Near Bajaj
Finserv Viman Nagar, Pune - 411014.
13. Anil Vithaldas Whabi, Indian Inhabitant,
having permanent address at Krishna Kunj,
P. no. 41, Parkland Society, Near Bajaj
Finserv Viman Nagar, Pune - 411014.
14. Pravin Hiralal Jain, Indian Inhabitant,
having permanent address at Flat no. 301,
Queens Court Housing Society Ltd., Narangi
Baugh Road, Off Boat Club Road, Pune -
411001.
15. Jain Pravin Hiralal HUF, Indian
Inhabitant, having permanent address at
Flat no. 301, Queens Court Housing Society
Ltd., Narangi Baugh Road, Off Boat Club
Road, Pune - 411001.
16. Lokesh Pravin Jain, Indian Inhabitant,
having permanent address at Flat no. 301,
Queens Court Housing Society Ltd., Narangi
Baugh Road, Off Boat Club Road, Pune -
411001.
17. Asha Manik, Indian Inhabitant, having
permanent address at 12 A II Palazzo Little
Gibbs Road, Mumbai 400006.
18. Rohan Manik, Indian Inhabitant, having
permanent address at 12 A II, Palazzo Little
Gibbs Road, Mumbai 400006.
Page 13 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
19. Jayshree Gokal, Indian Inhabitant,
having permanent address at 12 A II Palazzo
Little Gibbs Road, Mumbai 400006.
20. Prasham Shah, Indian Inhabitant,
having permanent address at 10/12, 4 th Floor
Jolly Center, Tilak Road, Santacruz West,
Mumbai - 400054.
21. Gandhi Securities and Investment Pvt.
Ltd., Indian Inhabitant, having permanent
address at 9, Haji Kasam Building, 66,
Tamarind Lane, Fort, Mumbai - 400 001.
22. Pina Pankaj Shah, Indian Inhabitant,
residing at Flat 10, 4th Floor, Jolly Center,
Tilak Road, Santacruz West, Mumbai
400054.
23. Pankaj Shah, Indian Inhabitant, residing
at 10/12, 4th Floor Jolly Centre, Tilak Road,
Santacruz West Mumbai - 400054. ...Respondents
WRIT PETITION (L) NO. 2325 OF 2024
WITH
INTERIM APPLICATION (L) NO. 9266 OF 2024
IN
WRIT PETITION (L) NO. 2325 OF 2024,
1. Ashoka Marketing Limited, through its
authorised representative having its
registered office at First Floot, Express
Building 9-10, Bahadur Shah Zafar Marg,
New Delhi - 110002.
2. Arth Udyog Limited, through its
authorised representative having its office
at 16A, Lajpat Nagar-IV, New Delhi - ... Petitioners
110024.
Versus
1. Securities and Exchange Board of India,
having its headquarters at SEBI Bhavan, Plot
Page 14 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
No. C4-A, 'G' Block, Bandra Kurla Complex,
Bandra (E) Mumbai, 400 051.
2. Bharat Nidhi Limited through its
authorized representative having its
registered address at First floor, Express
Building, 9-10 Bahadur Shah Zafar Marg,
New Delhi - 110002.
3. Matrix Merchandise Limited through its
authorized representative having its
registered office at 101, Pratap Nagar, Mayur
Vihar, Phase 1, East Delhi, New Delhi -
110091.
4. Mahavir Finance Limited, through its
authorized representative having its
registered office at 101, Pratap Nagar, Mayur
Vihar, Phase 1, East Delhi, New Delhi -
110091.
5. TM Investments Limited, through its
authorized representative having its
registered office address at 814, Plot No. 7,
Roots Tower, Laxmi Nagar, District Centre,
East Delhi, New Delhi - 110092.
6. Sanmati Properties Limited, through its
authorized representative having its
registered office address at 814, Plot No. 7,
Roots Tower, Laxmi Nagar, District Centre,
East Delhi, New Delhi - 110092.
7. Vineet Jain, 15, Motilal Nehru Marg, New
Delhi - 110002.
8. Ashok Dayabhai Shah, Indian Inhabitant,
having permanent address at 20, Alli
Chambers, 2nd Floor, Tamarind Lane, Fort,
Mumbai - 400 023.
9. Rupal Ashok Shah, Indian Inhabitant,
having permanent address at 20, Alli
Chambers, 2nd Floor, Tamarind Lane, Fort,
Mumbai - 400 023.
Page 15 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
10. Kuntal Hasmukhlal Shah, Indian
Inhabitant, having permanent address at
104, 1st Floor, Panchsheel, Plot No. 53,
Road, P. M. Shukla Marg, Churchgate,
Mumbai - 400020.
11. Hasmukhlal Vrijlal Shah, Indian
Inhabitant, having permanent address at
104, 1st Floor, Panchsheel, Plot No. 53,
Road, P. M. Shukla Marg, Churchgate,
Mumbai - 400020.
12. Shilpa Ajay Shah, Indian Inhabitant,
having permanent address at 107/4, Natwar
House, V. P. Road, Near Girgaon,P. O.
Mumbai 400004.
13. Gautam Kantilal Pandhi, Indian
inhabitant, having permanent address at
Royal Garden, Flat No. 303, 3rd Floor, 203
New Palasia Indore, Madhya Pradesh,
Indore-452001.
14. Madan Lal Narula, Indian Inhabitant,
having permanent address at 162, Venus
Apartment, Cuffe Parade, Near President
Hotel, Colaba, Mumbai - 400005.
15. Sneha Anil Whabi, Indian Inhabitant,
having permanent address at Krishna Kunj,
P. no. 41, Parkland Society, Near Bajaj
Finserv Viman Nagar, Pune - 411014.
16. Anil Vithaldas Whabi, Indian Inhabitant,
having permanent address at Krishna Kunj,
P. no. 41, Parkland Society, Near Bajaj
Finserv Viman Nagar, Pune - 411014.
17. Pravin Hiralal Jain, Indian Inhabitant,
having permanent address at Flat no. 301,
Queens Court Housing Society Ltd., Narangi
Baugh Road, Off Boat Club Road, Pune -
411001.
18. Jain Pravin Hiralal HUF, Indian
Inhabitant, having permanent address at
Page 16 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
Flat no. 301, Queens Court Housing Society
Ltd., Narangi Baugh Road, Off Boat Club
Road, Pune - 411001.
19. Lokesh Pravin Jain, Indian Inhabitant,
having permanent address at Flat no. 301,
Queens Court Housing Society Ltd., Narangi
Baugh Road, Off Boat Club Road, Pune -
411001.
20. Asha Manik, Indian Inhabitant, having
permanent address at 12 A II Palazzo Little
Gibbs Road, Mumbai 400006.
21. Rohan Manik, Indian Inhabitant, having
permanent address at 12 A II, Palazzo Little
Gibbs Road, Mumbai 400006.
22. Jayshree Gokal, Indian Inhabitant,
having permanent address at 12 A II, Palazzo
Little Gibbs Road, Mumbai 400006.
23. Prasham Shah, Indian Inhabitant,
having permanent address at 10/12, 4 th Floor
Jolly Center, Tilak Road, Santacruz West,
Mumbai - 400054.
24. Gandhi Securities and Investment Pvt.
Ltd., Indian Inhabitant, having permanent
address at 9, Haji Kasam Building, 66,
Tamarind Lane, Fort, Mumbai - 400 001.
25. Pina Pankaj Shah, Indian Inhabitant,
residing at Flat 10, 4th Floor, Jolly Center,
Tilak Road, Santacruz West, Mumbai
400054.
26. Pankaj Shah, Indian Inhabitant, residing
at 10/12, 4th Floor Jolly Centre, Tilak Road,
Santacruz West Mumbai - 400054. ... Respondents
WITH
INTERIM APPLICATION (L) NO. 9266 OF 2024
IN
WRIT PETITION (L) NO. 2325 OF 2024,
Page 17 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
1. Ashoka Marketing Limited, through its
authorised representative having its
registered office at First Floot, Express
Building 9-10, Bahadur Shah Zafar Marg,
New Delhi - 110002.
2. Arth Udyog Limited, through its
authorised representative having its office
at 16A, Lajpat Nagar-IV, New Delhi - ... Applicants/
110024. Original Petitioners
IN THE MATTER OF
1. Ashoka Marketing Limited, through its
authorised representative having its
registered office at First Floot, Express
Building 9-10, Bahadur Shah Zafar Marg,
New Delhi - 110002.
2. Arth Udyog Limited, through its
authorised representative having its office ... Petitioners
at 16A, Lajpat Nagar-IV, New Delhi -
110024.
Versus
1. Securities and Exchange Board of India,
having its headquarters at SEBI Bhavan, Plot
No. C4-A, 'G' Block, Bandra Kurla Complex,
Bandra (E) Mumbai, 400 051.
2. Bharat Nidhi Limited through its
authorized representative having its
registered address at First floor, Express
Building, 9-10 Bahadur Shah Zafar Marg,
New Delhi - 110002.
3. Matrix Merchandise Limited through its
authorized representative having its
registered office at 101, Pratap Nagar, Mayur
Vihar, Phase 1, East Delhi, New Delhi -
110091.
4. Mahavir Finance Limited, through its
authorized representative having its
registered office at 101, Pratap Nagar, Mayur
Page 18 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
Vihar, Phase 1, East Delhi, New Delhi -
110091.
5. TM Investments Limited, through its
authorized representative having its
registered office address at 814, Plot No. 7,
Roots Tower, Laxmi Nagar, District Centre,
East Delhi, New Delhi - 110092.
6. Sanmati Properties Limited, through its
authorized representative having its
registered office address at 814, Plot No. 7,
Roots Tower, Laxmi Nagar, District Centre,
East Delhi, New Delhi - 110092.
7. Vineet Jain, 15, Motilal Nehru Marg, New
Delhi - 110002.
8. Ashok Dayabhai Shah, Indian Inhabitant,
having permanent address at 20, Alli
Chambers, 2nd Floor, Tamarind Lane, Fort,
Mumbai - 400 023.
9. Rupal Ashok Shah, Indian Inhabitant,
having permanent address at 20, Alli
Chambers, 2nd Floor, Tamarind Lane, Fort,
Mumbai - 400 023.
10. Kuntal Hasmukhlal Shah, Indian
Inhabitant, having permanent address at
104, 1st Floor, Panchsheel, Plot No. 53,
Road, P. M. Shukla Marg, Churchgate,
Mumbai - 400020.
11. Hasmukhlal Vrijlal Shah, Indian
Inhabitant, having permanent address at
104, 1st Floor, Panchsheel, Plot No. 53,
Road, P. M. Shukla Marg, Churchgate,
Mumbai - 400020.
12. Shilpa Ajay Shah, Indian Inhabitant,
having permanent address at 107/4, Natwar
House, V. P. Road, Near Girgaon,P. O.
Mumbai 400004.
13. Gautam Kantilal Pandhi, Indian
inhabitant, having permanent address at
Page 19 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
Royal Garden, Flat No. 303, 3rd Floor, 203
New Palasia Indore, Madhya Pradesh,
Indore-452001.
14. Madan Lal Narula, Indian Inhabitant,
having permanent address at 162, Venus
Apartment, Cuffe Parade, Near President
Hotel, Colaba, Mumbai - 400005.
15. Sneha Anil Whabi, Indian Inhabitant,
having permanent address at Krishna Kunj,
P. no. 41, Parkland Society, Near Bajaj
Finserv Viman Nagar, Pune - 411014.
16. Anil Vithaldas Whabi, Indian Inhabitant,
having permanent address at Krishna Kunj,
P. no. 41, Parkland Society, Near Bajaj
Finserv Viman Nagar, Pune - 411014.
17. Pravin Hiralal Jain, Indian Inhabitant,
having permanent address at Flat no. 301,
Queens Court Housing Society Ltd., Narangi
Baugh Road, Off Boat Club Road, Pune -
411001.
18. Jain Pravin Hiralal HUF, Indian
Inhabitant, having permanent address at
Flat no. 301, Queens Court Housing Society
Ltd., Narangi Baugh Road, Off Boat Club
Road, Pune - 411001.
19. Lokesh Pravin Jain, Indian Inhabitant,
having permanent address at Flat no. 301,
Queens Court Housing Society Ltd., Narangi
Baugh Road, Off Boat Club Road, Pune -
411001.
20. Asha Manik, Indian Inhabitant, having
permanent address at 12 A II Palazzo Little
Gibbs Road, Mumbai 400006.
21. Rohan Manik, Indian Inhabitant, having
permanent address at 12 A II, Palazzo Little
Gibbs Road, Mumbai 400006.
22. Jayshree Gokal, Indian Inhabitant,
Page 20 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:12 :::
SEBI MATTER_.doc
having permanent address at 12 A II, Palazzo
Little Gibbs Road, Mumbai 400006.
23. Prasham Shah, Indian Inhabitant,
having permanent address at 10/12, 4 th Floor
Jolly Center, Tilak Road, Santacruz West,
Mumbai - 400054.
24. Gandhi Securities and Investment Pvt.
Ltd., Indian Inhabitant, having permanent
address at 9, Haji Kasam Building, 66,
Tamarind Lane, Fort, Mumbai - 400 001.
25. Pina Pankaj Shah, Indian Inhabitant,
residing at Flat 10, 4th Floor, Jolly Center,
Tilak Road, Santacruz West, Mumbai
400054.
26. Pankaj Shah, Indian Inhabitant, residing
at 10/12, 4th Floor Jolly Centre, Tilak Road,
Santacruz West Mumbai - 400054. ... Respondents
--------------------
Mr. Venkatesh Dhond, Senior Advocate a/w. Mr. Ameya
Gokhale, Mr. Rishabh Jaisani, Ms. Karishma Rao, Mr. Harit Lakhani
and Mr. Ansh Kumar i/by. Shardul Amarchand Mangaldas and Co.
for the Petitioners in WP No.3977/2024 and for Applicant in IA
No.2566/2024.
Mr. Janak Dwarkadas, Senior Advocate a/w. Mr. Ameya
Gokhale, Mr. Rishabh Jaisani, Mr. Harit Lakhani and Mr. Ansh
Kumar i/by. Shardul Amarchand Mangaldas and Co. for the
Petitioners in WP No.4828/2024 and for Applicant in IAL
No.9433/2024.
Mr. Ashish Kamat, Senior Advocate a/w. Mr. Ameya Gokhale,
Mr. Rishabh Jaisani, Mr.Harit Lakhani and Mr. Ansh Kumar i/by.
Shardul Amarchand Mangaldas and Co. for the Petitioners in WP (L)
No.2325/2024 and for Applicant in IAL No.9266/2024.
Mr. J. J. Bhatt, Senior Advocate a/w Mr. Vishal Kanade, Mr.
Mihir Mody,Shreyans Menkudale i/by. K. Ashar and Co. for
Respondent No.1 (SEBI) in WP No.3977/2024, WPL No.2325/2024
and WP No.4828/2024.
Page 21 of 132
11th June 2025
::: Uploaded on - 16/06/2025 ::: Downloaded on - 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Mr. Gaurav Joshi, Senior Advocate a/w. Mr. Kunal Katariya i/b
Garima Mehrotra for Resp nos.26 and 27 in WP 3977/24, for
Respondent nos.25 and 26 in WPL 2325/24 and Respondent Nos.22
and 23 in WP No.4828/2024.
Mr. Navroze H. Seervai, Senior Advocate a/w Ms. Arti
Raghavan, Mr. Pulkit Sukhramani, Ms. Samreen Fatima and Mr.
Juan Dsouza i/by. JSA Advocates and Solicitors for Respondent Nos. 9
to 25 in WPL No. 3977/2024, for Respondent Nos. 8 to 24 in WPL
No.2325/2024 and for Respondent Nos. 5 to 21 in WP 4828/2024.
---------------------------
CORAM: BHARATI DANGRE &
MANJUSHA DESHPANDE, JJ.
RESERVED ON: 11th March, 2025
PRONOUNCED ON: 11th June, 2025
(THROUGH V.C. )
JUDGMENT (Per Bharati Dangre, J.)
1. Commonality of the three Writ Petitions lies in the fact that all
the three, raise a challenge to the order dated 10.11.2023. passed by
Securities and Exchange Board of India (SEBI)revoking the settlement
order passed by it on 12.09.2022.
By the said order, involving the entities, who are the Petitioners
in the three Writ Petitions, the decision is taken by SEBI to revoke the
Settlement Order dated 12.09.2022, in exercise of the power conferred
under Regulation 28 of the SEBI (Settlement Proceedings) Regulations,
2018, for failure to comply with its terms. The impugned order also
direct that upon revocation, no amount paid by way of compliance of
the monetary terms be refunded and the Board shall restore or initiate
Page 22 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
the proceedings with respect to which the Settlement Order was passed
against the Petitioners.
2. To begin with, it would be appropriate to introduce the
Contenders in the proceedings, which are placed before us for
consideration; on one hand stand the Petitioners, the prime contender
amongst them being Bharat Nidhi Limited (“BNL”) the Petitioner in
Writ Petition No.3977/2024, an unlisted public limited company
incorporated under the provisions of Companies Act, 1930, presently
placed on the Dissemination Board (DB) of National Stock Exchange of
India Limited (“NSE”) since February 2019, pursuant to the circular
issued by SEBI.
Whereas, in Writ Petition No.4828/2024 (Stamp No.2326/2024)
the Petitioners are the following entities :-
1) Matrix Merchandise Limited, New Delhi;
2) Mahavir Finance Limited, New Delhi;
3) T. N. Investments Limited, New Delhi;
4) Sanmati Properties Limited, New Delhi;
5) Vineet Jain, New Delhi.
The Petitioner Nos.1 to 4 are the Companies incorporated under
the Companies Act, 1930 having its registered office at the address
mentioned in the title clause of the Petition, whereas Petitioners No.5
Vineet Jain is an Indian Inhabitant, a resident of New Delhi.
In the third Writ Petition, WP(L) No.2325/2024, the Petitioners
are Ashoka Marketing Limited, alongwith Arth Udyog Limited
Page 23 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Companies registered, which also raise challenge to the impugned
order.
3. Opposing the Petition, on one hand stands SEBI, the Regulation
and on the other hand are the Minority Shareholder Group headed by
Ashok Dayabhai Shah (known as ‘Ashok Shah Group’) as well as ‘Pina
Pankaj Shah Group’, all of whom being impleaded in WP No.
2326/2024 as Respondent Nos.5 to 23 in terms of the amendment
permitted to be carried out by order dated 08/02/2024 and
15/02/2024.
The Respondent Nos. 5 to 23 are the minority shareholders in
BNL, who had approached this court by filing separate Writ Petitions
viz. WP No.447/2023 and WP No.530/2023 respectively challenging
the Settlement Order of SEBI and the postal ballot notice issued by it.
We will refer with the Petitions and the orders passed therein as
and when the occasion arises.
4. The three Writ Petitions, face opposition at the instance of SEBI
as well as private respondents, minority shareholders of BNL, who were
aggrieved by the Settlement Order passed in favour of the 8 Petitioners
and as it is their specific contention that the Settlement Order must fail
as it has resulted into breach by the Petitioners and they find
justification in SEBI revoking the order of Settlement.
Page 24 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
5. In support of the Petitioners, we have heard the learned senior
counsel Mr. Janak Dwarkadas, representing the Petitioners in WP
4828/2024, Senior Counsel Mr. Ashish Kamat, representing the
Petitioners in WP no.2325/2024 and the learned senior counsel Mr.
Dhond, representing BNL (WP No.3977/2024).
SEBI is represented by the learned Senior Counsel Mr. J. J.
Bhatt, whereas the respective minority shareholders are represented by
the learned senior counsel Mr. Navroz Seervai and Mr. Gaurav Joshi.
6. Bharat Nidhi Limited (In short, ‘BNL’), the Petitioner, is an
unlisted Public Limited Company, which was initially listed on Delhi
Stock Exchange and then on Calcutta Stock Exchange prior to its de
recognition by SEBI. While it find itself placed on the Dissemination
Board (In short, ‘DB’) of National Stock Exchange of India Limited
(NSEL) since 12.02.2019 and being subjected to control of SEBI,
pursuant to complaints and representations from certain shareholders,
primarily alleging violation SEBI’s minimum shareholding norms (NPS
norms) and disclosure requirements, common show cause notice
bearing reference No.SEBI/HO/IVD/IDI/OW/P/2020 of 18105 dated
20.10.2020 along with the other seven Petitioners, who are the
shareholders of BNL.
The show cause notice attributed violations to BNL and the other
Petitioners, the notice being issued under Section 11(1), 11(4), 11(4A),
11B(1) and 11(2) of the SEBI Act, 1992, read with SEBI (Procedure for
Page 25 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Holding Enquiry and Imposing Penalties) Rules, 1995 and Section
12A(1)(a) and Section 23E of Securities Contract (Registration) Act,
1956. The notice specifically attributed violation of Regulation 31(1)(b)
of SEBI (Listing Obligation and Disclosure Requirements) Regulations,
2015 (“LODR Regulation”) read with SEBI circular no.
CIR/CFD/CMD/13/2015 dated 30 November 2015 read with regulation
2(za) of SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009 and Rule 19 A(1) of Securities Contract Regulation
Rules, 1957.
7. The show cause notice issued also indicated that since a
settlement mechanism is formulated under the SEBI (Settlement
Proceedings) Regulation, 2018, the noticee is at liberty to opt for the
settlement process in the manner prescribed, in the Regulation though
it was clarified that filing of settlement application did not confer any
right to settle the proceedings.
The aforesaid resulted into filing of Settlement Applications by
each of the Petitioners separately, along side the response to the show
cause notice, so as to settle the purported allegations in the show cause
notice.
8. Neither the show cause notices nor the Applications for
settlement or the replies submitted, form part of the Petition as it is the
pleaded case of the Petitioners that they are confidential documents
under Regulation 29 of the Regulations. It is however worth to note
Page 26 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
that the Settlement Applications preferred on distinct dates were
registered under different numbers and they were placed before the
Internal Committee (IC), a body of SEBI. Thereafter, meetings were
held between IC and the representatives of the Companies on various
dates to deliberate on each of the Settlement Application and to discuss
and negotiate the terms of settlement.
As per Petitioners, during this process, various queries were
raised by IC from time to time and the Petitioners responded resulting
into filing of revised Settlement Terms, based on the interse
deliberations.
The IC finalised the terms of settlement in respect of each of the
Petitioner and in terms of Regulation 13(3) of the Settlement
Regulation, forwarded the same for consideration of the High Powered
Advisory Committee (HPAC) which comprise of Judicial member, who
has been a Judge of the Supreme court or High court and three
external experts having expertise in securities market or in connected
matters. The HPAC considered the Settlement Applications and also
settlement terms forwarded by the IC.
In the wake of pendency of WP (C) No.10756/2019 before the
Delhi High Court, Aditya Agrawal and others Versus SEBI alleging
violation of SEBI Regulations by BNL, HPAC directed Matrix
Merchandise and the co-Petitioners to seek permission from the Delhi
High Court to decide and dispose of the settlement applications.
Page 27 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
On a green signal being shown by the Delhi High Court,
permitting SEBI to deal with / adjudicate the Settlement Applications
on their merits, HPAC approved the Terms of Settlement and
forwarded the same to the Panel of Whole Time Members of SEBI
(“Panel of WTM’s), the ultimate authority within SEBI for passing of
settlement orders as per the Regulation.
9. The Petitioners, vide email were communicated by SEBI that it
had in principle agreed to accept the terms of settlement and also
advised to pay the respective settlement amounts to SEBI.
In compliance of the agreed Terms of Settlement applicable to
the Petitioners, each of them remitted the respective settlement
amounts, the details of which are contained in the respective
Petitions.
While the Settlement applications were pending for
consideration before SEBI, the Petitioners were also called upon by it
for hearing on the show cause notice before the SEBIs WTM, on
different dates and on the hearing being concluded, SEBI allowed the
Settlement Applications, by passing a common Settlement Order on
21/09/2022.
The Settlement Order has a mention of all the 8 entities
including BNL with reference to their distinct settlement applications.
Page 28 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
10. In the backdrop of the applications filed by the Applicants,
proposing to settle , without admitting or denying the findings of fact
and conclusion of law, in response to the show cause notice received,
alleging violation of various provisions and pending enforcement
proceedings initiated under SEBI Act read with SEBI (Procedure for
Holding Enquiry and Imposing Penalties) Rules, 1995, the Settlement
Order clearly noted that the SEBI conducted an investigation in the
matter to ascertain whether there had been any misrepresentation of
the shareholding of promoters as public shareholding and the possible
non compliance with the minimum public shareholding norms.
Based on the findings of the investigation, enforcement
proceedings were initiated resulted into show cause notice alleging
lapses separately against each of the eight Noticee, which came to be
settled by a common order.
11. The Settlement order dated 12.09.2022, specifically referred to
the meeting of the representative of the Applicants with the IC and that
the applications being placed before HPAC, which considered the
Settlement Terms proposed by the Applicants and recommended the
case for settlement on distinct following terms, formulated against each
of the Petitioners and referred to the recommendation of HPAC in its
meeting held on 09.06.2022.
Page 29 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
The order of Settlement further stated that upon acceptance of
the recommendations by the panel fo WTM in terms of Regulation
15(2) of the Settlement Regulations, notices of demand were issued to
the Applicants, on 20.07.2022 and the Applicants informed about the
remittance of the respective settlement amounts and SEBI has
confirmed crediting of the same.
Paragraphs 7 and 8 of the Settlement Order specifically record
thus :-
“7. The applicants informed about the remittance of the respective
settlement amounts between August 10 to August 16, 2022 and SEBI
has confirmed the credit of the same. The applicants also provides an
undertaking to comply with the non-monetary terms forming part of the
settlement terms as mentioned at paragraph no.5.
8. In view of the above, in exercise of the powers conferred under
Section 15JB read with Section 19 of the SEBI Act and under Section
23JA of the SCR Act and in terms of Regulation 23 read with Regulation
28 of the Settlement Regulations, it is hereby ordered that the pending
enforcement proceedings for the alleged defaults as mentioned at
paragraph 1 and 2 are settled qua the applicants on the following terms:
i. this Order disposes of the enforcement proceedings initiated by
SEBI for the defaults as mentioned earlier in respect of the
applicants’
ii. SEBI shall not initiate any other enforcement action against
the applicants for the said defaults; and
iii. Bharat Nidhi Limited shall submit a report of compliance with
the terms of its undertaking given at paragraph 5, within 15 days
of the passing of this settlement order, failing which the
settlement order shall cease to operate qua all the applicants.”
12. The Settlement Order clearly stated that passing of the order is
without prejudice to the right of SEBI under Regulation 28 of the
Settlement Regulations to take enforcement action including
Page 30 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
continuation of the proceeding against the Applicants in the following
contingencies :-
“a) any representation made by the applicants in the present
settlement proceedings is subsequently found to be untrue’
b) the applicants have breached any of the clauses/conditions of
Undertaking/Waivers filed during the present settlement
proceedings; and
c) there was a discrepancy while arriving at the settlement terms.”
The Settlement Order passed on 12.09.2022, to the above effect
stated that it shall come into force immediately and copy of the order
shall be forwarded to the Applicants and also published on the website
of SEBI.
13. This Settlement Order, is however revoked by SEBI on
10.11.2023 as regards all the 8 entities, by invoking Regulation 28 of
the SEBI (Settlement Proceedings) Regulations, 2018 alleging failure
to comply with it. The order dated 10.11.2023 is communicated to each
of the Petitioner through separate communication and find annexed to
each of the Petition.
The communication resulting into revocation of the Settlement
Order is signed by one Shri L. KAGIO MAO on behalf of SEBI.
14. The impugned order is assailed in the three Petitions, by setting
out distinct grounds, the foremost ground advanced being that no case
is made out for revocation of the order under Regulation 28, as it
permit revocation of Settlement Order only in the contingencies
Page 31 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
stipulated therein viz. if there is failure to comply with the settlement
order or if at any time after the settlement order is passed it comes to
the notice of the Board, that the Applicant has not made full and true
disclosure or has violated the undertakings or waiver and only upon
such happening, the order of settlement shall stand revoked and
withdrawn and thereupon the Board shall restore or initiate the
proceedings with respect of which the the Settlement Order is passed.
It is the case of the Petitioners before us that the order of
settlement was withdrawn by SEBI alleging that there is failure to
comply with the Settlement Order.
The decision is clamped by the Petitioners as arbitrary as it has
failed to follow the principles of natural justice and also procedure
contemplated under SEBI (Settlement Proceedings) Regulations, 2018,
which would have justified revocation of the Settlement Order.
15. We shall briefly refer to the arguments advanced by the senior
counsel, representing the Petitioners in the three Petitions.
For the sake of convenience we have considered the Petition filed
by BNL, (Writ Petition No. 3977 of 2024) as lead Petition.
To begin with we would refer to the arguments advanced by Mr.
Dwarkadas and Mr. Kamat, representing one set of Petitioners.
Mr. Dwarkadas, representing Petitioners in Writ Petition no.
4828 of 2024, Matrix Mercandise Limited, Mahavir Finance Limited,
Page 32 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
T.M. Investment Limited, Sanmati Properties Limited the four
companies and one individual Mr. Vineet Jain has taken us through
the Securities and Exchange Board of India (Settlement Proceedings)
Regulations 2018 as regards power available to SEBI, constituted
under the Act of 1992 and the Regulation being framed providing for
the terms of settlement and prescribing the procedure of settlement
and the matters connected therein.
The Regulation having coming into force from 01.01.2019,
according to Mr. Dwarkadas, has culled out the scope of settlement in
Chapter III and has vested the power in the Board, to take into account
various factors while it consider application for settlement and it
expect the Board to take into account factors as contemplated under
sub-rule (3) of Regulation 5 which include a factor, as to whether the
Applicant has provided an exit or purchase option to investors in
compliance with securities laws to the satisfaction of the Board.
According to him, the board is given discretion not to settle
specific proceedings, in case where the Applicant is a willful defaulter,
a fugitive economic offender or has defaulted in payment of any fees,
dues or penalty imposed under the Securities Laws.
The Terms of Settlement according to Mr. Dwarkadas, which are
contemplated under Chapter V of the Regulation, cover a Settlement
amount and/or non monetary terms which may include the one
specified in sub-rule (2) of Regulation 9 including suspension or
Page 33 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
cessation of business activities for a specified period, Exit from
Management, Loss of securities, submit to enhanced internal audit and
reporting requirements, restraining and accessing the securities
market and /or prohibiting from buying, selling or otherwise dealing in
securities directly or indirectly and associating with the securities
market in any manner, for a specified period.
The procedure contemplated for settlement as set out in Chapter
V is a three tier system according to Mr. Dwarkadas involving a High
Power Advisory Committee (HPAC), Internal Committee(s) (IC) and
the panel of Whole Time Members, which ultimately is the authority
either to accept or reject the recommendation to settle the specified
proceedings.
16. Inviting our attention to the procedure for passing settlement
orders, as specified in Regulation 23, the learned Senior Counsel would
submit that the WTM, adjudicating officer or the competent officer of
the Board before whom the proceedings are pending, shall dispose of
the respective proceedings , by an appropriate order on the basis of the
approved settlement terms.
Focusing his attention on Regulation 28 pertaining to revocation
of Settlement order , according to Mr. Dwarkadas, the revocation is
permissible only upon the contingencies occurred, stipulated in Sub
Rule 1. Further Sub Rule 2 of Regulation 28 categorically set out that
whenever any Settlement Order is revoked, no amount paid under the
Page 34 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Regulations shall be refunded meaning thereby that that the amount
paid under the Settlement order shall be forfeited, thereby resulting
into civil consequences. In the wake of Regulation 28 specifically
setting out the contingencies when the settlement order can be
revoked, according to Mr. Dwarkadas, none of the contingencies have
occurred in the present case.
17. It is contended on behalf the Petitioners that the sudden U turn
by SEBI in revoking the Settlement Order which it had passed after
following the appropriate procedure for settlement as set out in the
Regulation of 2018, has its roots in the proceedings, instituted by
Ashok Shah Group.
For this purpose, our attention is invited to the WP No.
530/2023 filed filed by Ashok Shah and Group as well as another WP
No.447/2023 instituted by Pina Shah, challenging settlement order of
BNL which resulted into an interim order being passed on 17/10/2022
by the High court, restraining BNL from finalising the offers received
by it.
The Petitions were exhaustively amended, alleging revocation of
the settlement order by operation of law by categorically stating that
BNL by not following the terms of Settlement have caused its breach
and thereby the consequences contemplated under Rule 28
automatically followed, as upon failure to comply with the settlement
Page 35 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
order it stand revoked and withdrawn and the proceedings instituted
stand restored, as if no settlement order was ever passed.
It is, in these proceedings, according to Mr. Dwarkadas, SEBI
adopted a fair stand, as when it filed an Affidavit on 30.03.2023,
specifically stating the Settlement Order has been passed by following
the appropriate procedure and it contained monetary and non
monetary terms and BNL had already paid the settlement amount.
It also conceded that in the wake of the order passed by the High
Court on 17.10.2022, the buy-back cannot be completed by BNL, but
BNL alongwith other entities mentioned in the Settlement Order had
furnished an Undertaking to comply with the non monetary terms
forming part of the settlement terms . It also assured to the Court by
stating that it shall ensure that the terms of the Settlement Order are
complied with in letter and spirit by BNL as well as the other
Applicants forming part of the settlement order and in case of any
breach it shall take enforcement action forming part of the settlement
order.
Though according to Mr. Dwarkadas, on 05.09.2023, SEBI made
a categorical statement before the High Court that since there was a
change in its WTM members, it would take an appropriate decision
upon revocation of the settlement order.
18. Referring to the order dated 13/09/2023, Mr. Dwarkadas would
submit that the Court was called upon to deal with prayer clause (g) of
Page 36 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
the Petition filed by the minority shareholders of BNL who had
complained to SEBI, of violation of various provisions of Securities
Laws.
As before hearing of the Petitions of the Petitioners therein, they
insisted for prayer clause (g), in form of a direction to direct SEBI to
produce copies of investigation report, show cause notices, minutes of
meetings of IC, HPAC and panel of WTMs, order/communication,
noting vide which the settlement applications filed by the eight
applicants were approved by SEBI.
By order dated 23.10.2023, the Division Bench of this Court
directed SEBI to furnish the necessary documents, as the Court was of
the opinion that all actions taken by SEBI and its various bodies
constituted under the Act and the Regulations are required to be in the
paramount interest of the investors and there is no reason why the
documents shall be not made available to the Petitioners, who were not
strangers but minority shareholders of BNL. As SEBI was directed to
furnish the copies of the documents within a period of 3 weeks of
passing of the order, which rattled SEBI, according to Mr. Dwarkadas
and thereafter resulted into revocation of settlement order in an
extremely hush up affair.
19. Mr. Dwarkadas has taken us through the sequence of
subsequent events, which resulted into filing of SLP by BNL as well as
the other Petitioners, which resulted into an order on 06/111/2023, as
Page 37 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
the Apex Court was of the view that the impugned order of the High
Court was clearly interlocutory in nature and therefore the SLP was not
entertained though parties were granted liberty to pursue their
remedies in accordance with law on all count after the final Judgment
of the High Court. According to Mr. Dwarkadas SEBI adopted a
dubious stand as before the High Court on 08/11/2023, SEBI agreed to
supply the documents, but immediately with one day in between, on
10.11.2023, chose to pass the impugned order, withdrawing the
settlement order.
20. According to Mr. Dwarkadas, as far as his clients are concerned,
though the Settlement Order bifurcated the terms of settlement qua
each of the Applicant, as far as the Petitioners he is representing are
concerned, it only contemplated monetary terms as settlement
amount, quite distinct from BNL, which in addition to the Settlement
amount, was required to submit a voluntary undertaking to provide
exit offer to its shareholders for a period of 3 months after the
Settlement order is passed, at the same exit price that was offered in
the year 2019 and also to refrain from accessing the capital market by
issuing prospectus, documents or advertisement soliciting money from
public for a period of 24 months from the date of Settlement Order.
According to Mr. Dwarkadas, the necessary payments were made
towards the settlement amount by the five Petitioners which is clearly
recorded in the Settlement Order.
Page 38 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
21. The learned Counsel would submit that the Settlement order
was passed after following the appropriate procedure of processing the
Applications through HPAC which recommended its acceptance and
therefore, the revocation of the settlement order against the Petitioners
according to Mr. Dwarkadas is a gross illegality. It is also his specific
contention that assuming for a moment that there was some default on
part of BNL, why should the other Applicants suffer, as the terms of
settlement clearly contemplate different monetary terms and except
for BNL the settlement order did not contemplate any non monetary
term.
According to him, only when the High Court directed disclosure
of certain documents at the instance of Ashok Shah Group, as a knee
jerk reaction, SEBI sprung into action and without following the
procedure contemplated under the Regulation of 2018, deemed it
appropriate to revoke the settlement order despite there being no
breach of Undertaking or default to comply with any of the terms
stipulated in the Settlement Order by his clients.
It is also an arguments advanced by Mr. Dwarkadas that when
SEBI filed SLP being aggrieved by the order of 23.11.2023 passed by
the High Court which directed it to disclose to the minority
shareholders the documents sought in terms of prayer clause (g) of
their Petition the SLP do not contain any averment about a process
being initiated by SEBI revoking the Settlement Order and according to
Page 39 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
him it was not therefore even on the mind of SEBI to do so. However,
all of a sudden 10.11.2023 at 7.52 p.m. by exchanging a communication
the settlement order stood revoked.
22. Inviting our attention to the Regulation wherein the procedure
is contemplated as to follow a particular route Mr. Dwarkadas allege
that did the file was moved from Stage 1 to Stage 2 i.e. from the HPAC
to the WTM, with supersonic speed and it is highly an impossibility, as
it was a Diwali day, a holiday, which saw flurry of activity.
He would also raise a doubt as to whether the communication
dated 10/11/2023 is an order or it is a communication and for this
purpose he has placed reliance upon two affidavits filed by SEBI, the
first filed by Sachin Sonawane, Deputy General Manager, who had
referred to the communication dated 10/11/2023 as an ‘order’, where
he specifically stated that since the revocation order is passed on
10/11/2023 which is self explanatory nothing survive in Writ Petition
NO.530/2023 filed by Ashok Shah and others and the same to be
disposed off. However, another affidavit filed by SEBI specifically
affirmed by Mr. Mao a stand is adopted that communication dated
10/11/2023 is not an order.
23. Harping upon the contradictory stand adopted by SEBI
particularly when it is a Regulatory authority expected to act with
responsibility and accountability, Mr. Dwarkadas has called in
question the entire approach of SEBI. Another limb of argument of
Page 40 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Mr. Dwarkadas is that the impugned order/communication dated
10/11/2023 is violative of principles of natural justice and he would
place reliance upon two decisions of the Apex Court in case of State
Bank of India vs Zha Developers Pvt. Ltd. & Ors 1, as well as
decision in case of State Bank of India & Ors. vs. Rajesh
Agarwal & ors.2, holding that administrative action having civil
consequences must adhere to the principles of natural justice.
24. The learned Senior Counsel Mr. Ashish Kamat representing
Ashoka Marketing Limited and Arth Udyog Limited in Writ Petition
No.2325 of 2024 has adopted the argument advanced by Mr.
Dwarkadas and he would submit that the petitioners had filed separate
and independent settlement applications with SEBI in accordance with
the Settlement Regulations, pursuant to a show notice being issued on
28.10.2020 alleging non-disclosure of promoter share holding in BNL
by the petitioners and resultantly violating the MPS norms as well as
the circular providing the manner of achieving MPS as well as the
accusations being levelled as per the SEBI (Prevention of Fraudulent
and Unfair Trading Practices Regulation 2003).
According to Mr. Kamat, applications were filed to settle
purported allegations contained in the show notice against the
petitioners and it was followed by separate meetings being held
between the representatives of the petitioners and the members of the
1 2019 6 SCC 687,
2 (2023) 6 SCC 1
Page 41 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
internal committee of SEBI, which resulted in submission of revised
settlement terms based on interse deliberations. According to him,
when SEBI informed the petitioners that it had in principle agreed to
accept the terms of settlement and calling upon them to pay their
respective settlement amounts, the petitioners tendered the respective
settlement amounts to SEBI, which was a pre requisite for passing of
the settlement order.
On the settlement order being passed on 12/09/2022, as far as
the petitioners are concerned, which comprise of monetary and non-
monetary settlement terms, the petitioners complied with both.
25. Mr. Kamat concurred with Mr. Dwarkadas in bringing to our
attention the stand of SEBI, in the affidavit filed, while responding to
the Petition filed by minority group. However according to him, when
the direction was issued, by the Division Bench of Bombay High Court
on 23.10.2023, directing SEBI to furnish the documents enlisted in
prayer clause (g) of the Petition, which interalia included internal
noting and communications of SEBI and the investigation report, SEBI
adopted an adversarial stand from then.
On 10.11.2023, the impugned orders were passed, revoking the
Settlement Order and the orders have been subjected to challenge by
specifically stating that the order has been passed by the Deputy
General Manager and not by the panel of WTM’s. Further, it is also
urged that SEBI is now contending that it is just a communication and
Page 42 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
not an order and if this is so, SEBI is admitting that there is no order
revoking settlement order as on date. Also stating that revocation of the
settlement order has entail civil consequences, which necessarily
contemplate a reasoned order to be passed after an opportunity of
hearing being provided, the impugned order on the aforesaid grounds,
which fails to adhere to the well settled norms of principles of natural
justice cannot therefore be sustained.
26. According to Mr. Kamat there is no order revoking the
settlement order within the meaning and scope of the Regulation of
2018. Assuming that there exist an order, he would submit that SEBI
has attempted to support the revocation for extraneous reasons, which
in no case can be justified as the revocation of settlement order is
nothing but an knee-jerk reaction, when SEBI was directed by the
Court to disclose the necessary details to the minority shareholders in
the petition filed by Ashok Shah Group.
According to Mr. Kamat, in passing the impugned orders, SEBI
has skipped various stages and in an hurried manner has taken a
decision to revoke the order on 10/11/2013, within a short span of 2-3
days. To support his contention, he would place reliance upon a
decision in case of Noida Entrepreneurs Association vs. Noida
and ors3.
It is also the submission of Mr. Kamat that, at this stage, SEBI
cannot renege from its understanding/interpretation of para 8 (iii) of
3 WP (C) No. 150 of 1997
Page 43 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
the Settlement Order, which contemplated filing of an undertaking of
complying with the terms of the settlement order, including providing
an exit to the public shareholders (within 15 days of passing of the
settlement order). According to him BNL had complied with the said
direction on 27.09.2022, and therefore, SEBI was quite clear and
conscious about the compliance which it intended to have when it
considered the application for settlement by BNL.
In addition, according to him, the revocation of settlement order
can be only on the grounds which are stated in Regulation 28 and in
absence of any of the contingency being attracted in the present case,
the impugned order can only be stated to be based on extraneous
contention and that to at the instance of Ashok Shah Group, the
minority shareholders. According to him, the BNL the petitioners and
others have complied with the settlement order and merely because the
minority shareholding group is of the opinion that there is no
compliance as BNL was required to give an exit offer and not a
buyback, the different approach adopted by SEBI cannot be justified as
the decision taken by SEBI now find its root in the contentions
advanced by Ashok Shah Group when it raise challenge to the validity
of settlement order, which is completely irrelevant.
Apart from this, Mr. Kamat would submit that the settlement
order is not composite and is severable qua the petitioners that is his
client Ashoka Marketing Limited and Arth Udyog Limited and
Page 44 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
assuming for a moment that there is no compliance of the terms of
settlement by BNL, the petitioners cannot be painted by the same
brush and cannot be put to prejudice.
It is also his specific contention that the revocation of the
settlement order in-flagrant violation of principles of natural justice,
that is, without any notice, hearing or a reasoned order, do not meet
the parameters of an order, which should stand to the judicial scrutiny,
particularly when the petitioners have already paid the amounts
pursuant to the demand notice and prior to the passing of the
settlement order and therefore, there was no question of
retrospectively imposing coextensive liability upon the petitioners. Mr.
Kamat has also placed reliance upon various authoritative
pronouncements, which include the decision in case of Oryx
Fisheries Pvt Ltd vs. Union of India & ors 4, Dayaram vs
Raghunath & ors5 as well as the decision in case of Noida
Entrepreneurs and Association vs. Noida and ors 6 and also the
decision of the Apex Court in case of 63 Moons Technologies Ltd.
(formerly known as Financial Technology India Ltd.) & Ors
vs. Union of India & Ors7.
27. Senior Counsel Mr. Venkatesh Dhond, representing Bharat
Nidhi Limited in Writ Petition no. 3977 of 2024, has advanced his
4 (2010) 13 SCC 247
5 (2007) 11 SCC 241
6 WP(C) No. 150 of 1997
7 Civil Appeal No. 4476 of 2019
Page 45 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
arguments with reference to the relevant dates leading to the passing of
revocation order on 10.11.2023 in exercise of powers under Regulations
28, on the ground that BNL has failed to comply with its settlement
order.
While raising a challenge to the impugned order, he has focussed
his attention upon the analysis of the settlement order, since its
revocation is based on the ground of non-compliance and in the words
of SEBI, for the reasons of “failure to comply”. According to him, the
policy of the law is to facilitate and/or promote settlements and not
derail them, particularly for extraneous reasons as, unsettling well
considered decisions to settle erodes the confidence of parties, leading
to multiplicity of litigation, where settlement was already worked out.
According to him, a body which has to decide the matters of settlement
must bear in mind the larger picture and/or policy underlying the
compounding provisions.
He is extremely critical about the revocation order which is a
non-speaking and unreasoned order, having been passed without
following the principles of natural justice, due process and conduct of
necessary inquiries and investigations. In addition, it is also his
submission that the revocation order has not been passed by an
appropriate authority under law which makes the order without
jurisdiction.
Page 46 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Adopting the arguments advanced by Mr. Dwarkadas as well as
Mr. Kamat, for the other two Petitioners, Mr. Dhond has also urged
that the timing of the revocation order is full of suspicion and contrary
to SEBI’s stand adopted in previous litigation, challenging the
settlement order.
28. Mr. Dhond would submit that the settlement order passed by
SEBI involving BNL, prescribed that it shall provide an exit offer to its
public shareholders for a period of three months, in addition to the
monetary terms of which the compliance was already ensured by BNL
as early as on 27.09.2022. According to him, the settlement order did
not specify the mode of exit to be provided by BNL and in any case BNL
was already moved to the dissemination board in February, 2019 and
was no longer a listed entity and therefore the SEBI
norms/compliances or listed entities, could not be made applicable to
it.
According to him, in compliance with the settlement order, BNL
had taken all necessary steps to ensure the compliance and
immediately after passing the settlement order on 12.09.2022, a
meeting of the Board of Directors of BNL was convened wherein the
Resolution was passed approving the buy-back of 1.067 percent shares of
BNL at the price of INR 11,229/- per share (subject to enhancement by Delhi
High Court) and also according approval for approaching share holders
holding more than one percent in BNL, who had previously in 2019
Page 47 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
expressed their willingness to not exit BNL, to ascertain their
willingness to continue to remain share holders of BNL.
Pursuant to the Board’s approval, postal ballot notices were
issued to the share holders seeking their consent for buy-back offer and
the voting being kept open.
BNL also made a public announcement of the proposed buy-back
in two widely circulated newspaper and it also updated SEBI of the
steps taken by it.
29. According to Mr. Dhond, BNL intended to provide exit by way of
buy-back of shares and it was in the process of writing to certain share
holders asking if any public share holder is willing to come forth and
provide an exit to the other public shareholders by offering to purchase
their shares at the same price at which date buy-back will be
undertaken by BNL, after completion of buy-back offer by BNL. It also
addressed letters to all share holders holding more than one percent
shares and out of them three share holders namely TM Investments
Limited, Sanmati Properties Limited and Vineet Jain had expressed
their interest to provide exit to other shareholders i.e. to participate in
the Proposed Exit Offer. However, in the wake of the two Writ
Petitions filed by the Shah Group, BNL was restrained from finalising
the buy-back offer by the Bombay High Court by its Order dated
17.10.2022.
Page 48 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
On 03.12.2022, the buy-back offer lapsed and a total of 4.046
percent of shares tendered by the interested share holders were held in
escrow accounts.
30. Mr Dhond has invited our attention to heap of correspondence
entered with SEBI in order to support his contention that SEBI was
kept in loophole throughout the said process when BNL was attempting
to comply with the settlement order and according to Mr. Dhond, the
exchange of communications placed on record is clearly reflective of the
fact that SEBI was conscious of the steps taken by BNL and it never
contemplated the compliance in a particular fashion.
31. The submission of Mr. Dhond is that SEBI was aware of the steps
taken by BNL to comply the non monetary terms specified in the
settlement order, as it had set out the manner of compliances by BNL.
BNL also sought in person meeting with SEBI to explain the matter in
detail and it addressed a detailed representation on 08.09.2023,
requesting for a hearing and this representation, according to Mr.
Dhond, categorically amounted to its written submission, as it
apprehended that SEBI was likely to take a decision on revocation of
settlement order. BNL categorically highlighted, in its representation
that the buy-back process for 30 days would be followed by the
Proposed Exit Offer by TM Investments Ltd., Sanmati Properties Ltd.,
and Vineet Jain for a period of 60 days at the same exit price in two
steps. It also stated that there was statutory limitation in
Page 49 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
implementation of buy-back, in the wake of the restraint order dated
17.10.2022 and a request was made that SEBI must keep in mind the
interest of all the share holders, as Ashok Shah and PINA Shah Groups
had obtained a restraint of buy back, thereby jeopardising the exit of
willing 4.046 percent share holders as against 1.27 percent holding of
the Shah Group.
32. Mr. Dhond has also invited our attention to the steps taken by
BNL pursuant to the passing of impugned order which include the
application filed by Ashok Shah in the Bombay Petitions seeking revival
of the Petitions and also seeking restraint on the public announcement
issued by BNL in relation to the buy-back on 11.12.2023, which was not
entertained by the Court. According to him, the BNL took all the
requisite steps in compliance of the settlement order under the
supervision of SEBI but everything was thrown in air, as SEBI was
perturbed because it was asked to disclose its internal record and the
only way to wriggle out of the whole procedure was to revoke the
settlement order.
Further, the timing of passing of the impugned order is very
crucial as per Mr. Dhond this order has been passed only after SEBI
was directed to furnish copies of internal noting and communications
with respect to the settlement order to the Ashok Shah Group and,
therefore, even in his opinion, the issuance of impugned order is a knee
jerk reaction of SEBI, to avoid disclosure despite the fact that on
Page 50 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
30.09.2023 SEBI itself had made a statement before this Court that
after taking instructions from the new panel of WTM’s, it did not intend
to revoke the Petitioners’ settlement order. With no material and
information having surfaced, what made SEBI revoke the settlement
order is a point to ponder upon according to Mr. Dhond as in a hurried
manner the impugned order was passed without affording an
opportunity to the Petitioners to defend itself or by adhering to the
principles of natural justice as so much was the hurry that the
revocation order was a non-speaking and a unreasoned order.
33. In support of his submission, Mr. Dhond has also placed reliance
upon catena of decisions. He would rely upon the decisions of the Apex
Court in case Standard Chartered Bank & Ors. vs. Directorate
of Enforcement & Ors.8, as regards principle of corporate criminal
liability. Reliance is also placed on the decision of the Indore
Development Authority vs. Manoharlal & Ors. 9 to submit that
when there is a disability to perform a part of the law, such a charge has
to be excused particularly when performance of the formalities
prescribed by a statute is rendered impossible by circumstances over
the person’s concern had no control and in such a case it has to be
taken as a valid excuse. In addition he would also place reliance upon
the decision in the case of Reliance Industries Limited vs.
Securities and Exchange Board of India & ors.10 in support of
8 2005(4) SCC 530
9 2020(8) SCC 129
10 2022 (10) SCC 181
Page 51 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
his submission that SEBI is a regulatory body and is cast with a duty to
act fairly while conducting proceedings or initiating any action against
the parties and it must act in accordance with the Rules prescribed by
law. Further reliance is placed upon the decision of the Bombay High
Court in case of Milind Patel vs. Union Bank of India & Ors. 11
with reference to the orders of proceedings of the settlement
commission. Mr. Dhond has also placed reliance upon the report on
the settlement mechanism by the High Level Committee to review the
enforcement and settlement mechanism, and it is intended to
encourage settlement.
34. Learned Senior Counsel, Mr. Bhatt, representing SEBI, the
statutory body, has rebutted the arguments advanced on behalf of the
three learned Senior Counsel in favour of the Petitioners and, according
to him, the five points which were raised by the Counsel for the
Petitioners are devoid of any merit and substance.
He would summarise the arguments of the Petitioners on five
major counts, namely,
(i) violation of principles of natural justice – the order being
unreasoned;
(ii) because of the orders passed by the Bombay High Court, BNL
could not comply with the non-monetary terms of the settlement
order;
(iii) manner of passing of the impugned order is not in terms of the
Regulation of SEBI;
(iv) the settlement order reflected individual settlement qua the
Petitioners and on failure on part of BNL, it could not have
warranted a wholesome withdrawal of the settlement order by
taking recourse to Regulation 29; and
11 2020(4) SCC OnLine Bom 745
Page 52 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
(v) SEBI’s revocation of the settlement was a knee-jerk reaction as
the Bombay High Court ordered disclosures.
35. Mr Bhatt has put before us a compilation of documents which
include the various orders passed by the Court and while dealing with
the objection that SEBI had passed the order of revocation to defeat the
orders of disclosure as prayed in the Writ Petition filed by Ashok Shah
Group, and in specific prayer clause (g), he would submit that SEBI
never hesitated in making full disclosure before the Court and by
inviting our attention to the order dated 05.09.2023, he would submit
that SEBI fairly made a statement before the Court that there was a
change in the Whole Time Members (WTM) of SEBI and that it would
be in a position to take a decision whether the settlement order in
question has to revoked and if it stands revoked, in such an event
further adjudication of the Petition would not be necessary.
To be fair to the Court and to the opponent, Mr. Bhatt would
submit that on 19.10.2023, when the Court considered the prayer
clause (g) of the Petition, it is the private Respondents who objected to
the disclosure of the documents but SEBI had been fair as it placed
before the Court the copies of the Show Cause Notice dated 20.10.2020
and also the application for settlement filed by BNL and the Court
directed that the documents be placed in a sealed cover.
36. It is on 23.10.2023, the Division Bench by a detailed order
granted prayer clause (g) of the Petition and though in the said order,
an observation of the Court is to the effect that SEBI had resorted to all
Page 53 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
possible efforts not to comply with the order of 23.10.2023 and to the
effect some more observations to paragraph 29, it is a specific
contention of Mr. Bhatt that SEBI never objected to furnishing of the
documents, as when the said order was passed, SEBI put its firm stand
that principal prayer clauses of the Petition i.e. prayer clauses (a) and
(b) do not survive for adjudication as the settlement order itself was
revoked by SEBI. This argument according to him was supported by
the Counsel representing Respondent Nos. 2, 7, 8 and 9 as they
unanimously contended that the settlement order dated 12.09.2022
stood revoked and therefore the show cause notice issued to
Respondent nos. 2 to 9 are now required to be taken forward and
decided on merits.
37. It is in the wake of these peculiar circumstances, the Learned
Senior Counsel would vehemently submit that SEBI never adopted a
stand of confidentiality of the documents and in fact it was always
ready and willing to place all the relevant documents involving the
settlement proceedings before the Court.
Mr. Bhatt would also submit that even SEBI filed a Special Leave
Petition before the High Court but this Petition was restricted to the
interpretation of Regulation 29 of the SEBI (Settlement Proceedings)
Regulation 2018, framed under Section 50 (j)(b) read with Section 30
of the Securities and Exchange Board of India Act, 1992. Mr. Bhatt
would also place before us the copy of the Special Leave Petition, which
Page 54 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
has formulated the question of law in specific as to whether SEBI
holding the documents relating to the settlement proceedings in a
statutory fiduciary capacity under Regulation 29 of the SEBI
Regulations, 2018 can be directed contrary to the Regulations, to
disclose details of settlement applications, etc.
In short, it is the submission of Mr. Bhatt that SEBI never
dithered from supplying the necessary documents in terms of prayer
clause (g). Thus, the contention of Mr. Dwarkadas that the passing of
the impugned order by SEBI was a knee-jerk reaction to the High
Court’s order dated 23.10.2023 is a misconstrued argument and in any
case, he would submit that finally the Special Leave Petitions before the
Apex Court were disposed off and SEBI never hesitated in disclosing
the documents to the Court.
38. Coming to the second point as regards the common settlement
order being passed against the six entities but the non-compliance
being only attributed to BNL, the other entities/the Petitioners did not
put to disadvantage, according to Mr. Bhatt, the show cause notice
dated 28.10.2020 which he has placed before us clearly establish the
connect of the entities with one another and the settlement order had
categorically mentioned that any non-compliance of the same would
result into consequences of its revocation without making any
distinction as to on whose failure to abide by the settlement order
would stand revoked.
Page 55 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Coming to his prominent submission, rebutting the argument of
Mr. Dhond representing BNL that the compliance of the settlement
order became an impossibility, he would invite our attention to the
settlement order dated 12.09.2022 and submit that because show cause
notices being issued alleging that the Petitioners were the promoters
and who filed settlement applications proposing to settle, through a
settlement order, without admitting or denying the findings and
conclusions of law, in pursuance to the enforcement proceedings being
initiated against them and the settlement was accepted, after following
a procedure, by obtaining inputs from the IC as well as the HPAC,
which considered the settlement terms proposed by the applicants and
recommended the case for settlement.
According to Mr Bhatt, the order of settlement made it clear that
the exit offer shall be given to its shareholders within a period of 15
days and it would be kept open for a period of three months. The order
made it very clear that if there is no compliance, SEBI reserved its
rights under Regulation No. 28.
He has also placed before us a compilation of documents which is
comprise of the communications exchanged between SEBI and BNL.
According to him, there were two options open, either to buy-back or
provide an exit offer to buy-back the equity shares of the company and,
according to him, BNL passed a resolution to be compliant with the
SEBI settlement order, thereby resolving to buy-back of up to 30,958
Page 56 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
fully paid up equity shares of Rs.10/- each of the Company,
representing 1.06 percent paid up of equity shares of the Company (exit
offer) at a price of Rs.11,229/- per equity share, being the same exit
price at which an exit offer was given in 2019, payable in cash for an
aggregate amount of up to Rs.34,76,27,382/- equivalent to the
maximum permissible buy-back amount, in accordance with the limit
of aggregate of 25% of the fully paid-up equity share capital and free
reserve of the company, as per the Unaudited and Limited Reviewed
Financial Statement of the Company for the period ending on
3.08.2022.
Inviting our attention to the circular of SEBI, dated 10.10.2016,
which was the guideline which BNL ought to have been followed,
according to Mr Bhatt, it failed to comply with the said guideline. He
would submit that on 27.09.2022, the BNL wrote to the Settlement
Department, Enforcement Division-II, as a compliance of the non-
monetary terms of settlement to provide an exit offer to its public
shareholders for a period of three months, after the order and referred
to the resolution passed by the company. However, it is the specific
contention of Mr Bhatt that they followed it to buy-back only to the
extent of 1.067%, but leaving 21.33% still not being offered for buy-
back.
As far as the remaining shareholders are concerned, it was
communicated that the company had received letters/confirmations
Page 57 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
from shareholders holding an aggregate of 77.83% of the total paid-up
share capital of the company, stating their willingness to continue to
remain as shareholders of the company and not to participate in the
upcoming exit offer of the company, thus leaving 21.33% of the total
equity shares outstanding even after the buy-back offer. Thus,
according to Mr Bhatt, BNL restricted the buy-back offer only to
1.067% of the shareholders.
39. Mr. Bhatt has placed before us the correspondence exchanged
with BNL, to indicate that BNL did nothing to ensure compliance of the
non-monetary terms of the settlement order.
He would invite our attention to the communication addressed
by SEBI, to BNL, right from 03.03.2023, when it sought compliance
status with respect to the settlement (1:24) order in the matter of BNL
Limited, and sought to know about the status of the buy-back offer, as
well as the compliance with respect to the settlement order. By
communication dated 10.03.2023, Bharat Nidhi submitted its
response, submitting that the company had approached certain public
shareholders, asking if they are willing to come forth and provide an
exit offer to other public shareholders of the company, for a period of
two months following the buy-back, (referred to as the ‘Proposed Exit
Offer’). However, it also informed that since the buy-back offer has
been kept on hold in the Bombay High Court by the interim order, it is
posing a difficulty in taking any further steps with respect to the
Page 58 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Proposed Exit Offer. The statutory body was therefore informed that
the company is unable to complete the buy-back offer and the Proposed
Exit Offer in the wake of the interim orders issued by the Bombay High
Court.
40. According to Mr. Bhatt, when SEBI querried with BNL, with
specific reference to its public announcement, as it proposed to buy-
back up to Rs.1.067 of the paid-up equity capital through buy-back
offer and, with reference to the three public shareholders who had
indicated their willingness to provide an exit offer to the remaining
shareholders for a period of two months following the buy-back offer.
However, it was clearly indicated that the said shareholders had put up
a maximum ceiling on the amount that can be deployed towards the
purchase of the shares, and this amounted to Rs. 105 crores.
First of all, according to Mr. Bhatt, computing on the basis of the
said disclosure, SEBI indicated that the aforesaid three shareholders
can purchase maximum of 3.22% paid-up capital of BNL, and therefore
BNL shall provide the status of exit opportunity provided to the
remaining shareholders holding of 17.87% of paid-up capital of BNL in
terms of the settlement order. It also requested BNL to provide total
number of shares of the company as on 31.03.2019 and 30.09.2022,
with any deviation, if any.
SEBI, however was of the view that BNL however remained as
evasive as possible, as it communicated through its Company Secretary,
Page 59 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
but the compliance of the settlement order was not in foresight, as
could be reflected from the entire correspondence placed before us.
Secondly, on 24.05.2023, SEBI addressed a communication to
BNL, stating that the complete exit process for the remaining
shareholders, i.e. 22.17% shareholding has not been submitted and
BNL was therefore advised to submit the process undertaken to provide
exit to the remaining 22.17% shareholders as per the conditions
mentioned in the settlement order dated 12.09.2022, and also submit a
copy of the consent provided by the remaining shareholders. This
received a response from BNL, by stating that the company is willing
and has in fact given an offer to all its shareholders to participate in the
buy-back offer, and all the remaining shareholders holding an
aggregate of 22.17% were free to apply and participate in the buy-back
offer at their option. Ultimately, it categorically informed SEBI that the
company’s obligation is limited to providing an exit offer for a period of
90 days to its public shareholders. However, the shareholders retain
their rights to choose to not avail/participate in the exit opportunity
offered to them, if they so wish, as no shareholder is legally bound to
provide an express undertaking that they have chosen to remain as a
shareholder in the company, but they may simply choose to not tender
their shares as a part of the exit offer, by conveying their intention to
continue the company as a shareholder.
Page 60 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
41. According to Mr. Bhatt, BNL attempted to offer a stepwise plan
which, according to him, is their gateway to escape and ultimately,
BNL informed SEBI that their ability to complete the exit offer has
been restrained and complicated on account of the litigation by the
minority shareholders, who had asked for implementation of the exit
offer and sought injunction. According to Mr. Bhatt, the pendency of
the legal proceedings was put up as a shield for BNL not complying
with the terms of settlement. SEBI continued with its stand when on
26.05.2023, it sought a list of shareholders who had tendered their
shares in the buy-back offer announced by BNL, vide public
announcement dated 2.09.2022 in the format which was also
furnished. It also sought compliance in respect of remaining 6,11,868
shares as BNL was required to provide exit offer in respect of 29,00,132
shares (100%), whereas BNL received undertaking to continue as
shareholders in respect of 22,57,307 shares.
42. On 08.09.2023, BNL once again addressed a communication to
SEBI in form of a representation regarding compliance of the
settlement order dated 12.09.2022 since SEBI had made a statement
before the High Court in the pending Writ Petitions in its order dated
05.09.2023, to the effect that since there was a change in the Whole
Time Members of SEBI, SEBI would now be in a position to take a
decision as to whether settlement order in question has stood revoked,
and if it has, in that case, adjudication of the proceedings is not called
Page 61 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
for. In this communication, which has been projected as a stand as
BNL, where a huge cloud has been raised about the proposed decision
to revoke the settlement order, or whether the settlement order stood
revoked in the wake of the deeming provision, BNL accused SEBI of
not following principles of natural justice.
43. According to Mr Bhatt, in the present case, the Petitioners cannot
try to project non-compliance of principles of natural justice, as it is a
peculiar case where consent order of settlement has been passed, but
when the question came of its compliance, the Petitioners are dragging
their feet and claimed an opportunity of hearing. According to him, the
Petitioners need not be heard personally, as the settlement order made
the terms and conditions of compliance very clear, and the Petitioners,
including BNL, had rightly understood the context of the order, but still
committed its breach. According to Mr Bhatt, this is not a case of
impossibility of performance, and rather, by inviting our attention to
the correspondence that is placed on record, is a specific contention
that BNL had no plan as to how they were going to ensure compliance
of the order of settlement, but all the while, they attempted to shield
themselves by taking recourse to the interim order passed by the High
Court in the Petition filed by Shah Group. Knowing very well that they
were in breach of the order, according to Mr Bhatt, BNL filed a detailed
representation on 08.09.2023, praying for an opportunity of hearing,
which has been rightly rejected.
Page 62 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
44. Mr Bhatt has distinguished the decision cited on behalf of the
Counsel for Petitioners in case of Rajesh Agarwal (supra), and he
would submit that the civil consequences in the said case were so grave
that no decision could have been taken by hearing. He would rely upon
the decision of the Apex Court in case of State of U.P. vs. Sudhir
Kumar Singh12, to support his submission that before a party alleges
violation of principles of natural justice, rendering a decision to be
void, it is necessary for it to establish prejudice and the Court would
look into this aspect as to whether prejudice is more than an
apprehension or even a reasonable suspicion of a litigant, as the
prejudice should be a matter of fact or be based upon a definite
inference of likelihood of prejudice flowing from non-observance of
natural justice.
To elaborate his submission, Mr Bhatt would submit that in the
present case, there has been no prejudice caused to the Petitioners
because they were not afforded an opportunity of hearing before the
decision to revoke has been taken as all the facts involved are admitted
and not denied, as it is admitted that a settlement order was passed
which was subject to ensuring certain compliances and there has been
no compliance of the non-monetary terms by BNL.
Further, according to Mr Bhatt, BNL is not in a position to
comply and nor did they ever offer a plausible explanation or a road
map to SEBI as to how they would ensure compliance of the settlement
12 (2021) 19 SCC 706
Page 63 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
order. At the end of the entire correspondence, ultimately BNL raised
its hand and categorically stated that it is not possible for it to comply
with the order and therefore, according to Mr Bhatt, there is no
question of violation of principles of natural justice as the Petitioners
are now harping upon the sacrosanct principle of non-observance of
principles of natural justice and therefore the decision having been
rendered void, which is a non-acceptable argument.
45. Another limb of argument of Mr Bhatt is the statutory
provisions and the Regulations formulated thereunder. He has invited
our attention to Section 19 of the SEBI Act 1992, which is a provision as
regards the delegation and permit the Board, by general or special
order in writing, to delegate to any member, officer of the Board or any
other person, as may be specified in the order, such of its powers and
functions under this Act as it may deem necessary, subject to such
conditions. He would then proceed to invite our attention to
Regulation 28 of the Securities and Exchange Board of India
(Settlement Proceedings) Regulations 2018, when he would submit
that if the power which is to be exercised by the Board under Section
28, this provision has to be read along with Section 19 where
delegation of power is permitted. Therefore, according to him, the
panel of Whole Time Members (WTM), are entitled to act as delegatee
and the revocation of settlement orders, the authority has been
delegated under the new regime of 2019 on the members of the WTM
Page 64 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
and therefore there is no illegality when the order is passed by the
delegate.
In short, it is the submission of SEBI that the objections raised
on behalf of the Petitioners in raising a challenge to the impugned
order has no merit and substance and therefore the revocation order
passed by SEBI falls within the four corners of the Regulation of 2018
and in absence of any prejudice being shown, on not affording an
opportunity before the impugned order has been passed, deserves to be
upheld and the petitions are liable to be dismissed.
46. Learned Senior Counsel Mr. Navroze Seervai and Mr. Gaurav
Joshi, representing Respondent nos. 9 to 25 and Respondent nos. 26
and 27 in Writ Petition No. 3997 of 2024 referred to as ‘Ashok Shah
Group’ and ‘PINA Shah Group’, the minority public shareholders of
Bharat Nidhi Limited, which have also supported the stand of SEBI.
Mr. Seervai has submitted before us that BNL is the single
largest shareholder in Bennett Coleman and Company Limited as it
holds 24.41% of shareholding and also in its wholly owned subsidiary
Bennett Property Holdings Company Limited into (BPHCL) are
unlisted companies. According to him, based on publicly available
details of investments of the two companies the valuation exercise
carried out by a category one merchant banker has valued BCCL at
approximately 79,000 crores and BPHCL at 3226 crores and BNL’s
Page 65 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
direct holding in BCCL is valued at approximately 20,000 crores and
indirect holdings approximately at 40,500 crores.
According to Mr. Seervai it is for this reason that BNL’s share
presented a lucrative investment opportunity for the Respondents (the
minority shareholders) and they invested in BNL. He would unfurl
before us the true nature of control over BCCL’s holding companies as
he would submit that it is owned and controlled by certain companies
in which Mr. Vineet Jain, Mr. Sameer Jain and their immediate family
members have direct and indirect holding.
According to him, Vineet Jain group along with BNL Arth Udyog
Limited TM Investment Limited and Sanmati Properties Limited, has
50% shareholding in BCCL whereas Mr. Sameer Jain along with Vineet
Jain and four other limited companies have 50% shareholding in BCCL.
The entities in Vineet Jain Group and Sameer Jain Group are
owned and controlled through a complex web of cross-holding and
once this is eliminated the ultimate beneficiaries are Vineet Jain and
Sameer Jain and he would accuse that despite the fact that BNL is
owned and controlled by Vineet Jain, it has falsely represented itself as
a promoter-free company and the company sans any promoters has
only public shareholders, which claim is absolutely false.
According to Mr. Seervai the minority shareholders have
consistently sought disclosure/compliance from BNL, as it had failed to
disclose the real identity of its promoters by making false and
Page 66 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
misleading claims in violation of SEBI (Listing Obligation and
Disclosure Requirements) Regulations 2015, as well as SEBI
(Substantial Acquisition of Shares and Takeovers) Regulation 2011 and
SEBI (Prohibition of Insider Trading) Regulations, 2015 and as BNL
declared itself to be a promoter free company. In addition according to
him, BNL has failed to comply with applicable securities law that
mandated all listed companies to have minimum public shareholding of
25% (Minimum Public Shareholding Norms).
According to Mr. Seervai, if SEBI had enforced the applicable
securities law, BNL would have required to reduce its promoter
shareholding percent in accordance with the NPS norms and this would
have allowed BNL to be listed as a company on the Nationwide Stock
Exchange, and provided ready marketability and liquidity to the script,
ensure proper supervision and control over dealings in the script
market driven valuation as well as prestige and brand value.
47. The Respondents, according to Mr Seervai, since 2013 filed
multiple complaints with SEBI regarding violation of NPS norms and
disclosure requirements inter alia by BNL along with connected
entities under the control of Mr. Vineet Jain and Mr. Samir Jain along
with other members of Jain family, however SEBI chose to turn blind
eye towards the issues which were highlighted and did not take any
action. According to Mr. Seervai, the action of the Shah Group was
always directed towards achieving liquidity and fair price discovery in
Page 67 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
respect of their investments, in accordance with law. The complainant
therefore sought that SEBI should identify the true extent of the
promoter holding in BNL and ensure that it is compliant with NPS
norms as well as SEBI’s exit circulars in respect of ELCs by having BNL
listed on a Nationwide Stock Exchange, which would ensure a more
dispersed public shareholding, promoting liquidity and price discovery.
In addition to the minority share holders i.e. the Shah Group, various
other groups had addressed numerous correspondence to SEBI alleging
violations by BNL and other connected entities which had resulted into
institution of proceedings before Delhi High Court including the case of
Mr. Aditya Agrawal & Ors. vs. SEBI13 .
48. Alleging violation of NPS norms and disclosure requirement
inter alia by BNL and other connected entities under the control of Mr.
Vineet Jani along with other members of the Jain family he would
submit that Delhi Stock Exchange de-recognized BNL pursuant to SEBI
circulars in the year 2014 and BNL obtained listing on Calcutta Stock
Exchange. However, in 2015, BNL came to be placed on dissemination
board of Bombay Stock Exchange, which provided a platform where
transaction could take place between the buyer and seller on trade for
trade basis. The placement of BNL on dissemination board resulted in
self operating disadvantages, but BNL preferred to remain so and
ultimately, in the year 2019, BNL was moved to dissemination board of
NSE. In the year 2019, it issued a postal ballot notice seeking
13 Writ Petition (C) 105 of 2019
Page 68 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
shareholder approval for buy-back up to 21,791 equity shares and this
prompted the minority shareholders to file a complaint on SEBI
SCORES portal whereby issues relating to non-disclosure of promoter
shareholdings of DNL and violation of minimum public shareholding
requirement were raised. This complaint was however summarily
closed by SEBI which emboldened BNL to continue with its illegality.
The minority shareholders approached the Securities Appellate
Tribunal by filing an appeal and certain harsh words were used by the
Tribunal reminding SEBI that it has a role to play as a regulator but it
has failed to perform its duties and had kept the complaint pending for
more than six years which speaks volumes and directed to decide the
representation within a period of six weeks. He preferred an appeal
against this order before the Supreme Court which confirmed the
directions of the Appellate Tribunal and directed SEBI to pass
appropriate orders.
This extensive exercise ultimately resulted in issuance of show-
cause notice to the Petitioners in the year 2020, pursuant to which the
settlement applications came to be filed separately by the Petitioners
and the settlement order came to be passed on 28.09.2021. The
minority group had filed a Writ Petition raising a challenge to the
settlement proceedings but was allowed to withdraw it with a liberty to
approach the Court upon an appropriate order being passed by SEBI.
Page 69 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
49. According to Mr Seervai, when the settlement order was passed
pursuant to the show cause notices being issued by SEBI, the order
clearly recorded that upon the settlement application being preferred,
the settlement is granted “without admitting or denying”, specific
allegations in the show cause notice. His first contention is that SEBI
in stipulating so in the order of settlement had acted in violation of its
own Regulations and SEBI should have not allowed such a settlement
at all. According to him, even assuming that the settlement order was
passed, the settlement was based on voluntary undertaking given by
BNL and its promoters, by giving the exit offer to all public
shareholders on certain terms, it ought to have been given after
considering its effect, when this was voluntarily undertaken to be
complied with, that there is no question of they wriggling out of it on
the ground that it is not possible for them to ensure compliance.
According to him the argument advanced on behalf of the
Petitioners is a fanciful dishonest argument when they talk of ‘buy-
back’, and they offer it only to one percent of the shareholders. It is his
specific contention that the use of the word ‘exit’ was coined as an
afterthought after the settlement order was passed.
Mr. Seervai is critical of the lackadaisical approach of SEBI as it
did not initiate any action against BNL, he accused SEBI that the
Petitioners are turning deaf ear in complaints filed by the minority
share holders from time to time. He would submit before us that SEBI
Page 70 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
initiated action for violation of its Regulations after thirteen years and
despite this, permitted a settlement, thereby condoning serious lapses
of the Petitioners.
50. Having unconditionally accepting the terms and conditions set
out in the order of settlement which were routed through the IC as well
as the HPAC of SEBI, according to Mr. Seervai, there is no question of
going back on the order of settlement. According to him, the buy-back
was made only to 1.044% of the shareholders, which was clearly in
breach of the stipulations in the settlement order as the buy-back was
intended for all shareholders and not for a miniscule percentage. It is
his specific contention that the offer was being kept open for three
months and the BNL kept it open only for one month and therefore the
consequences are res ipsa loquitur as there was a breach in stipulations
of the settlement.
Mr. Seervai has invited our attention to Regulation 28, which has
been invoked while revoking the settlement order on 10.11.2023 and,
according to him, the Regulations itself is operating and once there is a
failure to ensure compliance with the stipulations in the settlement
order, whether any order is passed or not by SEBI, the consequences
follow. According to him, once this self operating clause kicks in, the
subsequent events are irrelevant. On expiry of fifteen days, according
to him, stipulations in the settlement order being failed, the
proceedings did revive.
Page 71 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
51. Further, Mr. Seervai has placed before us the sequence of events
to submit that BNL, pursuant to the settlement order being passed,
issued a postal ballot notice seeking shareholder approval for buy-back
of 30,958 shares, which only amounts to 1.067% and the voting on the
buy-back offer was kept open from 27.09.2022 to 26.10.2022. It is his
specific contention that the postal ballot notice demonstrate that the
exit offer was only to 1.06% of his shareholders, which was not in
compliance with the terms of the settlement order, which contemplated
providing an exit to all public shareholders, i.e., 100% shareholders of
BNL. Further, the explanatory statement to the postal ballot notice
declared that there are no promoters in the company, which is contrary
to the terms of the settlement order.
In addition, it is his specific submission that the postal ballot
notice failed to make any mention of the purported exit opportunity
offered by the public shareholders, the same being represented to be
part of the exit offer in compliance with the settlement order. In
addition, BNL also failed to disclose that there was a possibility of
buyback offer price being announced by Delhi High Court and
therefore, according to Mr. Seervai, BNL acted deceptively right from
the beginning.
According to Mr. Seervai, the compliance report clearly establish
that BNL has failed to comply with requirement of paragraph 8(iii) of
the settlement order and therefore the settlement order, which is a
Page 72 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
composite order had ceased to operate against all the Petitioners from
that date. He would submit that BNL cannot now contend that after
issuance of the settlement order, its Board of Directors recognised
purported legal difficulties in complying with the stipulations therein,
as BNL was always aware of the consequences of undertaking to ensure
compliance and in fact, BNL had previously done buy-backs and
therefore it was aware of regulatory limitations posed by buy-back.
Thus, according to Mr. Seervai, BNL adopted a half-hearted
approach and when it addressed communications to the three entities,
Sanmati Properties, TM Investments and Vineet Jain taking their
expression of interest to provide exit to the shareholders, they replied
indicating their willingness, for a period of two months, after closure of
BNL’s buy-back offer at the exit price of Rs. 11.229 per equity share for
aggregating amount of Rs.50 crores and Rs. 10 crores respectively.
Thereafter, when the Writ Petition No. 447 and 530 of 2023 was
filed before the Bombay High Court by his client, an ad-interim order
was passed on 17.10.2022 directing BNL to proceed with the buy-back
by inviting offers but not to finalise the same. Once again, on
02.11.2022, BNL issued a public announcement informing that the
buyback would be kept open from 04.11.2022 to 03.12.2022 and a
public announcement was also issued in Financial Express and Jan
Satta informing inability to finalise the buy-back offer on 18.12.2022.
On 19.12.2022, BNL informed SEBI that it cannot take any further
Page 73 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
steps with respect to the Proposed Exit Offer due to the interim order
passed by the High Court.
According to him, BNL had demonstrably failed to comply with
the settlement order on the ground that the High Court’s interim order
prevented it from doing so, however, according to Mr. Seervai, it is a
false cover as for whatsoever reason, since the Petitioners had
unconditionally accepted the settlement order and defended it in the
proceedings instituted by his client, they are estopped from disputing
or disowning any terms of the settlement order. Mr. Seervai is very
harsh in submitting that if they have derived the benefit of the
settlement order, as a result of which the charges against them have
been dropped, they ought to have been conscious and meticulous in
complying with the terms and conditions subject to which the
settlement order was passed.
52. It is a specific contention of Mr. Seervai that there is a distinction
between an exit and the buy-back as the settlement order did not
require that exit was to be provided by way of a buy-back offer and,
therefore, any purported statutory restraints arising as a result of
electing to offer an exit through a buy-back shares, is a problem created
by BNL itself and it cannot be cited as a ‘statutory restraint’. It is a
specific contention that BNL had ample opportunity to consider the
feasibility of complying which in itself had put in if the HPAC were
accepted and therefore now it is not open for it to wriggle it out once
Page 74 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
the settlement order is passed, it cannot be modified and that too by an
unilateral interpretation/application of its terms by the applicants, i.e.
BNL and other entities.
Mr. Seervai has also insisted in submitting that revocation of the
settlement order upon non-compliance in terms of Regulation 28 is
automatic and is an operation by law, which cannot be stalled.
According to him, providing BNL and the entities with an opportunity
of notice of hearing in the event of an apprehended violation of terms of
settlement order is wholly unnecessary and rather it would defeat the
purpose of having brought the litigation to a quietus and in fact, it
would impart to revisit or relocate the settlement terms through an
adjury criteria process relating to revocation. He would also submit
that Regulation 28 does not contemplate an opportunity of hearing and
failure to provide a hearing would not render an action illegal or illegal
as no prejudice is caused to the parties who have abjectly failed to
comply and abide by the settlement order. According to him, natural
justice does not necessarily or invariably contemplate a personal
hearing and in cases where facts are undisputable/admitted, it is the
duty of the Court to determine if prejudice has been caused on account
of a party not being afforded a personal hearing. He has placed reliance
upon K. K. Chari v. R. M. Seshadri 14, as also decision in case of S.
L. Kapoor v. Jagmohan & Ors15, in support of his contention. He
14 (1973) 1 SCC 761
15 (1980) 4 SCC 379
Page 75 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
would also rebut the contention of civil consequences having been
entailed upon passing of the impugned order, which necessarily require
an opportunity of hearing, as he would submit that there is no vested
right of settlement in the Petitioners, as it is the submission of Mr.
Seervai, that no civil consequences follow the revocation of the
settlement order, as to entail civil consequence to an action, the effect
must be demonstrable and material, and it must affect the party’s civil
right. He would therefore distinguish the decision relied upon in case
of Rajesh Agarwal (supra) as well as Zha Developers Pvt. Ltd.
(supra). In short, it is the submission of Mr. Seervai that if the
impugned order is quashed, it would result in revival of a patently
illegal settlement order, which by no stretch of justification, could be
allowed to stand and in any case this would not be allowed by the Court
in exercise of its extraordinary jurisdiction conferred under Article 226
of the Constitution as an ex facie illegal order would stand revived. He
would therefore request for dismissal of the petition as according to
him, SEBI is duty bound to protect the small investors, and the
Respondents have been fighting for a cause alleging violation of the
provisions of SEBI regulations and if once the settlement order having
been passed and there was a failure to abide by the stipulations therein,
according to SEBI, has rightly revoked the settlement order.
53. The rival arguments advanced before us deserve appreciation in
the backdrop of the factual scenario as well as the statutory scheme.
Page 76 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
At the outset we must make it clear that we are proceeding ahead
by accepting that the communication dated 10.11.2023 addressed to the
Petitioners is the order of revocation of the settlement order, passed by
SEBI.
The factual scenario deserve a narration commencing from the
show cause notice issued by the Investigation Department of SEBI on
28.10.2020 to Bharad Nidhi Limited as well as six other entities and
one individual, Mr Vineet Jain. The genesis of this notice be issued by
SEBI is in the complaint alleging misrepresentation of promoter
holding as public holding and non-compliance of Minimum Public
Shareholding against Bharat Nidhi Limited, (BNL) along with Arth
Udyog limited (AUL) as well as few other entities, apart from the
noticees.
The complainant approached Securities Appellate Tribunal (SAT)
seeking a direction to SEBI to examine the allegations, in pursuance of
which SAT directed the complainant to file a consolidated
representation and directed SEBI to take a decision within a period of
six weeks.
SEBI therefore conducted an investigation which resulted in
issuance of the show cause notice, as it focussed its attention on BNL, a
company incorporated whose shares were listed at Delhi Stock
Exchange ( DSC ) as well as Calcutta, Stock Exchange,(CSE) and in
Page 77 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
2019, the scrip was transferred to the dissemination board of NSE, with
its total shareholding of 29,19,722%.
BNL was identified as one of the largest shareholders of Bennett
Coleman and Company Limited (BCCL) holding 21.41% shares.
Similarly, the other noticee also held shares in BCCL in the following
percentage :
Sr. No Name Percentage
1 Sanmati Properties Limited 9.75 %
2 Arth Udyog Ltd 9.31 %
3 TM Investments Ltd 5.96 %
4 Vineet Kumar Jain 0.57 %
54. The investigation revealed that BNL was under the control of
eleven Directors which included Mr. Vineet Jain from 28.04.2003 to
16.07.2014 along with Mr Amit Jain and Mr Revati Jain, the close
family members of Mr Vineet Jain.
In response to the complaint, BNL asserted that it had no
identifiable promoters but the investigation revealed that six entities
along with an individual Mr Vineet Jain held 77.31% shares of BNL and
as on 31.03.2017, Vineet Jain was holding 20.21% of shares whereas
Matrix Merchandise Limited had a shareholding to the extent of
20.55%.
As on 31.03.2019, the share holding of the noticees in BNL was
found to the following extent :
Page 78 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docSr. Name 31-March-2018 31-March-2019
No.
Shares held % of shares Shares held % of
held share shares held1 Matrix Merchandise Ltd 600000 20.55 600000 20.55
2 Vineet Jain 590000 20.21 590000 20.21
3 Sanmati Properties Ltd. 471588 16.15 471588 16.15
4 Ashoka Marketing Ltd. 300000 10.27 300000 10.27
Mahavir Finance Ltd. 200000 6.85 200000 6.85
5
Arth Udyog Ltd
6 57974 1.99 57974 1.99TM Investments Ltd.
7 37744 1.29 37744 1.29
Total 2257306 77.31 2257306 77.31
55. The investigation highlighted the connect amongst the
shareholders, namely Vineet Jain and the shareholder of BCCL. Similar
connect was established amongst the entity/company and the
conclusion was drawn to the effect that eight companies mentioned in
the show show cause notice were sharing addresses among themselves,
reflecting that they had a connect with BCCL.
56. The show cause notice alleged of wrongful disclosure of promoter
shareholding as public shareholding with reference to the SEBI (Issue
of Capital and Disclosure Requirements) Regulations 2009 as well as
the SEBI (Substantial Accusation of Shares and Takeovers) Regulations
2011. In order to ascertain the promoters of BNL, based on the annual
reports filed, as well as their reply to the notice issued to the SEBI the
Page 79 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docanalysis of share holding of BNL was carried out to find that Vineet
Jain, the living entity was holding 12.87% shares in Matrix
Merchandise Limited, 20% in Ashoka Marketing Limited, 25% in
Mahavir Finance Limited, 33.67% in Arth Udyog and 18.50% in TM
Investments Limited.
It was thus concluded that out of the six shareholders which were
body corporates and one living entity had a significant share holding in
BNL and the percentage of share holding held by Vineet Jain in each of
the Companies was more than one percent.
57. On the basis of the annual returns, the major shareholders of the
five companies, Ashoka Marketing Limited, Matrix Merchandise
Limited, TM Investments Limited, Arth Udyog Limited and Mahavir
Finance Limited were traced out, with the inference drawn to the effect
that in case of all the eight noticee’s, apart from the shareholding held
by Shri Vineet Jain, the majority shareholding was held by BNL and
other shareholders of BNL i.e. Arth Udyog Ltd, Matrix Merchandise
Ltd, Mahavir Finance Ltd.
The show cause notices attributed the lapse on part of each
noticee separately.
58. The investigation by SEBI divulged, the control over Bharat
Nidhi Ltd. through Ashoka Marketing Ltd. as well as Arth Udyog
Limited and its connect with the BCCL to reveal that two out of four
Directors of Ashoka Marketing were employees of BCCL and one
Page 80 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Director, was a non-independent Director as well Director of Times
Journal India Limited (BCCL). Similarly, three Directors on the audit
committee and nomination and regulation Committee was shown as
independent Director associated with BCCL. Similarly, in Arth Udyog
Ltd., three out of five Directors were employees/consultant of BCCL. It
was thus concluded that majority of Board of Directors of Ashoka
Marketing Limited (AML) and Arth Udyog Ltd. (AUL) were employees
of consultants of BCCL and Shri Vineet Jain, who was MD of BCCL,
held 20% shares in AML and 33.67% in AUL leading to an inference
that through the share holding and directorship, he had direct/indirect
control over the companies and could influence its decision making.
59. In addition, as per the disclosures made by BNL under
Regulation 31(1)(b) of SEBI (Listing Obligations & Disclosure
Requirement) 2015, clause 35 of the listing agreement, the entire share
holding of BNL was shown as held by public shareholders which was a
completely incorrect. For wrong disclosure of promoter holding, it was
alleged that BNL had failed to comply with the Regulation of 2015 as
well as the circular of SEBI dated 30.11.2015, read with Regulation 2
(za) of SEBI (ICDR), Regulations 2009.
60. According to SEBI as per SEBI (SAST) Regulation 2011, the
disclosures are required to be made to every stock exchange where the
shares of the target company are listed and also were the target
company has its registered office. BNL was listed on Calcutta Stock
Page 81 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Exchange between 2015 to 2019 but no disclosures were made either by
Shri Vineet Jain or the other entities of other share holding in BNL
during the investigation period and, therefore, it was alleged that they
had failed to comply with the SEBI Regulations 2011.
Similarly, as per Regulation 7(1)(a) of SEBI (Prohibition of
Insider Trading) Regulation 2015, every promoter, key managerial
personnel and director of every company whose securities are listed on
any recognized stock exchange shall disclose his holding of securities of
the company as on the date of these regulations taking effect to the
company within thirty days of these regulations taking effect.
However, there was no disclosure of share holdings in BNL by
the noticees which violated SEBI (PIT) Regulations 2015.
61. Similarly, the show cause notice also alleged non compliance of
minimum public shareholding as, according to SEBI, every listed
company (other than Public Sector Company), had to maintain public
share holding of atleast 25% as per Securities Contract (Regulations)
and every listed Public Sector Company had large public share holding
of 25% on commencing of SEBI Regulation of 2018 shall increase its
public share holdings to 25% within a period of two years in the
manner provided by SEBI.
Not only this, it was alleged that there was misrepresentation and
wrongful disclosure regarding public shareholders, as the majority
shareholding of BNL had been structured in the manner to camouflage
Page 82 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
the actual share holding of Shri Vineet Jain and this structured manner
reflected a deliberate attempt on the part of the company/promoters of
BNL to mislead the non-promoters investors of the listed entity,
though the true nature of BNL indicated controlled by the noticees. It
was alleged that the non-disclosure by the promoter entities of the
Company having shareholding of 77.31% adversely effected the actual
interest of the share holders and they were accused of perpetuating a
fraud on promoter share holders of BNL and of violating Section 12-
A(a) and (b) of SEBI Act, 1992 read with Regulations 2003 relating to
prohibition of fraudulent and unfair trade practices relating to
securities market.
62. Coming to the statutory regime, it is to be noted that SEBI
established under SEBI Act, 1992, is cast with a duty to protect the
interest of securities and to promote the development and to regulate
the securities market by such measures as it think fit is a competent
body to regulate the business stock exchanges and any other security
markets. It is also cast with the function of prohibiting fraudulent and
unfair trade practices relating to security markets as well as prohibiting
insider trading in securities.
The Board constituted under the SEBI 1992, is also empowered
to carry out investigation, if it has reasonable ground to believe that
the transactions and securities are being dealt with in a manner
detrimental to the investors or the securities market.
Page 83 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
63. The Act of 1992 contemplate imposition of penalty for failure to
furnish information, written, etc., as directed by the Board and
similarly by virtue of Section 15C, if any listed company or person
register as intermediary, after having been called upon by the Board in
writing, failed to redress the grievance of the investors, such company
or intermediary is liable for penalty.
The Act also imposes penalty for fraudulent and unfair trade
practices and the Board is also vested with the power to adjudicate the
complaints upon holding an inquiry in the prescribed manner after
giving any person concerned a reasonable opportunity of being heard
for the purpose of imposing the penalty.
64. A specific provision contained in form of Section 15JB,
permit settlement, upon an application being filed by any person
against whom proceedings are being initiated under the provisions of
the Act, if such an application is filed to the board proposing for
settlement of the proceedings initiated or to be initiated for the alleged
defaults.
The Board after taking into consideration the nature, gravity and
impacts of default(s) may agree to the proposal for settlement, on
payment of such sums or such other terms as determined by the Board
in accordance with the Regulations made under the Act.
Page 84 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Sub-section(3) of Section 15JB stipulate that the settlement
proceedings shall be conducted in accordance with the procedure
specified in the Regulations made under the Act.
65. The SEBI (Settlement Proceedings) Regulations, 2018, set out
the terms of settlement and the procedure to be followed, in case if an
application is made by a person against whom any proceedings have
been initiated and are pending or may be initiated.
The manner in which such application shall be preferred as well
as the details which shall be provided is clearly set out in the
Regulations 2018, which make it imperative for the applicant to make
full and true disclosure in respect of the alleged default(s) and an
application for settlement of defaults related to disclosures, in terms of
sub-rule (8) of Regulation 3 shall, to the extent possible, is to be made
after making the required disclosure.
66. Chapter III of the Regulations set out the scope of settlement by
specifically prohibiting applications to be considered in certain
situations prescribed.
Sub-clause (3) of Regulation 5 prescribe guidelines for settling
any specified proceedings pending before the Board and it require
following factors to be considered:
“(a) whether the applicant has refunded or disgorged the monies
due, to the satisfaction of the Board;
Page 85 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
(b) whether the applicant has provided an exit or purchase option
to investors in compliance with securities laws, to the satisfaction
of the Board;
(c) whether the applicant is in compliance with securities laws or
any order or direction passed under securities laws, to the
satisfaction of the Board;”
67. Chapter IV contemplate the terms of settlement and Regulation
9, categorically prescribe that the settlement terms may include a
settlement amount and/or non-monetary terms, in accordance with the
guidelines specified in Schedule II and the non-monetary terms may
include suspension or cessation of business activities for a specified
period, exit from management, law in all securities, submission to
enhance internal audit and reporting requirement, etc.
While arriving at the settlement terms, the Board may consider
the conduct of the applicant during the specified proceedings,
investigation, inspection or audit and also the nature, gravity and
impact of the alleged defaults as well as the extent of harm and/or loss
to the investors and/or gains to the applicant as well as the compliance
schedule proposed by the applicant.
68. Regulation of 2018 provide a three tier system before a decision
is taken on an application for settlement as the Regulations
contemplate constitution of a HPAC for consideration and
determination of the terms and settlement. Apart from this, the
Page 86 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Regulations also prescribe for constitution of an Internal Committee(s)
which shall comprise of all the Officers of the Board.
The application for settlement shall be referred to an IC to
examine whether the proceedings may be settled and if so, to determine
the settlement terms. The Internal Committee is empowered to call for
relevant information, documents, etc., pertaining to the alleged
default(s) and is also empowered to call for personal appearance of the
applicant before it and may also require the applicant to comply with
condition precedent(s) within a specified time period of consideration
of application for settlement.
Pursuant thereto, the proposed settlement terms, if any, shall be
placed before the High Powered Committee, which shall consider the
proposed settlement terms and is empowered to seek revision of the
settlement terms.
69. The recommendation of the HPAC shall be placed before the
panel of WTM which shall consider the recommendation of the
Committee which shall accept or reject the same. Whether the panel of
WTMs accept the recommendation of the HPAC to settle the specified
proceedings, a notice of demand shall be issued and thereupon the
applicant shall remit the settlement amount forming part of settlement
terms not later than 30 calendar days from the date of receipt of the
demand notice and also fulfill/undertake in writing to abide by other
settlement terms, if any, within the time provided to the applicant.
Page 87 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Chapter VII set out the summary settlement procedure and
Chapter IX, comprise of a provision for confidentiality of an applicant
seeking the benefit of settlement.
70. Chapter X of the Regulations contains provisions as regards the
settlement order, in form of an appropriate order which shall dispose of
the respective proceedings, on the basis of the approved settlement
terms by the panel of WTMs. The settlement order passed under the
Regulations is expected to contain the details of the alleged detail(s),
relevant provisions of the securities laws, brief facts and circumstances
relevant to the alleged default as well as the admission made by the
applicant, if any, and the terms of settlement. The settlement order as
soon as it is passed, shall be served on the applicant as per Regulation
25 and shall also be published on the website of the Board, subject to
the confidentiality clause.
71. Regulation 28, which is most crucial for determination of the
dispute before us pertains to revocation of the settlement order and it
reads thus :
“28.(1) If the applicant fails to comply with the settlement order or
at any time after the settlement order is passed, it comes to the
notice of the Board that the applicant has not made full and true
disclosure or has violated the undertakings or waivers, settlement
order shall stand revoked and withdrawn and the Board shall
restore or initiate the proceedings, with respect to which the
settlement order was passed.
Page 88 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc(2) Whenever any settlement order is revoked, no amount paid
under these regulations shall be refunded.”
Regulation 29, categorically provide that all information
submitted and discussions held in pursuance of the settlement
proceedings under these regulations shall be deemed to have been
received or made in a fiduciary capacity and the same may not be
reduced to public, if it prejudices the Board and/or the applicant.
72. It is in the backdrop of the aforesaid Regulations of 2018, the
settlement order was passed pursuant to the show cause notice dated
28.10.2020 issued to seven entities and one individual Mr. Vineet Jain
under Section 11(1), 11(4), 11(4)(a), 11B(i) and 11B(2) of the SEBI Act,
1992, read with SEBI Rules, 1995 and Section 12A(1)(a) and Section
23E of the Securities Contract (Regulation) Act 1956 read with
Securities Contract (Regulation) procedure for holding inquiry and
(Imposing Inquiry) Rules 2005.
Pursuant to the show cause notices being received, each of the
noticee preferred separate application for settlement as contemplated
under the Regulations of 2018, being allotted a distinct number,
proposing to settle, through a settlement order without admitting or
denying the finding of facts and conclusion of law as regards the
enforcement proceedings initiated against them vide show cause notice
dated 28.10.2020.
73. Pursuant to the receipt of the settlement application, their
authorized representative had a meeting with the IC of SEBI and
Page 89 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
pursuant to the deliberations on the terms of settlement, they proposed
revised settlement terms to settle the proceedings initiated against
them. The applications along with the revised settlement terms were
placed for consideration before the HPAC in its meeting on various
dates, when HPAC recommended that the deliberations of the
settlement applications may be deferred till they seek specific
permission from Delhi High Court and accordingly necessary steps to
that effect were initiated and Delhi High Court cleared the way for
consideration of the settlement application by directing that the SEBI
shall be free to deal with them on its own merits, the applications were
once again placed for consideration before the HPAC on 09.06.2022.
HPAC recommended the case for settlement with the applicants
by clearly stipulating conditions qua each of them and the settlement
order dated 12.09.2022 categorically recorded the settlement terms
formulated as per SEBI Regulations 2018.
Name of the Settlement Terms formulated as per SEBI
Applicant (Settlement Proceedings) Regulations, 2018
Bharat Nidhi Limited Rs.2,43,10,000/- (Rupees Two Crore Forty Three
Lakh Ten Thousand Only) as settlement amount
along with voluntary undertaking: (i) to provide
another exit offer to its public shareholders for a
period of three months after Settlement Order at the
same exit price as was offered in the offer given by it
in 2019, subject to any enhancement of such exit
price if so directed by the High Court of Delhi and (ii)
to refrain from accessing the capital markets by
issuing prospectus, offer documents or
advertisements soliciting money from the public for a
period of 24 months from the date of the settlement
order and refrain from accessing the capital markets
by issuing prospectus, offer documents or
advertisements soliciting money from the public for a
period of 24 months from the date of the settlement
order Bharat Nidhi Limited.
Page 90 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
Mr. Vineet Jain Rs.1,12,01,300/- (Rupees One Crore Twelve Lakh
One Thousand Three Hundred Only) as settlement
amount in respect of Mr. Vineet Jain.
Ashoka Marketing Rs.2,37,40,200/- (Rupees Two Crore Thirty Seven
Limited Lakh Forty Thousand Two Hundred Only) as
settlement amount along with voluntary undertaking
to refrain from accessing the capital markets by
issuing prospectus, offer documents or
advertisements soliciting money from the public for a
period of 24 months from the date of the settlement
order in respect of Ashoka Marketing Limited.
Arth Udyog Limited Rs.2,24,21,300/- (Rupees Two Crore Twenty Four
Lakh Twenty One Thousand Three Hundred Only) as
settlement amount along with voluntary undertaking
to refrain from accessing the capital markets by
issuing prospectus, offer documents or
advertisements soliciting money from the public for a
period of 24 months from the date of the settlement
order in respect of Arth Udyog Limited.
Matrix Merchandise Rs.2,24,21,300/- (Rupees Two Crore Twenty Four
Limited Lakh Twenty One Thousand Three Hundred Only) as
settlement amount in respect of Matrix Merchandise
Limited.
Mahavir Finance Rs.2,24,21,300/- (Rupees Two Crore Twenty Four
Limited. Lakh Twenty One Thousand Three Hundred Only) as
settlement amount in respect of Mahavir Finance
Limited.
TM Investment Limited. Rs.2,24,21,300/- (Rupees Two Crore Twenty Four
Lakh Twenty One Thousand Three Hundred Only) as
settlement amount in respect of TM Investment
Limited.
Sanmati Properties Rs.2,24,21,300/- (Rupees Two Crore Twenty Four
Limited. Lakh Twenty One Thousand Three Hundred Only) as
settlement amount in respect of Sanmati Properties
Limited.
74. The recommendations of the HPAC were placed for
consideration before the panel of WTMs in terms of Regulation 15(2) of
the Settlement Regulations and the notices of demand were issued to
the applicants on 20.07.2022.
The applicants informed SEBI about remittance of the respective
settlement amounts and SEBI confirmed the same. The settlement
order also record that the applicants provided an undertaking to
comply with the non-monetary terms forming part of the settlement
terms as mentioned in paragraph 5.
Page 91 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
It is in the wake of the power conferred under Section 15JB read
with Section 19 of the SEBI Act and under Section 23 JA of the SCR Act
and in terms of Regulations 23 read with Section 28 of settlement
Regulations, it was ordered that pending enforcement proceedings for
the alleged default against all the applicants (Petitioners before us)
were settled and the enforcement proceedings initiated by SEBI for the
defaults stood disposed off and SEBI was restrained from initiating any
enforcement action against the applicants for the said defaults.
The settlement order also cast an onus on BNL to submit a report
of compliance with terms of its undertaking given at paragraph 5,
within fifteen days of passing of the settlement order, failing which, it
contemplated that the settlement order shall cease to operate qua all
the applicants.
The copy of the settlement order was sent to all the applicants
and it was also published on the website of SEBI.
75. In the wake of the rival contentions advanced, without going into
the aspect whether in passing the settlement order, SEBI was justified,
we are restricting our deliberation only on the issue whether on the
revocation of the order, by SEBI was justified.
It is not in dispute that in all eight noticees were served the show
cause notice were accusing them of violation of the provisions of SEBI
Act as well as various Regulations. By following the procedure
prescribed in the Regulations of 2018, upon each of the applicant filing
Page 92 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
separate settlement application, a common settlement order was
passed on 21.09.2022. The order itself reveal that the procedure
prescribed under Regulations 2018 was strictly followed as initially the
meetings were held between the representative of the applicants/the
noticee with the IC when they deliberated on the terms of settlement
and upon deliberation, the terms were revised and they were placed for
consideration before the High Powered Committee which accepted the
settlement terms proposed by the applicants and recommended their
case for settlement.
76. A close reading of the settlement order would reveal that as far as
Bharat Nidhi Limited is concerned, apart from the fact that it was
under obligation to abide by the monetary term, by paying the
settlement amount, it was also cast with an obligation in form of non-
monetary term as it agreed to provide a voluntary undertaking to the
following effect:
(i) to provide another exit offer to its public share holders for
a period of three month after settlement order at the same exit
price that was offered in the year 2019;
(ii) to refrain from accessing the capital markets by issuing
prospectus, offer documents or advertisements, soliciting money
from public for a period 24 months; and
(iii) refrain from accessing the capital market by issuing
prospectus, offer documents or advertisements, soliciting money
from public for a period of 24 months from the date of settlement.
Page 93 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
The other noticees were cast with an obligation only to make
payment of settlement amount, whereas Ashoka Marketing Limited
and Arth Udyog Limited, in addition to the monetary terms had also
agreed to submit a voluntary undertaking to refrain from accessing
capital markets, by issuing prospects, offer documents or
advertisements or soliciting money from the public for a period of 24
months from the date of settlement order passed in their favour.
77. The bone of contention between the Petitioners and SEBI on one
hand and the minority share holders on other hand, is, that Bharat
Nidhi Limited failed to comply with non-monetary terms of settlement
as it failed to provide exit offer to its public share holders, in terms of
the settlement order itself, and in particular clause 8(iii), the settlement
order ceased to operate qua all the applicants.
Mr. Seervai and Mr. Bhatt are categorical in their submission
when they submitted that Bharat Nidhi was under obligation to submit
the report of compliance with the terms of its undertakings in
paragraph 5 of the settlement order within 15 days of the passing of the
order, failing which the settlement order ceased to operate qua all the
applicants.
Mr. Dwarkadas and Mr. Kamat representing Bharat Nidhi
Limited, have advanced two-fold argument; first being, no case for non-
compliance is at all made out as SEBI was all the while supportive of
the steps taken by BNL in complying with the non-monetary terms but
Page 94 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
all of a sudden chose to revoke the settlement order by invoking the
deeming provision contained in Regulations 28, without affording it an
opportunity of hearing.
78. In order to ascertain whether SEBI was justified in revoking the
settlement order on the ground of non-compliance, we have carefully
gone through the exchange of communication between BNL and SEBI.
SEBI’s stand apart from the arguments advanced by Mr. Bhatt as
featured before us through its affidavit filed by one L. Kajio Mao,
Deputy General Manager, SEBI affirmed on 28.02.2024, which has
offered an insight into the procedure i.e. followed by SEBI when it
issued the impugned order revoking the settlement.
The affidavit attributed non-compliance to the applicants when it
categorically averred to the following effect –
“I say that the impugned Communication dated 10th November
2023 was made after adhering with the procedures required under
the SEBI Act, 1992 (the said Act), the Settlement Regulations
framed thereunder including SEBI Delegation of Powers Order. It
is submitted that as the Settlement Applicants had not taken
effective steps to provide exit opportunity to all the public
shareholders, as stipulated in paragraph 5 of the Settlement Order
as undertaken by them. The correspondence between SEBI and
the Petitioners was examined and it was found that the
requirement of giving exit offer to all the public shareholders of
BNL as stipulated in the Settlement Order has not been complied
with. Thereafter, the Settlement Division, after due
consultation/discussions with other relevant departments of SEBI,
had proposed Revocation of the Settlement Order and restoration
of the original enforcement action, as contemplated under
Page 95 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docRegulation 28 of the Settlement Regulations, 2018. The said
proposal was thereafter placed before the concerned DGM, the
concerned CGM and the panel of WTM’s who approved of the said
action after scrutinizing the facts arising from passing of the
Settlement Order until events subsequent thereto. The said
decision of Revocation of the Settlement Order was thereafter
communicated by the Dy. General Manager to all the Applicants
including the Petitioners vide the Impugned Communication i.e.
email and letters dated 10th November 2023. All the steps followed
for revocation were followed in accordance with Delegation of
Power issued by the Board.”
SEBI, has therefore, adopted the stand of admitted non-
compliance and, according to him, granting of an opportunity of
hearing would have been an empty formality.
79. A perusal of the settlement order dated 12.09.2022 make it clear
that BNL undertook inter alia to provide exit offer to its share holders
for a period of three months after the settlement order, at the same exit
price as was offered by it in 2019 subject to enhancement of such exit
price if so directed by the High Court of Delhi. The manner/type of exit
offer to be provided by BNL was not specified in the settlement order.
It is therefore necessary to examine as to what steps were taken
by BNL to ensure compliance of this particular stipulation as it is
violation of this part of the settlement order which forms the basis of its
revocation.
After the settlement order was passed on 12.09.2022, BNL
convened a meeting of the Board of Directors when it passed a
resolution for buy-back of 1.067% of shares of BNL at the price of INR
Page 96 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
11,229/- per share. It also accorded approval of postal ballot to be
issued to the share holders seeking their approval for buy-back and
approval was also accorded to approach those share holders holding
more than 1% shares of BNL, who had previously in 2019 expressed
their desire not to exit BNL and to ascertain their willingness to
continue to remain the share holders of BNL.
80. It is worth to note that under Section 68(2)(b) of the
Companies Act, 2013, a special resolution is contemplated authorizing
the buy-back and BNL could only buy-back a maximum of 25% of its
total paid up capital and free reserves, amounting to approximately
1.067% of its share holdings. Section 68(2) which imposes the
embargo, reads thus :
“Section 68 – Power of company to purchase its own securities
(1) …
(2) No company shall purchase its own shares or other
specified securities under sub-section (1), unless–
(a) the buy-back is authorised by its articles;
(b) a special resolution has been passed at a general
meeting of the company authorising the buy-back:
Provided that nothing contained in this clause shall apply
to a case where–
(i) the buy-back is, ten per cent. or less of the
total paid-up equity capital and free reserves of
the company; and
(ii) such buy-back has been authorised by the
Board by means of a resolution passed at its
meeting;
(c) the buy-back is twenty-five per cent. or less of the
aggregate of paid-up capital and free reserves of the
company:
……
…… ”
Sub-section (11) of Section 68 of the Companies Act provide that
if a company makes any default in complying the provision of the
Page 97 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docSection, it shall be liable for punishment in form of fine and also
imprisonment for a prescribed term.
Further, Section 70 of the Companies Act imposes a prohibition
for buy-back and no company is permitted to directly or indirectly
purchase its own shares or other specified securities through any
subsidiary company or through any investment company or group of
investment companies.
Worth it to note that Section 68 comes with a Non Obstante
clause and make the power of the company to purchase its securities
subject to the stipulations in sub-section (2) of Section 68.
81. It is the case of BNL that it had indulged itself in a buy-back in
2019 where out of 75% of its share capital 0.68% of shareholders had
participated in the buy-back process. Pursuant to the Board approval,
postal ballots were issued to the shareholders for securing their consent
to the buy-back offer and the voting on buy-back was kept open for a
period of 30 days. Even BNL made a public announcement of the
proposed buy-back by publishing it in two widely circulated news
paper.
SEBI was informed about this compliance by communication
dated 27.09.2022 when BNL made its intention clear to provide exit by
way of buy-back of shares and it was specified that BNL was in the
process of writing to shareholders if they are willing to come forth with
an exit to the public shareholders of BNL by offering to purchase their
Page 98 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docshares at the same offer which was given in 2019. As per BNL, SEBI
was aware that BNL could only buy-back a maximum of 25% of its total
paid up capital and free reserves amounting to approximately 1.067% of
its shareholders.
Followed by this, on 30.09.2022, BNL addressed letter to all
shareholders who were holding more than 1% of its share to ascertain
their willingness to continue to remain its shareholders and its
intention to provide exit to other public shareholders for a period of
two months at the same price as that of buy-back offer (INR 11,229/-)
(Proposed Exit Offer).
82. Pursuant to this step taken, TM Investments, Sanmati Properties
and Vineet Jain expressed their interest to provide exit to the
shareholders i.e. by participating in the Proposed Exit Offer and they
provided their willingness to provide an exit to public shareholders
with a cap of INR Rs.10 crores, Rs.50 crores and Rs.40 crores
respectively, cumulatively offering an exit to 3.224% of shareholders.
The proposed buy-back offer given was approved by the
shareholders of BNL and BNL who made a public announcement,
whereby shareholders were informed that buy-back would be kept open
for a period of 30 days and even letters were issued to the shareholders.
This step was compliant with Rule 17(5) of the Companies (Share
Capital and Debenture) Rules 2014.
Page 99 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docHowever, upon the order being passed by the Bombay High
Court in the Writ Petitions filed by the minority shareholding groups
i.e. Ashok Shah and Pina Shah Group, on 17.10.2022, BNL was
restrained from finalizing the buy-back offer.
The buy-back period however expired on 03.12.2022 and 4.046%
of shares were tendered by the interested shareholders which were kept
in an escrow account.
83. As per the submission of BNL, it was able to provide an exit to
4.291% of shareholders i.e. 1.067% by way of buy-back and 3.224%
through way of TM Investments, Sanmati Properties and Vineet Jain.
However, the tender shares only amounted to 4.046% and therefore
BNL would have been in a position to provide exit all the willing
shareholders which would be compliant with the settlement order.
However, it is its specific allegation that the Ashoka Shah Group and
Pina Shah Group did not tender their shares in the buy-back and chose
to remain shareholders for BNL with an intention to extract higher
monies from its shares.
Upon BNL approaching the Bombay High Court, on 05.12.2022,
the High Court permitted it to claim the benefits of interim orders so
far as time frame is concerned.
84. The communications exchanged between BNL and SEBI are
placed on record by Mr. Dhond as well as by Mr. Bhatt, which to some
extent are overlapping.
Page 100 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docThe letter dated 19.12.2022 addressed by BNL informed SEBI
that the Bombay High Court has passed an order of restraint on
17.10.2022, as a result of which BNL is unable to finalize the buy-back
offer and in view of the buy-back offer and therefore it would be
inappropriate to proceed with the exit offer. It also informed that, it
received communication from certain shareholders indicating their
willingness to provide Proposed Exit Offer to the remaining public
shareholders, over and above such shareholders who would be brought
back as a part of the buy-back offer at the same exit price for two
months following the buy-back. However, since the buy-back offer
process was kept on hold, it had become difficult to BNL to take any
further steps in respect of the Proposed Exit Offer.
BNL, the Respondent in the Petitions filed by the Shah Group
also filed an affidavit before the High Court highlighting the steps taken
by it pursuant to the passing of the settlement order and as to how the
restraint order has impacted its further steps.
85. An important milestone came when SEBI itself filed an affidavit
before the Bombay High Court making a categorical statement that the
settlement order did not provide the manner in which the exit offer was
to be provided by BNL and that in the wake of the order dated
17.10.2022 passed by the Bombay High Court, BNL had not been able
to finalize the exit offer by way of buy-back.
Page 101 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docIt is thus evident that whatever steps were taken by BNL was all
made known to SEBI and SEBI did not initiate any action, being was
convinced that BNL was committed to provide exit to all public
shareholders. BNL had also furnished to SEBI the names of the
shareholders who would provide the Proposed Exit Offer namely, TM
Investments, Sanmati Properties and Vineet Jain, with the cap
indicated by them.
86. From the correspondence placed on record, it is seen that SEBI
addressed a communication to BNL on 06.04.2023 inter alia calling
upon BNL to disclose the name of the share holders who had indicated
their willingness to provide an exit to the remaining shareholders of
BNL and also the update on exit offer compliance as well as the
documentary evidence reflecting the exit price offered in 2019.
Pursuant thereto, according to Mr. Dhond, BNL provided to SEBI the
requisite information and reiterated its commitment to provide exit to
all public share holders. It also clarified in its communication dated
11.04.2023 that after the buy-back, another exit offer by certain share
holders of BNL i.e. Proposed Exit Offer, shall be given for a period of 60
days and if it find that there are any intending share holders who wish
to exit the company, BNL shall take adequate steps for the purpose of
offering the exit. BNL also specified the names of the share holders
who would provide the Proposed Exit Offer i.e. TM Investments Ltd.,
Page 102 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docSanmati Properties Ltd and Vineet Jain with a cap of INR 10 crores, 50
crores and 45 crores respectively.
On 04.05.2023, an email was addressed by SEBI to BNL seeking
information on the share holding pattern of BNL pre and post exit
offer, list of public share holders with their share holding and also the
letters addressed to the proposed different share holders who had
expressed their willingness to accept the exit offer. BNL immediately
complied with the said requirement and thereupon on 22.05.2023
SEBI addressed another email to BNL seeking information on
methodology which will be adopted by BNL to provide exit to
remaining share holders after conclusion of buy-back and the Proposed
Exit Offer. This prompted BNL to respond on 24.05.2023, stating that
BNL shall provide an exit to the remaining share holders (17.87
percent) by exercising the options or combinations stipulated therein.
BNL also highlighted to ascertain in excess share for an exit may be
premature and unnecessary since during the previous buy-back
conducted in 2019 only 08.68 percent of 0.75 percent of shares were
tendered and therefore even the previous buy-back offer had been
under subscribed. Thereafter SEBI called upon BNL vide its
communication dated 24.05.2023 to submit complete exit process for
the potentially willing share holders (22.17 percent) and also calling
upon BNL to submit letters by the remaining share holders i.e. 77.83
percent share holding indicating their willingness to participate in the
Page 103 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docprocess. Thereafter BNL responded by its email dated 26.05.2023,
categorically stating that BNL was in a position to provide exit to all of
the 4.046 share holders who had tendered their share seeking an exit,
through buy-back and Proposed Exit Offer. It also stated that BNL
would follow a stepwise process to provide an exit to its share holders
and ultimately reiterated its commitment to provide an exit to all its
existing public share holders.
BNL also highlighted that it shall ascertain if excess shares shall
be tendered for an exit, since during previous buy-back conducted in
2019, only 0.68% out of 0.75% shares were tendered and the buy-back
offer was under subscribed.
87. The entire communication placed on record between SEBI and
BNL, where SEBI called upon BNL to submit the exit process for
potentially willing shareholders and also calling upon it to submit
letters by the remaining shareholders i.e. 77.83% shareholding
indicating their willingness to participate in the exit process, received a
response from BNL on 26.05.2023, where BNL made it clear that only
4.046% shares were tendered during the 30 day period and exit could
be only offered to those shareholders, through buy-back (1.067%) and
Proposed Exit Offer (3.224%) but a step wise process would be followed
by BNL to provide an exit to the shareholders who are willing to exit.
There is further exchange of communications between BNL and
SEBI, in form of emails. However, when on 05.09.2023, SEBI made a
Page 104 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docstatement before the Bombay High Court that there was a change in the
panel of WTMs of SEBI and SEBI would be in a position to take a
decision as to whether the settlement orders be revoked, BNL got
alarmed and it addressed a detailed response in form of representation
on 08.09.2023 to SEBI, where it clarified its stand as regards the
invocation of Regulations 28, of the Settlement Regulations on the
pretext of non-compliance of the terms of settlement.
88. The whole background scenario after passing of the settlement
order could be garnered through series of communication between BNL
and SEBI, as SEBI has resorted to Regulation 28 on account of alleged
non-compliance which stands on two purported limbs, (a) that despite
the settlement order requiring all public shareholders of BNL to
provide exit, it gave an exit by way of buy-back of shares which came to
be offered only to 1.067% of shareholders and, therefore, BNL has
failed to comply with the terms of settlement; and (b) while this
settlement order requires this exit offer to be kept open for a period of
three months, the exit offer by BNL was only for a period of thirty days.
It is pertinent to note that the settlement order came to be passed
on 12.09.2022 and pursuant to its communication, BNL took necessary
steps for implementation of the non-monetary terms therein as the
monetary terms were already complied with.
89. From the steps taken by BNL, it becomes apparent to us that the
settlement order required BNL to provide an option to exit at the same
Page 105 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docrate which was offered in the year 2019 and, therefore, according to
BNL, the option to exit was pegged at a price of Rs.11,229/- per share
and this exit was to be provided for a period of three months, within
which the shareholders had to decide whether or not to exit.
The aforesaid necessarily contemplated devising of a structure,
which necessarily had to be in accordance with the prevailing law
including the provisions of the Companies Act and definitely intended
BNL to be compliant with the prevailing statutory mechanism, so as to
achieve the target of the settlement order.
90. From the heap of correspondence placed on record addressed to
SEBI, it is evidently clear that the BNL initiated the process of offering
exit to its public shareholders and as a step towards this, it initiated the
process of buy-back of shares necessarily, in accordance with
Companies Act, 2013 and the Companies (Share Capital and
Debenture) Rules 2014. According to BNL, it opted for buy-back as a
first step since it was one of the fastest mechanism to provide exit and
even in 2019, BNL had resorted to the same mechanism.
In any case, we find that there was no particular mode of exit
which was specifically prescribed by SEBI in the order of settlement
dated 12.09.2022 which left it open for BNL to adopt a mode which
would achieve a target of providing exit and this was clarified by SEBI
in the affidavit filed in the Petition by minority shareholders when it
Page 106 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docconcurred the view of SEBI that no particular mode of exit was
contemplated in the order.
SEBI chose buy-back as it was in the interest of the shareholders
and when it floated buy-back, it received letters from three buyers,
Sanmati Properties Ltd, T.M.Investments and Vineet Jain
addressing/expressing interest for providing an exit to the public
shareholders of BNL and by Vineet Jain to the extent of INR 45 crores,
50 crores and 10 crores respectively after closure of the buy-back offer.
The buyers were categoric in communicating their interest for
providing an exit, since BNL had proposed an exit offer to its public
shareholders through a buy-back offer upto 1.067% of its total paid up
equity share capital being the maximum permissible limit under the
relevant law as shareholders holding an aggregate 77.83% of the total
paid up share capital of BNL had provided confirmation to BNL that
they will not be participating in the buy-back offer and expressed their
willingness to continue to remain as its shareholders.
Therefore, the buyers gave an offer to its remaining shareholders
(shareholders left after the closure of buy-back offer and all other exit
offers, if any), for a period of two months after closure of BNL’s buy-
back offer at an exit price of INR 11,229/- per equity share.
However, in the wake of the order passed on 17.10.2022, a
restraint was imposed upon BNL in finalizing the offer and therefore
BNL could not ask the three shareholders to buy the shares and thus
Page 107 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docBNL was disabled from moving ahead with its predetermined course of
action.
91. The aforesaid inability is described by SEBI as breach of the
terms of settlement at a belated stage, though we find that in an
affidavit filed in Writ Petition No. 447 of 2023 before Bombay High
Court, by the Assistant General Manager of SEBI on 13.03.2023, SEBI
had made a statement as below :
“… It may be noted that the manner/type of exit offer to be taken
by the company was not specified in the impugned specified order.
However, by virtue of voluntary undertaking by Respondent no.2,
it is imperative upon Respondent no. 2 to provide an exit offer to
all its public shareholders for a period of three months.
6. I say that as far as the present buy-back by Respondent no. 2 is
concerned, this Hon’ble High Court vide its Order dated
17.10.2022 has directed that the Respondent no. 2 may proceed to
the extent of inviting offers but shall not finalize the offers. Thus,
the buy-back cannot be proceeded by Respondent no. 2 in view of
the aforementioned directions of this Hon’ble Court.”
92. Thus, SEBI was clear in its understanding when it filed an
affidavit with the aforesaid statement on 13.03.2023 and did not find
BNL to be at fault.
BNL pursuant to the order of settlement, took prompt steps to
offer exit to its public shareholders since it chose the mechanism of
buy-back which it offered in the year 2019 BNL found itself to be bound
by Section 68 of the Companies Act read with Rule 17 which mandated
that a company can buy-back only up to 25% of aggregate of its paid-up
Page 108 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
capitals and free reserves and in case of BNL, this aggregate as on
31.08.2022 was Rs.13,905.36 lakhs and 25% of it was computed as
Rs.3,476.34 lakhs and it was therefore permissible for BNL to buy-
back the shares only to this extent.
Since the exit price was fixed by SEBI at Rs.11,229/- per share,
the number of shares which could be brought back was estimated to be
30,958/- equity shares which aggregated to 1.067% of its shares. Any
offer by BNL to buy-back share holding in excess of 1.067% could have
been violation of law and therefore BNL is justified in restricting its
buy-back to 1.067% of its share capital.
All public shareholders were given buy-back offer and amongst
those who accepted the buy-back offer, BNL would have brought their
shares aggregating to 1.067% of the total shareholding but because of
the interim order passed by the Bombay High Court, it could not
complete the process.
93. Coming to the timeline for which the buy-back could be kept
open, there is a statutory fixed limit of maximum thirty days as per
Section 68 of the Companies Act and accordingly the buy-back offer
was structured keeping it open for the window of thirty days.
BNL clarified to SEBI that considering the aforesaid constrain on
buy-back of share under the Companies Act, it developed a
methodology, by which its shareholders who desired to exit the
company would be in a position to sell their shares and exit, without
Page 109 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
BNL buying them and BNL would identify the shareholders in BNL
who would purchase the shares of other shareholders, who desired to
buy, offering it at the same price and the offer to be kept open for a
further period of sixty days, after the thirty days buy-back period was
closed.
BNL in its representation addressed to SEBI clarified that the
shareholders who were desirous of accepting the offer but missed the
bus because of the window of thirty days, would get a further
opportunity to be brought out at the same price, within further period
of sixty months, thus keeping the exit open for three months.
94. The detailed representation preferred by BNL on 08.09.2023
placed on record at exhibit NN in the Petition filed by BNL i.e. Writ
Petition No. 3977 of 2024, has offered the details of shares tendered
and those which would be brought back under the contemplated step
one and step two proposed by BNL which had 29,00,132 total shares
with 1,17,334 shares tendered by shareholders who wanted to exit
(4.046%) and 30,958 shares which would be brought back by BNL
under buy-back (1.067%). In the computation, BNL reflected 86,386
(2.979%) shares to be excess being tendered under the buy-back that
cannot be brought by BNL due to threshold limits under the Companies
Act but it estimated 93,506 (3.224%) of shares which could have been
brought under step two.
Page 110 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
BNL therefore demonstrated to SEBI in its representation that it
was fully committed to comply with the terms of settlement order and if
it had no intention to do so, it would not have paid the settlement
amount of Rs.2,43,10,000 (Rupees two crores, forty three lakhs and ten
thousand).
95. The Settlement Order required an exit offer to be kept open for
three months and BNL was thus required to work out a strategy to
ensure buying back the shares of even such persons who may opt to
offer their shares in step two i.e. after the window of thirty days was
over and this could have been ensured complete adherence to the terms
of settlement.
In fact what is worth to note is that the entire arrangement
devised by BNL was discussed with SEBI and forms part of the
correspondence exchanged and SEBI never raised any murmur in this
regard thereby directly or indirectly indicating that it found the action
of BNL to be not headed in tune with the settlement, which necessarily
had to be complied with by keeping in mind the statutory regime.
The exchange of communications between BNL and SEBI right
from 27.09.2022 till 04.08.2023, is clearly indicative that BNL had
kept SEBI informed about the manner in which it planned to comply
with the settlement order and SEBI never indicated its dissatisfaction
on the proposed compliance.
Page 111 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
96. Though a serious attempt is made on behalf of learned Senior
Counsel Mr. Dwarkadas as well as Mr. Dhond in arguing before us that
when the Bombay High Court in the Petition filed by minority
shareholders, ordered disclosure of its internal documents/notice, etc.,
which led to the passing of settlement order, BNL felt rattled and
therefore decided to revoke the settlement order, we do not intend to
ascribe this intention to a statutory body like SEBI, which is cast with
an important duty of protecting the interest of investors and securities
and to promote the development and regulate the securities market. At
this juncture, we must however express that all the while after passing
of the order of settlement till the passing of the impugned order
revoking the same, not a single act is indicative of the intention of SEBI
to revoke the settlement on the ground of non-compliance and we have
noted Mr. Dhond arguing before us that all the while BNL was taken a
garden path and all of a sudden, it is attributed of a failure to comply
with the terms of settlement.
97. Regulation 28 empowered the board to revoke the settlement on
failure to comply with the conditions in the order and in such case the
settlement order would stand revoked and withdrawn and the board
shall be competent to restore or initiate the proceedings with respect to
which the settlement order is passed.
In the present case, SEBI vehemently told us that there is a
failure to comply with the settlement order which is definitely distinct
Page 112 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
from a breach which is wilful as “failed to comply” would not govern an
inability to perform in peculiar circumstances and all the while the
stand of BNL through its representation is the impediment in its way,
when it could not achieve the timelines and the steps which it
contemplated as a compliance of the settlement order.
From the arguments advanced before us and in the wake of
reading of exchange of communications, it cannot be said that BNL had
an intention to evade or flout the settlement order and that the breach
alleged is wilful. BNL sprung into action immediately when the
settlement order was communicated to it and laid its blue print of
action before SEBI, which SEBI tacitly accepted and never raised any
objection and hence the accusation that there was failure to comply
with the terms of settlement at the end of BNL and therefore the
settlement order shall stand revoked against all the noticees is too
broad a proposition to accept. However, we agree with Mr. Bhatt and
Mr. Seervai that the settlement order is a composite order, since the
show cause notice alleged a concerted action on behalf of all the
noticees and therefore its effect was cumulative and, covered all of
them.
98. Another facet of the matter is whether SEBI ought to have
granted an opportunity of hearing to the Petitioners before the
revocation order was passed as its action involved civil consequences
and in particular when the breach alleged is not wilful but it is the case
Page 113 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
of BNL that it was disabled from completing its course of action leading
to a full dressed compliance of the terms of settlement. BNL had three
buyers before it which was part of its first step but was unable to
complete the transaction in the wake of the order passed by the Court
restraining it from finalizing the offer.
The well known maxim “Lex non cogit ad impossibilia” – “The
law compels no impossibility”, being discussed in Bennion’s Statutory
Interpretation, IVth Edition at page 969, “when an enactment requires
what is legally impossible, it will be presumed that parliament
intended it to modify so as to remove the impossibility element” and
this principle in form of doctrine of Impossibility of Performance has
been gainfully applied by the Indian Courts and has been invoked by
BNL by urging before SEBI, that it is excused from performing what it
could not perform legally.
This principle has found its way in the Constitution Bench
decision in the case of Indore Development Authority (LAPSE-
5J.) vs. Manoharlal & Ors.16 with the following observations :
“314. The maxim “lex non cogit ad impossibilia” means that the
law does not expect the performance of the impossible. Though
payment is possible but the logic of payment is relevant. There are
cases in which compensation was tendered, but refused and then
deposited in the treasury. There was litigation in court, which was
pending (or in some cases, decided); earlier references for
enhancement of compensation were sought and compensation was
enhanced. There was no challenge to acquisition proceedings or16 (2020) 8 SCC 129
Page 114 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doctaking possession, etc. In pending matters in this Court or in the
High Court even in proceedings relating to compensation, Section
24(2) was invoked to state that proceedings have lapsed due to
non-deposit of compensation in the court or to deposit in the
treasury or otherwise due to interim order of the court needful
could not be done, as such proceedings should lapse.”
…
319. In Standard Chartered Bank v. Directorate of Enforcement
[Standard Chartered Bank v. Directorate of Enforcement, (2005)
4 SCC 530 : 2005 SCC (Cri) 961] , the legal maxim “impotentia
excusat legem” has been applied to hold that law does not compel
a man to do that which cannot possibly be performed. Though the
maxim with respect to the impossibility of performance may not be
strictly applicable, however, the effect of the court’s order, for the
time being, made the authorities disable to fulfil the obligation.
Thus, when they were incapable of performing, they have to be
permitted to perform at the first available opportunity, which is
the time prescribed by the statute for them i.e. the total period of 5
years excluding the period of the interim order.”
The maxim founded principle of equity, clearly indicate – The
law does not compel a man to do what he cannot possibly perform.
99. SEBI while revoking the order of settlement vide its
communication dated 10.11.2023, has simply informed the Petitioners
that the settlement order dated 12.09.2022 stands revoked and
withdrawn in terms of Regulation 28 of the SEBI (Settlement
Proceedings), Regulation 2018, for failure to comply with the
settlement order. By the said communication, it has also intimated to
Page 115 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
the Petitioners that no amount paid shall be refunded and the board
shall restore/initiate the proceedings.
In the common affidavit filed on behalf of SEBI, it is admitted
that BNL undertook to provide exit offer to its public shareholders for
period of three months after settlement order at the same exit price
which was offered in 2019 and therefore it was imperative for it to
provide an exit offer. In addition, it is the stand of SEBI that the show
cause notice dated 28.10.2020 was a composite notice against all eight
Petitioners and the Order dated 12.09.2022 was a composite order
which bind all the eight entities.
This order, according to the affidavit of SEBI was to be complied
in letter and spirit by all eight entities and SEBI categorically state that
it was continuously examining if they are complying with the directions
contained in the settlement order and it so stated in its affidavit dated
13.03.2023. If this is the stand of SEBI and particularly when it did not
address any single communication to BNL or any of the Petitioners that
they were not proceeding in accordance with the terms of settlement,
its stand in the affidavit that since the Petitioners were not able to fully
comply with the settlement order, SEBI decided to revoke the same and
therefore it issued the impugned communication is nothing but a flip
flop, in our view.
For reaching this conclusion, SEBI has relied upon the
communication dated 19.12.2022, where the Petitioners (BNL) had
Page 116 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
stated that it would not be appropriate to proceed with the exit offer at
that stage.
The affidavit therefore make a reference to the communication
from BNL addressed to the Settlement Division on 19.12.2022 and also
the affidavit of the Petitioners dated 09.03.2023 where it was
categorically stated that by letter dated 19.12.2022, BNL informed SEBI
that in the wake of the directions of the High Court with regard to buy-
back process, it had become difficult for it to take any further steps
with respect to exit proposed offer and it would not be appropriate to
proceed with the exit offer at that stage and therefore SEBI was
informed that Proposed Exit Offer was kept on hold, until it was
permitted to finalise the buy-back offer.
100. A reading of the communication dated 19.12.2022 from BNL,
in the wake of the interim order passed by the Court on 05.12.2022,
apprising it about its resolve to the buy-back offer despite indicating
that in the interest of fair disclosure, the company has already made a
public announcement on 18.12.2022 informing the shareholders of the
development relating to interim order and its impact on the finalisation
of the buy-back offer. However, what is missed out is a subsequent
narration, which was brought to the notice of SEBI :
“7. Kindly note that as mentioned in the Compliance Report, the
Company had approached its certain public shareholders asking if
any such shareholder is willing to come forth and provide an exit
offer to other public shareholders of the Company by offering to
purchase their shares at the Exit Price, after the completion of the
Page 117 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docBuy-back Offer by the Company. Thereafter, the Company had
received communication from certain shareholders indicating
their willingness to provide an exit offer, upto a certain amount
(subject to necessary internal approvals at their end), to the
remaining shareholders of the Company (over and above such
shareholders who would be bought back as part of the Buy-back
Offer), at the Exit Price, for a period of two months following the
Buy-back Offer (hereinafter referred as, the Proposed Exit Offer).
However, given that the Buy-back Offer has been kept on hold by
the BHC by way of the Interim Orders, it has become difficult to
take any further steps with respect to the Proposed Exit Offer. The
petitioners to the Writ Petitions have challenged the terms of the
Settlement Order and have inter alia sought quashing of the
Settlement Order by the BHC. Therefore, pending directions from
the BHC permitting the Company to proceed further in providing
an exit to its shareholders by finalising the Buy-back Offer, it will
not be appropriate to proceed further with the Proposed Exit Offer
at this stage; accordingly, the Proposed Exit Offer has been kept on
hold till the time the Company is permitted to finalise the Buy-
back Offer.
8. We request your understanding and co-operation in
considering that the Company has made its best efforts to comply
with the Settlement Order, and the inability to complete the Buy-
back Offer within the prescribed timelines is borne solely out of
the Interim Orders of the BHC in the aforesaid ongoing judicial
proceedings. We reiterate our commitment to take steps to finalise
the Buy-back Offer as and when it becomes permissible for the
Company to do so, in compliance with further directions of the
BHC.”
101. In terms of the affidavit dated 20.02.2024, SEBI has adopted a
stand that in the wake of the admitted factual position when BNL itself
had expressed its inability to follow the path chartered by it and clearly
Page 118 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
stated that it has become difficult for it to take any further steps with
respect to the proposed exit order, it has resulted into failure to comply
with the settlement order. Based upon this stand, SEBI has pleaded
that there was no necessity of affording of hearing to the Petitioners as
the Petitioners did not comply with the non-monetary terms and there
was no requirement of ensuring compliance of the principles of natural
justice as in any case neither Section 15JB of SEBI Act, 1992 and SEBI
(Settlement Proceedings) Regulation 2018 contemplate so.
102. It cannot be disputed that SEBI continued to entertain the
Petitioners and specifically BNL, when it kept it informed about the
steps taken for ensuring a compliance with the settlement order and at
time also expressed, as to how it was placed in a difficult situation in
the wake of the interim order passed by the High Court when it was
unable to move ahead. It is not the case that SEBI arrived at a
conclusion that there was the breach of the non-monetary terms of
settlement order immediately after three months had lapsed but for
almost for fourteen months, SEBI continued to entertain BNL and even
found the stand of BNL to be a plausible one promoting it to file an
affidavit before the Court on 13.03.2023, resonating with the stand of
BNL, that the buy-back cannot be proceeded in view of the directions
passed by the High Court, despite the fact that by virtue of voluntary
undertaking given to it, it should provide exit offer to all its public
shareholders for a period of three months.
Page 119 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
What made SEBI suddenly adopt a ‘U’ turn and alleged failure of
compliance of the directions as not fathomable.
103. SEBI functions as a Regulator and has a duty to act fairly, while
conducting proceedings pursuant to initiation of action against the
parties. Given the discharge of functions by the Board to protect the
interest of investors in securities, and while it investigate the
transactions in securities, being dealt in a manner detrimental to the
interest of investors or securities market or initiate an action against
any person/entity associated with securities which is alleged to have
violated any of the violations of the SEBI Act or Rules made or
directions issued by it, it is expected to act in a fair manner and shall
make no attempt to circumvent the Rule of law. As observed by the
Apex Court in the case of Reliance Industries Ltd. v. SEBI17, there
is a substantive duty on the Regulator to show fairness, in the form of public
cooperation and deference. The observations of the Apex Court in paragraph
45 is worth to be taken note of :
“45. The duty to act fairly by SEBI, is inextricably tied with the
principles of natural justice, wherein a party cannot be condemned
without having been given an adequate opportunity to defend
itself. In State Bank of Patiala v. SK Sharma, (1996) 3 SCC 364,
this Court while dealing with document disclosure and natural
justice held as under: (SCC pp. 385-86, para 28)
“28. The decisions cited above make one thing clear, viz.,
principles of natural justice cannot be reduced to any hard
and fast formulae. As said in Russell v. Duke of Norfolk
[(1949) 1 All ER 109 : 65 TLR 225] way back in 1949, these
principles cannot be put in a straitjacket. Their applicability17 (2022) 10 SCC 181
Page 120 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docdepends upon the context and the facts and circumstances
of each case.
(..As pointed out by this Court in A.K. Kraipak v. Union of India
[(1969) 2 SCC 262] , the dividing line between quasi-judicial
function and administrative function (affecting the rights of a
party) has become quite thin and almost indistinguishable — …”
104. In no uncertain terms, the importance of adopting
transparency in the judicial process was highlighted in paragraph 48 of
the decision by observing that keeping a party abreast of the
information that influenced the decision promotes transparency of the
judicial process which was discussed in T. Takano vs. Securities
and Exchange Board of India (SEBI) 18 with the following
observations :
“27. While the respondents have submitted that only materials
that have been relied on by the Board need to be disclosed, the
appellant has contended that all relevant materials need to be
disclosed. While trying to answer this issue, we are faced with a
multitude of other equally important issues. These issues, all
paramount in shaping the jurisprudence surrounding the
principles of access to justice and transparency, range from
identifying the purpose and extent of disclosure required, to
balancing the conflicting claims of access to justice and grounds of
public interest such as privacy, confidentiality and market
interest”
105. When SEBI, upon reflecting on the role played by SEBI
throughout the process and which is brought before us through oral
arguments as well as the affidavit placed before us, it is apparent that it
was monitoring the steps taken by BNL to ensure compliance of the
18 (2022) 8 SCC 162
Page 121 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
settlement order and it cannot be doubted that BNL has also already
initiated elaborate process for ensuring compliance and now when
SEBI alleges that the compliance as indicated in the settlement order is
not adhered to whereas BNL strongly contending that it had kept SEBI
into loophole and had furnished all necessary documents required, it
becomes necessary to afford an opportunity of hearing as against the
said action, there is no provision for appeal, review, etc.
One of the notable arguments advanced on behalf of the
Petitioners is, since the impugned order entail civil consequences, as
the settlement order being passed, conferred an immunity on the
Petitioners from any further action being initiated against the
entities/noticees, which could be both civil and criminal action and
therefore when it is revoked, it is necessary to adhere to the principles
of natural justice.
106. Rival contentions are advanced before us whether it was
necessary for SEBI to pass a speaking order, without any opportunity of
hearing or being afforded on consideration of its representation, as
according to the Petitioners, the order prejudices them and particularly
when SEBI as a public authority has a duty to act in a fair and
transparent manner and that the arbitrary and hasty decision taken by
it fail to follow due process of law.
It is trite position of law that principles of natural justice are not
merely formalities but they constitute substantive obligations that need
Page 122 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
to be adhered to by the decision making and adjudicating authorities,
it so a quasi-judicial authority. The adherence to the principles, act as a
guarantee against arbitrary action, both in terms of procedure and
substance and the two well known fundamental principles of natural
justice cover a pivotal principal of audi alteram partem, meaning that
a person affected must be heard before a decision he is visited with an
advise.
By expansion of the said principle, which it is equally made
applicable to the administrative as well as quasi judicial actions, it is
considered mandatory to provide for an opportunity of being heard,
when an administrative action results in civil consequence to a person
or an entity and every such action which involves civil consequences
must be consistent with the rules of natural justice.
107. Right from the decision of the Apex Court in the case of A. K.
Kraipak & Ors. vs. Union of India & Ors.19 till the recent decision
in case of SBI vs. Rajesh Agarwal (supra) on which strong reliance
is placed by the Petitioners, it is a well settled norm that a party who is
prejudiced by an order intended to be passed, is entitled to hearing,
applying alike to judicial tribunals and bodies of persons invested with
authority to adjudicate upon matters involving civil consequences.
It is one of the fundamental rules of our constitutional set-up that
every person is protected against exercise of arbitrary authority by the State
or its officers and if there is a power to decide and determine to the prejudice
19 (1969 (2) SCC 262
Page 123 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
of a person, duty to act judicially is implicit in the exercise of such power and
if an action is found devoid of these ingredient, then the order is a nullity.
The distinction between a judicial act and an administrative act has
withered away with passage of time and even an administrative order which
involves civil consequences must necessarily adhere to the principles of
natural justice.
The expression “civil consequences” encompasses infraction of not
merely property or personal rights but of civil liberties, material deprivations
and non-pecuniary damages and in its wide umbrella covers everything that
affects a citizen in his civil life.
108. In case of Rajesh Agarwal (supra), the Apex Court examined the
facet of ‘audi alteram partem’ in the backdrop of the duty of
administrative authority to act fairly and without being discriminatory,
with reference to the Reserve Bank of India, which is cast with the duty
to protect the banking system and with reference to the directions
issued to be followed by the bank before forming an opinion to proceed
with the criminal complaint against a borrower as well as the civil
consequences likely to flow therefrom.
With reference to the peculiar facts, while holding that rule of
audi alteram partem ought to be read in the relevant clauses of Master
Directions on Frauds, the Apex Court observed thus :
“95. In light of the legal position noted above, we hold that the
rule of audi alteram partem ought to be read in Clauses 8.9.4 and
8.9.5 of the Master Directions on Fraud. Consistent with the
principles of natural justice, the lender banks should provide anPage 124 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docopportunity to a borrower by furnishing a copy of the audit reports
and allow the borrower a reasonable opportunity to submit a
representation before classifying the account as fraud. A reasoned
order has to be issued on the objections addressed by the
borrower. On perusal of the facts, it is indubitable that the lender
banks did not provide an opportunity of hearing to the borrowers
before classifying their accounts as fraud. Therefore, the impugned
decision to classify the borrower account as fraud is vitiated by the
failure to observe the rule of audi alteram partem. In the present
batch of appeals, this Court passed an ad interim order [Shree
Saraiwwalaa Agrr Refineries Ltd. v. Union of India, 2022 SCC
OnLine SC 1905] restraining the lender banks from taking any
precipitate action against the borrowers for the time being. In
pursuance of our aforesaid reasoning, we hold that the decision by
the lender banks to classify the borrower accounts as fraud, is
violative of the principles of natural justice. The banks would be at
liberty to take fresh steps in accordance with this decision.”
Finally it is held that application of audi alteram partem,
principle cannot be impliedly excluded under the Master Directors of
Frauds and the principles of natural justice demanded that borrowers
must be served a notice, given an opportunity to explain the conclusion
of the forensic audit report and be allowed to be represented by the
banks before their account is classified as ‘fraud’ under the Masters
Directors of Fraud. In addition, the decision to classify in the
borrowers account as fraudulent must be preceded by a reasoned order.
A specific direction was issued to read the principle of audi
alteram partem, into the provisions of Master Directors on Frauds,
Page 125 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
which do not contemplate an opportunity of hearing to the borrower
before classifying their account as fraud.
109. Another aspect which also compel us to accept the arguments
advanced on behalf of the Petitioners, is the absence of reasons in the
impugned order.
In India, the judicial trend has always been to record reasons,
even in administrative decisions, if such decisions affects a party
adversely and even a quasi judicial authority is expected to record
reasons in support of its conclusions, as it form the soul of the order.
Necessity of recording of reasons is meant to serve a facet of principles
of natural justice, that justice is not only been done, but should also
appear to be done as well.
Recording of reasons operate as a valid restraint on possibly
arbitrary exercise of power and ensure that the power has been
exercised on relevant grounds and by disregarding extraneous
considerations. The reasons afforded also facilitate the process of
judicial review by the Superior Court and therefore offering of reason is
a requirement for, both judicial accountability and transparency.
110. Though an attempt was made before us to submit that the
revocation of the settlement order is a just a communication and is not
an ‘order’, we are not ready to accept the said submission as Mr. Bhatt
in no uncertain terms have argued before us orally and has also placed
before us the entire record of the investigation proceedings which make
Page 126 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
us accept the submission that the impugned communication is nothing
but an order. We, then cannot but observe that the said order is
unreasoned and it do not satisfy the requirement of the order being
compliant with the rules of natural justice, as reasons substitute
subjectivity by objectivity.
The rationale in passing a reasoned order is also being that the
affected party know why the decision has gone against him and this
being recognised as a statutory requirement of natural justice, the
impugned order which fails to ensure its compliance cannot be
sustained.
The one sentence order revoking the settlement order without
offering any explanation or detail to support and particularly having
been passed 14 months after settlement order is passed, with a heap of
correspondence entered into between the parties, in our opinion, the
impugned order of revocation, which failed to give any reason for its
conclusion by submitting that Regulation 28 contemplate automatic
revocation if there is no compliance, is not an argument which would
persuade us to be accepted.
Absence of reason has rendered the impugned order
unsustainable, when such order is subject to challenge before the
higher forum and in this case, particularly when BNL was all the while
in contact with SEBI and have complied with each of its directions to
submit the documents and information from time to time, the one line
Page 127 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
order revoking settlement, justly arrived, order definitely defeats the
principles of natural justice, as the reasoning in an order ensure
transparency and fairness in decision making and particularly when
SEBI, a Regulator is expected to act fairly while conducting proceedings
or initiating any action against the parties.
111. Reliance by Mr. Bhatt in State of U.P. vs. Sudhir Kumar
Singh (Supra), in our considered opinion do not apply to the facts
before us.
There may be situations where fair hearing would make no
difference, meaning that hearing would not change the ultimate
conclusion reached by its maker and in such situation, there would
arise no legal duty to offer hearing. In such situation, fair procedure
appear to serve no purpose since the right could be secured without
according such treatment to the affected party/person and, therefore, it
may not be necessary to strike off the action only on the ground that it
is in violation of principles of natural justice, rendering the order null
and void. In such situation, the validity of the order has to be decided
on the touchstone of prejudice, the ultimate test being test of prejudice
or the test of fair hearing.
In Sudhir Kumar Singh (Supra), the relevant observation of
the Apex Court reads thus :
“36. What is important to note is that it is the court or tribunal
which must determine whether or not prejudice has been caused,
and not the authority on an ex parte appraisal of the facts. This hasPage 128 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docbeen well-explained in a later judgment, namely, Dharampal
Satyapal Ltd. v. CCE [Dharampal Satyapal Ltd. v. CCE, (2015) 8
SCC 519] , in which, after setting out a number of judgments, this
Court concluded : (SCC pp. 538-41, paras 38-40 & 42-45)” …
40. In this behalf, we need to notice one other exception
which has been carved out to the aforesaid principle by the
courts. Even if it is found by the court that there is a violation
of principles of natural justice, the courts have held that it
may not be necessary to strike down the action and refer the
matter back to the authorities to take fresh decision after
complying with the procedural requirement in those cases
where non-grant of hearing has not caused any prejudice to
the person against whom the action is taken. Therefore, every
violation of a facet of natural justice may not lead to the
conclusion that the order passed is always null and void. The
validity of the order has to be decided on the touchstone of
“prejudice”. The ultimate test is always the same viz. the test
of prejudice or the test of fair hearing.
…
42. So far so good. However, an important question posed by
Mr Sorabjee is as to whether it is open to the authority, which
has to take a decision, to dispense with the requirement of the
principles of natural justice on the ground that affording such
an opportunity will not make any difference? To put it
otherwise, can the administrative authority dispense with the
requirement of issuing notice by itself deciding that no
prejudice will be caused to the person against whom the
action is contemplated? Answer has to be in the negative. It is
not permissible for the authority to jump over the
compliance of the principles of natural justice on the ground
that even if hearing had been provided it would have servedPage 129 of 132
11th June 2025::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.docno useful purpose. The opportunity of hearing will serve the
purpose or not has to be considered at a later stage and such
things cannot be presumed by the authority.”
112. The decision making authority therefore itself cannot dispense
with the requirement of natural justice on the ground that affording
such opportunity will not make any difference as no prejudice will be
caused to the person. Whether an opportunity of hearing will serve the
purpose or not cannot be presumed by an authority but it is only for the
Court to consider whether any purpose could be served in remanding
the case keeping in mind whether any prejudice is caused to the person
against whom the action is taken.
In the facts before us, we find great prejudice caused to the
Petitioners and though Mr. Bhatt has vehemently urged before us that
principles of natural justice need not be made as a shield, as in the
present case since the facts are admitted and not denied and
specifically that BNL did not comply with the undertaking of providing
an exit offer and even today they are not in a position to comply and do
not tell the Court or to SEBI as to how they are going to ensure its
compliance and rather in their representation they have made it clear
that they are unable to comply and, therefore, giving an opportunity of
hearing would have made no difference.
Here we disagree as we find that in the peculiar facts of the case,
when after a gap of more than fourteen months, SEBI argued before us
that there is a failure to comply with the stipulations in the settlement
Page 130 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
order, while we have noted that SEBI never raised any objection when
BNL was appraising it of the steps taken to ensure compliance of the
settlement order and when all of a sudden it makes up its mind to
revoke the settlement order, we are of the firm view, that this is a fit
case where it ought to have granted an opportunity of hearing to the
Petitioners before it embarked upon the journey to revoke the
settlement order.
In the representation preferred to SEBI, BNL was consistently
praying for an opportunity of hearing and the argument that since they
have breached the undertaking, SEBI did not hear them and there is no
possibility of them performing now, according to us, do not excuse
SEBI of denying the hearing to the Petitioners, and particularly BNL,
when it accused it of acting in breach of the terms of settlement.
113. Arguments are also advanced before us about the competency of
the authority/person passing the order. We have noted the Regulation
which permit the delegation of authority and since the SEBI has
categorically stated in the affidavit that the delegated power has been
put to use, we do not intend to interfere with the order on that ground.
In any case, since we are remanding the matter back to SEBI for
reconsideration of its decision to revoke the order of settlement, on the
ground of failure of the Petitioners to comply with its conditions and
since we are of the view that the decision ought to have been preceded
by an opportunity of hearing to the Petitioners, contemplating
Page 131 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::
SEBI MATTER_.doc
withdrawal of the settlement order on the ground of its breach, we
permit the Petitioners to raise this ground before the SEBI, which shall
then be duty bound to consider it.
114. In the wake of the aforesaid discussion, we quash and set aside
the impugned order passed by SEBI, communicated to the Petitioners
on 10.11.2023 and remand the proceedings of the settlement
applications qua each of the Petitioner to SEBI for reconsideration, by
affording an opportunity of hearing to the Petitioners within a time
bound manner and we expect the order to be passed, to be reasoned
order. The aforesaid exercise shall be carried out within a period of
four months from the receipt of the order by SEBI.
Writ Petition Nos. 3977 of 2024, 4828 of 2024 and 2325 of 2024
are made absolute to the aforesaid extent.
All pending Interim Applications are disposed off.
MANJUSHA DESHPANDE, J BHARATI DANGRE, J
ANDREZA RODRIGUES Digitally signed by ANDREZA
RODRIGUES EPEREIRA
EPEREIRA Date: 2025.06.16 20:09:53 +05’30’
Page 132 of 132
11th June 2025
::: Uploaded on – 16/06/2025 ::: Downloaded on – 21/06/2025 19:35:13 :::