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Securities And Exchange Board Of India v. Sahara India Real Estate Corporation Limited And Others
Factual and Procedural Background
The Supreme Court was seized of a special leave petition challenging an ad-interim order dated in Civil Misc. Writ Petition No. 11702 of 2010 (Misc. Bench 11702/2010) pending before the High Court. The High Court’s interim order had stayed a prior directive (Annexure 1 to the writ petition) while allowing the Securities and Exchange Board of India (SEBI) to continue its inquiry and directing the Registrar of Companies (RoC) to investigate issues affecting shareholders. Given the substantial investor interests at stake, the Supreme Court considered whether to interfere with the High Court’s interim order and instead opted to accelerate the High Court proceedings. It ordered that the writ petition be heard on a day-to-day basis starting 12-01-2011 and required SEBI and the RoC to file counter-affidavits by 07-01-2011.
Legal Issues Presented
- Whether the Supreme Court should interfere with the High Court’s ad-interim order at the present stage of the writ proceedings.
- Whether SEBI is entitled, during the pendency of its inquiry, to call for all information it deems necessary, including the names of investors in Optionally Fully Convertible Debentures (OFCDs).
Arguments of the Parties
Respondent 1’s Position
- Through senior counsel Mr. Sorabjee, Respondent 1 agreed to furnish any information SEBI may request in the course of its inquiry, while expressly reserving all substantive rights and contentions in the pending matter.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Supreme Court observed that the challenged order was only ad-interim and that the High Court had already scheduled the matter for a peremptory hearing on 12-01-2011. Because the High Court had granted SEBI liberty to proceed with its inquiry and required Respondent 1 to cooperate with the RoC, the Supreme Court found no immediate basis to intervene. Nonetheless, recognising the magnitude of investor interests involved, the Court:
- Directed the High Court to hear the writ petition on a continuous, day-to-day basis without adjournments from 12-01-2011 onward.
- Ordered SEBI and the RoC to file their counter-affidavits by 07-01-2011, ensuring prompt service on Respondent 1.
- Clarified that SEBI is entitled to demand any information it considers necessary, including identifying OFCD investors.
The Court expressly refrained from commenting on the merits of the underlying controversy, limiting its intervention to procedural facilitation and clarification of SEBI’s investigatory powers.
Holding and Implications
The special leave petition was DISPOSED OF without interference with the High Court’s interim order.
Implications: The writ petition will now proceed expeditiously before the High Court on a day-to-day basis. SEBI may fully exercise its investigative authority during the inquiry, and Respondent 1 has committed to supply requested information. The Supreme Court set no new precedent; its order primarily ensures procedural efficiency and protects investor interests in the interim.
Order
1. Taken on board. Since the impugned order Civil Misc. WP No. 11702 of 2010 (Misc. Bench 11702/2010) is an ad interim order and as the matter is listed for peremptory hearing on 12-1-2011, we see no reason to interfere at this stage. However, in view of the stakes involved (including protection of the investors), we are directing the High Court to proceed with the hearing of the case on day-to-day basis from 12-1-2011, without adjourning the case. We are directing SEBI and Registrar of Companies (RoC) to file its counter-affidavit by 7-1-2011, and copy be furnished immediately to Respondent 1 herein.
2. We quote hereinbelow para 32 of the impugned order Civil Misc. WP No. 11702 of 2010 (Misc. Bench 11702/2010) of the High Court:
“As an interim measure, the operation of the impugned order contained in Annexure 1 to the writ petition is stayed with liberty to SEBI to proceed with the inquiry but no final decision shall be taken. However, the Registrar of Companies/Central Government is directed to proceed with the controversy at their end, investigate in the interest of shareholders and submit a status report by the next date of listing. The petitioners shall provide all necessary required information to the Registrar of Companies in terms of the notices dated 21-9-2010 and 14-10-2010 expeditiously say within three weeks. In case the Registrar arrives at the conclusion that it is a case of public company then, shall proceed in accordance to law and also inform SEBI.”
From the said paragraph, we find that the High Court has given liberty to SEBI to proceed with the inquiry. At the same time, the High Court has directed Respondent 1 to give the names of the investors to RoC in terms of the notices dated 21-9-2010 and 14-10-2010. We make it clear that SEBI would also be entitled to call for any information which it deems fit, including the names of the investors who have invested in OFCDs in the course of the inquiry.
3. Mr Sorabjee, learned Senior Counsel appearing for Respondent 1, very fairly states that they agree to give information that SEBI will call upon them to furnish in the inquiry. However, it shall be given without prejudice to the rights and contentions in the pending matter.
4. Before concluding, we make it clear that we express no opinion on the merits of the case. We request the High Court to expeditiously hear and decide the case. The special leave petition is disposed of accordingly.
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