SC dismisses SEBI plea on transfer of pending cases

NEW DELHI: The Supreme Court on Friday dismissed the Securities and Exchange Board of India (SEBI) plea, seeking transfer to the apex court all petitions pending in various courts across the country challenging its regulatory power. A bench comprising justice H K Sema and justice L S Panta dismissed SEBI’s petition.

Solicitor general GE Vahanavati on behalf of the market regulator said that various petitions were pending in high courts of Madhya Pradesh, Gujarat, Chhattisgarh and others. It involves the similar question of the regulatory power of SEBI under the SEBI Act, 1992, and SEBI (collective investment scheme) Regulations, 1999.

In order to avoid conflicting judgments of high courts on the same issue, it is essential to transfer all those to this court (apex court), said Mr Vahanavati. However, it was opposed by some of the companies.

Advocate Prashant Kumar, appearing for ND Plantation, opposed the transfer petition of SEBI on the ground that the petitions pending in various high courts were with different facts. Secondly, no proper ground has been made out by SEBI for seeking transfer of petitions, argued Mr Kumar.

SEBI in its petition had said that the Central government in 1997 declared the entities, issuing agro bonds and plantation bonds, to be treated as collective investment schemes (CIS) and thus would fall under the provisions of Section 11 (2) of the SEBI Act, 1992.

SEBI further stated that it, after ordering audits in 35 such companies, found that these companies had offered high unrealistic tax-free returns without any basis just to woo investors and diverted the collected funds to unrelated activities without any security.

The petition had said that the regulator had received a number of complaints from across the country on bouncing of cheques issued by various CIS entities and vanishing companies.

“It is apparent that these companies are not conducting their affairs in the interests of investors from whom they are collecting their funds by promising unrealistic returns. It is, therefore, incumbent that the said petitions be transferred to this court,” SEBI had said in its petition.