The Practical Lawyer

Sahara India Real Estate Corpn. Ltd. v. Securities and Exchange Board of India,
(2013) 1 SCC 1

Debt, Financial and Monetary Laws

Non-Scheduled Banks/ NBFCs/Chit Funds/Saving Schemes/Financial leasing

Suspected case of fictitious deposit scheme involving tens of thousands of crores of rupees - Detailed directions issued,
per curiam, for creation of mechanism under stewardship of retired Supreme Court Judge for refund of amounts illegally
collected by appellant Companies with 15% interest per annum from date of receipt of subscription amount till date of
refund to SEBI by appellant Sahara Companies - Further directed (per curiam), if Saharas fail to comply with these
directions and do not effect refund of money as directed, SEBI to take recourse to all legal remedies including
attachment and sale of properties, freezing of bank accounts, etc. for realisation of amounts - SEBI to then locate
genuine depositor/investors (if any) and refund money to them - Unclaimed amounts to be appropriated to Government
of India - Held (per Radhakrishnan, J), maxim acta exteriora indicant interiora secreta (external action reveals inner
secrets) applies with all force in case of Saharas, which has been demonstrated on facts as well as on law - Conduct and
actions of Saharas indicate their intention - Their so-called intention has to be judged from their subsequent conduct -
Subsequent illegality shows that Saharas contemplated illegality - Such economic offences like the one committed by the
Saharas have to be treated with an iron hand, or else it may result in another security market pandemonium - Held (per
Khehar, J.), from examination of so called complete particulars of depositors/investors in OFCD scheme floated by
appellant Saharas the whole affair seems totally unrealistic, and may well be fictitious, concocted and made up - From
letters written by Saharas in January 2011, held, it was rightly concluded by SEBI that appellant Saharas were seeking
professional services to collect and compile data pertaining to OFCDs issued by them vide RHPs dt. 13-3-2008 and 6-10-
2009 - Since subscription to OFCDs under reference commenced in March 2008/October 2009, the same justifiably
raised suspicions about genuineness and bona fides of appellant Companies - Surely suspicion of SEBI was well placed -
This itself is sufficient to conclude that whole affair was doubtful, dubious and questionable - The consequence thereof,
if correct, would be shocking - It seems that that there may be no real subscribers of OFCDs issued by appellant Saharas
- or alternatively, there may be an intermix of real and fictitious subscribers - Apparent attempt of Saharas to withhold
disclosure of factual position solicited by SEBI cannot be brushed aside lightly - After all, both appellants were
proceeding on legal guidance right from the beginning - Procedure adopted by appellants makes their entire approach
calculated and crafty , (2013) 1 SCC 1-A

Securities, Markets and Exchanges

Economic offences pertaining to securities

Need to deal severely with - Collection of huge amounts (several thousand crores) from public at large, by public
companies by way of issuance of securities violating mandatory statutory requirements - Preplanned, and intentional
attempt to deliberately bypass regulatory and administrative authority of SEBI - Such economic offences, held (per
curiam), must be dealt with an iron hand - Else these may lead to further security market pandemoniums - Suspected
case of fictitious deposit scheme as a cover for money-laundering involving tens of thousands of crores of rupees -
Detailed directions issued for creation of mechanism under stewardship of retired Supreme Court Judge for transfer of
amounts illegally collected with 15% interest per annum to SEBI by appellant Sahara Companies - SEBI to then locate
genuine investors (if any) and refund money to them - Unclaimed amounts to be appropriated by escheat to Government
of India, (2013) 1 SCC 1-B

Corporate Laws

Companies Act, 1956

S. 73(2) - Violation of listing requirements in relation to public issue - Legal consequences -Obligation to refund money
collected from public with interest, held (per curiam), is mandatory as per S. 73(2) - Refund directed, per curiam, in
present case along with interest @ 15% p.a. from date of receipt of subscription amount till date of refund - Sum illegally
collected running into thousands of crores of rupees - Further detailed directions issued, to ensure refund of the monies
under stewardship of retired Supreme Court Judge, and ascertainment of true facts as to source of monies, etc., (2013)
1 SCC 1-C

Corporate Laws

Companies Act, 1956

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S. 67(3) first proviso r/w S. 73(1) and Ss. 67(1), (2), (3)(a) & (b) and Ss. 56, 68 & 60-B and Sch. 2 Pt. I - Public
offer/issue or invitation of securities - Meaning and scope of - Overriding effect of S. 67(3) first proviso - Deemed public
offer/issue leading to automatic mandatory requirement of listing on recognised stock exchange - Offer to more than 49
persons - Listing of securities on recognised stock exchange in case of - Mandatory legal obligation as to, of listed and
unlisted public companies - Applicability of said mandatory legal obligation to every public company - Obligation of listing,
when arises - Word intend - Meaning and scope of - Determination of intent of company - Relevant considerations -
Irrelevance of volition, discretion or stated intention of company making deemed public offer/issue in respect of
abovesaid mandatory obligation of listing which arises by operation of law as soon as offer/issue/invitation of securities is
made to more than 49 persons - After insertion of S. 67(3) first proviso with effect from 13-12-2000, any offer of securities
by any company to more than 49 persons, held (per curiam), will be deemed to be a public issue even if requirements of
exceptions under Ss. 67(3)(a) and/or (b) are satisfied - Thus, such offer/invitation would automatically attract all relevant
provisions of SEBI Act, regulations framed thereunder and Companies Act pertaining to public offers/issues/invitations of
securities - Hence, listing of securities on recognised stock exchange is mandatory in case of such offer or invitation to
more than 49 persons, and it is not dependent on volition or discretion of company concerned - Even offers falling under
Ss. 67(3)(a) or (b) attract mandatory requirement of listing if made to more than 49 persons - If unlisted company
expresses its intention, by conduct or otherwise, to offer its securities to public i.e. to more than 49 persons by issue of
prospectus, legal obligation to make application to a recognised stock exchange for listing arises immediately i.e. the
moment the company concerned issues prospectus expressing intention to offer securities to public - Intention of
company is to be gathered from its acts and conduct by application of maxim acta exteriora indicant interiora secreta
(external action reveals inner secrets) - No one in law can be presumed or deemed to intend something which is
contrary to law - Any offer of securities to public in violation of S. 67(3) proviso r/w S. 73(1) may attract civil and criminal
liability - Appellant Saharas had called for subscription to their securities by way of invitation to public (being to more than
49 persons) and not by way of private placement, as claimed by them - Further, in their red-herring prospectus (RHP),
they stated that they did not intend to get their securities listed on any recognised stock exchange - However, under law,
invitation for subscription from public could have been made only by way of listing through a recognised stock exchange -
Thus, held (per curiam), conduct and actions of appellant Companies indicated their intention to issue securities
(OFCDs) to public under garb of private placement - In such circumstances court can lift the veil to examine conduct and
method adopted by Saharas to defeat various provisions of law - Their failure to get securities (OFCDs) issued by them
listed was intentional and preplanned, and it must be held that they had contemplated illegality - Hence, despite their
protestations to the contrary appellants must be deemed to have intended to get their securities listed on a recognised
stock exchange, because they could only then be considered to have proceeded legally - Detailed directions issued for
creation of mechanism under stewardship of retired Supreme Court Judge for transfer of amounts illegally collected with
15% interest per annum to SEBI by appellant Sahara Companies - SEBI to then locate genuine investors (if any) and
refund money to them - Unclaimed amounts to be appropriated by escheat to Government of India, (2013) 1 SCC 1-D

Evidence Act, 1872

Ss. 8, 3, 14 and 15 - Intention of person (juristic or natural) - Inference of - Expressed or stated intention of person -
When irrelevant - No one in law, held, can be presumed or deemed to intend something which is contrary to law - Law
judges not what is in a person's mind: a person's inner intentions are to be read and understood from his acts and
omissions, taken as a whole - Whenever a person's state of mind is relevant, maxim acta exteriora indicant interiora
secreta (external action reveals inner secrets) comes into play - In present case, it was subsequent conduct of person
concerned that truly revealed its intentions, and not what it had expressedly stated - Hence, what was expressedly stated
was irrelevant, (2013) 1 SCC 1-E

Corporate Laws

Companies Act, 1956

Ss. 73, 67(3) first proviso, 56, 59, 62, 63, 68 and 68-A, 628 and 629 - Mandatory listing on recognised stock exchange
prior to public offer/issue of securities - Rationale for - Nature of continuing obligations of disclosure, and penalty for non-
compliance - Held, principles of listing are intended to assist public companies in identifying their obligations and
responsibilities, which are continuing in nature, transparent in content and call for a high degree of integrity - Disclosure
is the rule and there is no exception - Misleading the public is a serious crime, which may attract civil and criminal liability
- Any offer of securities to the public in violation of S. 67(3) proviso r/w S. 73(1) may attract civil and criminal liability - In
present case appellant Saharas' conduct invites civil and criminal liability under abovementioned provisions of
Companies Act and so on - Economic offences in India like the one committed by the Saharas have to be treated with an
iron hand, or else these may lead to another security market pandemonium - Suspected case of fictitious deposit scheme
as a cover for money-laundering involving tens of thousands of crores of rupees - Detailed directions issued for creation
of mechanism under stewardship of retired Supreme Court Judge for transfer of amounts illegally collected with 15%
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interest per annum to SEBI by appellant Sahara Companies - SEBI to then locate genuine investors (if any) and refund
money to them - Unclaimed amounts to be appropriated by escheat to Government of India, (2013) 1 SCC 1-F

Corporate Laws

Companies Act, 1956

Ss. 73, 67(3) first proviso, 56, 68, 60 and 60-B(9) - Overriding effect of S. 67(3) first proviso r/w S. 73 - Offer of
securities to more than 49 persons i.e. deemed public offer - Listing of securities on recognised stock exchange in case
of - Mandatory legal obligation as to, of listed and unlisted companies - Effect of registration of prospectus/red-herring
prospectus (RHP) with Registrar of Companies (RoC) only - Held, registration of RHPs by RoC does not mean that
mandatory provisions of S. 67(3) proviso r/w S. 73(1) and DIP Guidelines/2009 ICDR are not to be followed - In present
case OFCD offer being to more than 50 persons and it automatically being a public issue, appellant Saharas could not
have filed RHP or any prospectus with RoC alone, without submitting the same to SEBI [See also Shortnote O], (2013) 1
SCC 1-G

Corporate Laws

Companies Act, 1956

Ss. 73, 67(3) first proviso and 81(1-A) - Relative scope - Overriding effect of S. 67(3) first proviso r/w S. 73 - Offer of
securities to more than 49 persons i.e. deemed public offer - Listing of securities on recognised stock exchange in case
of - Mandatory legal obligation as to, of listed and unlisted companies - Effect of S. 81(1-A) - Held, S. 81(1-A) cannot in
any view have overriding effect on provisions relating to public issue - Even special resolution for further issue of capital
to persons other than shareholders can only be made subject to provisions of S. 67 i.e. that if offer is made to more than
49 persons, then it will automatically be deemed to be a public offer/issue - A public offer/ issue of securities will not
become a preferential allotment on description of label - S. 67(3) first proviso does not make any distinction between
listed or unlisted companies or between preferential or ordinary allotment, (2013) 1 SCC 1-H

Corporate Laws

Companies Act, 1956

Ss. 67(3)(a), (b) & first proviso, Ss. 73, 68 and 56 - Private placement of securities - What is - Exceptions under Ss.
67(3)(a) or (b) regarding not treating an offer/invitation of securities as having been made to the public - Invocation of -
Prerequisites - Held (per curiam), exceptions under Ss. 67(3)(a) or (b) can be invoked only if overriding requirement of
first proviso to S. 67(3) i.e. number of persons to whom offer/invitation is made does not exceed 49, is fulfilled - Thus,
private placement of securities can only be invitations/offers which are: (i) to 49 persons or less, and (ii) satisfy
requirements of Ss. 67(3)(a) and/or (b) - In present case, offer/issue of OFCDs by appellant Saharas did not satisfy either
Condition (i) or (ii), (2013) 1 SCC 1-I

Corporate Laws

Companies Act, 1956

Ss. 67(3)(a), (b) & first proviso, 73, 56, 68 and 60-B - Burden of proof to establish that offer/ invitation of securities
satisfied requirements of Ss. 67(3)(a) or (b) so as not to be treated as having been made to the public -
Details/information as to subscribers to issue/ offer of securities - Facts especially within knowledge of company making
issue/offer - Withholding of said details/information on basis of considered legal advice - Said details/information having
been called for by statutory body (SEBI) under relevant Act (SEBI Act) - Drawing of adverse inference against appellants
therefor, held, warranted with aid of S. 114 Ills. (g) & (h), Evidence Act, 1872 - Facts stated and omitted in information
memorandum (IM)/red-herring prospectus (RHP) issued by appellants - Relevance of - Appellant companies, belonging
to Business Group S, claiming that investors to issue floated by appellant Companies belonging to Group S, were
persons associated or connected with Group S - Burden to prove that claim, held, was on appellants - Burden not
discharged by them - No factual details had been furnished by appellant Saharas right up to these appeals before
Supreme Court, except for repeated assertions that issue was by way of private placement and umpteen legal objections
to proceedings/action taken by SEBI - Furthermore, said details/ information, held (per curiam), must be deemed to have
been consciously withheld as the same if disclosed, would have been unfavourable to appellants i.e. the same if
disclosed would have shown that optionally fully convertible debentures (OFCDs in question) were issued by appellants
by way of an invitation to public and not by way of private placement, as claimed by them - Furthermore, from facts
stated and omitted in IM and RHP and declarations flagrantly violative of statutory requirements made therein, it was
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possible to conclude, only on that basis, that real intent of appellant Saharas to offer said OFCDs was by way of
invitation to public, and not by private placement - Thus, there can be no hesitation in concluding that there was a
preplanned and intentional attempt by appellants to deliberately bypass regulatory and administrative authority of SEBI ,
(2013) 1 SCC 1-J

Corporate Laws

Companies Act, 1956

S. 67(3)(a) -Requirements of (provided that offer of securities is to less than fifty persons) - Non-transferability/non-
marketability of securities that have been issued - Requirement of - If satisfied - Transfer of security made subject to
prescribed terms and conditions and approval of issuing company, but there being no bar on transfer of security in
prescribed terms and conditions - Held, such security remains transferable - Giving liberty to subscribers to transfer
securities in question made them transferable - Thus OFCDs issued by appellants did not satisfy requirement of non-
transferability contained in S. 67(3)(a) [see also Shortnote Z], (2013) 1 SCC 1-K

Corporate Laws

Companies Act, 1956

Ss. 55-A(b), 67(3) first proviso r/w 73(1), 60-B(9), 56, 62, 63 and 68 - Jurisdiction of SEBI under S. 55-A(b) in respect of
unlisted public companies which intend to get their securities listed on a recognised stock exchange - Invocation of -
Deemed intention to list - When arises - Held (per curiam), power under S. 55-A(b) becomes available to SEBI on basis
of actual intention, or, deemed intention of unlisted company arising by operation of law irrespective of professed or
stated intention of company itself, to list its securities on recognized stock exchange - Such deemed intention to list
arises by virtue of mandatory overriding provisions of S. 67(3) first proviso r/w S. 73(1) whenever offer/issue/invitation of
securities is made to more than 49 persons [on issue of deemed intention see also in detail Shortnote D and Paras 89 to
91, 105 to 107, 140; 251 to 254 and 286 to 294] - Hence held (per curiam), issue/offer of OFCDs by appellant companies
fell under S. 55-A(b) and jurisdiction of SEBI despite express statement in their red-herring prospectuses (RHPs) that
they had no intention to list OFCDs, since offer/issue of OFCDs was made to more than 49 persons, (2013) 1 SCC 1-L

Corporate Laws

Companies Act, 1956

Ss. 55-A - Powers of SEBI to administer provisions referred to in opening part of S. 55-A - Categories of companies
covered - Expressions in any other case mentioned in S. 55-A(c) and all other matters mentioned S. 55-A Expln. -
Meaning and scope of, explained - Rationale for entrustment of such power with SEBI, explained - Held, power of SEBI
under S. 55-A extends as far as provisions mentioned therein relate to: (i) issue of securities, (ii) transfer of securities,
and (iii) non-payment of dividend - S. 55-A Expln. can never be construed to mean that SEBI has no power in relation to
prospectus and issue of securities by unlisted public company if offer is made to more than 49 persons - Further held,
entrustment of powers to SEBI under S. 55-A is in addition to existing powers of SEBI under SEBI Act, 1992 - Ministry of
Corporate Affairs (MCA), Government of India, it is well known, does not have machinery to deal with large public issues
of securities, to administer and regulate which SEBI has been specifically created - MCA's powers are limited to deal with
unlisted companies with limited number of shareholders/ debenture holders and offers/issues of securities to less than 50
persons, (2013) 1 SCC 1-M

Corporate Laws

Companies Act, 1956

Ss. 55-A and 60-B - Reference to Ss. 59 to 81 in S. 55-A - Scope of - Held, covered S. 60-B falling in between Ss. 59 to
81 - Specific inclusion of Ss. 68-A, 77-A and 80-A in a bracket therein, does not mean exclusion of all sections in
between Ss. 59 to 81 with suffix A or AA or B - Word including used in parenthetical clause is only to give emphasis to
Ss. 68-A, 77-A and 80-A, (2013) 1 SCC 1-N

Corporate Laws

Companies Act, 1956

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Ss. 60-B(9), (2) & (1), 2(36), 55 to 58, 62, 63, 68 and 55-A - Jurisdiction of SEBI under S. 60-B(9) - Listed companies as
specified in S. 60-B(9) which have to file final prospectus with SEBI and Registrar of Companies (RoC), as contrasted
with any other case wherein final prospectus has to be filed only with RoC - Listed companies as specified in S. 60-B(9),
held (per curiam), include deemed listed companies - Deemed listed companies are those unlisted companies which
must be deemed in law to intend to get their securities listed on a recognised stock exchange - Deemed intention of
unlisted company to list arises by operation of law irrespective of professed or stated intention of company itself by virtue
of mandatory overriding provisions of S. 67(3) first proviso r/w S. 73(1) whenever offer/issue/ invitation of securities is
made to more than 49 persons [on issue of deemed intention see also in detail Shortnote D and L] - In present case,
stated intention of appellant companies in red-herring prospectuses (RHPs) issued by them was that appellants did not
intend proposed issue of securities to be listed on a recognised stock exchange - However, appellants making
offer/issue/invitation of securities concerned (OFCDs) to more than 49 persons - Appellants published RHPs with
approval of RoC, but did not get them approved by SEBI - Held (per curiam), appellants were legally obliged to file final
prospectus under S. 60-B(9) with SEBI - Failing to do so, attracted criminal liability, (2013) 1 SCC 1-O

Corporate Laws

Companies Act, 1956

Ss. 60-B(9), (2) & (1), 2(36), 60, 55 to 58, 62, 63, 68 and 55-A - Circulation of information memorandum (IM) and filing
of red-herring prospectus (RHP) and final prospectus - Legal obligations of listed and unlisted public companies in
respect thereof - Duty and power of SEBI to regulate filing of prospectuses - S. 60-B(1), pertaining to circulation of IM to
public - Nature of - Held, S. 60-B(1) is an enabling provision and not mandatory - But, a public company offering
securities to public is mandatorily bound to file a prospectus prior to opening of subscription lists - SEBI as regulator is
legally obliged to examine whether, upon closing of offer, a final prospectus giving necessary details has been filed with
SEBI in case of (i) listed public company, or (ii) deemed listed company (which has made offer of securities to more than
49 persons) [see also Shortnote O], (2013) 1 SCC 1-P

Corporate Laws

Companies Act, 1956

Ss. 60-B(8) and 2(36) - Prospectus or red-herring prospectus (RHP) - Binding effect of terms of - Rights of investor or
depositor in case of alteration of - Held (per curiam), prospectus or RHP depicts terms and conditions of offer which have
binding effect - Any alteration thereof entitles applicant/investor to refund of entire amount with interest @ 15% per
annum, (2013) 1 SCC 1-Q

Securities, Markets and Exchanges

Securities and Exchange Board of India Act, 1992

Ss. 11(1) and (2) - Overriding primacy of S. 11(1) - Scheme of Ss. 11(1) and (2), explained in detail - Measures that
may be taken by SEBI in terms of S. 11(1) to protect interest of investors, to promote and regulate securities markets
such as it thinks fit - Wide open-ended scope of, emphasised - Held (per curiam), such measures that SEBI thinks fit
have been left to wisdom and discretion of SEBI and have not been curtailed or whittled down in any manner by any
other provision of SEBI Act, as no provision has overriding effect over S. 11(1) - Measures depicted in S. 11(2) are
illustrative and not exhaustive, and S. 11(2) does not dilute power vested in SEBI under S. 11(1), and S. 11(2) is
subservient to S. 11(1), (2013) 1 SCC 1-R

Securities, Markets and Exchanges

Securities and Exchange Board of India Act, 1992

Ss. 11(1), (2), (3), (2-A) & (4) - Relative scope, scheme and primacy inter se - Explained in detail - Sub-sections (2-A) &
(4) are subservient to both sub-sections (1) & (2), while sub-section (2) is subservient to sub-section (1) - Ss. 11(2-A) and
(4) confer additional powers on SEBI in respected of listed companies and companies which intend to list (including
deemed listed companies: for which see Shortnotes D, L and O), (2013) 1 SCC 1-S

Securities, Markets and Exchanges

Securities and Exchange Board of India Act, 1992

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Generally - SEBI Act has to be read in harmony with Companies Act - Both Acts must work in tandem, in the interest of
investors, particularly when public money is raised from people at large, (2013) 1 SCC 1-T

Corporate Laws

Companies Act, 1956

Ss. 55-A, 60-B, 67 and 73 - Interpretation of - Various provisions of SEBI Act, especially Ss. 11 to 11-C thereof have to
be borne in mind while interpreting sections of Companies Act such as Ss. 55-A, 60-B, 67, 73, etc., since SEBI Act shall
be in addition to and not in derogation of provisions of Companies Act, (2013) 1 SCC 1-U

Securities, Markets and Exchanges

Securities and Exchange Board of India Act, 1992

Ss. 11(1), (2), (2-A), (3), (4), 11-A, 11-B and 11-C - Powers of SEBI under - Scope of - Effect of insertion of S. 55-A in
Companies Act - Power to regulate unlisted public companies - Availability and scope of - Deemed listed companies -
From a collective perusal of Ss. 11, 11-A, 11-B and 11-C, held (per curiam), on subject of regulating securities market
and protecting interest of investors in securities, SEBI Act is a stand alone enactment and SEBI's powers thereunder are
not fettered by any other law including Companies Act - This conclusion was rendered absolute by addition of S. 55-A to
Companies Act - Further, entrustment of powers to SEBI under S. 55-A of Companies Act is in addition to then existing
powers of SEBI under SEBI Act, 1992, which takes in Ss. 11, 11-A and 11-B of SEBI Act - Powers of SEBI under Ss
11(1) & (2) extend to all kinds of companies dealing with securities, including unlisted public companies which offer/
invite/issue securities to more than 49 persons without getting them listed on a recognised stock exchange as per
overriding mandate of S. 67(3) first proviso r/w S. 73 of Companies Act - Ss. 11(2-A) and (4) should not be
misunderstood as having limited power of SEBI so as to enable it to regulate only listed public companies or such public
companies which intend (deemed or actual) to get their securities listed - Ss. 11(2-A) and (4) only confer certain
additional powers on SEBI - Hence, SAT was fully justified in concluding that functions and powers of SEBI under S. 11
insofar as protecting interest of investors in securities market and for promotion, development and regulation of the
securities market are concerned, are applicable to listed as well as unlisted companies, (2013) 1 SCC 1-V

Natural Justice

Generally - Nature, Scope and Applicability

Invocation of principles of - Precondition for - Fairness on part of person invoking principles of natural justice, held, is
the condition precedent therefor - Appellant companies failing to furnish information called for by SEBI on several and
repeated occasions - SEBI collecting information on its own (through investigating authority and other sources) and
relying on it for passing orders against appellants - Held, appellants not entitled to claim breach of principles of natural
justice - More so, when there were no allegations of bias, prejudice or malice against SEBI or investigating authority,
(2013) 1 SCC 1-W

Corporate Laws

Companies Act, 1956

Ss. 2(45-AA), 2(19-A) and 55-A - Securities as defined under Companies Act, SCR Act, 1956 and SEBI Act, 1992 -
Scope of - Hybrids - What are - Jurisdiction of SEBI in respect of hybrids - Securities, held (per curiam), has same
meaning as defined in Companies Act, SCR Act, and SEBI Act - Hybrids, thus, are included within term securities not
only for purposes of Companies Act, but also for purposes of SCR Act and SEBI Act - Hence, hybrids are amenable to
jurisdiction of SEBI under S. 55-A of Companies Act as well as SEBI Act, 1992 - Optionally fully convertible debentures
(OFCDs) issued in this case by appellant Saharas - Nature of, and if amenable to jurisdiction of SEBI - Held (per curiam),
said OFCDs were debentures in praesenti and shares in futuro - Hence, they were hybrids and fell under definition of
securities both for purposes of Companies Act, SCR Act and SEBI Act - SEBI has jurisdiction under S. 55-A of
Companies Act and under SEBI Act over hybrids like present OFCDs, (2013) 1 SCC 1-X

Securities, Markets and Exchanges

Securities Contracts (Regulation) Act, 1956

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S. 2(h) - Securities as defined in - Scope of - Includes hybrids as defined in S. 2(19-A) of the Companies Act, (2013) 1
SCC 1-Y

Securities, Markets and Exchanges

Securities Contracts (Regulation) Act, 1956

S. 2(h) - Securities - Scope of - Marketable security - Marketability - What are - Marketability means capable of being
transferred/sold - Transfer of security made subject to prescribed terms and conditions and approval of issuing company -
Effect of - Held, in absence of any prescribed terms and conditions barring transfer, securities concerned (OFCDs
issued by appellant Companies) were clearly transferable and hence marketable - Giving liberty to subscribers to transfer
securities in question made them marketable, (2013) 1 SCC 1-Z

Securities, Markets and Exchanges

Securities Contracts (Regulation) Act, 1956

Ss. 28(1)(b) and 2(h) - Inapplicability of SCR Act in terms of S. 28(1)(b) - Scope of - Held, does not extend to all types of
convertible debentures/hybrid debentures - Inapplicability of SCR as provided in S. 28(1)(b) is only in respect of options
or rights or entitlements that are attached to bond/warrant and not to bond/warrant itself - Parliament never intended to
exclude convertible debentures as a class from purview of SCR Act - It is only convertible bonds and shares/warrants of
type referred to in S. 28(b) that are excluded from applicability of SCR Act and not debentures as a class, which are a
separate category of securities under S. 2(h) - Hence, contention of appellant companies that optionally fully convertible
debentures (OFCDs) issued by them were convertible bonds issued on basis of price agreed upon at time of issue and,
therefore, provisions of SCR Act would not apply in view of S. 28(1)(b), rejected - OFCDs issued by Saharas to public
cannot be excluded from purview of listing requirements - Any interpretation to the contrary would contravene mandatory
requirements of S. 73(1) r/w S. 67(3) first proviso of Companies Act, (2013) 1 SCC 1-ZA

Securities, Markets and Exchanges

Securities

Generally - Entitlements arising from security - Severability and detachability from security itself - Postulated in S.
28(1)(b) of SCR Act, (2013) 1 SCC 1-ZB

Securities, Markets and Exchanges

Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009

Regn. 111 - Saving clause under - Applicability - Violations under SEBI (Disclosure and Investor Protection) Guidelines,
2000 [since repealed by ICDR 2009], for which no action taken under 2000 Guidelines - Applicability of ICDR 2009 to -
Held, ICDR 2009 would apply to said violations - More so, when such violations continued after coming into force of
ICDR 2009, (2013) 1 SCC 1-ZC

Securities, Markets and Exchanges

Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009

Regn. 111(2) - Expressions anything done or any action taken used therein - Meaning and wide scope of - Non-
performance of statutory obligations purposely or otherwise - Held, covered under the said expressions, (2013) 1 SCC 1-
ZD

Securities, Markets and Exchanges

Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009

Generally - Held, apply to all companies whether listed or unlisted, (2013) 1 SCC 1-ZE

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Securities, Markets and Exchanges

Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000

Generally - Nature of - Held, had statutory force since they were framed under Ss. 11 and 11-A of SEBI Act, (2013) 1
SCC 1-ZF

Securities, Markets and Exchanges

Unlisted Public Companies (Preferential Allotment) Rules, 2003

Applicability of - Not applicable to any offer of securities to more than 49 persons - 2003 Rules (and as amended by
2011 Rules) are only meant to regulate issue of shares and debentures by unlisted public companies to 49 persons or
less, (2013) 1 SCC 1-ZG

Corporate Laws

Companies Act, 1956

S. 81(1-A) r/w S. 642 and S. 67(3) first proviso r/w S. 73(1) - Rules framed under S. 81(1-A) r/w S. 642 - Nature and
scope of - Are subordinate legislation - Cannot override provisions of Companies Act - Must be read subject to provisions
of Companies Act, especially S. 67(3) first proviso r/w S. 73(1) and other related provisions - Hence, preferential
allotment defined in 2003 Rules as amended by 2011 Rules does not include offer/issue of securities to more than 49
persons (see also Shortnote H), (2013) 1 SCC 1-ZH

Corporate Laws

Company Law

Public companies and private companies - Distinction between - Public companies are more highly regulated than
private companies - Private companies are not authorised to offer any securities to public, (2013) 1 SCC 1-ZI

Corporate Laws

Company Law

Static nature of Indian Companies Act in comparison to English Companies Act on various issues - Absence of
universally accepted principles and concepts under Indian Company Law - Issues highlighted, (2013) 1 SCC 1-ZJ

Securities, Markets and Exchanges

Securities and Exchange Board of India Act, 1992

Ss. 15-K, 15-T and 15-U - Securities Appellate Tribunal (SAT) - Nature of - Has trappings of a court, (2013) 1 SCC 1-
ZK

Securities, Markets and Exchanges

Securities and Exchange Board of India Act, 1992

Ss. 15-Z and 15-T - Appeal to Supreme Court - Interference with findings of fact recorded by Securities Appellate
Tribunal (SAT) - Scope of - Findings not perverse or illegal - Held, cannot be interfered with by Supreme Court, (2013) 1
SCC 1-ZL

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