Thursday, April 14, 2011

Allahabad High Court’s Order Vacating Stay in the Sahara Case

We have previously discussed SEBI’s order restraining two entities of the Sahara group as well as certain promoters and directors from accessing the capital markets. The order was subsequently stayed by the Allahabad High Court.

On April 7, 2011, the Allahabad High Court vacated its stay, and this order is now accessible through eLegalix (Writ Petition No.11702 (MB) of 2010). While vacating the stay, the High Court has not ruled on any questions of law, particularly relating to the scope of a public offering of securities as compared to a private placement. The decision has been based largely on the conduct of Sahara in evading the requests of SEBI for providing further information regarding the names and addresses of investors to whom securities have been issued. The court offers some guidance regarding the types of information that can be sought by SEBI, and rules that the information needs to be provided within a reasonable time frame.

A report in today’s Mint discussed the impact (or lack thereof) of the High Court order on the offering of securities by the entities involved.

1 comment:

Amit Agrawal said...

Allahabad High Court's Approach Differred By Calcutta High Court

The stay vacation order, as noted in the post, does not decide any important question of law. It merely seems to proceed on the basis that injunction/stay being an equitable remedy cannot be extended or continued to be extended in favour of those who defy the orders of the court itself.

But it is noteworthy that the view taken in this case (noted in the order dated December 13, 2010) by the division bench to exercise jurisdiction under Article 226 of the Constitution has been differed from in the judgement dated 23 March 2011 given by single bench of Calcutta High Court in Rose Valley Real Estates and Constructions Limited and another v SEBI (2011 INDLAW CAL 180).
Calcutta High Court stated that the questions relating to absent jurisdiction of SEBI and violations of principles of natural justice (two important questions raised in the matter of Sahara also) can be effectively decided by SAT which forum by virtue of prescribed qualifications of members and its presiding officers make “formidable combination collectively representing judicial and specific subject expertise of extraordinary level”. It also placed importance on the fact that the provisions providing appeal to High Court from the order of SEBI have been omitted deliberately. And exercise of jurisdiction by High Court in such matters under Article 226 will derail the objectives of providing a quick statutory appeal to the Supreme Court under 15Z of the SEBI Act. It in fact went on to provide the specific exceptional situations in which high courts should exercise jurisdiction e.g. SAT is not functioning or the impugned order of SEBI is not available. Court noted that exercise of jurisdiction by high courts under article 226 will essentially sideline the special forum created by the statute.
The Calcutta High Court in this judgement expressly differed with the interlocutory order dated December 13, 2010 given by Allahabad High Court order in Sahara matter.

Amit Agrawal
Lawyer, Rajasthan High Court