Companies seeking exemption from disclosure norms before tapping the capital market can only do so with the prior consent of market regulator Securities and Exchange Board of India (SEBI), the Supreme Court has ruled.
The apex court’s direction came over a petition filed by SEBI against the Securities Appellate Tribunal (SAT), which had on August 7, 2009, directed the Bombay Stock Exchange (BSE) to grant in-principle approval for the allotment and listing of shares issued by S Kumar’s Nationwide Ltd to its promoters on a preferential basis, overruling the market regulator’s earlier orders in this regard.
Looking into the petition , the apex court specifically said that such exemption for companies and individuals can only be given by the Securities and Exchange Board of India under the SEBI Act and the tribunal is not allowed to permit investors to deviate from the Disclosure and Investor Protection (DIP) guidelines of the market regulator.
A bench headed by Chief Justice S H Kapadia further held that the order passed by the SAT directing the Bombay Stock Exchange (BSE) to list shares of S Kumar Nationwide Ltd was not valid as per law.
Earlier, in 2005, SEBI had turned down S Kumar Nationwide’s application for listing of shares on the bourses on account of violations of DIP Guidelines.
“The contention of the SEBI appears to be correct. The observations to the contrary in the impugned (SAT) order does not appear to be correct in law,” said the bench, which also comprised Justices K S Radhakrishnan and Swatanter Kumar.