SHOES EAST LTD Vs. SUBHASH B DALAL

JUDGEMENT

(1.) RFA No.441/2001 The present appeal under Section 96 of the Code of Civil Procedure, 1908 (CPC) has been filed against the judgment and decree dated 9.4.2001 (hereinafter referred to as the 'impugned judgment and decree'). By the impugned judgment and decree the appellant/plaintiff's suit for recovery has been dismissed in view of Sections 15Y and 20A of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the 'SEBI Act') which provisions contain a bar of jurisdiction of the Civil Courts.

(2.) THE facts of the case are that the appellant/plaintiff filed the suit for recovery of Rs.3,85,000/- against the defendant who had on payment of monetary incentive entered into an agreement with the appellant for procurement of applications for subscribing to a public issue of the appellant. In order to raise funds for its projects, the appellant-company floated a public-cum-right issue of shares aggregating to Rs.699,00,00,000/- and also a public issue of fully convertible debentures aggregating to Rs.349,93,75,200/-. THE case of the appellant-plaintiff is that relying upon the representation of the respondent/ defendant who undertook to procure subscription applications to the tune of Rs.10 crore in accordance with the incentive scheme dated 23.1.1995, the appellant released an amount of 50% of the incentive amount of Rs.2,50,000/- to the respondent. THE public issue, however, was not subscribed to the required extent and the respondent also failed to get the committed subscription as per the incentive scheme. Since the public issue failed, the appellant had to refund the amount to the various applicants-subscribers to the share issue and the fully convertible debentures issue. As per the incentive scheme, if the defendant failed to get the committed subscription, he had to refund double the amount of the advance taken from the plaintiff. THE appellant/plaintiff thus filed the suit against the respondent/defendant for recovery of the amount of Rs.2,50,000/- with interest @ 18% per annum w.e.f. 18.4.1995.

(3.) THE only issue, therefore, to be decided by this Court is as to whether the jurisdiction of Civil Courts is barred by virtue of Sections 15(Y) and 20A of the SEBI Act. THEse sections are reproduced as under: 'Section 15(Y) No civil Court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which an adjudicating officer appointed under this Act or a Securities Appellate Tribunal constituted under this Act is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act. Section 20A. No order passed by the Board (or the Adjudicating Officer) under this Act shall be appealable except as provided in (section 15T or) section 20 and no civil court shall have jurisdiction in respect of any matter which the Board (or the Adjudicating Officer) is empowered by, or under, this Act to pass any order and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any order passed by the Board (or the Adjudicating Officer) by, or under, this Act.'