DIVISIONAL HEAD Vs. KOSHY GEORGE

JUDGEMENT

(1.) The Divisional Head, Regional Manager, and Manager of the "Securities and Exchange Board of India (SEBI)", who were respondents 1 to 3 in W.P.(C) No.6106/2015, are the appellants herein, challenging the judgment of the single Judge, dated 22.6.2017.

(2.) The petitioners in the Writ Petition (respondents 1 to 4 herein) have approached this court questioning the rejection of their request by the 5th respondent company, for 'rights issue' of the shares of the said company to the existing shareholders, at the ratio of 3:10. The application for 'rights issue' was rejected on assigning the reason that the writ petitioners have failed to comply with the procedure stipulated for payment of money, known as "Application Supported by Blocked Amount (ASBA)". Instead, they have paid the amount only by way of Demand Draft. The Writ Petitioners contended that, as per Ext.P6 Regulations issued by the SEBI, only non-retailer investors, i.e. qualified institutional buyers and non-institutional investors, alone need to go through the procedure of ASBA. It was contended in the writ petition that, the conditions incorporated in Ext.P5 issued by the 5th respondent to the effect that the qualified institutional buyers and other applicants, whose application amount exceeds Rs.2 lakhs, will have to comply ASBA process, is arbitrarily and is against the Regulations formulated by SEBI and hence it goes against the interest of the investors. Hence, the writ petitioners sought for quashing Ext.P5 'letter of offer' issued by the company in question.

(3.) The appellants herein filed a counter affidavit in the Writ Petition inter alia contending that, Regulations 2(1)(ze) and (zf) of SEBIICDR Regulations insists that, retail investors are those who, including individuals, subscribed for shares of a value of less than Rs.2 lakhs. Therefore it is contended that, it is incorrect to say that the writ petitioners became retail investors only by being individuals. Since the writ petitioners had applied for shares of value of more than Rs.2 lakhs, by virtue of the above said Regulations, they cannot be treated as retail investors as claimed by them. As such, as per Ext.P6 Circular, it is mandatory for the petitioners to necessarily apply through the process of ASBA. Hence it was contended that, the instructions incorporated in the 'letter of offer' (Ext.P5) is in the same line as that of SEBIICDR Regulations and is in perfect tune with the circular issued by SEBI. Hence it was contended that, the writ petitioners, whose investment exceed Rs.2 lakhs, can participate in the issue only through ASBA process and the insistence for such process stipulated in Ext.P5 'offer letter' is not in violation or contrary to the Regulations of the SEBI.