The importance of judicial precedents is evidential. For better adjudication of cases of different perspectives, courts are segregated. Major changes can be seen in the aspect of corporate law via the purview of Company Law. It is very evident that the corporate structure is growing very fast along with various changes taking place each day. For the purpose of segregating the jurisdiction of the matters, several tribunals have been established so far. NCLT and SEBI are two of the main tribunals in the country dealing with the aspects of the corporate framework. However, recently, there has been seen a clash in the jurisdiction of both the tribunals i.e.,in the case of IFB Agro Industries Ltd.’s case against SICGIL India Ltd. Recently, the apex court in an appeal has clarified the position of both tribunals and has redefinedits scope in terms of insider trading. Parallel jurisdiction refers to a term that explains the jurisdiction of more than one authority to look after the matter in the same manner. However, in the present scenario, the term has been stated as void with respect to NCLT and SEBI for a particular matter.
The case revolves around a listed and a non-listed company. The tussle is for the validity or non-validity of the action of the Appellant in pursuit of Regulation 7(1) of the SEBI (SAST) Regulations. It states that it is mandatory for the acquirer to hold more than 5% of the shares of a company to get the disclosure of some information. For the reason of negligence on the part of the respondent company, the appellant was unaware of the acquisition. In this matter. The question that was posed before NCLT was in regard to buyback with respect to Section 111A of the 1956 Act. However, the tribunal failed to address the same.
The appeal filed before NCLAT was in regard to the mistake made by the subordinate tribunal. In the appeal, the tribunal allowed the appeal, and NCLT was set aside. Till here, the matter was only concerned with the matter of buyback. However, the matter triggered the issue of reading SEBI with the companies Act to deal with the present scenario. In accordance with the SEBI (SAST) Regulations of 1997 and the SEBI (PIT) Regulations of 1992, which of the appropriate venues can adjudicate and determine violations and the resulting actions? The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997, and the Securities and Exchange Board of India (Prohibition of Insider, Regulations, 1992, framed under the Securities and Exchange Board of India Act, 1992, required the Court to select the appropriate forum for adjudication and determination of violations. The major question was also regarding the scope and ambit of Section 111A of the 1956 Act.
The fact that a Board/Company Court has rectificatory powers under Section 38 of the Companies Act, 1913, Section 155 of the 1956 Act, Section 111A, which was added by the 1996 Amendment to the 1956 Act, and finally Section 59 of the 2013 Act all demonstrate that these powers have remained the same in their core. The ability to make changes or corrections to the member register is a summary power. The correction must be limited to the facts that are obvious and do not necessitate serious investigation and must relate to them. Hence, the issue gets resolved by merely reading the required regulations and getting familiar with the required statutes. “The SEBI (SAST) Regulations post and the SEBI (PIT) Regulations post are comparable. The buyer of more than 5% of a company’s shares is required to notify the company and the stock market under Chapter III’s Regulation. Failure to disclose is illegal under this restriction. The procedures for the Board’s investigation and enforcement are discussed in Chapter V. The Board’s authority to designate an investigating officer (Regulation 38), the sending of a show-cause notice to the acquirer (Regulation 39), the obligation for the investigating authority to submit a report as soon as possible (Regulation 41), the obligation to provide the acquirer with the report and provide him with a hearing opportunity before passing penal orders (Regulation 42), and, finally, the Board’s powers (Regulation 44) are all included in these procedures. It is essential to keep in mind that breaking the rules outlined in Regulation 45 carries severe penalties. The responsibility will be governed by the SEBI Act and the Regulations. Again, the SEBI (SAST) Regulation is a comprehensive plan that includes an inquiry, an investigation, a report from the investigating officer, procedural safeguards for the acquirer, and the Board’s restitution order or instructions. All these regulations are evident to portray a clear description of the power of the SEBI tribunal to comply with the matters. Scope of Section 111A of the 1956 Act,is concerned with rectification in the Register of Members. This was added in the act of 1956 by the amendment of 1996. The Supreme Court in the case of Ammonia Supplies Corporation (P) Ltd. v. Modern Plastic Containers Pvt. Ltd. &Ors. Held that the scope of the following provision is very limited.
The power here is summary in nature. The Supreme Court noted that Section 30 of the SEBI Act grants it the authority to create regulations to safeguard investors’ interests. For PIT Violation: The SEBI (PIT) Regulations, which are established under the authority of the SEBI Act, have a well-established procedure for inquiry, punitive action, and adjudication. Because of this, IFB Agro cannot circumvent SEBI as an adjudicating authority; in essence, IFB Agro is procedurally jumping the mechanism established by SEBI, which even deprives SICGIL of adjudicatory proceedings and justice. Again, the SEBI (SAST) Regulation is a comprehensive plan that covers inquiry, investigation, report submission by the investigating officer, procedural safeguards in favour of the acquirer, and the Board’s restitution order or instructions. By submitting an application under Section 111A of the 1956 Act claiming that parallel jurisdiction with the SEBI and CLB/Tribunal exists, this entire procedure cannot be sped up. The complainant’s transaction must be examined by the regulator, who alone is responsible for determining whether the SEBI Act and Regulations were violated. It has been stated by the court that “We are of the opinion that the important role of the Regulator cannot be circumvented by simply asking for rectification under Section 111A of the 1956 Act after considering the comprehensive role that the SEBI plays in regulating the securities market with regard to insider trading. It is against the law to take this approach. A transaction that is alleged to have violated the SEBI (PIT) Regulations will need to be examined in accordance with those regulations and the remedies they provide.” With regard to the overlapping jurisdictions of regulators and adjudicatory forums, this is a landmark decision. In the event that the aggrieved party approaches a forum where favourable or faster relief can be obtained rather than the appropriate forum, this judgment alone lays the foundation for preventing further disputes. The decision provides an impenetrable means of distinguishing between corporate action and activity regulatory jurisdiction and company law jurisdiction in general. This judgment provides for distinguishing between the generalized view of an entity’s existence in law and the specialized laws that the entity is subject to by virtue of the nature of its activities. Since every entity that falls under the jurisdiction of SEBI, TRAI, or IRDA is a company, NCLT also has jurisdiction over it. The Supreme Court in this case has again clarified that the tribunals should act with independence. Also, the overlapping in the jurisdictions will again disturb the judicial system of the country. Hence, it should be done strictly in compliance with the provisions of the concerned legislation.