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High Court/ Supreme Court Orders

1. Supreme Court denies withdrawal of public offer

Whether an acquirer who made a hostile takeover bid for a stake in Golden Tobacco Ltd. could withdraw its open offer was the question before Supreme Court of India in the matter of Pramod Jain & Others v. SEBI, Civil Appeal No. 9103 of 2014, Judgment dated November 07, 2016.

Hon’ble Supreme Court has held that there is no justification for automatic withdrawal from public offer without clear prejudice to the acquirer to the extent of rendering the carrying out of public offer impossible. It has also held that delay by SEBI in giving its comments on public offer is not by itself enough to justify withdrawal from public offer so long as the case does not fall under Regulation 27.

Supreme Court of India yet again has confirmed that corporates cannot hold back from open offers even if SEBI delays in responding to open offer applications.

2. Apex Court holds SARFAESI applies in J&K

Supreme Court of India in an order dated December 16, 2016 holds Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) to be applicable to State of Jammu & Kashmir. It holds that unlike the Constitution of India, J&K’s Constitution makes no reference to any sovereignty and hence, SARFAESI shall apply to state of J&K and shall override any conflicting state laws including Jammu & Kashmir Transfer of Property Act.

3. SC rules on anti-competitiveness of preventing exhibition of dubbed films and serials

The Supreme Court, in a judgment dated March 07, 2017 has ruled that an attempt to restrict the exhibition of dubbed films and serials on the grounds of protecting the language of a region would be considered as an anti-competitive activity in violation of Section 3 of the Competition Act, 2002 (“Act”). Although CCI has ruled on the relevant provisions of the Act earlier, this is the first time that the Supreme Court has analyzed and interpreted the same. In giving its judgment, Supreme Court has afforded a rather wide interpretation while discussing the meaning of ‘relevant market’, ‘person’, ‘agreement’ and ‘enterprise’ as per the Act. It concluded that despite the fact that the associations were not carrying out any economic activity by themselves, they would be considered an enterprise by virtue of their constituent members being engaged in the production, distribution and exhibition of films.

4. Supreme Court says – only Quasi-Judicial Orders of SEBI can be appealed in SAT

In a judgment dated March 7, 2017, the apex court held that only orders passed by SEBI in a quasi-judicial authority have an appellate jurisdiction in SAT. This came up in the matter of National Securities Depositories Ltd (“NSDL”) v/s Securities and Exchange Board of India (“SEBI”) (Civil Appeal: 5173/2006 & Civil Appeal 186/2007).The aforementioned was an appeal to the SAT Order issued on September 29, 2006 (NSDL v/s SEBI, Appeal 207/2005, SAT). It laid down precedential guidelines and further reinforced legislative and administrative powers of the regulator. The jurisdiction of SAT, therefore, has now been limited to orders passed by the SEBI and its Adjudicating Officers. This judgment has, to a great extent, narrowed the scope of SAT and taken the legislative as well as administrative actions of SEBI out of its jurisdiction. On the other hand, litigants will be able to agitate and take SEBI to High Courts in such matters.

5. Supreme Court orders SAT to reconsider the matter pertaining to front running by traders

Supreme Court in the matter of SEBI v. Anandkumar Baldevbhai Patel, Civil Appeal No. 2594/ 2013 by its order dated April 05, 2017, has set aside the order passed by Securities Appellate Tribunal (“SAT”) and has remanded the matter back to SAT for a de novo consideration.

The question that was raised before SAT in the Appeal No. 216 of 2011, 74 and 78 of 2012 was that whether trading done in the securities market by a person who is not an intermediary, on the basis of information about forthcoming orders of another trader in the market, is violative of Regulation 3 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 2003 (“FUTP Regulations”).

SEBI had conducted investigations into the trading activity of one Mr. Kanaiyalal Baldevbhai Patel (“KBP”), an individual trader, and Passport India Investments, a Foreign Institutional Investor (“FII”) for the period between January, 2007 and March, 2009. It was alleged that KBP placed and executed orders before order of FII and consequently squared off his position when FII placed its orders. Mr. Dipak Patel (“Dipak”) was the portfolio manager of the FII and is also cousin of KBP and Mr. Anandkumar Baldevbhai Patel (“ABP”). The modus operandi of these persons, as noted by SEBI, was that Dipak provided information to KBP and ABP regarding forthcoming trading activity of FII and taking advantage of the same KBP indulged in ‘front running’ by placing and executing orders before the order of FII and consequently squared off the positions when the orders of FII were placed in the market. The trades were executed using telephone number registered in the name of ABP at the common residential address of KBP and ABP. Thus, it was alleged that ABP aided and abetted KBP and Dipak in these transactions.

Accordingly, SEBI held them guilty of violating the provisions of Regulation 3(a), (b), (c) and (d) of FUTP regulations. However, by its impugned order dated November 09, 2012, SAT had set aside the abovementioned SEBI’s order on the note that, in absence of any specific provision in the SEBI Act, rules or regulations prohibiting front running by a person other than an intermediary and the appellants being traders and not intermediaries cannot be held guilty of the charges levelled against them.

Consequently, SEBI had filed this appeal against the SAT’s Order in Supreme Court of India, wherein apex court has set aside SAT’s order and has remanded matter to Tribunal while observing that the case of ABP is not the same as that of KBP and Dipak.

6. Supreme Court orders SAT to reconsider the matter pertaining to front running by traders

Supreme Court in the matter of SEBI v. Anandkumar Baldevbhai Patel, Civil Appeal No. 2594/ 2013 by its order dated April 05, 2017, has set aside the order passed by Securities Appellate Tribunal (“SAT”) and has remanded the matter back to SAT for a de novo consideration.

The question that was raised before SAT in the Appeal No. 216 of 2011, 74 and 78 of 2012 was that whether trading done in the securities market by a person who is not an intermediary, on the basis of information about forthcoming orders of another trader in the market, is violative of Regulation 3 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 2003 (“FUTP Regulations”).

SEBI had conducted investigations into the trading activity of one Mr. Kanaiyalal Baldevbhai Patel (“KBP”), an individual trader, and Passport India Investments, a Foreign Institutional Investor (“FII”) for the period between January, 2007 and March, 2009. It was alleged that KBP placed and executed orders before order of FII and consequently squared off his position when FII placed its orders. Mr. Dipak Patel (“Dipak”) was the portfolio manager of the FII and is also cousin of KBP and Mr. Anandkumar Baldevbhai Patel (“ABP”). The modus operandi of these persons, as noted by SEBI, was that Dipak provided information to KBP and ABP regarding forthcoming trading activity of FII and taking advantage of the same KBP indulged in ‘front running’ by placing and executing orders before the order of FII and consequently squared off the positions when the orders of FII were placed in the market. The trades were executed using telephone number registered in the name of ABP at the common residential address of KBP and ABP. Thus, it was alleged that ABP aided and abetted KBP and Dipak in these transactions.

Accordingly, SEBI held them guilty of violating the provisions of Regulation 3(a), (b), (c) and (d) of FUTP regulations. However, by its impugned order dated November 09, 2012, SAT had set aside the abovementioned SEBI’s order on the note that, in absence of any specific provision in the SEBI Act, rules or regulations prohibiting front running by a person other than an intermediary and the appellants being traders and not intermediaries cannot be held guilty of the charges levelled against them.

Consequently, SEBI had filed this appeal against the SAT’s Order in Supreme Court of India, wherein apex court has set aside SAT’s order and has remanded matter to Tribunal while observing that the case of ABP is not the same as that of KBP and Dipak.

7. Bombay High Court clarifies rules relating to transfer of Petitions to NCLT

MCA, in its Order dated December 7, 2016 stated that all petitions relating to winding up under clause (e) of Section 433 pending before High Courts, and which have not been served on the Respondent as required by Rule 26 of the Companies (Court) Rules, 1959, stand transferred to the appropriate Bench of the National Company Law Tribunal (“NCLT”) exercising territorial jurisdiction over the matter. A Company Petition came up for hearing before the Hon’ble High Court, in the matter of West Hills Realty Pvt. Ltd. v Neelkamal Realtors, where the main issue was when a petition has been served on the respondents under Rule 26, will the transfer notification still apply in the matter or not. Hon’ble Justice SC Gupte, on December 23, 2016, pronounced the judgment in the matter and held that “Every winding up petition under clause (e) of Section 433 which is pending before the High Court and which is not served by the petitioner on the respondent company shall stand transferred to NCLT under Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016. If such pending petition is served by the petitioner on the respondent, the petition will continue to be dealt with by this court and the applicable provisions will be the provisions of 1956 Act”.

8. Justice Patel restrained the release of Mahesh Manjrekar’s film ‘Rubik’s Cube’

By his order dated April 05, 2017, Justice G. S. Patel, Bombay High Court has restrained film maker Mahesh V. Manjrekar and others from releasing/continuing to work on their forthcoming Marathi film bearing the title ‘Rubik’s Cube’ which was due for release on April 14, 2017.

Rubik’s Brand Limited filed the suit against Mr. Mahesh Manjrekar on March 29, 2017 for passing off their registered trademark “Rubik’s Cube”. It was noted by Justice Patel that, Rubik’s Brand Limited have registration of their trademark in international jurisdictions and have an exclusive right to market and distribute the trademark ‘Rubik’s Cube’. Further, he noted that, Rubik’s Cube toy puzzle is an extremely popular puzzle, one that has achieved almost legendary status in the public domain and thus it is hard to believe that the defendants were unaware of this.

While passing the order, Justice Patel observed that, in passing off the intention is immaterial and one needs to look into the three tests of goodwill, damage and misrepresentation. Since, the respondent qualifies to all the three tests; they are restrained from releasing their film, pending the disposal of the Notice of Motion in the matter.

9. Delhi High Court says that it does not have power to modify the arbitral award

Recently, Delhi High Court, it is judgment dated May 9, 2017 in the matter of Angel Broking Ltd. v. Sharda Kapur holding that a lower court did not have jurisdiction to alter an arbitration award granted to a client who had accused broker of trading shares without her consent. The crux of the disputes between the parties was the allegation of Ms. Sharda Kapur that her broking firm M/s Angel Broking Ltd. did various trades in future and option segment in the market without her consent and knowledge, and therefore, M/s Angel Broking Ltd. was bound to return the shares which were illegally traded in the derivative segment of the market. The sole issue in this case was whether the court below or High Court has a power under Section 34 of the Arbitration and Conciliation Act, 1996 to modify the Award and grant additional reliefs not granted by the Award or grant the alternative reliefs which were prayed for in the arbitration proceedings but were denied by the Award. The Hon’ble Delhi High Court set aside the order of the lower court to the extent of relief granting interest and compensation as it amounted to modification of the Arbitral Award.

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