Yeshwant M. Desai Vs. Securities and Exchange Board of India - Court Judgment

Excerpt:
1. the securities & exchange board of india (sebi) had received several complaints against enkay texofood industries ltd. (hereinafter referred to as "enkay") from an investor and as on 31.3.2002, a total of 368 investor grievances which were not resolved or acted upon were pending with the company. sebi advised the company on 3.4.2002 to meet its officials in connection with the redressal of these investor grievances. however, the company failed to do so. a show cause notice was issued by sebi asking enkay why appropriate proceedings should not be taken up against them under section 11b of the sebi act read with section 621 of the companies act, 1956 for violation of section 73 and section 113 of the companies act. again there was no reply from the company, and the chairman, sebi thereafter formally directed the company vide his order dated 14.10.2002 to redress the grievances of the investors within a period of one month from the date of order.since the company again failed to redress the investor's grievances the chairman, sebi granted a further opportunity to the company to appear before him on 31.5.2003. the company again failed either to appear before the chairman, sebi or to make any submissions in this regard.the impugned order was thereafter passed by chairman, sebi directing the company as well as its directors to disassociate themselves from the securities market and not to deal in securities in any manner whatsoever for a period of five years.2. being aggrieved the appellant has filed the present appeal on the ground that he had resigned as a director of the company on 14th august 1998 whereas the entire correspondence cited in the impugned order started only in the year 2002. the appellant has pleaded that he is an advocate and solicitor by profession and has been practicing full time since the year 1953. he was a partner in the law firm m/s. ambubhai & diwanji from 1959 to 1991 and thereafter in the law firm m/s. desai and diwanji. it is the appellant's case that he was a professional, non-whole time and non-executive director of the company and was as such not concerned with nor responsible for nor in-charge of the conduct of the day today management, business or affairs of the company. he has further argued that during the time he was a director the company had full-fledged managing director who was responsible for the conduct of the day today business of the company. along with his memorandum of appeal, he has also filed a copy of form 32, which was filed by the company with the registrar of companies regarding his designation with effect from 16.7.1998.3. the appeal was taken up for final disposal with consent of parties.we are prima facie in agreement with the contentions raised by the appellant. the respondent sebi has not rebutted the same despite having been given time to do so and has only asked for remanding the matter for taking a fresh view. the impugned order in so far as the appellant is concerned is set aside. the matter is remanded to the respondent for fresh disposal in accordance with law.4. all contentions are left open. the respondent is directed to dispose of this appeal as expeditiously as possible.

Judgment:
1. The Securities & Exchange Board of India (SEBI) had received several complaints against Enkay Texofood Industries Ltd. (hereinafter referred to as "Enkay") from an investor and as on 31.3.2002, a total of 368 investor grievances which were not resolved or acted upon were pending with the company. SEBI advised the company on 3.4.2002 to meet its officials in connection with the redressal of these investor grievances. However, the company failed to do so. A show cause notice was issued by SEBI asking Enkay why appropriate proceedings should not be taken up against them under Section 11B of the SEBI Act read with Section 621 of the Companies Act, 1956 for violation of Section 73 and Section 113 of the Companies Act. Again there was no reply from the company, and the Chairman, SEBI thereafter formally directed the company vide his order dated 14.10.2002 to redress the grievances of the investors within a period of one month from the date of order.

Since the company again failed to redress the investor's grievances the Chairman, SEBI granted a further opportunity to the company to appear before him on 31.5.2003. The Company again failed either to appear before the Chairman, SEBI or to make any submissions in this regard.

The impugned order was thereafter passed by Chairman, SEBI directing the company as well as its directors to disassociate themselves from the securities market and not to deal in securities in any manner whatsoever for a period of five years.

2. Being aggrieved the appellant has filed the present appeal on the ground that he had resigned as a director of the company on 14th August 1998 whereas the entire correspondence cited in the impugned order started only in the year 2002. The appellant has pleaded that he is an advocate and solicitor by profession and has been practicing full time since the year 1953. He was a partner in the law firm M/s. Ambubhai & Diwanji from 1959 to 1991 and thereafter in the law firm M/s. Desai and Diwanji. It is the appellant's case that he was a professional, non-whole time and non-executive director of the company and was as such not concerned with nor responsible for nor in-charge of the conduct of the day today management, business or affairs of the company. He has further argued that during the time he was a director the company had full-fledged managing director who was responsible for the conduct of the day today business of the company. Along with his memorandum of appeal, he has also filed a copy of Form 32, which was filed by the company with the Registrar of Companies regarding his designation with effect from 16.7.1998.

3. The appeal was taken up for final disposal with consent of parties.

We are prima facie in agreement with the contentions raised by the appellant. The respondent SEBI has not rebutted the same despite having been given time to do so and has only asked for remanding the matter for taking a fresh view. The impugned order in so far as the appellant is concerned is set aside. The matter is remanded to the respondent for fresh disposal in accordance with law.

4. All contentions are left open. The respondent is directed to dispose of this appeal as expeditiously as possible.