In view of chit fund company Saradha and Sahara making headlines for illegally collecting money from people by promising attractive returns, the Supreme Court has asked Sebi to deal sternly with such firms. Message should go that our country will not tolerate market abuse and that we are governed by the rule of law, it said, while dismissing an appeal filed by N Narayanan, the promoter and the whole-time director of listed company Pyramid Saimira Theatre Ltd. Sebi had, in 2011, slapped a penalty of R50 lakh and restrained the promoter for two years from trading in stock market for making false disclosures and for not maintaining certain books of accounts.
Sebi should ensure that fraud, deceit and artificiality have no place in the securities market and market security is our motto, the top court said. Economic offences affect not only the countrys economic growth, but also hamper inflow of foreign investment by genuine investors and cast a slur on Indias securities market, it added. Companies are thriving with investors contributions but they are a divided lot. Sebi has, therefore, a duty to protect investors, individual and collective, against opportunistic behaviour of directors and insiders of the listed companies so as to safeguard markets integrity, the apex court stated, asking media not to mislead the public in their forecast on securities market.
Union leader no whistle-blower
Upholding the Gujarat HC order that ruled in favour of one Manoj H Mishras removal, the Supreme Court said that every informer is not automatically a bona fide whistle blower; he must possess the qualities of a crusader and there should be no doubt about his honesty, integrity and motivation. The primary motivation for the action of a person to be called a whistle blower should be to cleanse an organisation. It should not be incidental or byproduct for an action taken for some ulterior or selfish motive, it said.
In this case, Mishra worked as a tradesman at Kakarapar Atomic Power Project in Surat and was also a senior union leader in the public sector enterprise. During monsoon in 1994, the dam rose beyond the danger level, submerging nuclear reactors, damaging record rooms. The employee created media scare about the danger to the plant. Following this, he was removed from work for giving misleading information, damaging the reputation of the project. But the employee claimed that he was a whistle blower. Counsel Prashant Bhushan, appearing for Mishra, argued that his honest approach was not appreciated by the management and he was singled out for action, instead of taking action against erring officials.
Rejecting his plea, the top court said that Mishra, without any justification, assumed the role of vigilante. employees working within the highly sensitive atomic organisation are sworn to secrecy and have to enter into a confidentiality agreement. In our opinion, the appellant had failed to maintain the standard of confidentiality and discretion which was required to be maintained, it added.
Bhagwati plea maintainable
Setting aside the Calcutta HC judgment in a two-decade-long dispute between Bhagwati Developers and Peerless General Finance Ltd (PGFL), the Supreme Court has asked the HC to decide the complaint of oppression and mismanagement afresh within six months. In this case, SK Roy allotted 30,000 shares of PGFL to himself and his relatives, and being the majority shareholder therein, acquired control over the company. Ajit Kumar Chatterjee (3.66% shares) and Arghya Kusum Chatterjee (1.01% shares) filed Company Petition in 1991 before the HC with the consent of Bhagwati Developers (4.78% shares) and RL Gaggar (7.61% shares), alleging mismanagement and oppression. Roy contested the petition raising the preliminary issue of maintainability stating that the valid shares held by petitioners and consenting parties were valued at less than 10% of total shareholding. The company court in 1992 dismissed the petition without going into the merits of the case. When Chatterjee brothers joined the Board of Directors of PGFL, they withdrew appeals before the division bench (DB), thus prompting Bhagwati Developers seeking revival of the petition and substitution as the sole appellant. But the DB dismissed the application labelling the appellant as a stranger having no locus standi to maintain the company petition filed under Sections 397 & 398 of Companies Act, 1956.
The respondents opposed the appeal contending that Chatterjee brothers had withdrawn both their appeals and the company petition, therefore it was not permissible for Bhagawati Developers to move applications for impleadment and transposition. But the apex court rejected the opposition saying that a winding up petition can be filed with 10% shareholding in all and it is not necessary that the petitioner must hold it individually. A petition can be filed even after obtaining the consent of other shareholders, the court said.