The tribunal has not only set aside the Sebi order debarring these entities but has also directed the regulator to pay the cost of the litigation to these entities.
SAT in its order, the copy of which is available with FE, has asked the Sebi to pay Rs 2 lakh within six weeks from the date of the order. The SAT order was passed on August 24, '06. This is the second instance of SAT asking the capital market regulator to cough up the cost of litigation to the market intermediaries.
Earlier this year, the three-member bench headed by presiding officer, Justice NK Sodhi had directed Sebi to pay Rs 50,000 as cost of litigation to Times capital Ltd, a stock broker. The broker was asked to pay the turnover fees, where none was due from him and the regulator withheld his various permissions.
In the instant case, Sawaca Business Machines Ltd (Sawaca) was debarred from accessing capital market through an order passed by Sebi whole time member AK Batra on July 13, 2004.
The Sebi contention was that the preferential allotment of shares made by the Sawaca was not in accordance with the law and that the company had resorted to fictitious book entries for showing receipt of subscription towards the preferential allotment and thereby violated Sebi's Fradulent and Unfair Trade Practices (FUTP) Regulations.
SAT in its order disposed off all the allegations made by Sebi in impugned order and said it is arbitrary to the case. By debarring the appellant (Sawaca), who is a listed company, its reputation has been damaged. The Sebi order has also worked as detriment to the shareholders of Sawaca.
The damage caused is irreparable both to the company and its shareholders. We are, therefore, of the view that this is a fit case where the Board (Sebi) should be burdened with heavy costs.