B.P.SINGH - (1.) This batch of appeals has been preferred by the several defendants against the order passed by a learned Judge of this Court exercising original jurisdiction in Notices of Motion No. 3120 of 1997 and 3932 of 1998 in Suit No. 3910 of 1997. In the suit, the plaintiffs have challenged the substantial acquisitions of shares of defendant No. 12 by some of the defendants on the ground of the acquisitions being in breach of Regulations framed by the Securities & Exchange Board of India (SEBI), which had come into force with effect from November 7, 1994. The learned Judge, by the impugned common order, made the Notices of Motion absolute in part. It was held that the plaintiffs do have a prima facie right to maintain the suit to seek a declaration that the acquisition of the disputed shares is void being in breach of the SEBI Regulations. It has also been held that the Civil Court does have jurisdiction to interpret the provisions of the statute and the SEBI Regulations so as to lay down the correct interpretation and the frontiers of jurisdiction of the statutory authorities concerned. It is, however, held that the exercise of jurisdiction by the Court should not be extended to an extent so as to infringe the jurisdiction of the SEBI. That, prima facie, a suit was maintainable in common law for rectification of the companys membership register. The consequential decision on disinvestment, however, will have to be arrived after considering all aspects including a hearing by the SEBI in which case the actual order of disinvestment could be passed by the SEBI or the SEBI may pass any other order which it is entitled to pass, such as directing a post facto public announcement which will include the disputed shares. The concerned share-holders, in the meantime, have been held to be entitled to all their rights, even if their names are ultimately removed from the register, but the right to vote on the basis of their share-holding could be restricted by this Court or by SEBI. In view of these findings, it has been ordered that --- (i) Defendants No. 1 to 11 and their power of attorney and proxy-holders be restrained from exercising voting rights directly or indirectly insofar as they pertain to shares detailed in paragraph 18(ii) and (iii) of the plaint, the shares acquired by M/s. Imfa Holding Pvt. Ltd., M/s. Mahameru Trading (P) Ltd., and M/s. Shirish Finance & Investments Ltd., defendants No. 3, 4 and 5 respectively with a rider that any policy decision to be taken by the Board of Directors on items such as sale of assets, amalgamation, merger, etc., if objected to by defendants No. 1 to 11 in writing shall not be implemented for a period of 8 weeks from the date on which the decision is communicated to the defendants. Any objection in this behalf shall be furnished to defendant No. 12-company within 4 days from the date of meeting. (ii) As stated by Counsel appearing on behalf of defendant No. 12, no general meeting shall be held except with the prior application to this Court until SEBI decides the notices before it and/or until further orders. (iii) As a consequence, votes which have been segregated viz., those which pertain to the shares covered under paragraph 18(ii) of the plaint will have to be counted as valid votes while deciding the disputed items on the agenda of the meeting of 30th December, 1998. (iv) The votes of the share-holders who are covered under paragraph 18(i) to (iii) of the plaint will be excluded while arriving at the result.
(2.) As earlier observed, the aggrieved defendants have preferred these appeals. Defendant No. 1, Kishore R. Chhabria, is appellant in Appeal No. 8 of 2000. Defendant No. 5 is appellant in Appeal No. 6 of 2000. Defendant No. 4 is appellant in Appeal No. 7 of 2000. Defendant No. 11 is appellant in Appeal No. 11 of 2000, defendants No. 7 and 8 are appellants in Appeal No. 12 of 2000 and defendant No. 3 is appellant in Appeal No. 13 of 2000.
(3.) The main issue which arises for consideration in this batch of appeals is whether the acquisition of shares in defendant No. 12 company/Herberstons Ltd., by defendants No. 3, 4, 5, 7 and 8 is not in breach of the SEBI Regulations of 1994, and further whether the conversion of debentures of defendant No. 12 into shares in favour of defendant No. 2 is in breach of the aforesaid Regulations. The plaintiffs contend that such conversion and acquisitions are void since they offend the provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 (hereinafter referred to as the 1994 Regulations), and, therefore, the Register of members of the company be suitably modified to exclude the names of the persons/companies who have so acquired the shares.;