In an order passed on June 22, 2018, SAT held that SEBI’s decision taken on the SCORES platform would be a quasi-judicial decision and not an administrative decision, if it affects the rights and obligations of the shareholders of a company.
Independent Media Trust (IMT) was established in 2011, with Reliance Industries Limited (RIL) as the sole beneficiary. Shortly thereafter, IMT subscribed to Zero Coupon, Optionally and Fully Convertible Debentures (ZOCD) issued by the holding companies of Network 18 Media & Investments Ltd.(NW18) & TV 18 Broadcast Ltd. (TV 18). Based on this, in a complaint filed with NSE in 2014 and forwarded to SEBI in 2016, it is alleged by the Appellant that RIL had failed to disclose it had indirectly acquired control over NW18 and TV18 when IMT subscribed to the ZOCDs. In January 2017, SEBI rejected the complaint by stating that IMT was not a subsidiary of RIL and therefore, RIL was not required to make disclosures under Clause 36 of the Listing Agreement. Against this decision of SEBI, an appeal was preferred. Clause 36 requires listed companies to inform the stock exchanges of all events which have a bearing on the performance/operations of the company, including price sensitive events.
During the appeal, a preliminary objection was raised by SEBI that its decision was passed on the SCORES platform and thereby is an administrative decision/order under section 11(1) of SEBI Act, and appeal against such administrative decision is beyond the appellate jurisdiction of SAT. Rejecting the contention, SAT held that SEBI’s decision vitally affects the rights and obligations of the Appellants as shareholders of NW18 and therefore, would be a quasi-judicial decision and not an administrative decision.
Setting aside SEBI’s decision by deeming it erroneous and detrimental to the interests of investors, SAT held that SEBI was not justified in disposing the complaint by merely recording that IMT is not a subsidiary of RIL and Clause 36 of the Listing Agreement had not been violated. SAT directed SEBI to decide afresh whether execution of ZOCD agreement gave indirect control over NW18 and TV18 to RIL.
By clearly distinguishing administrative orders from quasi-judicial orders, SAT has provided clarity on the SEBI decisions which may be appealed by aggrieved parties.
