Background Matrix 

In the Matter of Tejo Ratna Kongara v. SEBI, The appellant filed an appeal in opposition to the order issued by the Securities and Exchange Board of India on December 15, 2022, which addressed the submission in the case of the proposed merger or arrangement between Indiabulls Real Estate Limited and Embassy Group Companies. On January 31, 2020, Indiabulls Real Estate Limited announced a merger proposal. On August 18, 2020, the Board of Directors decided to accept it. On February 16, 2021, a draught plan of arrangement was submitted to the National Stock Exchange of India Limited and the Bombay Stock Exchange for consideration of a no objection certificate. Shareholders and NCLT Bengaluru supported the plan, while NCLT Chandigarh rejected it. Between March 2021 and March 2022, a shareholder bought 20,100 equity shares in Indiabulls, although they were not present at the shareholders’ meeting. A share purchase agreement was used by DD to transfer his ownership of Indiabulls to the appellant on August 12, 2022, despite the shareholder having filed an intervention plea and representation before NCLT Chandigarh. The appellant, who asserts that he has assumed the role of the previous complainant and is entitled to continue the action, filed an appeal against the SEBI judgement.

Issue 

If the appellant qualifies as an aggravated person under Section 15T of the SEBI Act.

Analysis of Tribunal order 

The NCLT in Chandigarh was the appropriate forum for the appellant to bring his complaint, and after doing so, it was no longer possible for him to do so before another forum, namely SEBI. According to Justice Tarun Agarwala, the presiding judge, and Technical Member Meera Swarup, the appellant lacks the right to bring the appeal because he is not an aggrieved party.

The appellant acquires shares in the company by buying them from the shareholder, but this does not grant him or her the right to sue or pursue the case, according to the court’s ruling. Due to the fact that the complaint is private and terminates when the shareholder transfers the shares, the transfer of shares does not include a cause of action. The NCLT’s unique power to approve or reject schemes of arrangement is not infringed upon, the Court added in a separate statement on the Companies Act of 2013 and the LODR Regulations. To ensure that schemes of arrangement do not break securities regulations, SEBI’s responsibility is restricted to providing observation or no objection letters.

The Court decided that a shareholder cannot make a representation or submit an appeal over a plan of arrangement with SEBI or the Stock Exchange. When the plan of arrangement is put before the company’s shareholders for consideration, a shareholder who feels wronged by it may object, and under Section 230(4) of the Companies Act, they may also object before NCLT. The claim that SEBI regulates the scheme of arrangement under the LODR Regulations is false and cannot be accepted. According to the concept of election, the party who is complaining has the choice of choosing one remedy over another when there are two options for the same relief. The court observed that the shareholder or appellant had lost the opportunity to bring the same complaint before SEBI after they had addressed the appropriate forum before NCLT, Chandigarh. The appeal was denied because it could not be maintained. After all, the appellant was not a harmed party.

CASE NAAME – Tejo Ratna Kongara v. SEBI, Misc. Application No. 185 of 2023