Factual Background 

In the matter of Atul Agarwal V. UOI A PIL was filed by Atul Agarwal, a lawyer with a bachelor’s degree, seeking remedy on behalf of the millions of investors who have been taken advantage of by dishonest company promoters who then disappear with their victims’ hard-earned money. The petition relates to the shares of up to 464 companies whose equities were unilaterally delisted by the Bombay Stock Exchange without any effort on their side.

According to Rule 19(5) of the Securities Contracts (Regulation) Rules, 1957, the Bombay Stock Exchange is authorised by law to list or suspend the trading of shares, stocks, and other securities on its stock exchange. The petitioner’s main complaint is that the stock exchange, which is the respondent, arbitrarily uses this authority to suspend listed companies based solely on procedural disclosure violations.

Contention from parties 

The petitioner’s attorney argued that the Respondent had suspended a significant number of companies from a continued listing and that many of those companies had subsequently been delisted without offering investors any protection. As a result, the petitioner’s attorney argued, the proper mechanisms should be in place to take action against those responsible for defrauding investors. 

The petitioner, according to SEBI, filed the current petition without understanding that the interests of investors have been properly protected by SEBI under the De-Listing Regulations and SCRA, and that the revocation standards introduced by Respondent No. 3 BSE have been done so in furtherance of the provisions of SCRA and the Securities Contract Regulation Rules, 1957, and that every effort is being made by SEBI as well as BSE to ensure that no fraud occurs. 

The Ministry of Corporate Affairs, argues that it had established the Investor Education and Protection Fund. The Court remarked that the purpose of the SEBI, which was created by the passage of the SEBI Act by the Parliament, was to safeguard the interests of investors in securities, encourage the growth of the securities market, and regulate it. The Court further noted that the SEBI is authorized to take any actions in the interest of investors, including regulating stock exchange business, registering stockbrokers, overseeing their activities, and carrying out any other duties or exercising any other authority granted by the Central Government in accordance with the SCRA provisions.

Courts Decision 

A division bench of chief justice Subramonium Prasad and Justice Tushar Rao Gedela held that Given the existing statutory requirements, the interest of the investors is unquestionably protected by the statutory laws governing the subject. The Court came to the conclusion that since statutory provisions of law allow for an appeal against any order made by a recognised stock exchange before the SAT and anyone who has been wronged by an order made by the SEBI under Section 4B or by the adjudicating officer may also file an appeal, there is also an effective remedy under the statutory provisions. As a result, the Court determined that there is a transparent framework in place for delisting the securities, proper public shareholder participation and representation in the delisting process, and that an investor who has been wronged by the delisting process has a remedy available.