Brief about SEBI (Powers, Functions)

Securities and Exchange Board of India (SEBI) is a regulatory body of the Government of India. It controls the securities market. It was established on April 12, 1992 under the SEBI Act, 1992. It is headquartered at the Bandra Kurla Complex in Mumbai, India. It has regional offices in major cities of India such as New Delhi, Kolkata, Chennai and Ahmedabad. These cover the North, South, East and West regions of India. Besides, it has a network of local branch offices in prominent Indian cities.

The Preamble of the Securities and Exchange Board of India describes the basic functions of SEBI is the protection of investors interests in securities and to be a platform to promote, develop and regulate the securities market in India as well as the relating matters that are connected with it.The securities exchange board is permitted to approve rules and laws pertaining to the stock exchanges. It also implies that SEBI should enforce the laws for stock exchanges to follow. SEBI examines books of accounts of financial mediators and recognized stock exchanges. Another role of SEBI is to urge respective companies to list their shares in stock exchanges and manage the registration of distributors/brokers.

The SEBI board has three main powers:
– Quasi-judicial- In this, SEBI can deliver judgments related to the securities market pertaining to fraud and other unethical practices. This helps to ensure fairness, transparency, and accountability in the securities market.

– Quasi-legislative- These powers allow SEBI to frame rules and regulations to protect interests if the investors. Some of its regulations consists of Insider Trading Regulations, Listing Obligation, and Disclosure Requirements etc. These have been formulated to keep malpractices at bay.

– Quasi-executive- SEBI is empowered to implement its regulations and to put up a case against violators. It is also authorized to inspect books of accounts and other documents if it comes across any violation of the regulations.


SEBI also has regulations pertaining to Mutual Funds which are:


(1) A sponsor of a mutual fund, an associate or a group company which includes the asset management company of a fund, through the schemes of the mutual fund in any form cannot hold:

(a) 10% or more of the shareholding and voting rights in the asset management company or any other mutual fund

(b) An asset management company cannot have a representation on a board of any other mutual fund

(2) A shareholder cannot hold 10% or more of the shareholding directly or indirectly in the asset management companyof a mutual fund

Facts and Summary of the case

Thefirst Appellant is a company incorporated under the Companies Act, 1956 having their registered office at 908, GIDC Engineering Estate, Sector 28, Gandhinagar , Gujarat. Mr. Navinchandra B. Gandhi, Mr. Dharmendra B. Gandhi and Mr. Bhupendra B. Gandhi are its directors. The second Appellant is a company incorporated under the Companies Act, 1956 having its registered office at Dharmendranagar, Plot No.559, At Post: Sachana Ta: Viramgam, Dist, Ahmedabad, Gujrat. Mr. Navinchandra B. Gandhi, Mr. Suchil M. Kothari, Mr. Bhupendra B. Gandhi and Mr. Arvind J. Shah are its directors.

The Respondents received several complaints against both the companies from investors and as at 31st March, 2002, a total of 116 investors’ grievances which were not resolved or acted upon were pending with both the Appellants. The Respondent advised the Appellants to meet officials of SEBI in connection with the redressal of investors’ grievances pending against them . However, the Appellants failed to do so. As the Appellants failed to redress the grievances of investors within the stipulated time the Appellants were granted an opportunity to be heard before the Respondent. The hearing was fixed for 31st May, 2003.

However, the Appellants failed to appear before the Respondent. Therefore, in exercise of the powers conferred on the Respondent vide section 11 (1) and 11(4) (b) read with Section 11B of the SEBI Act, the Respondent directed that the Appellants and their directors shall dissociate themselves from the securities market for a period of 5 years and that the aforesaid persons shall not deal in securities in any manner whatsoever for a period of 5 years. With the consent of both the Appellants and Respondents the appeals were taken up for final hearing. The learned Counsel for the Respondents submitted a letter dated 24th March, 2004 from MCS Ltd., which was Registrar to the Appellants. This letter highlights that inspite of number of reminders issued by the Registrar, the Appellants have failed to attend to the same.

Though we do not depend on the contents of the letter yet the fact remains that the Appellants have not attended to a large number of complaints which has also been confirmed in their 16th Annual Report for the year 2002-2003 that 121 complaints remained pending to be attended. The learned Counsel for the Appellants had submitted that due to flood during the relevant period and in the absence of Compliance Officer they have not been in a position to dispose of the cases within the time schedule as desired. It was also stated that both the companies have gone to BIFR for consideration of rehabilitation package.


After hearing both the parties, the appeal is dismissed on the ground that this is a clear case of mismanagement and the Appellants are bound to attend to the grievances of the shareholders within a stipulated time schedule. However, if BIFR approves suitable revival package and the same requires mobilisation of capital from the public, the Appellants are open to approach the Respondent to review the suspension.

By Ipshita Vedajna,
School of law, Christ University,

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