Bombay HC in the Case of Swojas Energy Foods Ltd. & ors. V/s. SEBI & ors.

Case Covered:

Swojas Energy Foods Ltd. and ors.

vs

Securities and Exchange Board of India
and ors.

Facts of the Case:

• The Appeal has been filed by petitioners against the Freezing of their Demat accounts by Respondent no. 5 on the ground of statutory order. Previously in the order dated 27^th January 2021, Learned Counsel for Petitioners submitted that Respondent no. 5 is not a statutory authority. Therefore it got no power to freeze the Demat account. Also, there is no such order by Statutory authority for freezing of the Demat account of the petitioners.
• Respondent no. 5 Froze Demat account of petitioner for non-payment of Annual listing fee which has been quantified at Rs. 14,16,000/-
• In a previous appeal before the securities appellate Tribunal, in an Order dated 6^th January 2020 Securities appellate tribunal directed the petitioners to deposit Rs. 14,16,000/- before respondent no. 5 under protest upon which the Demat accounts would be unfrozen.
• The appeal filed by the petitioners against the decision of the Securities Appellate Tribunal has been rejected by the Supreme Court.

Observations:

• In a letter dated 11^th February 2021 of the Securities and Exchange Board of India ( SEBI ) laying down the standard operating procedure regarding action to be taken for non-payment of annual listing fees which have led to the freezing of the Demat accounts of the petitioners.
• Referring to paragraph No.6 of the said letter the standard operating procedure came into immediate effect and has superseded the previous circulars dated 11th June 2019 and 6th November 2020 clarifying that no further action shall be initiated by the stock exchanges on the strength of the superseded circulars.
• Referring to paragraph No.9 of the said letter the stock exchanges including respondent No.5 have been directed to formulate a consistent annual listing fee invoicing policy
• As per paragraph No.9.2 to inform the depositories to unfreeze the Demat accounts which have been frozen for non-payment of annual listing fees with immediate effect.

The Decision of the Court:

• In the light of the above development, we are of the view
  that the principal grievance of the petitioners has been redressed.
  We may also mention that one of the prayers made in the writ
  the petition was for quashing of circular dated 11th June 2019 which
  now stands superseded by the present letter dated 11th February,
  2021.
• At this stage, Mr.Shenoy submits that petitioners will
  deposit Rs.14,60,000/- into the Demat accounts and thereafter
  submit a fresh representation to SEBI as to the other grievances.
• Further, we grant liberty to the petitioners to file a fresh
  representation highlighting their grievances before respondent
  No.1 and if such a representation is made, an appropriate authority
  of respondent No.1 shall consider and decide the same by way of
  a speaking order expeditiously and at any rate within a period of
  eight weeks from the date of receipt of the representation.
• All contentions are kept open.
• At this stage, Mr.Modi learned senior counsel makes a prayer for stay of the order. Having delivered the order, we are not inclined to stay the same.
• The writ petition is disposed of.

Related Topic:
Freezing of Demat Accounts will be only of Promoter(s)

Read and download the full decision here:

Swojas energy foods ltd. Vs SEBI in Bombay High Court