SC relief to SEBI, NSE, BSE for mistakenly freezing accounts of 2 Mumbai residents

The Supreme Court on Monday set aside the order of the Bombay High Court, giving relief to market regulator Securities Exchange Board of India (SEBI) and the country’s two stock exchanges – National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Two residents of Mumbai Dr. Pradeep Mehta and his son Neil Pradeep Mehta have been fined Rs. 80 lakhs outlay.

In 2017, his demat accounts were mistakenly frozen as Pradeep Mehta was once one of the promoters of Srenuj & Company. Srenuj failed to report its quarterly earnings for April-June, July-September and October-December in 2016.

A bench headed by Chief Justice DY Chandrachud noted that the High Court had reserved its order in March on the father-son petitions seeking a direction to the National Securities Depository Ltd to transfer their securities lying in the best system to their demat accounts. However, the High Court in its August judgment had set aside the freezing order and imposed the penalty without hearing the market bodies, the CJI said, which was an error on the part of the High Court.

Restoring Mehta’s case to the High Court, the bench gave the duo liberty to seek interim relief from the High Court, which had termed the move to freeze the Mehtas’ demat accounts in August as “grossly illegal, arbitrary and unconstitutional”.

The High Court also took a swipe at SEBI, NSE and BSE and said such action by the statutory bodies would shake the confidence of investors who are non-resident Indians. “This is certainly not to be expected from the conduct of these institutions. The duty to protect the investor’s spirit and confidence is paramount which is breached in every possible way in the present case,” the HC said.

Mehta had challenged the freezing of his accounts, arguing that he had no direct or indirect control over the company’s affairs and was classified as a ‘promoter’ only on the basis of his relationship with the main promoter, of which he was unaware till June 2017. were