The notices followed a combined hearing of 2 public interest litigations (PILs) seeking a probe by the Central Bureau of Investigation (CBI) into regulatory inaction on suspended companies. The PILs were filed by Delhi-based Midas Touch Investors Association and Delhi-based pilot Atul Agarwal last year. As both PILs dealt with the issue of investor money locked up in companies suspended by stock exchanges, the court decided to combine these.
The two Investors Associations seeks action against Securities and Exchange Board of India (SEBI) for failing to regulate Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) regarding monitoring of compliance by listed companies. Despite recommendations from the Sahoo Committee, the market regulator has so far failed to take action against 2,050 companies & its promoters and directors
CBI Investigation.!
The Delhi High Court has issued notices to Union Government, SEBI, BSE and NSE on a PIL filed by Midas Touch Investors Association. The PIL also seeks a probe against SEBI and the bourses by the Central Bureau of Investigation (CBI) for their inaction to initiate action against defaulting companies.
Investors Association Midas Touch, in its instant writ petition has stated that SEBI as market regulator & both the exchanges, as first line of regulators have failed to perform their statutory duties. This has resulted in thousands of listed companies, their promoters & directors to get away with unfair practices without any statutory monetary penalty & penal action.
According to the PIL, over the years, over Rs. 58,000 crore of around one crore investors are blocked due to suspension of about1,450 companies by BSE and NSE.
Investors Shrunk from 2 core to 80 Lakh..!
India has one of the highest household savings but its investor population has shrunk from 2 core to 80 Lakh in the last 2 decades of liberalisation and enactment of SEBI Act in 1992, notwithstanding the fact that the economy has done exceedingly well leaving increasing number of young people with money to invest.
Bad administration by the regulator SEBI has eroded the faith of small investors in the share market who have virtually stopped investing in it to the detriment of the economy, the PIL stated.
Midas Touch Investors Association said it received more than 14,000 grievances from investors on its portal, out of which nearly 2,000 were against about 450 companies that were suspended by the stock exchanges for non-compliance of listing agreement.
When Midas Touch Investors Association took the grievances to the BSE and NSE, the first line of regulators, the bourses expressed their inability in resolving the complaints against suspended companies and advised the investor association to take up the matter with SEBI.
During a meeting between SEBI and Investors’ Associations, a Midas Touch representative on December 2010 raised the issue. Midas founder Mr. Virendra Jain stated that though suspension does not affect the company’s working, it has an adverse impact on shareholders since they can not sell their shares on the exchange until suspension is revoked by the exchange or SEBI.
According to pilot Atul Agarwal’s petition, there were,''one crore public shareholders /investors of these 1,405 suspended companies, whose enormous investment of more than Rs. 1,79,560 crore in these suspended companies is at stake”.
M.S. Sahoo Committee..!
The market regulator SEBI formed a committee under the chairmanship of Mr. M.S. Sahoo, a whole time member of SEBI to look into investor grievances against suspended companies. The committee was apprised that about 1,845 companies listed at BSE and 203 listed at NSE were not in compliance of various clauses of the listing agreement. These included 425 active companies comprising 60 listed on NSE and 365 on BSE -which were not suspended.
The Mr. M.S. Sahoo Committee recommended specific action under Securities Contracts (Regulation) Act to be taken against these companies and its promoters, directors, etc by NSE, BSE & SEBI, for non-compliance of listing agreement. It also recommended many measures for strengthening the monitoring system.
However, till date the recommendations of the Committee for taking action against about 2,050 companies & its promoters and directors are not implemented. Since SEBI failed to provide any information about the action taken by the market regulator, BSE & NSE against these companies, Midas Touch filed a PIL in the Delhi High court.
The investor association has requested the Delhi High court to direct SEBI to take similar action under Securities Contracts (Regulation) Act, 1956 (SCRA), against all those defaulting companies, their promoters, directors & company secretaries which are listed at other exchanges but not at NSE & BSE and to frame regulations and implement an action plan for effective monitoring of companies which were listed at now de-recognised stock exchanges.
No comments:
Post a Comment