Court Directs Petitioner to Pursue Alternative Remedies Under SEBI Act for Alleged Fraudulent Share Transfers
In a significant judgment, the Kerala High Court has dismissed a writ petition filed by Adheesh Damodaran against the Securities and Exchange Board of India (SEBI) regarding the approval of an Initial Public Offering (IPO). The petitioner alleged fraudulent transfer of shares, originally held by him, by another promoter, which led to the IPO process initiated by the respondent company.
The case was heard by Mr. Harisankar V. Menon, J., who emphasized the availability of an alternative remedy under Section 15T of the Securities and Exchange Board of India Act, 1992. According to this provision, any order issued by SEBI can be appealed. The court observed that the petitioner had the option to challenge SEBI's order dated March 11, 2026, which approved the IPO process.
The petitioner, represented by Senior Counsel Sri. Pramod Nair, argued that the shares offered for the IPO were deceitfully transferred by the third respondent, who is another promoter of the company. The petitioner also highlighted a communication from the Assistant Commissioner of Police, which corroborated his claims of not being present during the alleged transfer of shares.
However, counsel for the respondents, including Sri. K.M. Jamaludheen and Sri. Santhosh Mathew, countered these arguments, stating that the petitioner should pursue remedies provided under the SEBI Act. They contended that the court should not interfere in the IPO process since SEBI had already given its approval, and the allegations were yet to be finalized.
The court, after considering submissions from both parties, concluded that the petitioner should utilize the appellate mechanism under Section 15T of the SEBI Act. The judgment emphasized that the petitioner could not bypass the statutory remedy available under the Act, and hence, the writ petition was dismissed without prejudice to the petitioner's rights to seek redress through appropriate channels.
The dismissal of the writ petition underscores the judiciary's stance on adhering to statutory frameworks and the importance of utilizing designated appellate mechanisms before seeking judicial intervention.
Bottom line:-
Securities Law - A writ petition challenging an IPO process was dismissed due to the availability of an alternative remedy under Section 15T of the Securities and Exchange Board of India Act, 1992, which provides for an appeal against SEBI's orders.
Statutory provision(s): Securities and Exchange Board of India Act, 1992 Section 15T
