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Informist, Wednesday, Aug 28, 2024

 

NEW DELHI – Pulling up the Securities and Exchange Board of India, the National Stock Exchange Ltd and the BSE for "illegally" freezing the demat accounts of Dr Pradeep Mehta and his son Neil Pradeep Mehta, the Bombay High Court said that the father and the son were free to deal with all their shares held in their demat accounts. Their demat accounts were frozen as Pradeep Mehta happened to be one of the promoters of Shrenuj & Co Ltd, which could not file its quarterly earnings for Apr-Jun, Jul-Sep and Oct-Dec in 2016.

 

 

The court said that the action of freezing the petitioners' demat account was "grossly illegal, arbitrary and unconstitutional". The court has asked SEBI, NSE and BSE to pay a cost of 8 mln rupees to Pradeep Mehta and his son.

 

 

The court noted that Pradeep Mehta, a senior citizen, has faced difficulties since 2017 as his entire shareholdings as maintained in the demat account could not be utilised by him, which was a valuable property under Section 300A of the Constitution. "...we are of the clear opinion that BSE/NSE as also SEBI has clearly failed to discharge their duties and to act in accordance with law so as to deprive the petitioner (Pradeep Mehta) of his shares in the demat account held by him which certainly, in our opinion, is an infringement of petitioner's right guaranteed under Articles 14, 21 and 300A of the Constitution," said the court.

 

Regarding Neil Pradeep Mehta's case, the high court said "this is a gross case and more particularly considering that the petitioner in this case was not the promoter of Shrenuj and merely for the reason that he held a demat account along with his father Pradeep Mehta, who was the second holder". Neil Pradeep Mehta is a non-resident Indian currently residing in Singapore. The court said that there was much substance in the contentions of the petitioner that the action in his case crossed all boundaries of legitimacy, reasonableness, fairness. 

 

The court noted that Neil Mehta in this case was never the promoter of Shrenuj & Co. The court said that the present case was "more gross" and a "classic example of high-handed action" and a "reckless action" to freeze the demat account of Neil Mehta. "There is patent non-application of mind by any of these authorities, who are statutorily governed in resorting to take such drastic action," said the court. Even the elementary principles of natural justice of a fair opportunity of calling upon Neil Mehta to show cause, a hearing and appropriate order to be passed, have been "thrown to the winds", said the court. This is certainly not the manner or method in which the rule of law would mandate these authorities to act, the court added.

 

"We may also observe that the actions and conduct of the BSE/NSE and SEBI as the law mandates is to protect the interest of the investors. In the present case these statutory bodies have totally acted contrary to such norms," said the court. In fact the actions of these authorities when taken against a person like Neil Mehta are also likely to shake the confidence of investors who are non-residents Indian, it added. "This is certainly not what can be expected from the conduct of these entities. The duty to safeguard the investor's sentiment and confidence is paramount which stand breached in every possible manner in the present case," said the court.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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