JSA advised and successfully defended Aditya Birla Commodities Broking Ltd. (“ABCBL”), [now merged with Aditya Birla Money Ltd. (“ABML”)], in proceedings initiated by the Securities and Exchange Board of India (“SEBI”) in the matter of National Spot Exchange Limited (“NSEL”), under the SEBI (Intermediaries) Regulations, 2008. It was alleged that on account of ABCBL’s facilitation of trading on NSEL for some of its clients, ABCBL was no longer a “fit and proper person” and accordingly, ABCBL’s as well as ABML’s registration as a stock-broker ought to be cancelled. Vide its order dated November 06, 2023, SEBI concluded the proceedings against ABCBL (and ABML) without any adverse observations/directions.
Enquiry proceedings under Chapter V of the SEBI (Intermediaries) Regulations, 2008 (“Intermediaries Regulations”) were initiated against ABCBL. A show cause notice was issued under Regulation 25 of the Intermediaries Regulations by the Designated Authority (“DA”) calling upon ABCBL to show cause as to why action, including cancellation of registration, against ABCBL/ABML should not be recommended. Pursuant to receipt of the recommendation of the DA, a show cause notice and a supplementary show cause notice was issued by the Competent Authority (“CA”) under Regulation 28 of the Intermediaries Regulations calling upon ABCBL to show cause as to why action recommended by the DA or any other action should not be taken against ABCBL.
While disposing of the proceedings against ABCBL and consequently ABML, the Ld. Whole Time Member (“WTM”) of SEBI considered the settled position that upon amalgamation, the transferor company ceases to exist, and all rights and liabilities pass on to the transferee company. In the facts and circumstances of the matter, the WTM held that the “fit and proper” status of an entity is neither an asset nor a liability that can be transferred to the resultant entity. Accordingly, it was held that the “fit and proper” status of an entity could not be transferred, and the resultant entity would have to separately ensure that it is in adherence of the “fit and proper” requirement.
Our Securities Litigation team comprised Lead Partner – Vikram Raghani, Partner – Pulkit Sukhramani, Senior Associate – Vidhi Jhawar, and Associate – Deepank Anand & Shourya Tanay.
Pulkit Sukhramani specializes in Securities Litigation and Advisory.