JSA advised and successfully defended one of the former directors of Karvy Stock Broking Ltd. (“KSBL”) in proceedings initiated by the Securities and Exchange Board of India (“SEBI”) in respect of portfolio management activities of KSBL.
SEBI issued a Show Cause Notice (“SCN”) to certain individuals who were directors of KSBL at the relevant point. The SCN alleged that these directors were liable for the defaults/ violations/ non-compliance by KSBL of various provisions of the SEBI (Portfolio Managers) Regulations, 1993 and certain SEBI circulars. Vide its common order dated November 15, 2022, SEBI has exonerated the former director on the ground that there is no evidence/ material available on record to show that these individuals were involved in the active management or day to day affairs of the portfolio management activities of KSBL.
While defending the charge, various provisions of the SEBI Act, 1992, Companies Act, 2013, circulars issued by the Ministry of Corporate Affairs and various judgments were relied upon to submit that the former director could not be held liable merely on account of his directorship without producing any evidence to suggest his involvement in the alleged violations.
SEBI accepted the submissions made on behalf of the former director and concluded the proceedings without any adverse observations and acknowledged the well settled principle that directors of a company cannot be held vicariously liable for the acts of a company unless their involvement in the affairs of the company/ alleged violations can be established through board processes/ other documentary evidence.
JSA Dispute Team Comprised Partner – Vikram Raghani, Principal Associate – Pulkit Sukhramani, and Senior Associate – Vidhi Jhawar.
Pulkit Sukhramani specializes in Securities Litigation and Advisory.