SEBI Cannot Reject Requests Affecting Rights Through Cryptic Communications: SAT Mumbai

The Mumbai Bench of the Securities Appellate Tribunal (SAT) on 8 July held that the Securities and Exchange Board of India (SEBI) cannot reject a request to withdraw an open offer through a cryptic communication, as any decision having civil consequences must be supported by reasons.

Presiding Officer Justice P.S. Dinesh Kumar with Technical Members Meera Swarup and Dr. Dheeraj Bhatnagar allowed the appeal filed by Marwadi Chandarana Intermediaries Brokers Ltd against SEBI's communication directing it to proceed with an open offer for the acquisition of TruCap Finance Limited, a listed non banking financial company. The Bench held:

“SEBI is statutory market regulator. It is duty bound to pass speaking orders in accordance with law.”

The Tribunal was hearing an appeal against SEBI's communication dated 30 January 2026, which required Marwadi Chandarana Intermediaries Brokers Ltd to proceed with the open offer. 

The appellant had entered into a Share Purchase Agreement (SPA) and a Securities Subscription Agreement (SSA) with TruCap Finance Limited in May 2025, triggering an open offer obligation. Subsequently, the SPA and SSA were terminated. The appellant then sought SEBI's permission to withdraw the open offer. However, SEBI rejected the request and directed the appellant to proceed with the offer.

Before the Tribunal, the appellant argued that SEBI's communication had serious civil consequences and was issued without providing reasons or considering its submissions. SEBI contended that the communication was not an order but only a response to the draft letter of offer. It also argued that withdrawal of the open offer was barred under Regulation 23(1)(c) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as the alleged “material adverse effect” had not been disclosed in the Detailed Public Statement.

The Tribunal noted that the SPA and SSA contained a “material adverse effect” clause, which allowed termination if the target company's net worth declined by 20% or more. It observed that the appellant had relied on this clause while terminating the agreements and seeking withdrawal of the open offer. Further, it held that SEBI had received the appellant's withdrawal request, the merchant banker's comments and detailed submissions. However, the impugned communication did not refer to these materials.

Holding that SEBI's communication could not be treated as a mere exchange of correspondence, the Bench observed:

“In these circumstances, the impugned communication will result in serious consequences. Therefore, in our opinion, it is akin to an 'order', although it is mentioned as 'SEBI's comments in terms of Regulation 16(4) of SAST Regulations.'”

It added that “...all events subsequent to the impugned communication meet the appellant with civil consequences.” Lastly, the Bench held that since SEBI's decision affected the acquirer, the target company and investors, the regulator was required to communicate its decision through a reasoned speaking order.

Accordingly, the SAT set aside SEBI's communication and remitted the matter to SEBI to pass a speaking order in accordance with law.

For Appellant: Senior Advocate Janak Dwarkadas, Advocates Shruti Rajan, Vivek S Shah, Paras Taneja and Taposh Das

For Respondent: Senior Advocate Chetan Kapadia, Advocates Suraj Chaudhary, Mihir Mody, Harshvardhan Nankani, Vijay Chockalingam, Yash Sutaria, Karthik K.P and Aavish Shetty