SEBI Moves Supreme Court Against Kerala HC Ruling Dismissing Its Appeal Over Ramachandran Escrow Funds

On 22 August, the Securities and Exchange Board of India (SEBI) filed a special leave petition (SLP) before the Supreme Court challenging a Kerala High Court judgment which dismissed its appeal over funds lying in an escrow account linked to late filmmaker and jeweller M.M. Ramachandran and Atlas Jewellery.

A Division Bench of the Kerala High Court had held that SEBI, which was not the original writ petitioner, could not challenge the judgment in proceedings initiated by Axis Bank. It had observed:

If the SEBI has a claim over the property, it is for them to approach the authorities or to invoke remedies that are available to them in law, but cannot launch a collateral challenge against a judgement which only dealt with the contentions of the bank against Ext.P5 order and nothing else.”

The dispute concerns an escrow account jointly maintained by Ramachandran and Atlas Jewellery Pvt Ltd. for an open offer to acquire shares of Atlas Jewellery India Ltd.

Axis Bank had approached the Kerala High Court challenging the Income Tax Department's order directing it to remit the escrow funds towards Ramachandran's outstanding income tax liabilities.

The Single Judge declined to adjudicate SEBI's rights over the funds and permitted Axis Bank to inform the Income Tax Department about orders passed by SEBI and the Enforcement Directorate. The Judge also held that no legal provision prevented the Income Tax Department from recovering Ramachandran's tax dues from the escrow account.

SEBI then filed an appeal, contending that the funds were under its control and could not be released. The Division Bench dismissed the appeal, holding that SEBI could not mount a collateral challenge to a judgment that had considered only Axis Bank's challenge to the tax recovery order. This led to the present appeal before the Supreme Court.

The Supreme Court is yet to list the SLP.