Supreme Court Seeks Reply On SEBI's Appeal Against SAT Ruling In Bombay Dyeing-SCAL Services Case

The Supreme Court on Monday observed that the Securities Appellate Tribunal's 2:1 verdict setting aside SEBI's orders against Bombay Dyeing and SCAL Services shall not operate as a precedent in similar matters before the Tribunal, while hearing an appeal filed by the Securities and Exchange Board of India (SEBI).

The majority judgment had, among other things, held that the Companies Act would prevail over the Accounting Standards in determining whether SCAL was an associate company, and consequently found that Bombay Dyeing was not required to consolidate SCAL's financial statements

A Bench of Justice B.V. Nagarathna and Justice R. Mahadevan, while considering the market regulator's appeal against the tribunal order, observed,

"As the impugned order is a split verdict 2:1, we observe that the same shall not be a precedent in similar matters before SAT."

The matter has now been posted for the respondents to file their reply.

The appeal challenges a split verdict of the SAT, where the majority had allowed the appeals filed by Bombay Dyeing and SCAL Services and set aside SEBI's orders against them.

The majority held that SEBI had failed to establish that the flat sale agreements executed between the two group companies were sham transactions intended to inflate the company's revenue. Presiding Officer Justice P.S. Dinesh Kumar dissented, holding that the transactions were not genuine and existed only on paper.

For Appellant: K.J John and Co

For Respondents: Khaitan and Co, E.C Agarwala, Mudit Sharma, Kaushik Poddar and Nandini Gidwaney