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An Institution that is not registered under the Reserve Bank of India Act cannot be regulated through provisions of SEBI Act, 1992: Jharkhand High Court

As the institution is not registered under the provision of the Reserve Bank of India Act 1934, there cannot be any meaning of regulating by S.E.B.I. Act, 1992. The explanation for this is that if the company’s constitution opposes the law, there is no way to regulate it under the S.E.B.I. Act of 1992. The judgement was passed by the High Court of Jharkhand in the case of Green Ray International Limited vs The State of Jharkhand [W.P.(C) No. 1211 of 2013] by Single Bench consisting of Hon’ble Justice Sujit Narayan Prasad.

The facts of the case are The petitioner company is a registered company under the Companies Act as a Public Company Limited by shares, carrying out the business in pursuance to the MAAs have started the business but without any complaint whatsoever and without providing an opportunity of hearing to the petitioners, the authorities have taken restrainment measures by sealing the office and restraining the petitioner’s units in carrying out their business and therefore, the writ petition has been filed.

Learned counsel for the petitioners contended that in absence of any complaint from any quarter, the action which has been taken by sealing the office, is not proper and such decision has been taken without providing any opportunity of hearing to the petitioners, hence, the action of the respondents being arbitrary, therefore, a direction may be passed for allowing the writ petitioners to carry out their business.

Learned counsel for the respondent has submitted that since the petitioner company is not running in pursuance to the provision of Reserve Bank of India Act, 1934, therefore, keeping the objects and intents of the Securities and Exchange Board of India Act, 1992, even if any inquiry would be conducted the factual scenario of non-registration under the Reserve Bank of India Act, 1934, will not be changed.

The Learned Court observed that “though the petitioners’ are claiming that they are doing the business of gold and silver coins from the counter-affidavits filed by the respondents it appears that they are also involved in non-banking activities like collecting money from the customers without NBFC of Reserve Bank of India.”

While dismissing the petition the Court reasoned that “as the institution is not registered under the provision of Reserve Bank of India Act 1934, there cannot be any meaning of regulating under S.E.B.I. Act, 1992. The reason being that when the constitution of the company itself dehors the rule, there is no question of regulating it under the S.E.B.I. Act, 1992. It has also been informed that concerning the affairs of this company, FIR has been instituted and now the matter is being looked into by the Central Bureau of Investigation.”

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