The Securities Appellate Tribunal has dismissed appeals from three former independent directors of Bhartiya Global Infomedia who sought to challenge a SEBI order regarding IPO fraud. This ruling confirms that former directors remain accountable for regulatory breaches despite claims of non-involvement in daily operations.
The Securities Appellate Tribunal (SAT) has issued a significant ruling concerning the 2011 initial public offering (IPO) of Bhartiya Global Infomedia. The tribunal dismissed the appeals filed by three former independent and non-executive directors—Harjeet Singh Anand, Arti Bhatia, and Sanjay Kapoor—who were attempting to challenge a long-standing Securities and Exchange Board of India (SEBI) order related to fund diversion and information concealment.
Finality of Regulatory Orders
The directors argued that they were not involved in the company's day-to-day operations and pointed to previous board resolutions intended to indemnify them. They also suggested that earlier assessments had indicated no diversion of funds. However, the SAT bench rejected these arguments, noting that the original SEBI order, which included a Rs 6 crore fine, has already reached finality. The tribunal emphasized that because the matter had been previously affirmed by higher judicial authorities, including the Supreme Court, it could not be reopened at this stage.
Impact on Criminal Prosecution
Beyond the financial penalties, the ruling carries consequences for ongoing legal battles. The former directors sought to halt criminal prosecution proceedings currently pending before a SEBI Special Court. The SAT clarified that it does not have the jurisdiction to intervene in these criminal matters. It stated that any challenge regarding the validity or necessity of such prosecution must be directed to the appropriate High Court.
This decision reinforces the principle that the role of an independent director does not grant immunity from regulatory accountability. In the context of serious breaches such as fraud during an IPO, regulatory bodies and courts are increasingly holding board members responsible for their oversight duties.
For investors, this case serves as a reminder of the risks associated with governance failures in smaller listed entities. While the events date back to 2011, the continued legal activity highlights the long-term impact of regulatory non-compliance on company management and stakeholders. Investors should monitor whether such long-standing litigation continues to affect the company's governance structure or if further developments arise from the proceedings in the SEBI Special Court or the High Court.