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C.K.Abdul Rehim,J.

The Divisional Head, Regional Manager, and Manager of the "Securities and Exchange Board of India (SEBI)", who were respondents 1 to 3 in W.P.(C) No.6106/2015, are the appellants herein, challenging the judgment of the single Judge, dated 22.6.2017.

2. The petitioners in the Writ Petition (respondents 1 to 4 herein) have approached this court questioning the rejection of their request by the 5th respondent company, for 'rights issue' of the shares of the said company to the existing shareholders, at the ratio of 3:10. The application for 'rights issue' was rejected on assigning the reason that the writ petitioners have failed to comply with the procedure stipulated for payment of money, known as "Application Supported by Blocked Amount (ASBA)". Instead, they have paid the amount only by way of Demand Draft. The Writ Petitioners contended that, as per Ext.P6 Regulations issued by the SEBI, only non-retailer investors, i.e. qualified institutional buyers and non-institutional investors, alone need to go through the procedure of ASBA. It was contended in the writ petition that, the conditions incorporated in Ext.P5 issued by the 5th respondent to the effect that the qualified institutional buyers and other applicants, whose application amount exceeds Rs.2 lakhs, will have to comply ASBA process, is arbitrarily and is against the Regulations formulated by SEBI and hence it goes against the interest of the investors. Hence, the writ petitioners sought for quashing Ext.P5 'letter of offer' issued by the company in question.

3. The appellants herein filed a counter affidavit in the Writ Petition inter alia contending that, Regulations 2(1)(ze) & (zf) of SEBIICDR Regulations insists that, retail investors are those who, including individuals, subscribed for shares of a value of less than Rs.2 lakhs. Therefore it is contended that, it is incorrect to say that the writ petitioners became retail investors only by being individuals. Since the writ petitioners had applied for shares of value of more than Rs.2 lakhs, by virtue of the above said Regulations, they cannot be treated as retail investors as claimed by them. As such, as per Ext.P6 Circular, it is mandatory for the petitioners to necessarily apply through the process of ASBA. Hence it was contended that, the instructions incorporated in the 'letter of offer' (Ext.P5) is in the same line as that of SEBIICDR Regulations and is in perfect tune with the circular issued by SEBI. Hence it was contended that, the writ petitioners, whose investment exceed Rs.2 lakhs, can participate in the issue only through ASBA process and the insistence for such process stipulated in Ext.P5 'offer letter' is not in violation or contrary to the Regulations of the SEBI.

5. The writ petition was now considered and disposed of by the learned Judge. On consideration of the factual aspects as mentioned above, it was observed that, since the writ petitioners have supported their applications through valid demand drafts, honestly and bonafide, it would be unfair and unjust to subject them to a detriment merely because they have not applied under the ASBA process. It was further found that, ASBA process is intended only to the benefit of the petitioners and merely because they have not made payments under the said process, it would be a paradox that they are refused allotment of shares. The learned Judge observed that, the petitioners' action in this regard would not and has not in any manner prejudiced any of the respondents, including respondents 4 and 5 therein. Based on the observations as mentioned above, it was found that the writ petitioners are entitled to be allotted with shares applied for by them. Therefore, a direction was issued to respondents 5 and 6 herein to allot shares to the writ petitioners under the 'rights issue' by accepting the amount provided by them through the demand drafts.

6. The appellants herein is challenging the judgment on the ground that the above said directions will ultimately result in permitting an illegal activity which is violative of the SEBIICDR Regulations. It is pointed out by learned counsel appearing for the appellants that, the learned single Judge had never found that the writ petitioners are retail investors who are entitled to byepass ASBA process in the matter of applying for the shares. It is further pointed out that, the learned single Judge had never found that the insistence to undergo ASBA process contained in Ext.P5 offer letter is in any manner violative of the SEBI Regulations and Ext.P6 Circular issued by SEBI. That being the position, the finding rendered by the learned Judge that the action of the petitioners in not applying through ASBA would not and has not in any manner prejudiced any of the respondents, is absolutely incorrect and unsustainable is the contention. It is pointed out that, the Regulations of SEBIICDR are having statutory force and are intended to protect the interest of the investors and the court should not have allowed the parties to violate it simply for the reason that it will not cause prejudice to anybody.