The Bombay High Court has ordered a combined penalty of Rs 80 lakh against the Securities and Exchange Board of India (SEBI), the Bombay Stock Exchange (BSE), and the National Stock Exchange (NSE) following the freezing of demat accounts belonging to Dr. Pradeep Mehta and his son, Neil Pradeep Mehta, reports Bar and Bench. In a ruling delivered on Monday, a bench of Justices GS Kulkarni and Firdosh P Pooniwalla condemned the actions of the financial regulatory bodies as "illegal and invalid." The bench while ordering the de-freezing observed, “Under none of the provisions of law and regulations, the impugned action of the respondent to freeze the petitioner’s demat account can be sustained. For the aforesaid reasons, in our opinion, the freezing of the petitioner’s demat account qua all the shares held by him was unwarranted, unjustified and in patent defiance of the principles of natural justice and brazenly illegal.” Also ReadNSE revives IPO plans, tells shareholders it will approach SEBI for go ahead Pradeep Mehta and Neil Mehta had their demat accounts frozen by the National Securities Depository Limited (NSDL) in early 2017 following directives from SEBI. The freeze was part of SEBI’s action against promoters of Shrenuj & Company, which had failed to comply with financial reporting regulations. Shrenuj was penalised by the Bombay Stock Exchange (BSE) for not submitting its December 2016 financial results, leading to broader regulatory measures. Dr. Mehta, a medical practitioner and minority shareholder with no operational role in Shrenuj, contested the freeze, arguing that the action was unjustified. Neil Pradeep Mehta, who lives in Singapore and was a minor at the time, was also impacted despite his limited involvement with the company. "There can be no manner of doubt that in his demat account the petitioner was holding shares not only of Shrenuj but also of other companies. Such shares as held by the petitioner in the demat account are certainly a property within the meaning and purview of Article 300A of the Constitution of India and thus, no action could have been taken to deprive the petitioner of the benefits of his property without following the procedure in law. Thus, looked from any angle, even assuming that the powers to defreeze the demat account of the promoter, the same could not have been done in the manner as in the present case. The action is fully draconian which cannot be sustained in law,” the Court said, as quoted by Bar and Bench. Subsequently, the Court ordered SEBI, BSE, and NSE to jointly pay Rs 50 lakh to Neil Pradeep Mehta and Rs 30 lakh to Dr. Pradeep Mehta. The High Court also directed the immediate unfreezing of all shares held by the petitioners in their demat accounts
