A. Cover Story

[A.1] Jurisdictional issue in Round-Robin allocation under SEBI’s ODR system

SEBI’s ODR framework allocates investor complaints to empanelled ODR Institutions on a market-wide round-robin basis [Master Circular for Online Dispute Resolution, dated July 31st, 2026]. Paragraph 16(a) of the Master Circular carves out an exception, wherein disputes with a listed company must go to the ODR Institution empanelled by the relevant Stock Exchange.

Now, the question arises: What happens when the algorithm assigns a complaint against a BSE-listed company to an exchange on which its securities are not even traded? Does that allocation confer jurisdiction?

These questions came before the High Court of Mumbai, but were left unanswered in ITC Ltd. v. Metropolitan Stock Exchange (August 21st, 2026). As per the facts of the case, a dispute between ITC Ltd. and the complainant on the allocation of shares was referred by SEBI to the Metropolitan Stock Exchange (MSE). ITC Ltd. filed a writ petition on the ground that MSE lacked jurisdiction to entertain the dispute raised by the Complainant, since the securities of the Petitioner are neither listed nor traded on MSE. The company contended that the complaint could only have been dealt with by the relevant Stock Exchange in accordance with the Master Circular and that the mere allotment of the complaint to MSE through the ODR Portal cannot confer jurisdiction where none otherwise exists.

The High Court, while dismissing the writ petition, held that the challenge to jurisdiction could not be entertained in the writ proceedings, but the petitioners are free to raise the objections concerning jurisdiction, allocation, limitation, locus, maintainability, res judicata, abuse of process and arbitrability before the concerned forum itself.

B. Case Laws

[B.1] Reverse Veil Piercing invoked to make the company liable for the debts of the shareholders

In corporate law, there is a foundational truth: “a company is a separate legal entity from its owners”. This is the corporate veil, a shield that protects shareholders from the company’s debts and the company from the shareholders’ personal liabilities.

However, there is the other side to this shield that is known as lifting the corporate veil. The other side becomes relevant when the corporate form is not used to protect, but to conceal or when a company is used as a vessel to hide assets that effectively belong to its controllers, allowing them to evade court orders.

There are two types of veil piercing: Traditional Veil Piercing and Reverse Veil Piercing. The traditional veil piercing takes place when a creditor sues the shareholder to access the company’s assets. On the other hand, reverse veil piercing takes place when a creditor or court looks through the company to treat the company’s assets as those of the shareholder/controller.

The concept of Reverse Veil Piercing lies at the heart of the recent judgement of the Delhi High Court in Daiichi Sankyo Company, Ltd. v. Malvinder Mohan Singh (August 31st, 2026). In this case, the Delhi High Court didn’t just pierce the veil; it explicitly invoked reverse corporate veil piercing to ensure that the assets held by Fortis Healthcare Ltd. (FHL) could be viewed as available to satisfy the judgment debt owed by the promoters (the Singh brothers).

As per the facts of the case, Daiichi Sankyo won a foreign arbitral award of ₹2,562 crore against the Singh brothers (Malvinder and Subrata). To secure this, the Singh brothers gave six solemn assurances to the Delhi High Court between 2016 and 2017 that they would not dissipate their assets, specifically their controlling stake in Fortis Healthcare Ltd. (FHL), which they held through a holding company, FHHPL. Despite these assurances, and even after the Supreme Court ordered a status quo on their shareholding, the Singh brothers’ stake in FHL vanished. In September 2016, FHHPL held 5.29 crore unencumbered shares. By December 2018, that number dropped to just 6.01 lakh shares.

The Decree Holder (Daiichi) argued that FHL itself was complicit. FHL argued it was a separate entity, unaware of the undertakings given by its directors (the Singh brothers, who were Chairman and Director of FHL). The Delhi High Court rejected this defence using the logic of reverse veil piercing. The Court held: “If FHL functioned as the alter ego or instrumentality of Judgment Debtors No. 1 and 6, its plea of complete ignorance cannot be accepted at face value… To permit the plea of separate corporate personality to foreclose such an enquiry would be to allow the corporate form itself to become an instrument for frustrating the administration of justice.” (Para 201)

The Court went further, stating: “JD No. 1 and JD No. 6… were the heart, soul and brain and the decision makers of FHL. Their personal knowledge is directly attributable to the knowledge of the company.” (Para 225)

Thus, the Court appointed a forensic auditor to investigate FHL, the banks, and the downstream entities. The Court is effectively treating FHL not as an innocent bystander, but as an extension of the judgment debtors. The assets of FHL (or transactions involving FHL) are being scrutinised as if they were the personal transactions of the Singh brothers. This is the essence of reverse veil piercing: ignoring the corporate form to look at the economic reality of control.

[B.2] Enquiry under Buyback and PFUTP Regulations is mutually exclusive

If a company’s buy-back escrow has been released by SEBI under the Buyback Regulations, does that amount to clearance from fraud under the PFUTP Regulations? This is the practical upshot of the Supreme Court’s judgment in SEBI v. Vedanta Ltd., decided on 9 September 2026. The Court held that the scope of the enquiry contemplated by Regulation 15B(8) of the Buyback Regulations, 1998 is confined to determining whether the escrow is liable to be forfeited or released as per the provisions. If the conditions for release of an escrow are satisfied, it cannot be treated as a finding on whether the company has committed fraud under the PFUTP Regulations.

The two regulations: Buyback and PFUTP, sit at the centre of the dispute. Regulation 14(3) of the SEBI (Buyback of Securities) Regulations, 1998 casts an obligation that the company shall ensure that at least fifty per cent of the amount earmarked for buy-back is utilised for buying back shares or other specified securities. As per Regulation 15B(8), where the fifty per cent threshold is missed, the Board may direct the merchant banker to forfeit the escrow, subject to a ceiling of 2.5% of the amount earmarked, except in three situations:

• the volume-weighted average market price during the buy-back period exceeded the buy-back price, as certified by the merchant banker;
• sell orders were inadequate despite buy orders placed by the company, as so certified; or
• circumstances beyond the company’s control which, in the Board’s opinion, merit consideration. On the other hand, the PFUTP Regulation addresses fraudulent and unfair trade practices, misleading statements, devices or schemes to defraud, and inducement of investors.

As per the facts of the case, Cairn India Limited (now Vedanta Limited) resolved to buy back 17.09 crore equity shares at a price cap of ₹335, for a maximum outlay of ₹5,725 crore. The company deposited an escrow of ₹143.124 crore, that is, 2.5% of the buy-back size, with Axis Bank. However, the company was able to buy back only 3.6 crore shares, 21.48% of the target, deploying ₹1,225 crore. Having failed the Regulation 14(3) threshold, the company applied under Regulation 15B(8) for release of the escrow. The SEBI’s investigation report concluded that the escrow stood exempt from forfeiture under clause (a), and separately noted that suspected PFUTP violations were being investigated independently. The escrow was released, and a separate PFUTP report followed on 17 March 2017, alleging that the company never intended to complete the buy-back and had deliberately placed insufficient buy orders. A show-cause notice issued on 19 January 2018 led to the Adjudicating Officer’s order of 19 May 2021 imposing ₹5.25 crore on the company and ₹15 lakh each on three directors.

SAT reversed the order, which was challenged before the Supreme Court by SEBI. In the appeal, the Supreme Court remanded the matter back to the SAT with different directions, inter alia, to render fresh findings on fraud.

[B.3] Guardianship rights under personal law are relevant for filing petition on behalf of minors

The National Company Law Tribunal (NCLT) often deals with interplays between the Companies Act and the personal laws. One such interplay arose in a recent judgment from the Mumbai Bench in Tarannum Khan v. Royal Palms (India) (P.) Ltd. (August 31st, 2026). In this case, the NCLT, while citing the principles of Mohammedan Law, held that:

1. The Mother is not the legal guardian of property under Muslim Law unless she is appointed as an executor under a will.
2. The Grandfather is the legal guardian in the absence of a will.

Consequently, the NCLT ruled that the mother could not maintain the petition on behalf of the minors unless the grandfather consented. The Tribunal directed the grandfather to make appropriate arrangements to protect and preserve the minors’ interests in the company. The Tribunal also observed that the mother, being a shareholder, does not automatically have the right to litigate on behalf of minor children’s shares if personal law dictates otherwise.

[B.4] Revival of the company should prevail over liquidation

The Supreme Court has explicitly stated the fundamental principle of Corporate Law that the revival of the Company is of paramount importance even in Liquidation, since Liquidation is the last resort in Arun Kumar Jagatramka v. Jindal Steel & Power Ltd., (2021) 7 SCC 474. The principle underlies Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016, which provides an opportunity to propose a compromise or arrangement even after the liquidation order has been passed under Section 33 of the Insolvency and Bankruptcy Code (IBC). The Regulation provides that the liquidator may file a proposal for compromise or arrangement only after a recommendation to explore such a proposal was made by the Committee of Creditors (CoC). Further, any proposed compromise or arrangement must be completed within 90 days from the date of the liquidation order passed under Section 33 of the Insolvency and Bankruptcy Code (IBC) and the time taken for such compromise or arrangement, up to 90 days, is not included in the total liquidation period. The NCLAT in Prakash Oil Depot v. G. Madhusudhan Rao, 190 SCL 60 (NCLAT-Chennai), has construed the 90 days as flexible.

While relying on the principle stated by the Supreme Court in Arun Kumar’s case (supra) and NCLAT’s order in Prakash Oil Depot (supra), the High Court of Telangana recently overturned the decision of the NCLT, wherein it had rejected the application filed by a sole financial creditor for grant of 90 days to consider a proposal for Compromise and Arrangement. The NCLT rejected the Creditor’s application on the ground that the Scheme had earlier been rejected by an earlier order passed by the NCLT and that there was no intervening change in circumstances to merit a different order. According to the NCLT, the only change was the assignment of the debt by the State Bank of India in favour of Maximus ARC. However, the High Court held that the assignment of debt by SBI to Maximus ARC and substitution of creditor was a material change.

The High Court of Telangana also held that the Committee of Creditors’ commercial wisdom is paramount. The NCLT cannot substitute its wisdom for the commercial wisdom of the Committee of Creditors. The Financial Stakeholder itself made an application before the NCLT since it is only the Stakeholder whose money is at stake. The balance of convenience was also significant. No auction Notice had been issued. This additionally showed that an extension of time of ninety days to consider the Scheme would not prejudice anyone.

[B.5] Stock exchange cannot compel to take delivery of shares after annulment of trade

What happens if a broker pays the full price for shares, but the exchange annuls the trade as fictitious, and returns the scrip to the selling broker? Can the exchange write letters asking the buyer to “please collect your shares from the clearing corporation”? The Bombay High Court, in Bipin Kantilal Kapadia v. Stock Exchange Bombay (September 11th, 2026), called this insistence of the exchange an action which “defies all logic.”

As per the facts of the case, a member-stock broker of the BSE (appellant) bought 44,600 shares of a company on behalf of his clients. His account was debited about Rs. 22.30 lakh, and he deposited roughly Rs. 23 lakh with the Clearing House, which made him entitled to physical delivery. However, only 23,000 shares were delivered, and the shortfall of 21,600 shares was attributable to K.F. Vora (selling broker). The Disciplinary Action Committee of the exchange had suspended the trading rights of K.F. Vora, and about 69,400 shares were released back to him. The transactions of K.F. Vora were also annulled. Interestingly, the stock exchange, after annulment of the trades, turned around and insisted that the paying buyer take physical delivery of those very shares.

The Court held that once the trade is annulled, the trade ceases to exist; nothing remains to be delivered, no obligation survives against the seller-broker, and the money the buyer deposited with the exchange’s Clearing House must be refunded. Thus, the exchange was directed to refund the deposited amount with 9% interest from the date of filing of the suit until realisation.