MMY103

MAHARISHI MAHESH YOGI NATIONAL MOOT COURT

COMPETITION, 2023

Before
THE SUPREME COURT OF ARYA

RANTUNGAM AND ORS. . ................................................... PLAINTIFF

v.

SEBA & ANR. ................................................................... DEFENDANT

[MEMORIAL ON BEHALF OF THE PETITIONER]

0
 TABLE OF CONTENTS

LIST OF ABBREVIATIONS……………………………………………………………..2

TABLE OF
AUTHORITIES…………………………………………………………………………...3

STATEMENT OF
JURISDICTION..................................................................................................................5

STATEMENT OF
FACTS………………………………………………………………………………….....6

ISSUES RAISED………………………………………………………………………….8

SUMMARY OF ARGUMENTS………………………………………………………….9

WRITTEN PLEADINGS…………………………………………………………………13

PRAYER………………………………………………………………………………….36

1
 LIST OF ABBREVIATIONS

ABBREVIATION FULL FORM

Ors. Others

Anr. Another

AIR All India Record

v./vs Versus

SEBA Securities of Exchange Board of Arya

Co’ Company

Corpn Corporation

2
 TABLE OF AUTHORITIES

STATUTES

1. Securities of Exchange Board of Arya [India] Act, 1992

2. The Companies Act, 2013

3. Securities of Exchange Board of Arya [India] Guidelines

4. SEBA [I] (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities
Markets) Regulations, 2003

5. SEBA [I] (Prohibition of Insider Trading) Regulations, 2015

6. Securities and Exchange Board of Arya [India] (Listing Obligations and

Disclosure Requirements) Regulations, 2015

7. Income Tax Act, 1961.

CASES

1. Samir C. Arora v. Securities and Exchange Board of India, 2004 SCC OnLine SAT
90.

2. Kamlesh J. Shroff, In re (Non-compliance with the Statutory requirements), 2004 SCC

OnLine SEBI 52.

3. Subhash Chandra, In re, 2023 SCC OnLine SEBI 178.

4. Videocon International Ltd. v. Securities & Exchange Board of India, 2002 SCC
OnLine SAT 14.

1. Carole L. Haynes, Administrative Proceeding File No. 3

8512, https://www.sec.gov/litigation/aljdec/id78grl.txt .

3
2. K.S. Puttaswamy v. Union of India, (2017) 10 SCC 1.

3. State of Gujarat v. Mohanlal Jitamalji Porwal, (1987) 2 SCC 364.

4. State of Maharashtra v. Bharat Shanti Lal Shah, (2008) 13 SCC 5.

5. Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., (1981)
3 SCC 333.

6. Satyam Computer Services Ltd., In re, 2018 SCC OnLine SEBI 201.

7. Preeti Tulsian vs. CPIO, 2022 SCC OnLine SEBI 445.

8. Motilal Mohata and Sons HUF Vs CPIO, SEBI, Mumbai, 2022 SCC OnLine SEBI
443.

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 STATEMENT OF JURISDICTION

The Petitioners appears before the Hon’ble Supreme Court to hear and adjudicate over the
instant appeal under Section 15Z of the Securities of Exchange Board of Arya [India] Act,
1992:

Appeal to Supreme Court

Any person aggrieved by any decision or order of the Securities Appellate Tribunal may file
an appeal to the Supreme Court within sixty days from the date of communication of the
decision or order of the Securities Appellate Tribunal to him on any question of law arising
out of such order:

Provided that the Supreme Court may, if it is satisfied that the applicant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be filed within a
further period not exceeding sixty days.

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 STATEMENT OF FACTS

BACKGROUND

1. Arya is a populous country known for its cultural and historical significance. It is the
fifth-largest country in terms of landmass.

2. XYZ Inc. is a family-owned corporation controlled by the Rantungam family. he

majority of the board of directors and senior management positions are held by family
members, and the CEO position is occupied by Mr. Rantungam, who is also the head
of the family.

3. On September 12, 2022, Rantungam, the CEO of XYZ Inc., was accused of
embezzlement, diversion of funds, and fraud by the Securities and Exchange Board of
Arya (SEBA). Rantungam had previously faced charges of insider trading in a separate
case brought by SEBA.

4. SEBA found that stakeholders of XYZ Inc. had suffered a loss of Rs. 500 crore due to
unsecured loans and investments made to related parties.

5. SEBA, using its powers under section 11 of the SEBA Act 1992, conducted an
investigation and seized relevant documents and records. The interim order issued by
SEBA also froze the bank accounts of the CEO and Directors. SEBA directed the CEO
and Directors to show cause as to why they should not be jointly and severally liable to
disgorge the embezzled amount.

6. Following a hearing in the matter, SEBA rejected the preliminary objections raised by
Mr. Rantungam and the Directors. SEBA issued an order on December 21, 2022,
holding both the CEO and Directors jointly and severally liable for the embezzled
amount.

7. Displeased with SEBA's decision, Mr. Rantungam and the Directors appealed to the
Securities Appellate Tribunal (SAT). However, SAT upheld SEBA's order dated
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 December 21, 2022, thereby affirming their joint and several liability.

8. As a next course of action, Mr. Rantungam and the Directors filed an appeal with the
Apex Court of Arya (Supreme Court of Arya) challenging the decisions of SEBA and
SAT.

9. Additionally, in March 2020, the Rantungam family entered into a contract with The
Suppliers Ltd. containing confidentiality and non-compete clauses. The Suppliers Ltd.
alleges that Rantungam breached the contract by disclosing confidential information to
the Authority. The Suppliers Ltd.'s appeal against the High Court's decision in favor of
Rantungam and XYZ Inc. is pending before the Apex Court.

10. The appeal filed by the CEO and Directors against SEBA's order has been tagged along
with the Suppliers Ltd.'s appeal and is scheduled for final hearing before the Hon'ble
Supreme Court of Arya.

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 ISSUES RAISED

I.
DOES THE SEBA HAVE THE AUTHORITY TO BRING CHARGES AGAINST
RANTUNGAM IN CONNECTION WITH HIS ROLE AS THE CEO OF XYZ INC.
AND ITS DIRECTORS?

II.
CAN THE INVESTIGATING AUTHORITY SEIZE THE RECORDS OF
RANTUNGAM AND THE CORPORATION?

III.
DOES THE FAMILY RELATIONSHIP BETWEEN THE BOARD OF DIRECTORS
AND SENIOR MANAGEMENT OF THE CORPORATION AFFECT THE VALIDITY
OF THE SEBA INVESTIGATION AND CRIMINAL CHARGES AGAINST THEM?

IV.
CAN THE FAMILY RELATIONSHIP BETWEEN THE BOARD OF DIRECTORS
AND SENIOR MANAGEMENT OF THE CORPORATION AFFECT THE VALIDITY
OF THE SEBA INVESTIGATION AND CRIMINAL CHARGES AGAINST THEM?

V.
HAS RANTUNGAM IN CONNECTION WITH HIS ROLE AS THE CEO OF XYZ INC.
AND ITS DIRECTORS BREACHED THE CONTRACT WITH THE SUPPLIERS
LTD. BY DISCLOSING CONFIDENTIAL INFORMATION?

VI.
IS THE CONFIDENTIATLITY CLAUSE AND THE NON-COMPETE CLAUSE
ENFORCEABLE AGAINST RANTUNGAM AND THE CORPORATION?
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 VII.
CAN THE SUPPLIERS LTD. RECOVER DAMAGES FROM RANTUNGAM & THE
CORPORATION FOR THE BREACH OF CONTRACT?
SUMMARY OF ARGUMENTS

[1]. DOES THE SEBA HAVE THE AUTHORITY TO BRING CHARGES AGAINST
RANTUNGAM IN CONNECTION WITH HIS ROLE AS THE CEO OF XYZ INC.
AND ITS DIRECTORS?
The petitioner asserts that the Securities and Exchange Board of Arya (SEBA) lacks the
authority to charge Mr. Rantungam, the CEO of XYZ INC., and its directors, as XYZ INC. is
a family-owned corporation and the company doesn’t come under the scope of SEBA
regulations. SEBA's jurisdiction primarily revolves around protecting investor interests and
regulating the securities market, making it questionable whether it can intervene in the internal
affairs of a non-public listed company. Furthermore, the petitioner maintains that Mr.
Rantungam's liability for insider trading in a separate criminal case cannot not be associated
with XYZ INC., as the provided facts clearly state that, that was a distinct case. Additionally,
we also submit that on being found guilty of SEBA guidelines, there is a mandated prohibition
on buying, selling, or dealing in securities, applicable to individuals found guilty of such
violations, making it difficult for Mr. Rantungam to be the CEO of XYZ INC. if it were a public
listed company.

[2.] CAN THE INVESTIGATING AUTHORITY SEIZE THE RECORDS OF

RANTUNGAM AND THE CORPORATION?

The petitioner argues that the Investigating Authority lacks the authority to seize records related
to Mr. Rantungam and XYZ INC. under the SEBA Act, 1992. SEBA's jurisdiction primarily
covers publicly listed companies and securities market matters, while XYZ INC. is non-public
and family-controlled, lacking investor involvement. The accusations against Mr. Rantungam
involve embezzlement and fraud, which are internal company affairs rather than securities-
related issues.

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The petitioner also raises concerns about privacy and confidentiality rights, asserting that the
Investigating Authority should not invade these rights without clear legal grounds and
jurisdiction. They argue that the seizure of records is disproportionate, as there's no indication
that the entire corporation's records are necessary for the investigation, potentially eroding trust
with The Suppliers Ltd.

[3.] DOES THE FAMILY RELATIONSHIP BETWEEN THE BOARD OF DIRECTORS AND
SENIOR MANAGEMENT OF THE CORPORATION CREATE A CONFLICT OF INTREST
IN REGARDS TO THE SEBA INVESTIGATION AND CRIMINAL CHARGES AGAISNT
THEM?

The petitioner contends that familial relationships among directors and senior management in
XYZ INC., a non-public unlisted company, do not inherently create a conflict of interest with
SEBA's investigation. Directors have a legal duty under Section 166 of the Companies Act to
act in the company's best interests, regardless of family ties. They are obligated to disclose
conflicts of interest under Section 184 of the Companies Act and abstain from voting in such
matters under Section 300.

SEBA's mandate, as outlined in its preamble, primarily concerns investor protection and
securities market regulation. While it has jurisdiction over securities-related issues like insider
trading, it lacks authority over internal matters such as embezzlement or fraud within a family-
controlled corporation like XYZ INC., as per Section 11 of the SEBA Act. The charges against
Mr. Rantungam should be treated as an individual matter, and no automatic extension to the
corporation or other directors is warranted.

[4.] CAN THE FAMILY RELATIONSHIP BETWEEN THE BOARD OF DIRECTORS

AND SENIOR MANAGEMENT OF THE CORPORATION AFFECT THE VALIDITY
OF THE SEBA INVESTIGATION AND CRIMINAL CHARGES AGAINST THEM?

The petitioner asserts that when it comes to the question whether the validity of a SEBA
investigation will be affected the family relationship between the Board of Directors and senior
management does not per se affect the validity of the SEBA investigation. SEBA's jurisdiction
and authority to investigate securities-related offenses exist regardless of any familial
10
relationship within the corporation. Criminal charges brought against individuals by SEBA or
any prosecuting agency are subject to the legal requirements and procedures applicable to
criminal proceedings. The family relationship between the accused individuals and the Board
of Directors may be relevant during the criminal trial process, but it does not inherently
invalidate any investigation that SEBA wishes to conduct. Also, Interested directors and
KMP’s are not to participate or vote in an interested matter under section 300 of the companies
act.

[5.] HAS RANTUNGAM IN CONNECTION WITH HIS ROLE AS THE CEO OF XYZ
INC. AND ITS DIRECTORS BREACHED THE CONTRACT WITH THE SUPPLIERS
LTD. BY DISCLOSING CONFIDENTIAL INFORMATION?
The petitioners, Mr. Rantungam and XYZ Inc., firmly deny breaching the confidentiality clause
in their contract with The Suppliers Ltd. They argue that their actions were in line with the
contract's terms, which they interpret as not explicitly prohibiting disclosures to regulatory
authorities when legal obligations or compliance requirements necessitated it. They emphasize
their commitment to legal compliance and public interest, citing the lack of substantial evidence
supporting the Suppliers Ltd.'s allegations.

Rantungam and XYZ Inc. stress that their disclosures to regulatory bodies, including SEBA,
were made in strict accordance with their legal obligations as responsible corporate entities.
They argue that such disclosures were vital for transparency, regulatory compliance, and the
company's best interests. In their view, their actions were legally justifiable, given the general
principle of law that confidentiality can be an exception when mandated by legal requirements.

[6.] IS THE CONFIDENTIATLITY CLAUSE AND THE NON-COMPETE CLAUSE

ENFORCEABLE AGAINST RANTUNGAM AND THE CORPORATION?
The petitioner asserts that their actions were not driven by any intention to violate their contract
with the Suppliers Ltd. Instead, they were compelled by legal obligations mandated by the
Companies Act, which unequivocally requires document production during regulatory
investigations. These statutory duties take precedence over any contractual agreement, making
the confidentiality clause unenforceable in the face of such legal requirements.

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It is crucial to note that the petitioner's actions were motivated by a commitment to uphold the
law and general legal principles rather than a desire to breach the contract. Their dedication to
transparency and adherence to the law is evident. Notably, it's unclear from the case whether
Mr. Rantungam breached the non-compete clause.

[7.] CAN THE SUPPLIERS LTD. RECOVER DAMAGES FROM RANTUNGAM &
THE CORPORATION FOR THE BREACH OF CONTRACT?

The petitioner stresses their adherence to Section 37 of the Arya Contract Act, which
obligates parties to fulfil their promises within a contract, with exceptions allowed by the Act.
They argue that their legal and regulatory duties took precedence over the contract. The
investigation report is confidential and not public, as upheld by legal precedents. Charges
against Rantungam by SEBA required cooperation and information disclosure, governed by
the SEBA Act, specifically Section 11C, along with SEBA regulations like Regulation 4
(listing obligations) and Regulation 3 (prohibition of insider trading), which prioritize these
legal duties over conflicting contractual obligations.

Furthermore, the petitioner questions the Suppliers Ltd.'s claims of harm, citing a lack of clarity
regarding any actual damages suffered.

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 WRTTEN PLEADINGS

[1]. DOES THE SEBA HAVE THE AUTHORITY TO BRING CHARGES

AGAINST RANTUNGAM IN CONNECTION WITH HIS ROLE AS THE CEO
OF XYZ INC. AND ITS DIRECTORS?

1. The petitioner humbly submits before this Hon’ble Supreme Court that Securities
Exchange Board of Arya lacks the authority to bring charges against Mr. Rantungam
in connection with his role as the CEO of XYZ INC. and its directors. There are several
key points that substantiate this assertion:

2. It is crucial to emphasize that XYZ INC. is unequivocally a family-owned corporation,

solely controlled and owned by the Rantungam family. Furthermore, the petitioner,
who is also the CEO of the company, holds the prominent position of being the head
of the Rantungam family.

3. SEBA's Mandate and Functions: Referring to the Preamble of the Securities and
Exchange Board of Arya, it is evident that SEBA's primary functions are described as
follows: "...to protect the interests of investors in securities and to promote the
development of, and regulate the securities market and for matters connected therewith
or incidental thereto." This is clearly mentioned in Section 11 (2A) of Securities and

13
 Exchange Board of Arya Act,1992 1 states that : Without prejudice to the provisions
contained in sub-section (2), the Board may take measures to undertake inspection of
any book, or register, or other document or record of any listed public company or a
public company (not being intermediaries referred to in section 12) which intends to
get its securities listed on any recognized stock exchange where the Board has
reasonable grounds to believe that such company has been indulging in insider trading
or fraudulent and unfair trade practices relating to securities market.”, i.e. that SEBA
only has jurisdiction in the publicly listed companies in order to protect the rights of
investors.

4. While it is acknowledged that SEBA may have authority in the securities market, it is
essential to recognize that it's jurisdiction may not extend to the realm of internal
affairs within an incorporation, such as embezzlement allegations. Additionally, the
petitioner humbly submits that Mr. Rantungam was held liable in a separate criminal
case for insider trading. However, it is vital to underscore that this liability cannot be
inextricably linked back to XYZ INC. in any conceivable manner, as such a connection
has not been established anywhere in the facts. It should be explicitly noted that Mr.
Rantungam's liability pertains exclusively to a separate criminal case unrelated to the
operations of XYZ INC.

5. It is incumbent upon us to recognize that XYZ INC., under Mr. Rantungam's

leadership as CEO, does not fall into the category of a public listed company regulated
by SEBA. In the context of SEBA regulations, Section 195 of Companies Act,20132
talks about Prohibition on Insider Trading of Security Prohibition on Insider Trading
of Securities i.e., when an entity or individual is found guilty of insider trading, they
are prohibited from buying, selling, or dealing in securities, directly or indirectly and
are prohibited from the securities market for a certain period of time. Basically, non-
compliance would result in the punishment with imprisonment for a term which may
extend 5(five) years or with fine which shall be not less than Rs.5.00 Lakhs, but which

1
Securities and Exchange Board of India Act, 1992, S.11(2A), No. 15, Acts of Parliament, 1992 (India).
2
The Companies Act, 2013, S.195, No.18, Acts of Parliament, 2013 (India).
14
 may extend Rs.25.00 Crores or three times the amounts of profits made out of Insider
Trading, whoever is higher or with both., this prohibition is typically applied to entities
under SEBA's regulatory purview, which does not encompass non-public listed
companies like XYZ INC.

6. The similar has been observed in the case of Samir C. Arora vs Securities and
Exchange Board of India3, wherein it was held that, “In the light of the above and in
exercise of the powers conferred on me in terms of the SEBA Act, 1992, read with
Section 11(4) and 11B of SEBA Act, 1992, read with Regulation 11 of SEBA
(Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market)
Regulations 2003 and Regulation 11 of SEBA (Prohibition of Insider Trading)
Regulations, 1992, I hereby prohibit Shri Samir C. Arora not to buy, sell or deal in
securities, in any manner, directly or indirectly, for a period of five years.” This means
that since this individual was found guilty and held liable of insider trading, he was
barred from buying, selling or taking any part indirectly or directly in the securities
market. The same procedure should’ve been applied in the petitioner’s case making it
difficult for him to be the CEO of XYZ INC. if it were a listed company.

7. The above-mentioned restriction on an individual who is barred by SEBA from

participating in the securities market to become the CEO of a listed public company is
in accordance with SEBA (Prohibition of Insider Trading) Regulations, 2015. Under
these regulations, an individual who has been found guilty of insider trading or other
serious securities market violations may face penalties, including a ban from dealing
in securities or holding positions in listed companies. This prohibition is in place to
uphold the integrity and transparency of the securities market and to protect the
interests of investors. It ensures that individuals who have engaged in misconduct do
not have the opportunity to hold influential positions within listed companies where
they could potentially abuse their authority or access to sensitive information.

3
Samir C. Arora v. Securities and Exchange Board of India, 2004 SCC OnLine SAT 90.
15
 8. The similar was held in Kamlesh J. Shroff, in re (Non-compliance with the Statutory
requirements)4, wherein it was held that, “It is the duty of the regulator to safe guard
the interest of investors as also to ensure that unscrupulous and deceitful players in the
market are kept at a distance from the market. Therefore, in exercise of the powers
conferred upon me in terms of Section 19 of SEBA Act, 1992 read with Regulation 11
of SEBA (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities
Markets) Regulations, 2003 and Section 11 and 11B of the SEBA Act, I hereby
prohibit Shri Kamlesh J. Shroff, from dealing in securities for a period of three years.
I hereby also prohibit Shri Pradip R. Shroff, Marine Drive Investment, Matunga
Investment, Mahim Investment, Cumulative. Investment, Desai Investment and
Maxworth from dealing in securities for a period of one year.”

9. Furthermore, it is submitted that the similar decision was upheld in Subhash Chandra,
In re, 20235 wherein it was directed that “The Noticees (Subhash Chanda and Punit
Goenka) shall cease to hold the position of a director or a Key Managerial Personnel
in any listed company or its subsidiaries until further orders.” This in turn reiterates
the fact that in the present case Mr. Rantungam could not have become the CEO of
XYZ Inc. if it were a public listed company.

10. In the case of appointing a CEO in a listed public company, certain eligibility criteria
and regulations apply. The Companies Act, 2013, and the Securities and Exchange
Board of Arya (Listing Obligations and Disclosure Requirements) Regulations,
2015, lay down the requirements for the appointment of key managerial personnel,
including the CEO, in listed companies. the appointment of a CEO in a listed public
company should comply with the requirements prescribed by SEBA. These
requirements may include financial eligibility, professional qualifications, and a
clean record with no disqualifications or disqualifying circumstances. If an
individual is barred by SEBA from participating in the securities market, it is likely
that they would be considered ineligible to hold the position of CEO in a listed public

4
Kamlesh J. Shroff, In re (Non-compliance with the Statutory requirements), 2004 SCC OnLine SEBI 52.
5
Subhash Chandra, In re, 2023 SCC OnLine SEBI 178.
16
 company. The appointment of a barred individual could potentially violate the
regulations and guidelines set forth by SEBA. Therefore, this again clarifies and
reiterates the fact that XYZ INC.is not a publicly listed company and hence SEBA
does not have the authority to bring charges against the petitioner in his role as the
CEO and its directors.

11. The petitioner also humbly submits that the necessary ingredients to constitute a
violation of regulation 4(a) of SEBA (Prohibition of Fraudulent and Unfair Trade
Practices Relating to Securities Market) Regulations, 1995 i.e., basically the
ingredients constituting unfair practices that affect the investors rights as explained
by Hon'ble Securities Tribunal in Videocon International v. SEBI 6, are

i. a person should have affected, taken part in, or entered into directly or
indirectly, transactions in securities

ii. the transactions must have been with an intention

iii. such transactions must be to artificially raise or depress the prices of

securities

iv. result of the action must be to induce the sales or purchase of securities by
any person.

Now, in the present case we respectfully submit that since XYZ INC. is not
a public listed company, the allegations of embezzlement and diversion of
funds and fraud is not a matter that in anyway affects the securities market.
There is no intention to artificially raise or depress the price value of the
securities. In the observation of the Administrative Law Judge of US
Securities Exchange Commission in the case of Carole. L Hyenes.

“Haynes, that manipulative intent may be inferred from circumstantial

evidence. He had further observed that: “Proof of a manipulation almost
always depends on inferences drawn from a mass of factual data. Findings
must be gleaned from patterns of behavior, from apparent irregularities and

6
Videocon International Ltd. v. Securities & Exchange Board of India, 2002 SCC OnLine SAT 14.
17
 from trading data. When all of these are considered together, they can
emerge as ingredients in a manipulative scheme designed to tamper with free
market forces.” 7 Therefore, we maintain that SEBA does not have the
authority of bringing charges against the petitioner in the name of protecting
investors right.

12. In light of these considerations, it is respectfully asserted that SEBA lacks the requisite
authority to bring charges against the petitioner, Mr. Rantungam, in connection with
his role as the CEO of XYZ INC. and its directors, as the circumstances and legal
framework clearly establish the delineation of SEBA's jurisdiction and authority.

[2.] CAN THE INVESTIGATING AUTHORITY SEIZE THE RECORDS OF

RANTUNGAM AND THE CORPORATION?

1. The petitioner contends that under Section 11 of the SEBA Act 1992, the
investigating authority is empowered to seize records, but with a significant
limitation. Specifically, this authority extends only to public companies or listed
public companies. Section 11(2)(m) of the Act specifies that the investigating
authority can perform functions as prescribed. Additionally, Section 11(2A) allows
the Board to inspect books, registers, or other documents of listed public companies
or public companies (excluding intermediaries under Section 12) aiming to list their
securities on recognized stock exchanges. This inspection is warranted when the
Board has reasonable grounds to suspect insider trading or fraudulent and unfair trade
practices in the securities market.

2. In the present case, XYZ INC. is a family-owned corporation, and it is under the
control and ownership of the Rantungam family. The petitioner's argument revolves
around the notion that the investigating authority's powers, as outlined in the SEBA

7
Administrative Proceeding File No. 3 8512, https://www.sec.gov/litigation/aljdec/id78grl.txt .
18
 Act 1992, apply primarily to public companies and listed public companies, and these
powers should not extend beyond this scope to a family owned and controlled
incorporation.

3. The SEBA Act provides a clear delineation of SEBA's functions and powers,
concentrating on the regulation of securities and the protection of investor interests.
This distinction is significant when evaluating whether SEBA has the legal authority
to seize records unrelated to securities market activities. In the present case, the
allegations against Rantungam pertain to criminal activities unrelated to securities
violations. The petitioner emphasizes that SEBA's authority should be limited to
matters directly linked to securities market regulation. Any action that exceeds this
scope may be considered ultra vires and against the legal intent of the SEBA Act, as
reinforced by the case of Sahara India Real Estate Corpn. Ltd. v. SEBI, (2012).8

4. The principle of the separation of powers, enshrined in the Arya Constitution, plays a
pivotal role in this case. It underscores the need for distinct roles and responsibilities
among the legislative, executive, and judicial branches. Criminal investigations and
law enforcement are typically vested in designated executive branch agencies, such as
the police. In light of this constitutional principle, the petitioner argues that regulatory
bodies like SEBA should not have law enforcement powers. Their primary role is to
establish and enforce regulations within their specific domains, in this case, the
securities and financial markets. Hence, the petitioner contends that SEBA's
involvement in criminal investigations infringes upon the separation of powers and
may lead to regulatory overreach.

5. Article 21 of the Constitution of Arya guarantees the fundamental right to privacy,

extending protection to personal and business-related information. This right is
particularly relevant in cases involving the seizure of confidential records. In the
current case, where SEBA is seeking to seize records, the petitioner highlights the

8
Sahara India Real Estate Corpn. Ltd. v. SEBI, (2012) 10 SCC 603
19
 importance of respecting the right to privacy, especially when dealing with
commercially sensitive information. Any unauthorized seizure without clear legal
authority could potentially infringe upon this right, as well as compromise the
confidentiality of business records, as articulated in K.S. Puttaswamy v. Union of
India, (2017).9

6. Section 24 of the SEBA Act establishes a distinct line between SEBA's regulatory
functions and the powers vested in criminal courts. This distinction is of paramount
importance when assessing the appropriateness of SEBA's actions in criminal cases.
The petitioner argues that criminal offenses like embezzlement and fraud fall within
the domain of criminal law and should be investigated and prosecuted by law
enforcement agencies and the judiciary. SEBA's primary role is to regulate securities
markets, and any deviation from this mandate could potentially undermine the
principle of separated powers, as endorsed by State of Gujarat v. Mohanlal Jitamalji
Porwal (1987).10

7. Section 11B of the SEBA Act grants SEBA the authority to impose penalties that are
proportionate to securities market violations. This principle of proportionality
underscores the idea that regulatory actions taken by SEBA should be directly related
to alleged securities market violations. In the context of record seizure, the petitioner
contends that any such action should adhere to the principle of proportionality. This
means that the records seized should be directly linked to the alleged securities
violations and should not extend beyond the scope of SEBA's regulatory authority.
This principle ensures a fair and just regulatory process.

8. The petitioner emphasizes the need to prevent regulatory overreach into the internal
affairs of a family-owned corporation, as underscored by State of Maharashtra v.
Bharat Shanti Lal Shah (2010)11. This case reinforces the importance of respecting

9
Justice K.S. Puttaswamy (Retd.) & Anr. vs. Union of India & Ors. (2017) 10 SCC 1.

10
State of Gujarat v. Mohanlal Jitamalji Porwal (1987) 2 SCC 364.
11
State of Maharashtra v. Bharat Shanti Lal Shah, (2008) 13 SCC 5.
20
 the autonomy and privacy of businesses unless there is a direct link to securities
market misconduct. In the current case, where SEBA seeks to seize records related to
alleged criminal activities, the petitioner argues that such actions may infringe upon
the rights of individuals and corporations, particularly when these actions are outside
the regulatory body's specified scope of authority.

9. The right to due process, guaranteed by Article 21 of the Constitution, is a cornerstone

of fair legal proceedings. This right encompasses the expectation that government
authorities, including regulatory bodies like SEBA, act within the bounds of the law
and established procedures. In the case at hand, the petitioner argues that the
unauthorized seizure of records without a clear legal basis infringes upon the
principles of due process. It is vital to ensure that government authorities act in
accordance with established legal standards and procedures, as emphasized by various
Supreme Court judgments.

10. Section 11D of the SEBA Act precisely defines SEBA's authority to access records
related to securities market activities. This legal provision underscores that SEBA's
access to records should be limited to matters directly related to securities violations,
and it should not extend to personal records unrelated to securities market activities.
The petitioner emphasizes the importance of maintaining this clear demarcation
between personal and corporate records to uphold the principle of limited regulatory
authority. Such separation is essential to protect the privacy and rights of individuals
and corporations while ensuring regulatory actions remain within their prescribed
limits.

[3.] DOES THE FAMILY RELATIONSHIP BETWEEN THE BOARD OF

DIRECTORS AND SENIOR MANAGEMENT OF THE CORPORATION CREATE
A CONFLICT OF INTEREST IN RESPECT TOTHE SEBA INVESTIGATION
AND CRIMINAL CHARGES AGAINST THEM?

21
 1. In the context of this SEBA-regulated case, the petitioner contend that it is
imperative to explore how these familial ties could influence the SEBA investigation,
considering the gravity of the allegations against Rantungam, the CEO of XYZ Inc.

2. In any investigation involving individuals closely affiliated, within an organization,

particularly when they hold influential positions, there is a risk of perceived bias or
conflict of interest. External observers may raise concerns about the credibility of the
investigation process. They might question whether the investigation is being
conducted impartially or if there are underlying motivations to protect family
members or individuals in powerful positions within the organization.

3. In this case, where the investigation and potential criminal charges involve the CEO,
who have familial relationships with members of the board of directors and senior
management, the issue of credibility challenges become salient. Building upon the
Needle Industries (India) Ltd. vs Needle Industries Newey (India) Holding Ltd.12
(1981) case, the petitioner emphasizes the potential consequences of conflicts of
interest within the specific SEBA-regulated context. While this case may not directly
pertain to SEBA regulations, it serves as a relevant precedent to evaluate the impact
of familial relationships on governance and decision-making processes within XYZ
Inc.

4. Family relationships alone may not automatically create a conflict of interest.

However, it is vital to contextualize specific circumstances.In this case, where
allegations of financial misconduct are at the forefront and family members wield
substantial influence within XYZ Inc., the petitioner argues that this unique context
necessitates a comprehensive examination of potential and disclosed conflicts of
interests. Disclosures about conflicts of interests have been declared under the
companies act which may also be validated by SEBA. The familial relations should
not create a conflict of interest as under section 300 of companies act interested

12
Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd., (1981) 3 SCC 333.
22
 directors may not participate or vote in interested matter. Thus, creating further
transparency and clearing out any chances of conflict of interest during any
investigation.

5. Transparency and accountability are foundational principles in the SEBA act and
companies act, and the petitioner asserts that these principles must be upheld,
especially when allegations of financial misconduct arise. In the present case, where
SEBA observed that stakeholders' interests were affected due to alleged financial
misconduct within XYZ Inc., transparency and accountability become paramount.
However, the familial relations between the directors and senior management in a
family owned and controlled company do not come under this purview of SEBA.

6. The importance of impartial decision-making, as highlighted in the provided case

laws, directly relates to the SEBA investigation. The petitioner argues that any
potential or disclosed conflict of interest exists parallel to the investigation conducted
by SEBA. The simple fact that certain people in positions of power are related does
not automatically draw a conflict of interest as these individuals are held to operate in
good faith for the growth of the company and security of any and all parties of the
company. Additionally, mentioned in other responsibilities - members of the board
of directors shall act on a fully informed basis, in good faith, with due diligence and
care, and in the best interest of the listed entity and the shareholders as well as clause
(2) of SECURITIES AND EXCHANGE BOARD OF ARYA (LISTING
OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015
says that all related party transactions shall require prior approval of the audit
committee. This further clarifies the easy handling of any conflict of interest that
may arise.

7. The petitioner emphasizes that while the case laws provide valuable insights, each
case within SEBA's jurisdiction is unique. In the case of XYZ Inc., the specific
circumstances, including the nature of the allegations, the extent of family control,

23
 and the potential impact on the SEBA investigation, should guide the determination
of whether a conflict of interest exists. This approach ensures a nuanced and fact-
based assessment, aligned with SEBA's regulatory mandate as well as the general
principles of criminal law.

[4.] CAN THE FAMILY RELATIONSHIP BETWEEN THE BOARD OF DIRECTORS

AND SENIOR MANAGEMENT OF THE CORPORATION AFFECT THE VALIDITY
OF THE SEBA INVESTIGATION AND CRIMINAL CHARGES AGAINST THEM?

1. The petitioner states that these familial connections extend beyond mere professional
associations; they encompass personal loyalties and shared interests that run deep
within the family. While familial bonds are a cherished aspect of personal life, they
introduce a complex ethical and legal dilemma when intertwined with corporate
governance.
2. This conflict of interest is not merely hypothetical; it is palpable in the decision-making
processes and internal dynamics of the corporation. The question arises as to whether
these individuals, despite their legal obligations to act in the best interests of XYZ Inc.
and its stakeholders, can genuinely prioritize the corporation's interests above their
familial loyalties or one might take out familial vendettas through this process. This
question is not a mere abstraction; it has direct implications for the SEBA investigation.
It prompts us to examine whether the familial connections within the corporation may
influence responses to SEBA's inquiries, potentially compromising the investigation's
fairness and objectivity. It is not a matter of questioning the integrity of family members
but recognizing that the nature of familial relationships introduces a complex dynamic
that warrants careful consideration in legal proceedings.

3. The SEBA investigation centres on allegations of serious financial misconduct,

including embezzlement and diversion of funds, implicating Rantungam and the
corporation's leadership. In such a high-stakes investigation, the importance of
impartiality and objectivity cannot be overstated. However, the familial connections
24
 within the corporation raise legitimate concerns about whether these individuals can
maintain the requisite objectivity in their responses to SEBA's inquiries. The emotional
and familial bonds may inadvertently lead to more lenient or protective responses when
it comes to addressing allegations against a family member. This potential influence on
decision-making and responses during the investigation is a critical consideration, as it
has the potential to impact the completeness and accuracy of the information provided
to SEBA, thus compromising the fairness of the investigative process. These relations
between the directors and senior management of the family owned and controlled
corporation do not create a conflict of interest. However, they may create a question on
the validity of the said process in some way or the other.

4. SEBA's investigation necessitates full cooperation from the corporation, including the
provision of financial records and relevant documents. The integrity of the investigative
process relies on this transparency. However, the familial ties within XYZ Inc. may
raise concerns about whether these individuals can fully and transparently disclose all
critical details relevant to the investigation. The potential hesitancy in disclosing crucial
information could slow down the investigative process and introduce uncertainties
about the veracity and completeness of the information provided to SEBA. These
transparency concerns are not unfounded and merit consideration to ensure that the
investigative process remains open, objective, and thorough. Thus, the petitioner’s
humbly assert that the investigation done by SEBA is not valid.

5. Given the high-profile nature of the SEBA investigation and the presence of family
connections within XYZ Inc., external observers, including the public, investors, and
regulatory authorities, may legitimately raise questions about the credibility of the
investigative process. This scepticism arises from the perception that familial bonds
could lead to bias or with no reason against family members, particularly Mr.
Rantungam. In a case of such significance, the credibility of the investigation is of
utmost importance to ensure that justice is not only done but is seen to be done. The
credibility of the investigation is essential for maintaining public trust in the fairness of
25
 the process and the corporation's commitment to accountability. Any perception that
the investigation is not genuinely impartial or that it is influenced by familial vendettas
can have detrimental consequences. It can undermine the legitimacy of the investigation
in the eyes of the public, parties of the Co, any regulatory authorities. In cases like the
Satyam Computer Services Ltd., In re, 2018 13which was one of the biggest corporate
governance failures in Arya. The founder of Satyam Computer Services, Ramalinga
Raju, admitted to committing a massive fraud, inflating the company's profits and assets
by several billion dollars. This led to the company's collapse and a major loss of investor
confidence in companies Arya – that is the principles of corporate governance like
fairness, transparency, etc failed.

6. The erosion of public trust is a matter of significant concern, given the high stakes
involved in the SEBA investigation. The corporation's reputation and its ability to
attract investment may be compromised if there is a perception that the investigation is
not being conducted impartially due to familial ties. This concern is not limited to the
immediate proceedings but has broader implications for the corporation's standing in
the financial community.

7. Upholding the integrity of the investigation is essential not only for the petitioners but
for the broader interests of justice and the securities market in Arya. The conflict of
interest introduced by familial connections underscores the need to ensure that the
investigation remains impartial and transparent. The integrity of the process is a
foundational principle of the legal system, and its preservation is critical to the fair and
just resolution of the allegations. SEBA's role in ensuring a fair, valid and efficient
investigation may be undermined by the perceived from familial connections within the
corporation.

13
Satyam Computer Services Ltd., In re, 2018 SCC OnLine SEBI 201.
26
8. Under Companies Act, 2013, Section 166, directors have a duty to act in the best
interests of the company. This duty may be called into question when family
relationships exist within the board, potentially influencing decision-making. Section
184 of the Companies Act, 2013, mandates the disclosure of interests by directors. The
presence of familial connections may require more diligent disclosure to avoid any
appearance of impropriety. Section 166 of the Companies Act, 2013 obliges directors
to act in good faith and promote the best interests of the company. The existence of
family ties might lead to a perception of bias, raising concerns about the objectivity of
decision-making. Section 206 of the Companies Act, 2013 stipulates the maintenance
of proper books of accounts. Any lack of transparency in financial dealings, especially
when family members are involved, could give rise to concerns about compliance with
this provision.

9. Section 127 of the Companies Act, 2013, pertains to the disclosure of information to
investigators. Failure to provide complete and accurate information, especially in cases
involving family interests, could lead to transparency concerns. Section 211 of the
Companies Act, 2013 empowers regulatory authorities to investigate and gather
evidence. The presence of family relationships might lead to questions about the
credibility and impartiality of such investigations.

10. Both the Companies Act, 2013, Section 206, and the SEBA Act, 1992, Section 11B
require cooperation with regulatory authorities. Failure to cooperate, especially when
family interests are involved, can lead to regulatory challenges. SEBA Act, 1992,
Section 12A prohibits fraud and manipulative practices in securities markets. Familial
connections could raise suspicions of market manipulation if not handled transparently.
Companies Act, 2013, Section 166 establishes the fiduciary duties of directors,
including acting in good faith and promoting the company's best interests. Breaches of
these duties due to familial influence could result in legal consequences. While not
governed by a specific law, common law principles and contractual provisions may be

27
 invoked if family relationships result in breaches of contractual obligations, affecting
the corporation's interests.

[5.] HAS RANTUNGAM IN CONNECTION WITH HIS ROLE AS THE CEO OF XYZ
INC. AND ITS DIRECTORS BREACHED THE CONTRACT WITH THE SUPPLIERS
LTD. BY DISCLOSING CONFIDENTIAL INFORMATION?

1. Rantungam and XYZ Inc. firmly assert that they have not breached the confidentiality
clause stipulated in the contract with the Suppliers Ltd. They emphasize that their
actions were consistently in accordance with the terms of the agreement. The contract,
they contend, did not explicitly prohibit the disclosure of information to regulatory
authorities in the event of legal obligations or regulatory compliance requirements.
Thus, they argue that there was no contractual violation on their part. It is essential to
note that contracts are legally binding documents that set out the rights and obligations
of the parties involved. In this case, Rantungam and XYZ Inc. maintain that their
actions were well within the boundaries established by the contract. They assert that the
Suppliers Ltd.'s allegations of contract breach are unfounded and lack merit.

2. Rantungam and XYZ Inc. contend that any information they shared with regulatory
authorities, such as SEBA, was done so in strict accordance keeping in mind the pre-
requite of law and general legal principles. They argue that as responsible corporate
entities, they have a duty to cooperate with regulatory bodies to ensure market
transparency and integrity. They maintain that such disclosures were essential in
fulfilling their regulatory obligations and were not in violation of the contract's
confidentiality clause. Furthermore, Rantungam and XYZ Inc. highlight that their
actions align with their broader commitment to regulatory compliance. In the financial
industry, strict adherence to regulatory requirements is paramount to maintaining
market stability and investor confidence. By disclosing information to regulatory
authorities, they assert that they acted in the best interests of all stakeholders, including

28
 shareholders and investors. Therefore, they argue that their disclosure to SEBA was not
only justifiable but also essential to upholding the principles of good corporate
governance and market integrity.

3. Rantungam and XYZ Inc. assert that there is no concrete evidence to suggest that
confidential information was disclosed to unauthorized parties or competitors. They
argue that the information shared with SEBA was strictly related to regulatory inquiries.
Petitioners maintain that their actions did not breach the confidentiality clause of the
contract. Contracts typically hinge on the concept of intent and evidence. In this case,
the petitioners argue that there is no evidence to support the Suppliers Ltd.'s claim of
unauthorized disclosure. They assert that their actions were consistent with their legal
obligations and that any information shared with SEBA was done so in a controlled and
regulated manner, aimed solely at addressing regulatory inquiries.

4. The petitioner disputes the Suppliers Ltd.'s allegations of contract breach, emphasizing
that they have not caused any harm to the Suppliers Ltd.'s legitimate interests. They
contend that the Suppliers Ltd.'s claims lack substantial evidence and appear to be
driven by a misunderstanding of the circumstances surrounding the disclosures. As
such, they assert that there is no valid basis for the allegations brought against them. In
legal disputes, it is crucial to carefully examine the validity of the claims made by both
parties. Rantungam and XYZ Inc. maintain that the Suppliers Ltd.'s allegations are
unsubstantiated and should be thoroughly scrutinized. They argue that a comprehensive
assessment of the facts will reveal that their actions were consistent with their legal
obligations and that they did not breach the contract with the Suppliers Ltd..

5. These detailed explanations provide a comprehensive view of Rantungam and XYZ

Inc.'s position, emphasizing their commitment to legal compliance, public interest, and
the lack of evidence supporting the Suppliers Ltd.'s allegations of contract breach.

29
 Rantungam and XYZ Inc. put forward the argument that the contract allowed for
flexibility in situations where legal requirements or obligations supersede the
confidentiality clause. They emphasize that the contract should be interpreted in a
manner that aligns with broader legal principles and obligations. In the absence of
explicit language within the contract preventing disclosures mandated by law, they
assert that their actions were justified.

6. Contracts are legal instruments that operate within the framework of the law. The
petitioners contend that the contract's terms should be understood in the context of legal
compliance. They argue that it is not reasonable to interpret the contract in a way that
would force them to violate their legal obligations, particularly those related to
regulatory reporting and cooperation. Rantungam and XYZ Inc. assert that the
disclosures they made were not detrimental to the Suppliers Ltd.'s business or interests.
They emphasize that any information shared with SEBA was limited to what was
necessary for regulatory inquiries so aPreets to comply with orders of a government
regulatory authority. Moreover, any reports made by SEBA in said matter will remain
confidential.
7. In contractual disputes, it is essential to consider whether one party's actions have
caused harm to the other. The petitioners argue that their disclosures to SEBA were not
made with the intent to harm the Suppliers Ltd. but were driven by their legal and ethical
obligations. They contend that the Suppliers Ltd.'s interests were not adversely affected
by the disclosures. Rantungam and XYZ Inc. affirm their commitment to upholding
their contractual obligations. They argue that they have consistently honoured the terms
of the contract, except in instances where legal requirements and obligations
necessitated a deviation from the confidentiality clause.

8. Contracts are a foundation of business relationships, and maintaining contractual

integrity is paramount. The petitioners maintain that their actions were in accordance
with the spirit of the contract and that they have not wilfully breached its terms. Their
commitment to fulfilling their obligations within the confines of the law underscores
30
 their dedication to contractual ethics. Regulatory compliance is a central tenet of
Rantungam and XYZ Inc.'s argument. The fact they the petitioners are questioning the
jurisdiction of SEBA’s authority to conduct such an investigation shows good faith and
the intent of XYZ INC. to not want to breach confidentiality. As far as the non- compete
clause is concerned there is no clarity on that from the facts provided. They assert that
they have always prioritized adherence to regulatory requirements. Disclosing
information to regulatory authorities is an essential aspect of complying with these
obligations. Therefore, they argue that their actions were in line with their commitment
to regulatory compliance.

9. Financial markets are heavily regulated to ensure transparency, fairness, and stability.
The petitioners emphasize that their cooperation with regulatory authorities, such as
SEBA, was a manifestation of their dedication to upholding regulatory standards. They
argue that regulatory compliance is a shared responsibility in the financial industry and
is fundamental to maintaining market trust and integrity. Rantungam and XYZ Inc.
assert that their actions were legally justified and necessary given the circumstances.
They emphasize that the law takes precedence over contractual obligations and that they
were obligated to comply with legal requirements, including cooperating with
regulatory authorities. The petitioners argue that their actions were guided by legal
requirements and obligations, making them not only justifiable but also necessary to
uphold the law.

[6.] IS THE CONFIDENTIATLITY CLAUSE AND THE NON-COMPETE CLAUSE

ENFORCEABLE AGAINST RANTUNGAM AND THE CORPORATION?

1. In our case, it is crucial to recognize that our actions were not driven by any intent to
violate the contractual obligations stipulated in our agreement with the Suppliers Ltd.
Instead, our actions were guided by the overarching legal obligations imposed by the
governing acts of government regulatory authorities, which holds paramount
importance in the context of our business operations. Specifically, Section 11(C)(2) of
the SEBA Act unequivocally mandates the production of documents related to the
company during an investigation by regulatory authorities like SEBA and of the
31
 Companies Act, 2013. This legal obligation takes precedence over contractual
agreement, as pre-requisites of law is an exception effectively rendering the
confidentiality clause unenforceable in the face of a statutory duty.

2. Even in the case of Preeti Tulsian vs. CPIO 14 it has been stated that “Such information
is summoned by SEBA in the discharge of its regulatory function and in its authority
as a regulator of the market. Hence, the information thus called for, is provided by the
entity irrespective of whether the same is confidential or in the nature of commercial
confidence. Under the provisions of the law in force at the time, it is incumbent on the
entities/individuals during investigation to provide the requisite information lest they
be visited upon with the consequences of non-compliance with the summons issued by
SEBA in the matter. Hence it is the duty of the entities/individuals during investigation
to provide the requisite information to SEBA without any recourse to the claim of
privacy or confidentiality. Furthermore, I note that under the scheme of the SEBA Act,
1992, Section 11C empowers SEBA to investigate and based on the investigation,
appropriate actions are initiated in accordance with the provisions of the SEBA Act.
Further, Section 11C embarks a duty upon every person to provide the information
called for by Investigating Officer and any failure thereto, is a punishable Act under
Section 11C (6) of SEBA Act. Further, such person by virtue of Section 11C of SEBA
Act, is bound to disclose said information to SEBA, even though disclosure of such
information is confidential and against business or commercial interest of such person
or an entity relating to which the information is provided to the Investigating
Authority.”

3. This reiterates our commitment to upholding the law and cooperating with regulatory
authorities is unwavering. We firmly believe that when a conflict arises between
contractual clauses and statutory requirements, the latter must prevail to maintain the
integrity and well-being of the company and ensure compliance with the law.

14
Preeti Tulsian vs. CPIO, 2022 SCC OnLine SEBI 445.
32
 Therefore, it is essential to recognize that our actions were not driven by a desire to
breach the contract but rather by the necessity to adhere to legal obligations, a
fundamental principle in our legal system.

4. This commitment is bounded by an obligation and as stated above the same thing has
also been reiterated in the case of Motilal Mohata and Sons HUF Vs CPIO, SEBI,
Mumbai.15 It is of utmost importance to emphasize that we had no intention whatsoever
to violate the terms of our contract with the Suppliers Ltd. From the very outset, the
petitioner’s acted in good faith and with utmost integrity to fulfil legal obligations and
cooperate fully with regulatory authorities such as SEBA even if their interference in
the matters of a family owned and controlled incorporation were unjustified. Our
actions were motivated by a genuine commitment to transparency and adherence to the
law.

5. In our view, any breach that may have occurred is a direct result of the necessity created
by the law itself. We firmly believe that when regulatory investigations are initiated,
companies like ours must prioritize compliance with statutory mandates over
contractual obligations. This is not only in line with the principles of corporate
governance but also essential for maintaining market integrity and safeguarding the
interests of all stakeholders involved. Thus, while a breach may be perceived, it is
crucial to understand that it arises from the legal necessity imposed by regulatory
authorities.

6. Contracts serve as the cornerstone of business agreements, providing a structured

framework for parties involved. However, it is essential to recognize that contracts
cannot be absolute and must coexist harmoniously with the legal framework governing

15
Motilal Mohata and Sons HUF Vs CPIO, SEBI, Mumbai, 2022 SCC OnLine SEBI 443.

33
 a particular industry. In our case, where the SEBA Act and its provisions hold
significant sway over our operations, the need to strike a delicate balance between
contractual obligations and statutory mandates becomes evident. Additionally, however
the SEBA investigation reports are confidential in nature as held in the case of
.

7. The law is not static and can evolve over time, introducing unforeseen obligations that
could not have been anticipated during the formation of standard contracts. Regulatory
investigations and compliance requirements are prime examples of these evolving
obligations. In such circumstances, the law naturally prevails over contract clauses, as
it is incumbent upon us, as responsible corporate entities, to comply with statutory
requirements in a dynamic legal landscape. This balance between contract and law
underscores the complexities of modern business operations and the need for flexibility
to ensure compliance and ethical conduct in all endeavours.

[7.] CAN THE SUPPLIERS LTD. RECOVER DAMAGES FROM RANTUNGAM &
THE CORPORATION FOR THE BREACH OF CONTRACT?

1. The petitioners stress their unwavering commitment to have upheld the contractual
terms. They assert that throughout their business association with the Suppliers Ltd.,
they strictly adhered to the confidentiality and non-compete clauses. Their decision to
provide records was solely driven by a legal obligation to cooperate with the authorities,
and they maintain there is no factual basis for the Suppliers Ltd.'s breach claim in
respect to the non-compete clause. Additionally, they emphasize compliance with the
rules specified in section 37 of the Arya Contract Act. Section 37 outlines the obligation
of parties to perform their respective promises within the contract, with exceptions
specified by the Act.

34
2. Rantungam and XYZ Inc. argue that their legal obligations and regulatory duties took
precedence over the contract. Additionally, as a general principle of law if confidential
information is required as a pre-requisite of law then confidentiality is an exception –
this is a general principle of law and corporate contracts. They contend that charges
against Rantungam by SEBA necessitated their cooperation and disclosure of
information. These obligations are governed by the Securities and Exchange Board of
Arya (SEBA) Act, 1992, specifically under Section 11C, which empowers SEBA to
call for information, conduct investigations, and audits and by the companies act under
section
3. The enforceability of a non-compete clause is subject to legal requirements and
considerations, such as reasonableness, protectable interests, and public policy
concerns. Rantungam and XYZ Inc. challenge the Suppliers Ltd.'s claims of harm,
citing a lack of mention of any factual evidence to support said assertion. In the present
case, it is not explicitly mentioned whether Mr. Rantungam breached the non-compete
clause. However, it is important to review the specific language, scope, duration, and
geographic limitations of the non-compete clause to determine its enforceability against
Mr. Rantungam and the corporation about which the facts remain silent.

4. Rantungam and XYZ Inc. maintain that their actions were legally justified and
necessary under the circumstances. They argue that their compliance with legal
requirements and obligations was not only justifiable but also essential to uphold the
law. The case's facts highlight the legal context in which their actions occurred,
emphasizing the necessity of adhering to legal duties, including those under Section 28
of the SEBA Act, which pertains to the recovery of amounts [1]. The petitioner thus
humbly submits that in lieu of no breach in the first place, damages for said breach
should not be provided.

35
 PRAYER

Wherefore in the light of the issues raised, The Petitioner, therefore, pray before the
Hon'ble Supreme Court for the reasons stated above and those which will be argued at the
time of hearing,

1. This appeal be allowed and to declare that SEBA does not have the authority to bring
charges against the petitioners, therefore set aside the previous decision of the SAT and
investigation conducted by SEBA.

36
2. To declare that no breach of contract has taken place with the Suppliers Ltd.

3. To destroy the SEBA investigation report as it contains commercially sensitive

information related to XYZ INC.

And pass any other order, direction, or relief that this Hon’ble Court may deem fit in
the interests of justice, equity and good conscience.
FOR WHICH ACT OF GRACE AND FAVOUR, THIS APPELLANT AS BOUNDEN IN
DUTY SHALL EVER PRAY.

All of which is humbly prayed,

TC -

Counsels for the Petitioner

37