Securities and Exchange Board of India v. Terrascope Ventures Limited Etc  2026 INSC 245 - SEBI Act & Regulations - Ratification

SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 - Regulation 73 - The disclosure of the objects as mandated in Regulation 73 of the ICDR Regulations and as mandated by the fairness and transparency required of companies by the various regulations of SEBI have salutary purposes, which ought not to be casually compromised with- SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 -There could be fraud under the PFUTP Regulations even without deceit - The diversion of the funds raised for an object not set out in the notice of EoGM was clearly in breach of Regulation 3 as well as Regulations 4(2)(f), 4(2)(k) and 4(2)(r) of the PFUTP Regulations - When a company offers private placement or goes public, the legal regime mandates fair disclosure and transparency. The investors and all other stakeholders concerned with the securities market irrespective of whether they ultimately subscribe to the shares or not, adjust their affairs based on the disclosure made. (Para 46)

Ratification - By a private resolution, a liability which is crystalized cannot be wiped off by contending that the shareholders have condoned the action. When rights of multiple stakeholders are involved and certain Regulations proscribe a particular course of action any breach of the Regulation has to face its consequences. They are not in the realm of private rights which can be waived off as ratified. (Para 59)

Words and Phrases- Fraud - Any act expression or concealment committed whether in a deceitful manner or not in order to induce any person to deal in securities and whether or not there is any wrongful gain or avoidance of wrongful loss. Fraud would also include an active concealment of a fact by a person having knowledge or belief of the fact and making of a promise without any intention of performing it.  (Para 40)

Securities and Exchange Board of India Act, 1992 -SEBI Act and the Regulations are intended to pre-empt manipulative trading and check all kinds of impermissible conduct resorted by parties, so that the innocent investor is not misled. The primary purpose of such statutory provisions is to provide an environment conducive to increased participation and investment in the securities market, which is vital to the growth and development of the economy. while interpreting these regulations which are intended to protect the investor the Court must weigh against an interpretation which will protect unjust claims over just, fraud over legality and expediency over principle. Further, this Court has emphasized that any practice which does not conform to the fair and transparent principles of trades in the stock market would be captured under the rubric of unfair trade practices in the securities market. This Court has held that protection of investors should necessarily include prevention of misuse of the market. (Para 36-37)

Summary: The Supreme Court holds that Terrascope Ventures Limited (formerly Moryo Industries Ltd.) fraudulently diverted the proceeds of a preferential allotment almost immediately after receipt for undisclosed purposes (loans and investments in other companies), in clear breach of the disclosed objects under ICDR/Companies law and in violation of PFUTP Regulations and SCRA/Listing requirements. A later shareholder “ratification” resolution and subsequent alteration of the Memorandum of Association are declared incapable of curing this illegality, because such diversion strikes at public‑law protections in the securities market and cannot be waived or regularised by private consent. The Court therefore sets aside the SAT’s order, upholds SEBI’s Adjudicating Officer’s penalties on the company and its directors, and affirms that parallel proceedings by the Whole Time Member (under Section 11) and the Adjudicating Officer (under Section 15HA) were validly pursued in their distinct spheres.