Kerala High Court Dismisses SEBI’s Appeal in Escrow Fund Dispute Linked to Atlas Ramachandran
The Kerala High Court has dismissed a writ appeal filed by the Securities and Exchange Board of India (SEBI) in a dispute over money lying in an escrow account linked to late businessman Atlas Ramachandran (M.M. Ramachandran). The appeal challenged an earlier judgment passed in a case filed by Axis Bank against an Income Tax Department recovery order. A Division Bench of Justice Devan Ramachandran and Justice Basant Balaji held that SEBI could not challenge the judgment because it was not the original petitioner in the case.
SEBI Cannot File a Collateral Challenge
SEBI argued that the money in the escrow account was under its control and should not be released. However, the High Court rejected this argument. The Bench stated that if SEBI believes it has a legal claim over the funds, it must approach the appropriate authority or use the legal remedies available under the law. It cannot challenge a judgment that only decided the dispute between Axis Bank and the Income Tax Department.
Background of the Dispute
The escrow account was jointly maintained by late M.M. Ramachandran and Atlas Jewellery Private Limited. The account had been created for Atlas Jewellery’s open offer to acquire shares of Atlas Jewellery India Ltd.
Axis Bank had approached the High Court after the Income Tax Department directed the bank to transfer the money in the escrow account towards Ramachandran’s pending income tax dues.
Single Judge’s Earlier Decision
While deciding the writ petition, the single judge did not express any opinion on whether SEBI had any rights over the escrow funds. The court allowed Axis Bank to inform the Income Tax Department about the orders issued by SEBI and the Enforcement Directorate (ED).
The single judge also observed that there was no legal provision preventing the Income Tax Department from recovering tax dues from the escrow account.
Division Bench’s Observations
The Division Bench noted that the appeal had been filed by SEBI and not by Axis Bank, which was the original petitioner. The court described this as a “very curious” situation because SEBI was challenging directions that had been issued only against Axis Bank.
The Bench further clarified that the earlier judgment dealt only with Axis Bank’s challenge to the Income Tax Department’s recovery order. Since no decision had been made regarding SEBI’s independent rights over the funds, SEBI could not challenge that judgment through a separate appeal.
Court’s Final Ruling
The High Court concluded that the earlier judgment had already protected SEBI’s interests by allowing Axis Bank to inform the Income Tax Department about the orders passed by SEBI and the Enforcement Directorate. Since SEBI was not the original petitioner and the judgment did not decide its rights, the Division Bench dismissed SEBI’s writ appeal.
