In a recent ruling, the Bombay High Court reprimanded the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and the Securities and Exchange Board of India (SEBI) for their unlawful freezing of demat accounts belonging to a father and son. '

The court's division bench, led by Justice Girish Kulkarni and Justice Firdosh Pooniwalla, was addressing a petition from the father-son duo, who argued that their accounts were wrongfully frozen without due process.

The controversy began when the National Securities Depository Limited (NSDL) froze the demat accounts based on SEBI’s instructions. Concurrently, the BSE imposed fines and took regulatory actions for alleged non-compliance with financial result submissions as per SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations.

The father claimed the punitive measures stemmed from his being listed as a promoter of Shrenuj & Company Limited, a company established by his father-in-law, despite his lack of involvement. Both he and his son faced similar sanctions without any prior hearings.

The bench criticized the actions of BSE, NSE, and SEBI as arbitrary and failing to meet legal standards. The court emphasized that such actions infringed on the petitioners' constitutional rights under Articles 14, 21, and 300A. It highlighted the undue hardship caused over a six-year period, which hindered the petitioners' ability to manage their shares.

Consequently, the court ordered NSE, BSE, and SEBI to jointly compensate the father with ₹30 lakhs and the son with ₹50 lakhs. The ruling underscores the necessity for regulatory bodies to act within legal frameworks and respect individuals' rights.

Case Title: Dr. Pradeep Mehta vs Union of India