In Brief
Terrascope Ventures Limited raised funds through preferential share allotment by disclosing specific corporate objectives. SEBI alleged the company immediately diverted the proceeds into shares and loans instead of the stated purposes. The Securities Appellate Tribunal quashed SEBI's penalty orders. The Supreme Court reversed this, holding that the diversion violated securities regulations and investor disclosure protections. Fraud under these regulations is broadly defined and includes misleading disclosures. Post-facto shareholder ratification cannot legalize such breaches, as they involve public interest and multiple stakeholders beyond shareholders alone. The Court upheld SEBI's penalties against the company and directors, emphasizing that regulators' enforcement actions deserve deference when factually supported.
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