Civil Courts Have No Role in SEBI-Regulated Investor Disputes: Mandatory Injunction Suit Against Stockbroker Barred: P&H High Court

"Section 15-Y of the SEBI Act is an express bar on civil court jurisdiction in stock market disputes" — In a judgment that fortifies the exclusive jurisdiction of regulatory bodies in securities market disputes, the Punjab and Haryana High Court ruled that civil courts cannot entertain suits involving investor grievances against registered stockbrokers, as such matters fall squarely within the adjudicatory domain of the Securities and Exchange Board of India (SEBI).

P&H High Court allowed a civil revision petition under Article 227 of the Constitution, and set aside the trial court’s refusal to reject the suit under Order 7 Rule 11 CPC, holding that the dispute raised in the civil suit is one governed exclusively by the SEBI Act, 1992.

The suit filed by the plaintiff/respondent sought a mandatory injunction against the petitioner, a registered stockbroker, directing delivery of various shares and debentures allegedly withheld, and reversal of a ₹50,000 debit from the investor’s trading account. However, the High Court ruled that “matters relating to defaults by stockbrokers are to be adjudicated solely by SEBI officers, not civil courts.”

Justice Nidhi Gupta, who authored the judgment, delivered a clear finding on the bar of jurisdiction under the SEBI Act:

“A bare reading of Section 15-Y of the SEBI Act clearly shows that no civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which an adjudicating officer appointed under this Act… is empowered to determine.”

SEBI Act Is a Complete Code – Investor Cannot Circumvent It By Resorting to Civil Court

The Court held that the SEBI Act provides a comprehensive legal framework for the investigation, adjudication and redressal of investor grievances, especially under Sections 15-C, 15-F and 15-I, which deal with stockbroker defaults, penalties, and adjudicating officers.

In this case, the plaintiff had alleged non-delivery of shares and unauthorized debit, which would attract scrutiny under Section 15-F(b) of the SEBI Act — dealing with failure of a broker to deliver securities or make payment due to an investor.

The High Court found the remedy squarely within SEBI’s adjudicatory process:

“The Board is competent to adjudicate the matter in controversy as per Sections 15-C, 15-F, 15-I of the SEBI Act, 1992. It is trite law that in face of the prevalence and availability of the Special Act, the plaintiff could not have taken resort to remedy under the General Act.”

Referring to the decision of the Supreme Court in Om Aggarwal v. Haryana Financial Corporation, the Court reiterated that when a special statute provides for a remedy, that route must be followed, and civil jurisdiction stands excluded.

“Injunction Is Not a Substitute for Recovery Suit”: Suit Barred Under Specific Relief Act

The Court further ruled that the nature of the suit itself was impermissible, as the plaintiff sought a mandatory injunction, rather than filing a proper suit for recovery or declaration.

Relying on Section 41(h) of the Specific Relief Act, 1963, the Court held:

“When efficacious remedy in the form of suit for recovery is available to the plaintiff, the filing of suit for mandatory injunction would be hit by section 41(h) of the Specific Relief Act.”

Justice Gupta did not mince words in observing that the attempt to seek an injunction was possibly motivated by a desire to evade payment of ad valorem court fee, and such practices could not be permitted in law.

This view echoed the ruling in Spectrum Life Medical Device Pvt. Ltd. v. EMC Super Speciality Hospital Pvt. Ltd., where the Punjab & Haryana High Court had similarly declared:

“Suit for mandatory injunction is not maintainable when a full-fledged recovery suit is available but is avoided to bypass court fees.”

Court Also Pulls Up Trial Court for Repeating Error Despite Earlier High Court Order

Significantly, this was not the first time the petitioner had moved for rejection of the plaint. An earlier application under Order 7 Rule 11 CPC had been wrongly dismissed by the trial court in 2007, which was later set aside by the High Court in 2014 with a direction to reconsider the matter afresh. Despite this, the trial court passed the same erroneous order again in 2017, prompting the present revision.

Justice Nidhi Gupta noted this with disapproval:

“Despite specific directions issued by this Court, the trial court again dismissed the application under Order 7 Rule 11. Repetition of the error renders the impugned order unsustainable.”

Conclusion: Civil Suit Rejected as Barred by Law – High Court Affirms SEBI’s Exclusive Domain

The High Court allowed the revision petition, set aside the impugned trial court order dated 18.02.2017, and rejected the suit filed by the investor/plaintiff as barred by the SEBI Act and the Specific Relief Act. All pending applications were disposed of.

Summing up its reasoning, the Court made it clear that:

“In view of the bar created by Section 15-Y of the SEBI Act and availability of efficacious statutory remedies, the civil court had no jurisdiction and the plaint deserved to be rejected under Order 7 Rule 11 CPC.”

This ruling serves as a strong reminder that disputes in regulated sectors such as securities and capital markets must be addressed within the dedicated statutory frameworks, and civil courts should not be misused to bypass specialised tribunals or statutory obligations like court fees.

Date of Decision: 06/11/2025