📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!

    Question

    Under the SEBI Act, 1992, read with the SEBI (Procedure

    for Board Meetings) Regulations , if a member of the Board is a Director of a company whose "Draft Red Herring Prospectus" (DRHP) is being considered for an investigation order during a Board meeting, which of the following is the correct legal procedure?
    A The member must resign from the Board immediately to maintain the "Fit and Proper" status of SEBI. Correct Answer Incorrect Answer
    B The member may participate in the deliberation but must abstain from the final vote under Section 7A. Correct Answer Incorrect Answer
    C The member must disclose the nature of their interest and shall not take part in any deliberation or decision of the Board with respect to that matter. Correct Answer Incorrect Answer
    D The Chairman has the discretionary power to allow the member to vote if the member’s interest is less than 2% of the company's paid-up capital. Correct Answer Incorrect Answer
    E The entire proceeding of the Board becomes voidable at the option of the Central Government if the member was present in the room, regardless of participation. Correct Answer Incorrect Answer

    Solution

    Explanation: This scenario is governed by Section 7A of the SEBI Act (inserted via the 2002 Amendment). It codifies the principle of Nemo judex in causa sua (no one should be a judge in their own cause). The law is absolute: once a "pecuniary interest" (direct or indirect) is identified, the member is legally barred from both deliberation and the decision-making process. Unlike some corporate board rules where "disclosure and participation" might be permitted, SEBI’s statutory mandate requires total recusal for that specific agenda item to preserve regulatory integrity.

    Practice Next
    More Administrative Interpretation and Maxims Questions
    ask-question