The bench of Justices BV Nagarathna and R Mahadevan issued notice on the appeals filed by SEBI against the judgment but declined SEBI’s request to stay the SAT ruling but clarified that the ruling would not bind the tribunal in other cases.

“Since the impugned order is a split verdict, 2:1, we observe that the same shall not be a precedent in similar matters before SAT,” the Court said.

The dispute concerns 11 memoranda of understanding executed between Bombay Dyeing and SCAL Services Limited, both Wadia Group companies, for the bulk sale of flats in Mumbai.

SEBI alleged that the transactions enabled Bombay Dyeing to recognise revenue of ₹2,492.94 crore and profit before tax of ₹1,302.20 crore between financial years 2011-12 and 2017-18.

The regulator termed the MoUs sham transactions intended to artificially inflate the listed company’s financial statements and mislead investors. It imposed penalties exceeding ₹15 crore on Bombay Dyeing, its promoters Nusli, Ness and Jehangir Wadia, SCAL, senior executives and directors.

In January, SAT set aside SEBI’s orders by a 2:1 majority. Technical Members Meera Swarup and Dheeraj Bhatnagar held that the MoUs concerned real projects and that the flats were ultimately constructed and sold. They concluded that SEBI had failed to establish fraud or artificial inflation of profits.

Presiding Officer Justice PS Dinesh Kumar dissented. He found that SCAL functioned as an extended arm of Bombay Dyeing and that the company had recognised revenue and profits in a deceitful manner.

Before the Supreme Court, Senior Advocate Arvind Datar, appearing for SEBI, said Bombay Dyeing originally held 49 per cent in SCAL. On March 29, 2012, it reduced its holding to below 19 per cent, following which SCAL ceased to qualify as an associate company.

However, the 30 per cent stake was transferred to another group entity and not an independent third party, SEBI argued. The first MoU was executed the following day. Eleven MoUs aggregating ₹3,333 crore were executed over two years.

SEBI further alleged that Bombay Dyeing recorded sale proceeds in its books, while SCAL did not reflect corresponding purchases and instead showed an agency commission.

Datar argued that the majority ruling raised questions concerning associate companies, the lifting of the corporate veil and the principle of a single economic entity.

The respondents opposed a stay on the judgment. They said the SAT had completely exonerated them on facts and that SEBI had not challenged several findings validating the transactions. They also highlighted the delay of around nine years in initiating proceedings.

The Court allowed the respondents to file their counters and directed that all four connected appeals be listed together.