Sources say companies have approached the Securities Appellate Tribunal against the SEBI circular on 'shell companies'.
Prakash Industries, J Kumar Infraprojects Ltd and Parsvnath Developers, three of the 331 firms named as shell companies by a SEBI circular, have moved the Securities and Appellate Tribunal (SAT) against the circular, sources have told Moneycontrol.
The SAT, which serves as a tribunal that reviews SEBI's orders, held a hearing from representatives of Prakash Industries and J Kumar Infra. Hearing with representatives of Parsvnath is expected to held tomorrow.
The circular released by exchanges on Monday evening, which has a list of 331 suspected shell companies, directed stock exchanges restricting trading activities in shares of their counter.
The list of shell companies has caused considerable consternation in financial circles, as it includes some companies that have operational, tangible business - a point raised by the companies that moved SAT today.
Further, there is not enough legal clarity on what constitutes a 'shell company'.
Sources say the list of shell companies was passed on to SEBI by the Ministry of Corporate Affairs on June 9, following which the market regulator issued the circular.
SAT today asked SEBI whether it had carried out any investigation into these 'shell companies' or merely named them in its circular in toto.
Hearings are expected to continue tomorrow. The appellate may pass an order tomorrow as well.Sources previously told Moneycontrol that SEBI will be giving a week's time to check the existence of these 331 companies. Exchange officials have been asked to check the legitimacy of these companies and will submit a full report by Tuesday.
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