Supreme Court Dismisses SEBI Plea Over Atlas Ramachandran Open Offer Escrow Funds With Axis Bank — September 29, 2026

The Supreme Court on Tuesday declined to entertain an appeal by the Securities and Exchange Board of India (SEBI) against a Kerala High Court Division Bench judgment concerning funds deposited in an escrow account with Axis Bank. Following sharp questioning from the bench regarding its legal standing, the market regulator withdrew its Special Leave Petition (SLP).

The dispute centers around funds deposited in an escrow account jointly maintained by the late jeweller-filmmaker M.M. Ramachandran—widely known as Atlas Ramachandran—and Atlas Jewellery Private Limited. The escrow account was created to back an open offer for acquiring shares of Atlas Jewellery India Ltd under SEBI’s takeover regulations.

Question of Locus Standi

A bench comprising Justices Dipankar Datta and Sheel Nagu questioned SEBI at the threshold regarding its locus standi to appeal the High Court's ruling. The underlying litigation originated not from SEBI, but from Axis Bank, which had filed a writ petition challenging an order issued by the Income Tax Department. The tax authority had directed Axis Bank to remit the escrow funds to satisfy Ramachandran's pending income tax liabilities.

A Single Judge of the Kerala High Court had previously disposed of Axis Bank's petition by declining to rule on SEBI's regulatory claims over the escrow money while observing that no statutory provision barred the Income Tax Department from recovering tax dues from such accounts. When SEBI challenged that decision before a Division Bench, the High Court dismissed the writ appeal on the grounds that SEBI could not launch a collateral challenge against a ruling addressing Axis Bank’s petition.

Before the apex court, the bench observed that an intra-court appeal or subsequent challenge cannot be sustained merely because an entity claims an interest in the underlying subject matter. The court noted that the appellant must establish that the order binds it or causes direct legal injury.

Justice Datta observed during the hearing: * The High Court had not adjudicated on SEBI’s substantive rights and had expressly left remedies open to the parties. * The Supreme Court Rules cannot override Article 226 of the Constitution to create an appellate right for a third party where none exists. * SEBI failed to demonstrate that the High Court order was prejudicial or directed the regulator to perform any act.

Regulatory Escrow vs. Statutory Tax Dues

Representing SEBI, Senior Advocate Arvind Datar argued that the controversy holds significant legal and operational implications for capital markets. Under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, acquirers making an open offer are required to deposit a designated portion—often 25%—of the total consideration into an escrow account held with an approved commercial bank to guarantee performance to public shareholders.

Datar contended that once money is placed in an escrow account pursuant to an open offer, it ceases to be the unencumbered property of the income-tax defaulter and is legally sequestered for market participants and public shareholders. SEBI submitted that allowing tax authorities to attach regulatory escrow accounts could compromise transaction certainty across domestic mergers and acquisitions.

However, the apex bench pointed out that since the High Court had not shut out SEBI from pursuing independent remedies under the law, an appeal against an order passed in Axis Bank's writ proceedings was unsustainable. Faced with the bench's unwillingness to intervene on procedural grounds, SEBI opted to withdraw the petition.

Tags: SEBI Axis Bank Atlas Jewellery India Income Tax Department Supreme Court of India