No cover for fraud: SC upholds SEBI penalties, rules shareholder approval cannot legalise fund diversion

In a significant ruling, the Supreme Court affirmed that shareholder approval does not grant companies immunity from violations of securities law. Terrascope Ventures faced repercussions for diverting funds, notwithstanding investor agreement. The court highlighted that utilizing capital for undefined purposes constitutes fraud. Shareholder endorsement cannot legitimize such practices, as they compromise regulatory protections and the greater public good.