New Delhi, March 22 -- The Supreme Court of India, on 17 March, ruled that companies cannot legitimize the diversion of funds raised from investors through a subsequent shareholder approval, tightening disclosure and accountability norms in the Indian capital markets.

The court set aside a decision by the Securities Appellate Tribunal (SAT) that had given relief to Moryo Industries Ltd, now called Terrascope Ventures Ltd, and its promoters and restored penalties imposed by the Securities and Exchange Board of India (Sebi). The ruling comes amid a surge in primary market fundraising in recent years.

Mint explains what the ruling means for companies and investors.

In 2012, Moryo Industries raised about Rs.15.87 crore from investors throu...