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2022 (12) TMI 237 - HC - SEBIPublic Interest Litigation - Regulations seeked to Time Share Companies as Collective Investment Scheme (CIS) under SEBI Act and the Collective Investment Schemes Regulations, 1999 (“CIS Regulations”) - scheme or arrangement to be qualified as a CIS as defined under the SEBI Act - substantial public interest for entertaining this petition - this petition has been instituted is that the rights of several million residents of India are adversely affected due to malfunctioning, fraud, misrepresentation and other wrongful and/or illegal activities of various Time Share Companies - as submitted since Time Share Companies were not included in the exempted categories and considering their mention in the interim report, they would be covered under the definition of CIS as a scheme or arrangement in section 11AA(1) of the SEBI Act HELD THAT:- Once the Parliament has included the provisions with respect to CIS after considering the Dave Committee report and which provisions have been held to be intra vires in the decision of Rose Valley Kolkata [2013 (9) TMI 623 - CALCUTTA HIGH COURT] as quoted above, it would not be necessary for us to dwell any further on this aspect. In view of the above discussion, in our considered view, the reliance by the Learned Counsel for the Petitioners on the decision of Rose Valley Kolkata (supra) does not advance the case of the Petitioners. Petitioner’s reliance on the Securities Appellate Tribunal decision in the case of Chandrasen Ganpatrao Bhise Vs. Securities and Exchange Board of India [2022 (3) TMI 1449 - SECURITIES APPELLATE TRIBUNAL MUMBAI] in support of the contention to bring all time share schemes within the ambit of CIS also appears to be misplaced in as much as in the specific facts of that case a reference has been made to the finding of the Tribunal that the time sharing business of the company was a CIS. Moreover that was a case filed by one of the directors of a company namely Pancard Clubs Limited on whom a penalty had been levied under Section 15HA for fraudulent and unfair trade practice for violation by the company of not registering the CIS under Section 12(1B). In the said case the Tribunal quashed the imposition of penalty on the director holding that the penalty for non-registration was under Section 15D(a) and not under Section 15HA as the director had not indulged in fraudulent and unfair trade practice. In our view, the finding that the time sharing scheme that is selling of rooms for a fixed duration of nights / days depending upon the scheme opted by its customers was held to be a collective investment scheme by the Tribunal itself demonstrates that on a case to case basis after due examination of the facts, the Tribunal may come to a conclusion that a particular scheme is a Collective Investment Scheme. However, that does not mean that every time sharing scheme of selling rooms for a fixed duration of nights and days would be a collective investment scheme, as submitted by the Learned Counsel for SEBI. True that the innocent and gullible investors need to be protected against the abuse in the name of Time shares. However as mentioned above, SEBI – the Regulator being fully empowered to do so, it would therefore not be necessary for us to give any such directions to the Regulator. The purposes for which a public interest litigation can be instituted has been very succinctly elucidated by the Supreme Court in the case of State of Uttaranchal Vs. Balwant Sing Chaufal & Ors [2010 (1) TMI 1095 - SUPREME COURT] where it has been clearly observed that PIL can be filed only for the following three purposes and not otherwise: (i) for enforcement of fundamental rights of marginalized and deprived sections of the society; (ii) for preservation of ecology and environment; (iii) for purity in public administration and probity in governance Having said so, even if such companies, keeping in mind the complex nature of the schemes and the arrangements by which people contribute monies into pools under promises of rights to holidays and the segment of the population that they may touch, require a separate regulation as canvassed by the Learned Counsel for the Petitioners, that clearly in our view is not the job of the Courts. The Supreme Court in the case of Mallikarjuna Rao and Ors v. State of Andhra Pradesh & Ors [1990 (4) TMI 307 - SUPREME COURT], has categorically held that the High Courts or the Administrative Tribunals cannot issue a mandate to the Government to legislate nor recommend / advise / direct legislation on a subject nor even require the executive to exercise its rule making power in any manner. Applying the aforesaid principles, the present petition, in our considered view, does not fall within any of the aforesaid categories and cannot be styled or filed as a Public Interest Litigation as it is neither for enforcement of fundamental rights of marginalized and deprived sections of the society nor for preservation of ecology and environment nor for purity in public administration and probity in governance but seeking directions to the Respondents to either enforce the provisions pertaining to CIS Regulations against Timeshare companies, which we have found to be without any merit or in the alternate, issue directions to formulate legislation / guidelines / regulations, which we have already held to be de hors the scope of our constitutional mandate under Article 226. Petition deserves to be dismissed and is hereby dismissed with costs of Rs. 25,000/- to be paid by the Petitioner to the SEBI, within a period of two weeks.
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