TMI Blog2019 (8) TMI 1143X X X X Extracts X X X X X X X X Extracts X X X X ..... y 25, 1995 and, thus, Regulation 73 of the CIS Regulations is not applicable. Once there is an order to refund the money collected by the appellant under the scheme, the question of circulating the information memorandum to the contributories under Regulation 73(6) and requiring the contributors / investors to give their consent under Regulation 73(7) does not arise. Such exercise would be defeating the order of refund of the monies collected illegally under the CIS Scheme. Merely quoting a wrong provision of the Statute while exercising power under an Act would not invalidate the order passed by the authority if it is shown that such order could be passed under other provisions of the Statute When there was a clear cut direction of WTM directing refund of the monies collected under the CIS, the question of continuing with the scheme by distribution of information memorandum under Regulation 73 does not arise. The application of the appellant seeking to circulate the information memorandum under Regulation 73 to its investors was patently misconceived and was rightly rejected. Request for extension of time to refund the monies, we are of the opinion that the WTM rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 129 of 2017 And Appeal No. 203 of 2016 - - - Dated:- 13-8-2019 - Mr Tarun Agarwala, Presiding Officer, Dr. C. K. G. Nair, Member And Mr M. T. Joshi, Judicial Member For The Appellant : Mr. Rajiv Nayyar, Senior Advocate with Mr. Saurabh Seth, Mr. Surendra Dube, Mr. Shatadru Chakraborty And Mrs. Gauri Memon, Advocates i/b M/s. Nankani And Associates For The Respondent : Mr. Shyam Mehta, Senior Advocate with Mr. Mihir Mody, Mr. Sushant Yadav And Mr. Tabish Mooman, Advocates i/b K Ashar And Co. JUGDMENT Per : Justice Tarun Agarwala, Presiding Officer 1. The facts leading to the filing of the appeal is that the appellant is a public limited company and was carrying on the business of development of high quality infrastructure and real estate in and around India. Securities and Exchange Board of India (hereinafter referred to as, SEBI ) issued a show cause notice dated November 21, 2012, contending that the appellant was found to be running a collective investment scheme as defined under Section 11(AA) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The impugned order further directed that attachment and recovery proceedings should be initiated against the company for noncompliance of its order dated June 21, 2013. 5. The appellant challenged the order dated May 27, 2015 passed by SEBI before this Tribunal in Appeal No. 298 of 2015. This Tribunal by an order dated June 15, 2015 set aside the order of SEBI dated May 27, 2015 and directed SEBI to verify the claim made by the appellant regarding refund. The Tribunal directed the appellant to furnish the particulars demanded by SEBI vide its various letters for the purpose of verifying the claim. If such particulars were furnished by the appellant, SEBI was required to verify the same and pass appropriate orders on the application of the appellant. It was stated that if the appellant failed to furnish the requisite particulars within the stipulated time the order of SEBI dated May 27, 2015 would revive. 6. It is alleged that pursuant to the order of the Tribunal dated June 15, 2015 the requisite information was submitted within the stipulated period. Thereafter, the appellant again made a fresh representation dated August 7, 2015 seeki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that SEBI in its counter affidavit filed before the Hon ble Supreme Court admitted that the Regulation 73 is required to be followed. 11. In our view, the contention raised by the learned senior counsel for the appellant is patently misconceived and cannot be accepted. Before proceeding, it would be appropriate to extract the operative portion of the order passed by the WTM dated June 21, 2013 : 50. Therefore, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 and sections 11 and 11B thereof and regulations 65 and 73 of the SEBI (Collective Investment Schemes) Regulations 1999, hereby issue the following directions to safeguard the interest of the investors: ( a) Alchemist Infra Realty Limited shall not collect any money from investors or launch or carry out any scheme which has been identified as a collective investment scheme in this Order. ( b) Alchemist Infra Realty Limited and its directors including Mr. Brij Mohan Mahajan, Mr. Sunil KantiKar and Mr. Narayan Madhav Kumar shall wind up the existing collective investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts of the securities market and the investors and without prejudice to its right to initiate action under this Chapter, including initiation of criminal prosecution under section 24 of the Act, give such directions as it deems fit in order to ensure effective observance of these regulations, including directions: ( a) requiring the person concerned not to collect any money from investors or to launch any scheme; ( b) prohibiting the person concerned from disposing of any of the properties of the scheme acquired in violation of these regulations; ( c) requiring the person concerned to dispose of the assets of the scheme in a manner as may be specified in the directions; ( d) requiring the person concerned to refund any money or the assets to the concerned investors along with the requisite interest or otherwise, collected under the scheme; ( e) prohibiting the person concerned from operating in the capital market or from accessing the capital market for a specified period. 73. (1) An existing collective investment scheme which: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directions provided under Regulation 65 of CIS Regulations. 15. Regulation 73 has been provided under Chapter IX of the CIS Regulations under the heading existing collective schemes and where existing schemes failed to comply with the provisions under Regulations 71 and 72 then the said existing collective schemes were required to be wound up. The information memorandum contemplated under Regulation 73(6) is to provide an option to the contributors as to whether they would like to continue with the collective investment schemes or not. 16. In our opinion, Regulation 73 is not applicable in the instant case in as much as it was not an existing scheme as on the date of incorporation of the Regulations which came into effect on January 25, 1995. The appellant s CIS scheme came into effect much after 2005. The Hon ble Supreme Court in SEBI vs. Gaurav Varshney and Ors. [(2016) 14 SCC 430] has categorically held that an existing collective investment scheme within the meaning of Section 12(1B) as also within the meaning of collective investment regulations, comprise of only such collective investment scheme which has come into existence prior to Jan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of law. In any case, the law on Regulation 73 has now been settled by the Hon ble Supreme Court in the Gaurav Varshney case (supra). 20. In the light of the aforesaid, we are of the opinion that when there was a clear cut direction of WTM directing refund of the monies collected under the CIS, the question of continuing with the scheme by distribution of information memorandum under Regulation 73 does not arise. The application of the appellant seeking to circulate the information memorandum under Regulation 73 to its investors was patently misconceived and was rightly rejected. 21. With regard to the request for extension of time to refund the monies, we are of the opinion that the WTM rightly rejected the application. Enough latitude has been given to the appellant to refund the amount. More than five years have elapsed and the order of SEBI dated June 21, 2013 is yet to be implemented in full. 22. In this regard, we find that SEBI in its order dated June 21, 2013 had directed the appellant to refund the amount to its investors within three months. This period of three months was extended by 18 months by the Tribunal by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conduct of the appellant, we are of the opinion that admittedly the entire amount has not been repaid to the investors and whatever has been alleged by the appellant to have been repaid has not been verified. The appellant is guilty of adopting dilatory tactics in getting the repayments verified. 26. Thus, we are of the opinion that the application for extension of time to refund the amount was rightly rejected. It may be stated here that more than ₹ 1900 crores were collected which till date has not been refunded inspite of the order being passed by SEBI on June 21, 2013. Thus, no relief can be granted to the appellant. 27. Before parting, we would like to observe that the hearing before the WTM concluded on April 6, 2016. The interim audit report is dated May 28, 2016 which the WTM considered. In our opinion, if a document comes to existence after the conclusion of the hearing, the said document cannot be taken into consideration unless an opportunity is given to the appellant which in the instant case is non-existent. However, reliance on the interim audit report will not invalidate the impugned order as in our opinion, sufficient time wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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