Sealing of business premises may be lifted under protective conditions while statutory regulators complete inquiry and assets are preserved.
Sealing of business premises may be lifted subject to protective conditions while statutory regulators conduct inquiries; inventory and safe custody of seized materials must be prepared and maintained, copies provided on payment, and assets protected from dissipation. Petitioners are prohibited from new business, advertising, withdrawal or alienation of accounts/assets and must deposit any incoming investor funds into an interest-bearing escrow. Statutory regulators are directed to complete inquiries within eight weeks (subject to extension) and may take lawful action if violations are found; absence of violations requires clearance to resume operations.
Issues: (i) Whether sealing of petitioners' business premises by district authorities without independent regulatory inquiry could be continued indefinitely, and whether the sealed premises ought to be unsealed subject to protective conditions and regulatory inquiry.
Analysis: The petitioners challenged the sealing as lacking lawful justification in absence of inquiry by statutory regulators. Regulatory authorities having jurisdiction over the matters were impleaded and are required to examine compliance with applicable statutory enactments and guidelines. To balance investor protection with petitioners' right to carry on business, measures were directed to secure seized materials, enable regulatory inquiry, and prevent dissipation of assets or fresh solicitation of funds during the inquiry. Procedural safeguards include preparation of an inventory by the Registrar of Companies cum Official Liquidator with district administration assistance, safe custody of seized materials, provision for petitioners to obtain copies on payment, prohibition on new business or advertising, mandatory escrow for any new deposits, and restriction on operation or alienation of accounts/assets pending clearance by statutory authorities.
Conclusion: (i) The sealing shall be lifted subject to specified protective conditions: inventory and safe custody of seized materials; statutory inquiry by SEBI, RBI, Registrar of Companies and relevant cooperative authority within eight weeks (subject to extension); prohibition on new business, advertising, withdrawal or alienation of assets; deposits by existing investors to an interest bearing escrow account; and cooperation by petitioners. Regulatory authorities may take lawful action if violations are found; if no violations are found, clearance/NOC shall be furnished to enable resumption of business.
TaxTMI 
AI Drafter ✕
TaxTMI 
