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of <h1>Appellants as VCF trustees held liable under Section 15 Indian Trust Act and Section 15HB SEBI Act; penalties varied</h1> AT upheld SEBI's finding that the appellants, as trustees of a SEBI-registered venture capital fund, were responsible for non-winding up of the schemes ... SEBI-registered Venture Capital Fund - Trust - CIG Realty Fund - non-winding up of the schemes - Imposition of a monetary penalties on each of the appellants u/s 15HB of the SEBI Act, 1992 for violation of SEBI (VCF) Regulations, 1996 - HELD THAT:- Appellant’s contention is that it is the duty of the investment advisor to wind up the scheme. We are unable to persuade ourselves to accept the said contention because, as per Section 15 of the Indian Trust Act, the primary responsibility to achieve the purpose of the trust is upon the trustees. Admittedly, the Schemes I, II and IV have not been wound up. The penalty imposed by SEBI for not winding up schemes I and II has been upheld by this Tribunal. The only additional contention which requires consideration whether the appellants, as trustees are also responsible for the winding up. The answer must be in the affirmative in view of Section 15 of the Indian Trust Act. Quantum of penalty - While considering non-winding of Schemes I and II, SEBI has imposed a penalty of Rs.1 Lakh on the appellants. This appeal is in respect of Scheme No. IV. Appellants are senior citizens and Fund’s assets are under attachment by the Enforcement Directorate. Therefore, it would be just and appropriate to reduce the penalty to Rs.2 Lakhs each on all three appellants. Appeal is allowed in part. Issues: Whether the trustees of a SEBI-registered venture capital fund are responsible for non-winding up of expired schemes and related regulatory breaches; and whether the quantum of monetary penalty imposed under Section 15HB of the SEBI Act on the trustees should be modified.Analysis: The Court examined the legal obligations of trustees under Section 15 of the Indian Trust Act, 1882 and the relevant VCF Regulations, noting that trustees bear primary responsibility to achieve the purpose of the trust and possess powers to realise and protect trust property. The Tribunal considered the factual finding that the three schemes had expired and were not wound up, prior penalties upheld against the trustees for Schemes I and II, the role and alleged dysfunction of the investment advisor, and attachments by enforcement authorities. The Tribunal evaluated submissions on procedural timelines and SEBI's power to issue directions under the VCF Regulations and relevant SEBI Act provisions. Considering appellants' status as trustees, the prior Tribunal decision upholding penalties for non-winding up, the absence of sufficient steps taken by the trustees to wind up Scheme IV, and appellants' personal circumstances (senior citizens and attachment of fund assets), the Tribunal determined that liability of trustees for winding up is established but that the monetary quantum could be reduced in the interest of justice.Conclusion: The appeal is allowed in part: the trustees are held responsible for the non-winding up and related regulatory breaches, but the penalty is modified and reduced to Rs. 2,00,000 (Rupees Two Lakhs) payable by each appellant; all other directions in the impugned order remain undisturbed.
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