TaxTMI 
TaxTMI 
2016 (3) TMI 835
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.... any Collective Investment Schemes ("CISs") including the schemes which have been identified as CISs in the impugned order itself. The four Directors have also been barred from accessing the securities market by imposing a prohibition of four years in this regard. The precise directions issued by the said impugned order dated 21st August, 2015 are reproduced below:- "a. Royal Twinkle Star Club Limited and its Directors, namely, Mr. Omprakash Basantlal Goenka [PAN: AECPG3854J], Mr. Prakash Ganpat Utekar [PAN: AALPU9100E], Mr. Venkatraman Natrajan [PAN: ACUPV4686K] and Mr. Narayan Shivram Kotnis [PAN: ABIPK5022D] shall abstain from collecting any money from the investors or launch or carry out any Collective Investment Schemes including the scheme which have been identified as a Collective Investment Scheme in this Order. b. Royal Twinkle Star Club Limited and its Directors, namely, Mr. Omprakash Basantlal Goenka, Mr. Prakash Ganpat Utekar, Mr. Venkatraman Natrajan and Mr. Narayan Shivram Kotnis are restrained from accessing the securities market and are prohibited from buying, selling or otherwise dealing in securities market for a period of four (4) years ....
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.... with returns which are due to them. - SEBI would make a reference to the State Government/ Local Police to register a civil/ criminal case against Royal Twinkle Star Club Limited, its promoters, directors and its managers/ persons in-charge of the business and its schemes, for offences of fraud, cheating, criminal breach of trust and misappropriation of public funds; and - SEBI would make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the company, Royal Twinkle Star Club Limited. - SEBI shall initiate attachment and recovery proceedings under the SEBI Act and rules and regulations framed thereunder." 2. For the sake of convenience and with the consent of the parties, Appeal No.436 of 2015 preferred by the Appellant-company against the impugned order is taken as the lead case. 3. Briefly stated the facts of the case are that; the Appellant-company started its business of selling of holidays plans on 6th May, 2008. The Appellant i.e. RTSCL belongs to Mirah Group of Companies which is stated to be engaged in various business activities, including the business of running hotels and restaurants since the year ....
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....nd the Respondent, an order dated 7/3/2014 was straightaway passed against the Appellant by the Respondent invoking powers under Section 11(1) 11B and 11(4) of the SEBI Act, 1992 read with Regulation 65 of the CIS Regulations, 1999 directing the Appellant and its Directors:- "a. not to collect any more money from investors including under the existing schemes; b. not to launch any new schemes; c. not to dispose of any of the properties or alienate any of the assets of the schemes; d. not to divert any funds raised from public at large which are kept in bank account(s) and/or in the custody of the company; e. submit the list of investors with full particulars such as PAN numbers, addresses etc within fifteen days from the date of receipt of this order; f. submit full inventory of 233965 rooms as mentioned in the letter of RTSCL dated August 5, 2013 within fifteen days from the date of receipt of this order." 5. Strangely, this letter itself was treated as a show-cause notice against the Appellant by the Respondent. It is relevant to note that the Ministry of Corporate Affairs has already found that no action was necessary in t....
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....f any money to such customers, is a matter of good gesture on the part of the Appellant and cannot be treated as a factor to bring the business activity of the Order under the preview of the CIS. In nutshell, it is that, the four ingredients of Section 11 AA of the SEBI Act are not at all satisfied in the present case and that the concept of CIS has been unnecessarily been stretched to bring the business activities of the Appellant under the clutches of CIS by deliberately ignoring the contractual nature of the obligations undertaken by the customers while purchasing timesharing holiday plans from the Appellant. 8. The Appellant's next contention is that the investigation undertaken by the SEBI in the present matter was to "determine" the nature of the business activities of the Appellant in the context of CIS Regulations on the basis of certain complaints. These complaints were never supplied to the Appellants' and fragmented copies, that too without the details of the complainants, on the directions of this Tribunal, were furnished during the course of the hearing. In the process, the Appellant lost the opportunity to redress any grievances of the complainants, if any. In this....
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.... four years. 10. Although various points/grounds have been urged in the Appeal by the Appellant, but during the course of hearing Shri Pradip Sancheti, learned Senior Counsel for the Appellant, mainly, submitted that since there was no mention of debarment of Appellants from accessing the securities market in the SCN, no adverse order could be passed by the Respondent without putting the Appellants to notice in respect thereof. In this connection, Shri Sancheti has relied upon the judgment of the Hon'ble Supreme Court delivered in the case of Gorkha Security Services Ltd. v. Government (NCT of Delhi) & Ors., reported in (2014) 9 Supreme Court Cases, page 105 and has pleaded for quashing and setting aside of the show-cause notice dated 7th March, 2014 along with proceedings and the consequent impugned order dated 21st August, 2015. Secondly, Shri Sancheti has brought to our notice that more than 70% amount collected from various customers has either since been paid and/or the customers have availed the time sharing schemes for which they had paid the money in question. For remaining 30%, Shri Sancheti has pleaded for two years time so as to enable the Appellant to discharge its c....
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....e action as mentioned above may not be taken against the firm, beside other actions as deemed fit by the competent authority." 13. Finally, impugned order dated 11th September 2013 was passed by the hospital holding that Gorkha had violated the terms and conditions of the contract / labour laws and as such following penalties were imposed on Gorkha: "9............................ (i) A penalty of Rs. 3000/- (Rupees Three Thousand only) under clause 27 (c) of the T&C, on account of public complaints. (ii) A penalty of Rs. 41,826/- (Rupees Forty One Thousand Eight Hundred Twenty Six only) under Clause 27 (c) (a) (i) on account of unsatisfactory performance and not abiding by the statutory requirements. (iii) A penalty of forfeiture of performance guarantees amounting to Rs. 3,70,000/- (Rupees Three Lac Seventy Thousand only) submitted at the commencement of contract. (iv) A penalty of blacklisting the firm M/s Gorkha Security for a period of 4 years from the date of this order, from participating the tenders in any of the department of Delhi Government/ Central Government/ Autonomous Body under the Government. (v) Since, the fi....
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....he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/ breaches complained of are not satisfactorily explained. When it comes to black listing, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. 22. The High Court has simply stated that the purpose of show cause notice is primarily to enable the noticee to meet the grounds on which the action is proposed against him. No doubt, the High Court is justified to this extent. However, it is equally important to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. To put it otherwise, we are of the opinion that in order to fulfill the requirements of principles of natural justice, a show cause notice should meet the....
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....stance, we may point out that no such case was set up by the respondents that by omitting to state the proposed action of blacklisting, the appellant in the show cause notice has not caused any prejudice to the appellant. Moreover, had the action of black listing being specifically proposed in the show cause notice, the appellant could have mentioned as to why such extreme penalty is not justified. It could have come out with extenuating circumstances defending such an action even if the defaults were there and the Department was not satisfied with the explanation qua the defaults. It could have even pleaded with the Department not to blacklist the appellant or do it for a lesser period in case the Department still wanted to black list the appellant. Therefore, it is not at all acceptable that non mentioning of proposed blacklisting in the show cause notice has not caused any prejudice to the appellant. This apart, the extreme nature of such a harsh penalty like blacklisting with severe consequences, would itself amount to causing prejudice to the appellant." 17. The above analysis of Gorkha Security Services Ltd. clearly reveals that the ratio of the said judgment is an advance....
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....lant has not enrolled a single new member after 31/3/2012 in any of the erstwhile schemes run by RTSCL. However, we also note that the Appellants went on collecting equated monthly installments from the members enrolled prior to 31/3/2012 and on 9/6/2014 addressed a letter to that effect to SEBI. Admittedly, this letter remained unanswered by the Respondent. Further, during the course of hearing we directed the Appellant to submit to SEBI a complete list of its members as also the balance amount refundable to the members. The same was promptly done by the Appellant with various details of its members/customers. SEBI selected about 500 members and verified from them about the conduct of the Appellant in the matter of repayment to them. Learned Senor Counsel Shri Sen fairly submitted before us that no negative comments were received from the people which could be contacted by the SEBI. Therefore, the conduct of the Appellants seems to be good. Similarly, the Appellants have filed an affidavit before the Court categorically stating that the remaining likely contractual liability to repay to those customers who don't want to avail of the holiday facility in their resorts, hotels and re....