2021 (11) TMI 122

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....e Managing Director of petitioner No.1 company. 3. Respondent No.2 Securities & Exchange Board of India issued Provisional Registration Certificate as per Annexure-A on 09.07.2001 to the petitioners with certain conditions as specified in Regulation No.71(1) of the SEBI (Collective Investment Schemes) Regulations, 1999 ('the Regulations' for short). 4. On 18.02.2005 Respondent No.2 acting under Sections 4(3) and 11B of the Securities and Exchange Board of India Act, 1992 ('the Act' for short) and Regulations 65 and 73 of the Regulations passed order directing petitioner No.1 company to wind up its scheme and refund investors' money. 5. The petitioners challenged the said order before the Securities Appellate Tribunal ('SAT' for short) in Appeal No.59/2005. The SAT passed the interim order on 11.03.2005 directing the petitioners to deposit Rs. 50,00,000/- with respondent No.2. The SAT by its order dated 28.06.2005 in Appeal No.59/2005 remanded the matter to respondent No.2 to take decision after granting opportunity of hearing to the petitioners. 6. The petitioners sent reply dated 07.11.2005 to respondent Nos.2 and 3. Respondent No.2 sent another notice dated 11.11.2005....

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....n memorandum in compliance with SAT's order. Respondent No.3 issued another notice dated 05.10.2010 as per Annexure-B stating that the petitioners have not complied SAT's order in winding up of the Company and for repayment of investors money and called upon them to show cause why appropriate action should not be initiated against them under Section 11B of the Act and Regulations 65 and 73 of the Regulations including restraining them from accessing the capital market and prohibiting from buying, selling or dealing in the securities in any manner. 12. The petitioners submitted reply as per Annexure-C dated 29.10.2010. The petitioners issued another letter as per Annexure-D dated 05.02.2011 requesting respondent No.3 not to precipitate the matter. Respondent No.3 sent another show cause notice as per Annexure-E dated 15.02.2011 stating that it has not complied the directions of the SAT and to complete all the formalities and submit a compliance report and submission of information memorandum failing which it shall go ahead with initiation of action against the petitioners. 13. The petitioners filed W.P.Nos.9699-9700/2011 (GM-RES) seeking to quash Annexure-E the show cause noti....

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....9. Reiterating the grounds of the petition, Sri S.S.Naganand, learned Senior Counsel appearing for Sri Sriranga.S., learned Counsel on record for the petitioners submits that the impugned notices are arbitrary and malafide. 20. In support of his contentions, he relies upon the following judgments: (i) Associated Cement Companies Ltd. v. Union of India 1995 SCC Online Kar 583 (ii) Oryx Fisheries (P) Ltd. v. Union of India (2010) 13 SCC 427 (iii) Daryao & Ors. vs. State of U.P. & Ors. (1962) 1 SCR 574 21. Reiterating the grounds urged in the statement of objections Sri Nitin Prasad, learned Counsel for respondent Nos.2 to 4 opposes the petition on the following grounds: (i) Annexures-H and H1 are not show cause notices and they are only hearing notices;   (ii) Even assuming that they are show cause notices, the petitioners have opportunity to appear before the WTM and put forth their grounds, therefore Annexures-H & H1 have not affected any rights of the petitioners. Under the circumstances, the writ petition is not maintainable and the same is premature; (iii) In fact as per Annexures-H & H1 the petitioners were given ....

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....e two documents shows that no where petitioners were called upon to show cause against initiation of any action. They are only called upon to adduce evidences and clarifications in support of their contention in respect of the charges leveled against them in the show cause notice issued to them under Section 11B of the Act read with Regulations 65 and 73 of the Regulations. 27. Annexures-H and H1 contain only reference to Annexure-B the show cause notice dated 05.10.2010 issued to them. Annexure-B refers to the complaints received from the investors against the petitioners for nonpayment of their money. Annexure-B was issued pursuant to the order of SAT dated 21.10.2008 in Appeal No.48/2006 for submission of information memorandum to respondent No.2 for vetting. 28. The order of SAT in Appeal No.48/2006 dated 21.10.2008 is placed on record. That goes to show that the SAT condemned the conduct of the petitioners on several grounds. It was observed that the petitioners have made misleading statements in the information memorandum only to lure the small time investors to remain invested in the Scheme and the petitioners continue to operate its Collective Investment Schemes even ....