TaxTMI 
TaxTMI 
2021 (3) TMI 1280
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....rth Luthra, Sr. Adv., Ms. Gauri Rasgotra, Adv., Mr. L. Vishwanathan, Adv., Mr. Sumit Attri, Adv., Mr. Adarsh Saxena, Adv., Mr. vikash Kumar Jha, Adv., Mr. Aditya Sikka, Adv. Ms. Nikitha Shenoy, Adv., Mr. Yash Johri, Adv., Mr. Venkat, Adv., For M/S. Cyril Amarchand Mangaldas Aor, AOR, Mr. Kunal Katariya, Adv., Ms. Pratiksha Sharma, AOR, Mr. Kunal Kothary, Adv., Mr. Ankit Acharya, Adv., Mr. Shreyas Awasthi, Adv., Mr. Sidharth Sethi, AOR, Mr. Divyanshu Goyal, AOR O R D E R 1. This is an application preferred by the Respondent No. 5Dalmia Cement (Bharat) Ltd. (hereinafter 'Applicant') with a prayer to modify an interim order of this Court dated 27.08.2019 (hereinafter 'Interim Order') passed in Civil Appeal Nos. 53955398 of 2019 (hereinafter 'Accompanying Appeal'). Further, to that effect, direct the Respondent No. 7 National Securities Depository Limited (hereinafter 'NSDL') to release/transfer Mutual Fund units in favour of Respondent No.5Applicant herein, by crediting the same in their demat account maintained by NSDL. 2. For ready reference, the Interim Order dated 27.08.2019 is extracted below: "Permission to file appeal is granted. We have heard learned counsel ....
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....t the demat accounts were not trading accounts and that no power of attorney or authorization was given by the Applicant to Allied to deal with the Mutual Fund units in any manner whatsoever. The Mutual Fund units were not in physical form but in digitalized form, kept in the demat account of the Applicant. iii. The Applicant alleges that Allied had fraudulently and unauthorizedly placed the Applicant's Mutual Fund units as security with Respondent No.1IL & FS Securities Services Ltd. & Ors. (hereinafter 'ISSL') as collateral for Allied's own transaction, i.e., margin obligations. iv. Aggrieved by the alleged fraudulent activities of Allied, the Applicant lodged a complaint dated 8.02.2019 with Respondent No.1 Securities and Exchange Board of India (hereinafter 'SEBI') and a complaint dated 15.02.2019 with the Economic Offences Wing, Delhi Police (hereinafter 'EOW') against Allied, ISSL, NSDL and their officials. v. On 9.12.2019, i.e., subsequent to the passing of the Interim Order by this Court, SEBI issued a show cause notice to ISSL wherein it has observed that ISSL had allegedly facilitated Allied in executing the fraudulent transfer of Mutual Fund units from the accou....
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....ould not be permitted to be kept with a party against whom chargesheet has been filed. 5. It has also been submitted on behalf of Respondent No. 5Applicant that though liberty was granted by the Interim Order to ask for conversion/sale/encashment of the Mutual Fund units, they do not wish to exercise such option as the value of the Mutual Fund units would increase over time. Therefore, by encashing the same at this point in time, the Applicant would stand to lose financially. II. Respondents' Submissions: 6. Per contra, learned Senior Counsel appearing for Respondent No. 1 ISSL, Mr. K.V. Vishwanathan and Mr. Sidharth Luthra have vehemently opposed the present Application for modification of the Interim Order. They have submitted that vide the Interim Order, this Hon'ble Court took constructive custody of inter alia the said Mutual Fund units and provided for an interim arrangement to protect the interests of all the parties and preserve the value of the Mutual Fund units. Thus, pending final disposal of the Accompanying Appeal, the Applicant's interests are protected. Further, it is submitted that mere filing of a chargesheet by EOW and/or issuance of a summons against ISS....
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....L regarding each other's involvement/collusion with Allied in perpetrating the alleged fraud and in fact, the very nature and substance of the alleged fraudulent activities itself. These questions/allegations are subject matter of the Accompanying Appeal and the investigations being carried out by SEBI and EOW. Until the final disposal of the Accompanying Appeal, it is imperative that the interests of all the parties are substantially protected, including that of the Applicant. It is not disputed that the ownership of the Mutual Fund units vests with the Respondent No. 5Applicant herein. Their contention is that Respondent No. 4Allied wrongfully placed these units as collateral for certain transactions on the stock exchange. This contention was argued before this Court, and duly considered, prior to the passing of the Interim Order dated 27.08.2019 as well. In the meanwhile, a chargesheet dated 12.11.2019 (supra) has been filed by the EOW which appears to support the Applicant's case. We agree with Respondent No. 1 to the extent that mere filing of a chargesheet would not constitute a material change in circumstances showing mala fide on part of ISSL. The same is not conclusive pro....
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....sposed of. It is, however, made clear that any observations made hereinabove would not affect the merits of the appeals as we have considered the case only with regard to the disposal of the present Application and have not gone into the questions raised in the main appeals. O R D E R The Interim Application stands disposed of in terms of the signed order. The operative part of the signed order reads as under:- "we modify the Interim Order dated 27.08.2019 to the extent that the Mutual Fund units of Respondent No. 5-Applicant, kept with the Respondent No.1- ISSL, be released in favour of the Respondent No.5- Applicant by way of transfer of the said Mutual Fund units and crediting the same in the demat account of the Respondent No.5-Applicant. This is subject to the Applicant furnishing requisite Bank Guarantee of equivalent value as the Mutual Fund units, to the satisfaction of the Trial Court. The Respondent No. 5-Applicant shall comply with this requirement within one month of filing of application for release of Mutual Fund units (along with a copy of this order) before the Trial Court. The Trial Court shall also dispose of such application expeditiously. It is....