Kanwal Jit Singh vs Sebi

Date of Decision : 08.01.2018

Misc. Application No. 294 of 2017 And Appeal No. 79 of 2017

Kanwal Jit Singh C 603 Mithras Park, Rahatani Road, Pimple Saudagar, Pune - 411027. ...Appellant

Versus

1.

The Whole Time Member Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051.

2. The Executive Trustee UTI Mutual Fund, UTI Tower, 'Gn' Block, Bandra Kurla Complex, Bandra (East) Mumbai - 400 051.

3. The Vice President Operations Department of Operations, UTI Asset Management Company Ltd.

UTI Tower, 'Gn' Block, Bandra Kurla Complex, Bandra (East) Mumbai - 400 051.

4. The Managing Director UTI Trustee Company P Ltd.

UTI Tower, 'Gn' Block, Bandra Kurla Complex, Bandra (East) Mumbai - 400 051. ...Respondents

Mr. Kanwal Jit Singh, Appellant in person.

Mr. Chirag Bhavsar, Advocate with Mr. Pranav Jain, Advocate i/b MDP Partners for Respondent No. 1.

Mr. P.N. Modi, Senior Advocate with Mr. Vishal Talsania, Advocate i/b R V Legal for Respondent 2 to 4.

2

CORAM : Justice J.P. Devadhar, Presiding Officer Jog Singh, Member Dr. C.K.G. Nair, Member

Per : Justice J.P. Devadhar (Oral)

1. Although the appellant herein seeks to challenge the decision of the

Whole Time Member ('WTM' for short) of Securities and Exchange Board

of India ('SEBI') dated October 3, 2016, the reliefs claimed in the appeal

relate to the claim of several similarly situated unit holders whose names are

not disclosed in the memorandum of appeal. Moreover, appellant wants this

Tribunal to grant fees at 10% plus service tax to the appellant on the

quantum of amount that may be determined as payable to the investors

whose names are not even disclosed in the memorandum of appeal.

Jurisdiction of this Tribunal under Section 15T of SEBI Act is restricted to

deal appeals filed by any person aggrieved by an order passed by the Board

or by the Adjudicating Officer (AO) of SEBI. As the appeal is filed by

appellant alone, the appellant is not justified in claiming relief on behalf of

several other undisclosed investors.

2. Facts relevant to the present case are that on January 13, 1997

appellant had invested Rs. 12,800/- in a scheme floated by the then Unit

Trust of India ('UTI' for short). By a press release dated January 08, 2008

investors in the above scheme including the appellant were informed that

the said scheme would be terminated with effect from February 18, 2008.

By the said press release, the investors including the appellant were called

upon to opt either for any alternate scheme and exit the scheme by

repurchasing the remaining units or opt for repurchasing the outstanding

units at the prevailing NAV as on February 18, 2008. As per the said press 3

release last date for receiving the option form along with other documents,

as applicable, was February 4, 2008.

3. Admittedly the appellant failed to exercise the option within the

stipulated time. However, on September 6, 2014, that is, after lapse of more

than 6 years appellant exercised his option by seeking redemption of the

units to which he had subscribed to on January 13, 1997 and also claimed

interest on the redemption amount. Immediately thereafter on September 13,

2014, the redemption amount of Rs. 52,290.91 was paid to the appellant by

UTI MF.

4. As the interest on redemption amount claimed by the appellant was

denied by UTI MF, appellant lodged a complaint before SEBI on November

12, 2014 inter alia alleging that the scheme in which appellant had invested

has been terminated in violation of various provisions of law and that

interest on delayed payment of redemption amount has been wrongly denied

to the appellant.

5. By a communication dated August 12, 2015 SEBI rejected the

complaint filed by the appellant, inter alia, by recording that the scheme

which was launched prior to the SEBI (Mutual Fund) Regulations, 1996

('1996 Regulations' for short) being an assured return scheme which is not

allowed under the 1996 Regulations, by a press release the UTI MF had

rightly decided to close the scheme by giving option to the unit holders.

6. Appellant filed Appeal No. 6 of 2016 before this Tribunal to

challenge the said communication of SEBI dated August 12, 2015. On April

26, 2016 when the above appeal was taken up for hearing, in view of the

grievance made by the appellant that all contentions raised by the appellant 4

in his complaints filed from time to time have not been considered, SEBI

agreed to withdraw the communication dated August 12, 2015 and pass

fresh order. Accordingly, the communication dated August 12, 2015 was

quashed by this Tribunal with liberty to SEBI to pass fresh order on the

complaints filed by the appellant on November 12, 2014 and thereafter.

7. Thereafter the appellant was heard and by the impugned order dated

October 3, 2016 the WTM of SEBI rejected the issues raised by the

appellant. The WTM of SEBI has also held that UTI MF has paid the

redemption amount within few days of the appellant choosing to claim the

redemption amount and therefore, there being no delay on part of UTI MF,

the appellant is not justified in claiming interest on redemption amount.

8. Above facts on record clearly show that the appellant who has failed

to exercise the option within the stipulated time is not justified in claiming

interest on redemption amount. However, during the course of hearing, we

had enquired from the respondent nos. 2 to 4 as to whether the redemption

amount due to the appellant was invested upto September 13, 2014 when the

redemption amount was paid to the appellant.

9. By an affidavit dated January 6, 2018, respondent nos. 2 to 4 have

stated that the amount due to the appellant was invested and the gross

investment income on the redemption amount of Rs. 52,290.91 as on

September 13, 2014 would be approximately Rs. 25,700/-.

10. While we were considering the question as to whether the respondent

nos. 2 to 4 could be directed to pay the aforesaid investment income of

Rs. 25,700/- to the appellant, the appellant appearing in person submitted

that the reliefs claimed in the appeal is not restricted to seeking interest on

the redemption amount payable to the appellant alone but the reliefs claimed 5

extend to considering civil and criminal charges levelled by the appellant

against SEBI, UTI MF, other respondents and the claim of other similarly

situated unit holders whose names are not even disclosed in the

memorandum of appeal. Further, the appellant wants this Tribunal to award

fees @ 10% plus service tax (as applicable) from the amounts that may be

determined as payable to the unit holders whose names are not even

disclosed in the memorandum of appeal. Appellant also wants this Tribunal

to permit the appellant to audit the books of UTI MF relating to the scheme

in which the appellant had invested and submit a report to this Tribunal.

11. The issues that the appellant has framed in para 5.15 of the

memorandum of appeal for consideration of this Tribunal read thus:-

(i) Does SEBI have the authority or jurisdiction to waive

compliance with the Regulations to a mutual fund registered

under the Regulations for a particular scheme?

(ii) Does SEBI have the authority or jurisdiction to over ride the

mandate of an act of the Parliament - the Repeal Act to grant

waiver of compliance to the Regulations, when the Repeal Act

mandates compliance.

(iii) If SEBI does not have the authority,

(a) Then the approval dated Dec 26, 2007 granted by SEBI is

null and void.

(b) The redemption of SCUP units post Feb 18, 2008 is illegal. 6

(c) Penalty as per provisions of Section 15A, 15A, 15C, 15D,

15E, 15HA, 15HB and 24 of the SEBI Act are imposed on

each of the Respondents.

(iv) Is the procedure followed in termination of SCUP as per

procedure followed in terminating RUS 92 arbitrary,

unreasonable and unfair to the Group 1 unit holders?

(a) Can a unit be redeemed after the scheme has been

terminated, even where the Regulations do not apply?

(v) Is there a criminal breach of trust (Section 405 and Section 409

IPC) in UTI MF, UTI AMC and UTI TC not sharing any

revenue from the earning on the investment of unit holder

funds pending encashment?

(vi) Is there a breach of the fundamental rights of EI B unit holders

when the Class B unit holders were sub divided into two parts

- Group 2 and EI B prior to the effective date for purposes of

extension of the insurance cover?

(vii) Has UTI MF, UTI AMC and UTI TC violated the provisions of

Section 188 and Section 211 of Indian Contract Act in not

negotiating appropriately with NIAC for arriving at the

onetime insurance premium payable for this class of investors

while / after negotiating for Group 2 investors?

(viii) Are UTI MF, UTI AMC, UTI TC and SEBI and their

appropriate officials guilty of criminal activity as alleged by the

appellant under sections 119, 166, 157, 218, 219 IPC? 7

(ix) Is UTI TC guilty of hiding material facts in the Abridged

Annual Report for 2004-2005 for SCUP when it stated that

SCUP is being managed in compliance with the Regulations,

while in the submissions of UTI MF and UTI AMC to SEBI

and GoI, it held a diametrically opposite view?

(x) Has SEBI discharged its statutory duty to protect the interest of

investors in management and termination of SCUP and Unit

Growth and Value fund?

(xi) Has SEBI discharged its statutory duty to protect the interest of

the investors during the termination of RUS 92 in Sept 2000 -

under the provisions of SEBI Act, by ignoring the loss suffered

by investors when they did not receive any compensation on

the funds lying with UTI post termination?

(xii) Whether penal provisions of Para 14.1 of SEBI Master Circular

of October 01, 2014 providing for payment of compensation of

EI A unit holders and other unit holders of Schemes of

Respondent 2 are applicable? If yes, will the compensation be

on the basis of compounding of interest on annual basis,

considering the fact that the transactions are in the securities

markets - where annual accretions to the asset value are

included while arriving at the NAV of any mutual fund scheme

and Respondents 2, 3 & 4 are enjoying the fruits of

compounding on the investment of such funds?

(xiii) Is relief available to the appellant for services rendered to the

Eligible Unit holders and other Unit holders and to the

Government considering provisions of Section 70 of the Indian 8 Contract Act, 1972 and provisions of the Constitution invoked

by the appellant?

(xiv) Are the activities of the Respondents enumerated in the appeal

covered by the definition of fraud as per provisions of SEBI

(Prohibition of Fraudulent and Unfair Trade Practices relating

to Securities Market) Regulations, 2003 and Indian Contract

Act?

(xv) Are the victims entitled to additional relief from the penalties

levied on the respondents under Article 300 of the

Constitution?

(xvi) Can the appellant and his team be permitted to audit the books

of SCUP scheme since 2005 and submit report to SAT for

consideration on the material issues in the management and

termination of SCUP?

12. Apart from above, the appellant has filed Misc. Application No. 294

of 2017 to amend the memorandum of appeal by adding some more issues

for consideration of this Tribunal. By the additional issue framed, the

appellant wants this Tribunal to hold that all the respondents are liable for

negligence and tortuous liability as the unit holders have suffered on

account of their negligence.

13. As noted earlier the jurisdiction of this Tribunal is restricted to

entertaining appeals filed by persons who are aggrieved by the order passed

by the Board or by the AO under the SEBI Act. Since the appellant wants

relief on behalf of the unit holders whose names are not even disclosed in

the memorandum of appeal, and since the appellant wants this Tribunal to 9

take action against SEBI, UTI MF and other respondents on the basis of

civil and criminal charges levelled by the appellant against SEBI and other

respondents, in our opinion, the appeal is wholly misconceived and beyond

the powers conferred on this Tribunal under the SEBI Act.

14. For all the aforesaid reasons, the appeal as also Misc. Application are

dismissed with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member 08.01.2018 Prepared and compared by:msb