Karmbhoomi Real Estate Limited & Ors. vs Sebi

Date of Decision: 21.1.2020

Appeal No.11 of 2019 1.

Karmbhoomi Real Estate Limited 208A(226), Ashoka Height, Ganeshra Road, Mathura - 281004.

2. Manoj Kumar Sengar H.N. 190, Chaatikara, Mathura, Uttar Pradesh.

3. Devindra Pal Singh 1/36 Surendra Nagar, Aligarh, Uttar Pradesh - 202137.

4. Sardar Singh V.P.O. Chaatikara, Mathura, Uttar Pradesh.

5. Mahipal Singh V.P.O. Chaatikara, Mathura, Uttar Pradesh. .... Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. ... Respondent

Mr. M.S. Bhardwaj, Advocate with Mr. Asmit Agarwal, Advocate i/b. MSB Legal for the Appellant.

Mr. Kevic Setalvad, Senior Advocate with Mr. Chirag Bhavsar, Ms. Eram Quraishi and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent. 2

With Appeal No.195 of 2019

1. Karmbhoomi Real Estate Limited 208A(226), Ashoka Height, Ganeshra Road, Mathura - 281004.

2. Manoj Kumar Sengar H.N. 190, Chaatikara, Mathura, Uttar Pradesh.

3. Sardar Singh V.P.O. Chaatikara, Mathura, Uttar Pradesh.

4. Mahipal Singh V.P.O. Chaatikara, Mathura, Uttar Pradesh.

5. Devindra Pal Singh 1/36 Surendra Nagar, Aligarh, Uttar Pradesh - 202137. .... Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. ... Respondent

Mr. M.S. Bhardwaj, Advocate with Mr. Asmit Agarwal, Advocate i/b. MSB Legal for the Appellant.

Mr. Kevic Setalvad, Senior Advocate with Mr. Chirag Bhavsar, Ms. Eram Quraishi and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member 3

Per : Justice Tarun Agarwala (Oral)

1. Even though two separate orders have been passed, one

by the Whole Time Member (WTM) and the other by the

Adjudicating Officer (AO) against the appellant, the

controversy and the issues are the same. As such, both the

appeals are being decided together.

2. For facility, the facts stated in Appeal no.195 of 2019

are being taken into consideration. The appellant is a real

estate Company and was engaged in the sale and purchase of

agricultural land, construction of flats, etc. Based on a

complaint, an investigation was made and thereafter

Securities and Exchange Board of India (hereinafter referred

to as 'SEBI') issued an ex-parte order dated 30th December,

2014 restraining the appellants from collecting any fresh

money from the public and from issuing or launching any

new scheme and further restrained them from diverting any

funds raised from the public, etc. Pursuant to the reply

submitted by the appellants, the WTM passed an order dated

3rd December, 2015 under Section 11 and 11B of the

Securities and Exchange Board of India Act, 1992

(hereinafter referred to as 'SEBI Act') holding that the 4

Company and its directors, namely the appellants, were

engaged in operating a Collective Investment Scheme (CIS)

by mobilizing funds from the public in contravention of

Section 12(1B) of the SEBI Act and consequently directed

the Company and its directors to windup the CIS and refund

the money collected within a period of three months.

3. The appellants being aggrieved by the aforesaid order

filed Appeal no.143 of 2016 before this Tribunal wherein the

appellant submitted that without prejudice to their rights that

the schemes floated by the appellant did not constitute a CIS

the appellants are ready and willing to refund the amount

collected by the investors in a time bound manner. On this

statement being made, the Tribunal without going into the

merits of the case disposed of the case by an order dated

21st November, 2017 directing the appellant to make a

representation setting out in detail the names, quantum of

amount refunded to the investors and the mode and the

manner in which the balance amount would be refunded to

the investors.

4. Based on the aforesaid order, the appellant filed a

representation and submitted a list showing the names of the 5

investors and the quantum of amount refunded to them by

cash. Since this list was not supported by any material

document nor evidence was filed to show the trail of funds

through which the amount was sought to be refunded nor

receipts from the investor, or the bank account statement of

the Company was filed, the WTM recorded its proceedings

on 4th January, 2019 and granted further time to the appellant

to file the supporting documents. Since no documents were

filed the impugned order was passed by the WTM on

22nd February, 2019 rejecting the representation. Against this

order Appeal no.195 of 2019 has been filed.

5. For the alleged violation of the securities laws for

operating the CIS without registration a show cause notice

dated 10th October, 2017 was issued by the AO to show cause

why penalty should not be made for violating various

securities laws. After giving opportunity of hearing and after

further providing time to the appellant by an order dated

15th January, 2018 the AO passed an order dated

18th September, 2018 awarding a penalty of Rs.50 lakhs.

Against this order Appeal no.11 of 2019 has been filed. 6

6. We have heard Mr. M.S. Bhardwaj, Advocate assisted

by Mr. Asmit Agarwal, Advocate for the Appellant and Mr.

Kevic Setalvad, Senior Advocate assisted by Mr. Chirag

Bhavsar, Ms. Eram Quraishi and Mr. Harshad Vyas,

Advocates for the Respondent.

7. The learned counsel for the appellant submitted that as

per the order of SAT dated 21st November, 2017 the list of

investors and the amount refunded was duly supplied to the

authorities but the WTM unnecessarily directed the appellant

to furnish details which were not required nor directed by

SAT. The learned counsel further submitted that the

documents namely the agreement entered with the

buyers/investors, the details of the amount paid, the receipts

given by the investors have now been procured and, on that

basis, the learned counsel requested that he may be permitted

to file the said documents before this Tribunal. The learned

counsel further prayed that on the basis of these documents

the matter may be remitted to the authorities for

reconsideration.

8. The learned counsel further submitted that the scheme

operated by the appellant was not a CIS scheme and 7

contended that the business activities of the appellant does

not fall within the ambit of CIS as prescribed under the SEBI

Act. The learned counsel made long drawn arguments

contending that on a perusal of the scheme and the

agreements entered with the investors it was not a case of the

CIS but was a case of pure business transaction of sale and

purchase of agricultural land/flats developed by the

appellants.

9. Having heard the learned counsel for the parties at some

length, we are of the opinion that it is no longer open to the

appellant to challenge the findings given by the WTM in its

order dated 3rd December, 2015 holding that the business

activity of the appellants falls within the ambit of a CIS. The

order of 3rd December, 2015 was no doubt challenged by the

appellant before this Tribunal but contention was made by

the appellant that without going into the question as to

whether the business activities of the appellant comes within

the ambit of CIS or not, the appellants were willing to refund

the entire amount to the investors. Based on this concession

made by the appellant the appeal was disposed of without

going into the contention as to whether the scheme of the 8

appellant was a CIS under the SEBI laws or not. We are of

the view that since no liberty was taken from the Tribunal

reserving its rights to question the veracity of the finding of

the WTM on the business activity of the appellant as a CIS, it

is no longer open to the appellant at this stage to question the

findings of the WTM in its order dated 3rd December, 2015.

Even otherwise, we find that in the present appeal only the

impugned order dated 22nd February, 2019 passed by the

WTM has been questioned. No prayer has been made by the

appellant for quashing of the order dated 3rd December, 2015.

Thus, it is no longer open to the appellant to question the

findings of the WTM which held that the business activity of

the appellant came under the ambit of a CIS. The contention

raised by the appellant on this aspect is rejected.

10. Admittedly, the appellant did not provide the details

of the payments made to investors either before the WTM or

before the AO. In the absence of any documentary proof

supporting the list provided by the appellant, the WTM as

well as the AO rightly came to the conclusion that the

appellant failed to provide any evidence to support their 9

contention that the amounts have been refunded to the

investors.

11. During the course of hearing, a prayer was made by

the appellant to file the documents namely the

agreement/receipts of amount paid to the investors. Such

documents cannot be taken on record on the oral statement of

the counsel at the stage of final hearing without there being a

proper application for taking additional evidence on record.

Further, on the basis of these documents it is not feasible or

proper to remand the matter to the authorities. In our

opinion, it is a device made by the appellant to prolong the

issue for vested reasons.

12. In the light of the aforesaid, we are of the opinion that

the orders passed by the WTM as well as the AO does not

suffer from any manifest error of law. Both the appeals fails

and are dismissed.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member 21.1.2020 Prepared and compared by RHN