Mr. Hanif J. Siwani And Anr. vs Sebi

Date of Decision: 29.05.2018

Misc. Application No. 43 of 2018 And Appeal No. 44 of 2018

1.

Mr. Hanif J. Siwani H.M. Geneva House, 14, Cunningham Road, Bangalore, Karnataka - 560052.

2. Mr. Maheboob J. Siwani H.M. Geneva House, 14, Cunningham Road, Bangalore, Karnataka - 560052. .....Appellants

Versus

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

2. Mr. Ajay Tyagi The Chairperson, Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051.

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

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

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5. Mr. D.V. Shekhar The General Manager & Recovery Officer, Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ......Respondents

Ms. Ankita Chatterjee, Advocate i/b Siddiquee and Associates for Appellants.

Mr. Gaurav Joshi, Senior Advocate with Tomu Francis and Mr. Vivek Shah, Advocates for Respondents.

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

Per : Dr. C.K.G. Nair, Member (Oral)

Misc. Application No. 43 of 2018:-

By this Misc. Application appellants seek condonation of 3 days

delay in filing Appeal No. 44 of 2018. For the reasons stated in the Misc.

Application, the delay is condoned. Accordingly, Misc. Application is

disposed of with no order as to costs.

Appeal No. 44 of 2018:-

1. This appeal has been filed to challenge the order of the General

Manager & Recovery Officer of Securities and Exchange Board of India

('SEBI' for short) dated December 28, 2017 whereby the request of the

appellants for refund of the Earnest Money Deposit ('EMD' for short) given

to SEBI for participating in e-auction has been rejected. 3

2. Facts relevant to the matter are as follows:-

(a) Appellants are in the business of real estate as a residential and

commercial developer in Bangalore functioning since 1991.

Pursuant to a recovery proceedings initiated by SEBI against

Parasrampuria Plantations Ltd. SEBI issued e-auction sale

notice in its website on December 22, 2016 relating to three

properties situated at (1) Village - Belpada, Taluka - Alibaug,

Dist. Raigad, (2) Village - Sakurli & Dehane, Taluka -

Shahpur, Dist. Thane and (3) Village - Dehane, Taluka -

Shahpur, District, Thane. Further, on December 30, 2016

SEBI published the e-auction sale notice in Times of India and

Loksatta. SEBI arranged an inspection of the said three

properties, related documents and any other clarification

relating to them on January 23, 2017. This date was also

indicated in the notice of sale. On February 3, 2017 separate

bids for the three properties were submitted by the appellants

along with the EMD and a declaration to the effect that the

terms and conditions of the notice of sale in respect of the

three properties have been read and accepted by the appellant;

(b) The e-auction was to take place on February 8, 2017 between

10:30 am and 11:30 am. However, the appellants did not

participate in the e-auction and on February 8, 2017 appellants

sent a communication to SEBI indicating their non-

participation in the e-auction since they were not interested to

buy the properties as the same were not suitable for industrial

purpose as they are mangroves. Therefore, they requested 4

SEBI to refund their EMD. SEBI, in response, on February 23,

2017, informed the appellants that as per the terms and

conditions of the notice of sale only if a higher bidder is

available refund of EMD to the unsuccessful bidder would be

made. Accordingly, in respect of one property at Belpada

since a higher bidder was available EMD shall be refunded.

However, in respect of the other two properties since the

appellants were declared as the highest bidder they were

directed to pay the remaining amount also stating that if the

remaining amount is not paid the EMD for those two

properties shall be forfeited in accordance with law. Following

a few further communications to SEBI reiterating their request

for refund of EMD, on November 4, 2017 appellant send a

legal notice to SEBI calling upon SEBI to refund the two

EMDs of Rs. 12,60,000/- and Rs. 8,64,700/-. Appellants were

afforded an opportunity of personal hearing by SEBI on

December 4, 2017 vide SEBI's letter dated November 29,

2017. Vide letter dated November 30, 2017 appellants raised a

preliminary objection regarding the jurisdiction of SEBI to

hear the appellants and decide the matter. However, on

December 4, 2017 advocate for the appellants along with their

Chief Financial Officer attended the personal hearing.

Thereafter, on December 28, 2017 impugned order was issued

by General Manager & Recovery Officer of SEBI rejecting the

request for refund of the two EMDs of Rs. 12,60,000/- and

Rs. 8,64,700/-.

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3. Ms. Ankita Chatterjee, learned counsel appearing on behalf of the

appellants submitted that in the e-portal hosted by SBI Capital Markets Ltd.

which conducted the e-auction on behalf of SEBI, the nature of property

type had been given as "industrial lands / plots." However, later on actual

verification, it was found by the appellants that the properties were actually

agricultural lands in the form of mangroves. Therefore, the e-auction details

were not correctly given and hence the appellants were misguided and

therefore they are not in a position to take possession of the properties. She

further submitted that prior to bidding they could not visit the properties but

they relied on the e-auction details and submitted the bid documents to SEBI

on February 3, 2017. Subsequently, on actual site visit the appellants found

that the lands/plots are agricultural lands/plots and hence did not participate

in the e-auction held on February 8, 2017. Therefore, since SEBI has

misguided the appellants they are entitled to receive the EMD which has

been rejected by the impugned order. Therefore, the impugned order is not

sustainable in law. On a specific query as to why appellants did not visit the

properties before submitting their bids along with depositing substantial

amount of EMD, learned counsel for appellants could not provide any

reasonable explanation.

4. Shri Guarav Joshi, learned senior counsel appearing on behalf of

SEBI explained the details of the e-auction process and the documents

which are provided to the public for submitting bids and participating in the

e-auction. SBI Capital Markets Ltd. has been engaged by SEBI since a long

time and from June 13, 2012 ABC Procure of e-Procurements Technologies

Ltd. ('ABC' for short) was engaged by SBI Capital Markets Ltd. as an

e-auction service provider. Neither in the e-auction sale notice issued by

SEBI in their website on December 22, 2016 nor in the e-auction sale notice 6

published by SEBI in the newspapers on December 30, 2016 in the

description of lands/plots it was indicated that they were industrial

lands/plots. In fact, along with e-auction sale notice all details of the lands

along with conditions of tender-cum-e-auction, bid form, declaration form;

general guidelines to bidders etc. were also given. Property details were also

part of these documents. It is only in the document given by the ABC that

the words "industrial lands/plots" appeared. This may be due to some

automatic features provided by this platform. However, since no other

documents indicated in any manner that the properties were industrial

lands/plots and in any case appellants were expected to inspect the

properties and all the documents relating to the properties prior to

submitting their expression of interest and EMD and the appellants for

inexplicable reason did not do the same despite SEBI organizing such an

inspection on January 23, 2017 appellants cannot claim ignorance of the

nature of property and withdraw their application for bidding at a later stage.

Moreover, audit trail of the e-procurement site indicates that appellants had

downloaded the terms and conditions and all other relevant documents prior

to submitting their bids along with EMD on February 3, 2017.

5. Learned senior counsel for SEBI further submitted that the notice for

sale also stated that "potential bidders should make their own independent

enquiries regarding the encumbrances, litigations, attachments, acquisition

liabilities of the property, title, survey number/plot number and

claim/rights/dues etc. in respect of the properties put on auction, prior to

submitting their bid. The auction advertisement does not constitute and will

not be deemed to constitute any commitment or any representation of

SEBI/the Agency. The properties are being sold with all the existing and

future encumbrances, whether known or unknown to SEBI/the Agency. 7

SEBI/the Agency shall not be responsible in any way for any third party

claims/rights/dues, etc and the notice also clearly show that all properties are

auctioned on "as-is- where-is" basis. The learned counsel also relied on the

order of the Apex Court in the matter of Punjab Urban Planning and

Development Authority and Others vs. Raghu Nath Gupta and Others,

(2012) 8 Supreme Court Cases 197 regarding the meaning of 'as-is- where-

is' basis.

6. We do not find any merit in the submissions made by appellants. The

facts recorded in para 2 and 3 above clearly indicate that it was incumbent

on the appellants to verify the documents and do a site inspection before

participating in the bid process. Appellants are not able to furnish any

convincing reason as to why they could not do so; the only argument of

appellants is that in the e-auction platform of ABC engaged by SBI Capital

Markets Ltd. property type was indicated as "industrial lands/plots".

However, the entire documentation made available by SEBI through their

notices dated December 22, 2016 and December 30, 2016 did not make any

indication that the lands were industrial. It was also made clear that the

e-auction-cum-sale notice in respect of these properties was the result of

attachment proceedings against Parasrampuria Plantations Ltd. which was

supposed to be in the business of plantations rather than industrial

constructions. The appellants are not ignorant of real estate business as they

themselves are in the real estate business since 1991. We agree that the

e-auction site of ABC did not correctly portray the type of land but we do

not agree that the appellants entered into the bid process only based on this

information. Therefore, having accepted the terms and conditions of the

e-auction-cum-sale notice of SEBI issued with complete documentation on

December 22, 2016 and December 30, 2016 by SEBI and nowhere in these 8

documents there has been any indication that the properties were industrial

lands/plots and because the terms and conditions, inter alia, stating that

EMD will be paid back to only unsuccessful bidders, were accepted by the

appellants, we find no fault in the Recovery Officer's order whereby the

request for refunding the EMD to the appellants was rejected. However, we

also direct SEBI to ensure that their outsourced agencies should furnish

correct and full information in future.

7. Accordingly, appeal is dismissed with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

29.05.2018 Prepared and compared by:msb