Pacl Ltd. vs Sebi

Date of Decision : 12.08.2015

Misc. Application No. 88 of 2015 And Misc Application No. 129 of 2015 And Misc. Application No. 171 of 2015 And Appeal No. 368 of 2014

PACL Ltd. 22, 3rd Floor, Amber Tower, Sansar Chand Road, Jaipur- 302 004, Rajasthan ...Appellant

Versus

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

Mr. Janak Dwarkadas, Senior Advocate with Mr. Rajiv Nayar, Senior Advocate, Mr. L. S. Shetty, Ms. N. L. Shetty, Mr. N. L. Sabhnani, Mr. Abhishek Amritanshu, Mr. Amit Pawan and Mr. Rudreshwar Singh, Advocates for the Appellant.

Mr. Darius Khambata, Senior Advocate with Mr. Mihir Mody, Mr. Rushin Kapadia, Ms. Shruti Chiniwar, Mr. Akshay Patil, Mr. Jayesh Ashar and Mr. Harekrishna Ashar, Advocates i/b K. Ashar & Co. for the Respondent.

Mr. Chirag Kamdar, Advocate with Mr. Samir Ali Khan, Advocate for Applicant in M.A. No. 88 of 2015.

Mr. Gaurav Pachnanda, Senior Advocate i/b Mr. Devanshu Desai, Advocate for Applicant in M.A. No. 129 of 2015.

Mr. Srikant D. Padhi, Advocate i/b Mohanty & Associates for Applicant in M.A. No. 171 of 2015. 2

WITH Appeal No. 369 of 2014

Gurmeet Singh 22, 3rd Floor, Amber Tower, Sansar Chand Road, Jaipur- 302 004, Rajasthan ...Appellant

Versus

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

Mr. Janak Dwarkadas, Senior Advocate with Mr. Abhishek Amritanshu, Mr. L. S. Shetty and Ms. N. L. Shetty, Advocates for the Appellant.

Mr. Darius Khambata, Senior Advocate with Mr. Mihir Mody, Mr. Rushin Kapadia, Ms. Shruti Chiniwar, Mr. Akshay Patil, Mr. Jayesh Ashar and Mr. Harekrishna Ashar, Advocates i/b K. Ashar & Co. for the Respondent.

WITH Appeal No. 370 of 2014

Subrata Bhattacharya 22, 3rd Floor, Amber Tower, Sansar Chand Road, Jaipur- 302 004, Rajasthan ...Appellant

Versus

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

Mr. Janak Dwarkadas, Senior Advocate with Mr. Rajiv Nayar, Senior Advocate, Mr. Abhishek Amritanshu, Advocate, Mr. Amit Pawan and Mr. Rudreshwar Singh, Advocates for the Appellant.

Mr. Darius Khambata, Senior Advocate with Mr. Mihir Mody, Mr. Rushin Kapadia, Ms. Shruti Chiniwar, Mr. Akshay Patil, Mr. Jayesh Ashar and Mr. Harekrishna Ashar, Advocates i/b K. Ashar & Co. for the Respondent. 3

AND Appeal No. 95 of 2015

1.

Mr. Sukhdev Singh 22, 3rd Floor, Amber Tower, Sansar Chand Road, Jaipur- 302 004, Rajasthan

2. Mr. Tarlochan Singh 22, 3rd Floor, Amber Tower, Sansar Chand Road, Jaipur- 302 004, Rajasthan ...Appellants

Versus

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

Mr. T. R. Subramaniam, Senior Advocate with Mr. Sandeep Parekh, Mr. D. P. Mohanty, Mr. Shashank Prabhakar, and Mr. Shashank Patil, Advocates i/b Parekh & Co. for Appellants.

Mr. Darius Khambata, Senior Advocate with Mr. Mihir Mody, Mr. Rushin Kapadia, Ms. Shruti Chiniwar, Mr. Akshay Patil, Mr. Jayesh Ashar and Mr. Harekrishna Ashar, Advocates i/b K. Ashar & Co. for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Jog Singh, Member

Per: Justice J.P. Devadhar

1. Whether the Securities and Exchange Board of India ('SEBI' for

short) by its order dated 22.08.2014 is justified in holding that the

schemes floated by PACL Ltd. ("PACL" for short) constitute Collective

Investment Schemes ('CIS' for short) under the Securities and Exchange

Board of India Act, 1992 ('SEBI Act' for short) and assuming that the

said schemes are CIS, whether SEBI is justified in holding that as a 4

natural consequence, PACL and its promoters and directors, are liable

to wind up the said schemes and refund the monies collected from the

investors as per the terms of offer, without giving an opportunity to the

appellants to register the said schemes in accordance with the regulation

framed by SEBI is the basic question raised in all these appeals.

2. Appeal No. 368 of 2014 is filed by PACL and all other appeals

are filed by the promoter/directors of PACL to challenge impugned

order of SEBI dated 22.08.2014. Since the challenge in all these appeals

is to the order of SEBI dated 22.08.2014, all these appeals are heard

together and disposed of by this common order.

3. For the sake of convenience, facts set out in Appeal no. 368 of

2014 to the extent relevant are set out herein below:-

a) PACL is a real estate company duly registered under

the Companies Act, 1956 and is engaged in the

business of sale and purchase of agricultural land and

its development as per the scheme floated by PACL

from time to time.

b) Section 12(1B) inserted to the SEBI Act with effect

from 25.01.1995 provides that no person shall

sponsor or carry on a CIS unless that person obtains

a certificate of registration from SEBI in accordance

with the Regulations framed by SEBI. Accordingly,

the Central Government issued statutory directions 5

under Section 16 of the SEBI Act directing SEBI to

formulate draft Regulations for "Collective

Investment Scheme". On the basis of the said

directions SEBI issued various press releases

prohibiting companies from sponsoring or causing to

be sponsored any new CIS till the Regulations were

framed and notified by SEBI.

c) In the year 1998, a Public Interest Litigation ("PIL"

for short) was filed before the Delhi High Court

(CWP No. 3352 of 1998) wherein it was alleged that

various companies including PACL were carrying on

CIS without obtaining certificate of registration from

SEBI.

d) By its order dated 07.10.1998 the Delhi High Court

directed all the companies named in the PIL to get

themselves Credit Rated from the Credit Rating

Agency approved by SEBI and pending further

orders all those companies and their directors were

restrained from alienating or parting possession of

their immovable properties.

e) On 08.12.1998 PACL moved an application before

the Delhi High Court seeking deletion of its name

from the list of the respondents in the PIL on the 6

ground that the business carried on by PACL did not

fall within the scope of CIS.

f) On 15. 10. 1999 the Securities and Exchange Board

of India (Collective Investment Schemes)

Regulations, 1999 ('CIS Regulations' for short) were

framed and notified by SEBI. Thereafter by its

communications/ orders dated 30.11.1999 and

10.12.1999 SEBI informed that the schemes floated

by PACL were covered under CIS Regulations and

called upon PACL to comply with and abide by the

CIS Regulations, failing which consequential

directions would be issued under Section 11B of

SEBI Act and Regulation 65 of CIS Regulations.

g) By its reply dated 13.12.1999, PACL submitted that

the activities carried on by it were not covered under

CIS and hence, PACL was not required to comply

with the CIS Regulations. Apart from filing the

aforesaid reply, PACL filed a Writ Petition before

the Rajasthan High Court seeking an order directing

SEBI to withdraw the notices dated 30.11.1999 and

dated 10.12.1999.

h) By an order dated 21.12.1999 Rajasthan High Court

stayed the operation of the two notices dated

30.11.1999 and dated 10.12.1999. Thereafter, by its 7

final order dated 28.11.2003 the Rajasthan High

Court held that none of the conditions set out under

Section 11AA(2) were satisfied in the present case

and accordingly quashed both the notices dated

30.11.1999 and 10.12.1999 issued by SEBI.

i) In the meantime, Delhi High Court passed an order

on 16.11.2000 in the PIL filed before it whereby

Justice K. Swami Durai (Retd.) was appointed to

physically verify the genuineness of 14150 sale

transactions entered into by PACL with various

customers and also to supervise the registration of

sale deeds executed in respect of those transactions.

j) On 20.09.2002 Justice K. Swami Durai (Retd.)

submitted his final report inter alia recording that the

land which PACL proposed to transfer to its

customers were in existence and PACL was in

possession of the said lands in question either as

direct owner or owner by virtue of agreement for sale

in their favour by the erstwhile owners or pursuant to

the Power of Attorney executed in favour of the

representative of PACL by the erstwhile owner and

paying full amount of consideration to the erstwhile

owner. It was also recorded in the said report that the

development work on the lands in question was 8

found to be carried out by PACL and in some cases

the development was complete and the customers

had taken possession of the plots of land and

constructed cottages and were carrying on their

development work in addition to the development

work being carried out by PACL.

k) In view of the aforesaid report submitted by Justice

K. Swami Durai (Retd.) to the effect that the 14150

lac transactions entered into by PACL with its

customers were genuine and in view of there being

no objection from SEBI to the said report, Delhi

High Court by its order dated 03.03.2003 deleted the

name of PACL from the list of the respondents in the

PIL and further directed that all future sale deeds be

executed and registered by PACL in favour of its

customers under the supervision of Justice K. Swami

Durai (Retd).

l) Challenging the decision of the Rajasthan High Court

dated 28.11.2003, wherein it was held that the sale

and purchase transactions carried on by PACL are

not covered under CIS, SEBI filed Civil Appeal

before the Apex Court. By its order dated

26.02.2013, Apex Court set aside the decision of the

Rajasthan High Court and directed that the notices 9

dated 30.11.1999 and 10.12.1999 be treated as show

cause notices and permitted SEBI to issue

supplementary show cause notice to PACL and its

directors within the time stipulated therein and pass

fresh orders in relation to the question as to whether

the business activity carried on by PACL falls within

the category of CIS or not and depending upon that,

SEBI may proceed further in accordance with law.

Apex Court further directed that before taking any

future action SEBI shall give prior notice to PACL.

m) Accordingly, SEBI conducted further investigation

and issued a supplementary show cause notice on

14.06.2013 to PACL and its directors/former

directors, calling upon them to show cause as to why

the schemes of PACL should not be declared as CIS

and if found to be CIS why appropriate action

including direction under Section 11 and 11B of the

SEBI Act read with Regulation 65 of the CIS

Regulations should not be issued against them for not

complying with the provisions contained under the

CIS Regulations. It is not in dispute that the delay in

issuing the supplementary show cause notice has

been condoned by the Apex Court by its order dated

27.09.2013.

10

n) PACL as also the promoters and directors of PACL

denied the allegations made against them in the show

cause notices. After hearing PACL and its promoters

and directors SEBI passed the impugned order on

22.08.2014 holding that the schemes run by PACL

constitute CIS and as a natural consequence directed

PACL/its directors and promoters to wind up the

existing CIS and refund the monies which have been

collected from the customers in violation of SEBI

Act and the CIS Regulations, with promised return

within a period of three months from the date of the

said order. Challenging the aforesaid order all these

appeals are filed.

4. Mr. Dwarkadas, learned Senior Advocate appearing on behalf of

PACL argued by his oral and written submissions as follows:-

a) Finding recorded in the impugned order that the

appellant is running a CIS is factually incorrect.

Assuming while denying that the appellant is running

a CIS, WTM committed an error in holding that

PACL must be wound up as a 'natural consequence'

without offering second hearing after arriving at a

conclusion that PACL is running a CIS.

11

b) The conclusion that PACL is running a CIS is

primarily based on a reading of the judgement of the

Apex Court in PGF Limited vs SEBI reported in AIR

2013 S.C. 3702. That decision is wholly

distinguishable on facts, because, monies received by

PACL were utilized towards purchase of distinct plot

of land, each of which was identifiable vis-à-vis a

particular investor as noticed in the report of Justice

K. Swami Durai. There is no finding that the funds

received by PACL have been misused. To imply that

there is any irregularity in the conduct of its business,

without any evidence in that regard is baseless.

Monies were not collected from the investors with an

intention of pooling of funds is established from the

report of Justice K. Swami Durai and the finding

recorded by WTM that PACL possess large land

bank.

c) Inference drawn by SEBI that by pooling of funds

PACL is running a CIS is based on some contractual

documentation executed between PACL and some of

its customers. Assuming that actual purchase of land

was made by PACL some years after the monies

were collected from the investors cannot by itself

demonstrate any pooling of funds. In order to

demonstrate pooling of funds, it is incumbent on 12

SEBI to show that once monies are invested with

PACL, they completely lose their identity. In case of

PACL, each investor is allotted an identifiable piece

of land, albeit subject to certain contractual caveats at

a date subsequent to when the amount was paid. It is

not the case of SEBI that even in a single case, the

land allotted to the investor does not actually exist.

Therefore, fact that the land is allotted subsequent to

payment cannot be a ground to infer that the funds

are pooled.

d) Fact that insignificantly small number of sale deeds

have been executed and verified by Justice K. Swami

Durai cannot be a ground to infer that the business of

PACL was essentially providing fixed return on

investments. PACL is not providing any return to its

customer and at best it facilitates the sale of land

allotted to the customers if they wish to sell their

land before getting the actual sale deed executed.

Moreover, the land being sold are barren agricultural

lands, PACL knows how and to what extent the land

shall be developed and based on its expertise in the

field, is able to advise an estimated realizable value.

The number of sale deeds executed cannot be of

much consequence, because, what was being tested

was the business model of PACL. As long as PACL 13

was giving its customers option to get sale deeds

executed and come into possession of their land, the

fact that a significantly large number of customers

chose not to do so and instead chose to sell their land

and receive the monies, will not take anything away

from the real nature of the transaction i.e. the real

estate transaction.

e) Argument of SEBI that PACL instead of holding

land in its name holds land in the names of related

companies and that makes the availability of land for

actual transfer to the investor seriously suspect has

no basis, because, SEBI has not been able to point

out a single investor grievance or complaint as

regards the actual transfer of land when demanded.

In fact in several cases, as verified by Justice K.

Swami Durai, land was actually transferred to the

investor, pursuant to duly registered sale deeds. In

the absence of any specific case, where the related

entities have refused to make the land held by them

available for allotment/transfer to the investor, SEBI

is not justified in contending that the availability of

land for transfer is suspect. Since the business model

involved purchase of mostly barren land and its

proper treatment/development so as to make it arable

and capable of beneficial use, PACL collected 14

money for purchase of land and also towards

servicing the land.

f) Value of the land held by PACL as on date would be

far more as compared to the value reflected in the

books i.e. prior to the development/servicing the

land. In the absence of ascertaining the market value

of the land, WTM is not justified in concluding that

there is disparity between the value of the available

land and money collected from the customers. PACL

is unable to provide full disclosure of all its available

assets because relevant documents are in the custody

of CBI.

g) Assuming that the business run by PACL constitutes

CIS, WTM is no justified in passing the

consequential directions specified in para 38 of the

impugned order by ignoring the specific directions

given by the Apex Court in its order dated

26.02.2013. When an issue is remitted/remanded for

determination to a lower court with certain specific

directions from the superior court, it is the bounden

duty of such lower court to follow the directions of

the superior court with specificity and in entirety. In

support of the above contention reliance is placed on

the decision of the Apex Court in the case of Tirupati 15

Balaji Developers (P) Ltd. Vs State of Bihar reported

in (2004) 5 SCC 1.

h) By its order dated 26.02.2013 Apex Court gave

directions to SEBI as follows:-

(i) pass fresh order as to whether the business

activity of PACL falls under the category or

CIS or not;

ii) depending on that order proceed further in

accordance with law and;

iii) before taking any further action, give fresh

notice to PACL.

Since fresh notice is not issued after declaring that PACL is

running a CIS, impugned order is in direct violation of the

Apex Court directions.

i) Supplementary show cause notice issued on June 14,

2013 to the effect that 'appropriate action including

direction under Section 11 and 11B of SEBI Act read

with regulation 65 of the CIS Regulations' would be

taken in the event that the schemes of PACL were

found to be CIS, cannot be said to be in full

compliance with the directions given by the Apex

Court, because, fresh notice was required to be given

only after decision was taken on merits that PACL

was running a CIS. Prior to the passing of the 16

impugned order it was brought to the notice of WTM

that two tier procedure has to be followed, however,

the WTM failed and neglected to follow the two tier

procedure prescribed by the Apex Court. If there was

any doubt regarding the two stage hearing prescribed

by the Apex Court, SEBI ought to have sought

clarification from the Apex Court.

j) By disobeying the directions of the Apex Court and

fusing what was otherwise contemplated as two

separate hearing, the WTM has effectively taken

away the right of the appellant to file an appeal and

thus the impugned order is in violation of the

principles of the natural justice. Relying on a

decision of the Apex Court in case of Institute of

Chartered Accountants of India vs L. K. Ratna

reported in (1986) 4 SCC 537 it is submitted that

failure to comply with natural justice in the trial body

cannot be cured by a sufficiency of natural justice in

an appellate body. Above view of Apex Court is

based on the observation of Megarry J in leary vs

National Union of Vehicle Builders reported in

(1971) Ch 34, 49, and the said view holds good till

date. In case of Union Carbide Corporation vs Union

of India reported in (1991) 4 SCC 584 the Apex

Court while accepting the ratio of Leary's case has 17

held that the general rule in Leary's case will not

apply to the area of domestic jurisdiction or private

contractual matters but will clearly apply to a public

law situation. The present case, being a matter

between a citizen and the state, clearly falls within

the public law doctrine and therefore failure on part

of WTM to follow the principles of natural justice in

giving two stage hearing cannot be cured by hearing

the appellants before this Tribunal.

k) Impugned order passed by disregarding the

directions given by the Apex Court has severally

prejudiced PACL as its right to register as CIS is

taken away. PACL commenced its activities in the

year 1995. By orders dated 30.11.1999 and

10.12.1999 SEBI deemed the business of PACL as

CIS which was stayed by Rajasthan High Court on

21.12.1999 and finally set aside on 28.11.2003. After

the decision of Rajasthan High Court was set aside

by the Apex Court on 26.02.2013, by the impugned

order it is held for the first time on 22.08.2014 that

the business carried on by PACL constitutes CIS and

therefore it was imperative to provide an opportunity

to comply with the provisions of law regulating the

activities of CIS. Pertinently, CIS in not a prohibited

activity, but a regulated activity. It is not per se 18

illegal and the public policy does not require that all

CIS activity should be stopped. Therefore, without

giving an opportunity to register, WTM could not

have as a 'natural consequence' directed to wind up

the CIS carried on by PACL. By taking away

PACL's right to seek registration under CIS

Regulations and by virtually directing PACL to shut

down its business, the fundamental right of PACL to

carry on business guaranteed under Article 19(1)(g)

of the Constitution of India is infringed.

l) It is not in dispute that on registration PACL could

carry on CIS business legally. Since the business of

PACL commenced in 1995 and continued to be

carried on legitimately from 1999 onwards pursuant

to the orders passed by the Delhi High Court,

Rajasthan High Court and thereafter by the Apex

Court till the date of the impugned order, the WTM,

after holding on 22.08.2014 that PACL is running a

CIS, was duty bound to afford an opportunity to

PACL to register its business and conduct CIS

activity as per the provisions of law. During the

course of hearing before this Tribunal, PACL had

made without prejudice offer to seek registration

under CIS Regulations, however, the same was

turned down by SEBI on the ground that it is too late 19

in the day to do so. Although SEBI had right to reject

application for registration, such rejection could be

only after affording a hearing as mandated under

Regulation 12 of the CIS Regulations. Therefore,

ordering winding up of legitimate business carried on

by PACL since 1999, without giving an opportunity

to comply with the requirements of registration under

the CIS Regulations is nothing but malafide exercise

of power.

m) There is no dispute that PACL is legally entitled to

challenge the impugned decision of SEBI before this

Tribunal and if aggrieved by the decision of this

Tribunal to challenge the same before the Apex

Court and till the issue of CIS is finally determined

by this Tribunal and thereafter the Apex Court, the

business of PACL could not be directed to be wound

up.

n) In partial compliance of the impugned order, PACL

has halted the launch of any new schemes and halted

collection of any further amounts from the

subscribers to the already launched schemes as

recorded in the affidavit dated 09.03.2015 filed by

PACL before this Tribunal. This is done specifically

to ensure that in the event that the SEBI order is 20

ultimately upheld by the Apex Court and PACL is

conclusively held to be a CIS, the order of SEBI can

be implemented with effect from the date on which it

was passed. However, ordering winding up without

giving an opportunity to agitate the issue as to

whether or not the business of PACL constitutes CIS

and further without giving a separate hearing to the

appellants as regards the consequences of such

determination amounts to clear violation i) of the

procedure established in the CIS Regulations ii) of

the order of Supreme Court dated 26.02.2013 iii) of

the principles of natural justice.

o) Argument of SEBI that Chapter IX of the CIS

Regulations is applicable only to the CIS existing on

the date on which CIS Regulations came into force

and would not apply to CIS launched after the CIS

Regulations came into force is contrary to the

decision of this Tribunal in the case of Alchemist

Infra Realty Ltd. Vs SEBI (Appeal No. 124 of 2013

decided on 23.07.2013). Argument of SEBI that the

aforesaid decision of this Tribunal in Alchemist is

'per incuriam' on account of it being contrary to

regulation 68 of the CIS Regulations, is in correct,

because the said decision is based on a holistic

reading of the complete scheme of the regulations. A 21

holistic reading of the regulations would necessarily

involve considering regulations 9,10 and 12 etc.

Regulation 12 specifically provides for an

opportunity of hearing even if registration is to be

refused.

p) Argument of SEBI that PACL has been operating

CIS prior to 1999 and continued to operate those CIS

even after 1999 without availing the opportunity of

registration under CIS Regulations and thereafter,

launched new schemes without registering under CIS

Regulations is without any merit because i) PACL

has always contended that it is not a CIS ii) that stand

of PACL was upheld by Rajasthan High Court which

quashed the two orders issued by SEBI in 1999 iii)

SEBI attempted on two occasions to obtain stay of

the business of PACL which was refused by the Apex

Court on both occasions iv) Apex Court directed

SEBI to issue supplementary show cause notice and

thereafter consider as to whether the activities of

PACL were CIS; v) even while so remitting the

matter to SEBI, the Apex Court permitted PACL to

carry on its activities. Thus, for the first time by the

impugned order it is held by SEBI that PACL is

running a CIS and therefore, occasion for PACL to 22

seek registration arose only after the impugned order

subject to right of appeal before this Tribunal.

q) Fact that the two orders dated 30.11.1999 and

10.12.1999 which were quashed by the Rajasthan

High Court are liable to be treated as show cause

notices pursuant to the order of the Apex Court

would not mean that the decision of SEBI contained

in the orders dated 30.11.1999 and 10.12.1999 that

PACL is running CIS, stand revived. In fact, the

Apex Court remanded the matter by specifically

directing that the issue of CIS should be decided first

and thereafter further step be taken after issuing fresh

notice. Thus, it is only on 22.08.2014 when the

impugned order came to be passed that PACL was

running a CIS, the question of seeking registration

arose. Since, PACL was functioning legitimately

(having been declared not to be a CIS) as per the

order of the Rajasthan High Court, right up to 2013

and further there being no determination against

PACL that the business carried on by it was CIS till

the date of impugned order, argument of SEBI that

the right to register under CIS Regulations is no

longer available on account of the fact that PACL did

not avail that opportunity is wholly without merit. 23

r) Right to carry on business is a fundamental right and

to deprive that right on account of not having

registered as a CIS since 1999 would be wholly

unjustified, especially when the finding that the

business carried on by PACL was CIS is rendered for

the first time by the impugned order. During the

pendency of the appeal, assuming PACL were to

apply for registration, then, it would be highly

discriminatory and arbitrary on part of SEBI to reject

such application for registration as it would amount

to adopting a pick and chose policy based on whims

and fancies of SEBI, thus violating Article 14 of the

Constitution of India.

s) SEBI is labouring under an impression that PACL

has been defying law since 1999, which is totally

incorrect, because, the finding that PACL running

CIS has been decided by the impugned order which is

challenged in the present appeal. Since PACL has

been carrying on business in a bonafide and

legitimate manner duly permitted by orders of

Rajasthan and Delhi High Courts. Right to seek

registration in respect of CIS existing before the CIS

Regulations came into force being an inherent right,

SEBI is not justified in abrogating that right by the

impugned order.

24

t) Argument of SEBI that regulation 65 of the CIS

Regulations is a supervening power and overrides

Chapter IX is without any merit. Regulation 68 of the

CIS Regulations contains a deeming fiction. That

deeming fiction created by statute must be taken to its

logical end without allowing the imagination to

boggle. To give full effect to that legal fiction, viz

PACL is an existing CIS, all rights flowing from the

CIS Regulations for existing CIS's must be observed.

There has to be a determination as to whether or not

PACL is entitled to register itself as a CIS, as

provided in regulation 68 to 72 of the CIS

Regulations, which is an obvious and necessary

precursor, to determining eligibility of PACL to

register itself as a CIS. Winding up under the

circumstances set out under regulation 73 is subject

to following the procedure prescribed under

regulation 73(2) to 73(8). Since the WTM has

overlooked the above procedure, impugned order is

liable to be quashed and set aside. By disregarding

the procedure prescribed under Chapter IX, prejudice

is caused not only to PACL but also to the investors

whose rights to decide for themselves has been

arbitrarily taken away. It is trite law that if a stature

provides for a thing to be done in a particular manner, 25

then, it has to be done in that manner and in no other

manner. In this connection reliance is placed on a

decision of the Apex Court in case of J. Jayalalithaa

vs State of Karnataka reported in (2004) 2 SCC 401.

u) Argument of SEBI that the power to wind up the CIS

dehors Chapter IX of CIS Regulations exist in

regulations 65 and Section 11B of SEBI Act is

untenable for two reasons. First, that is not the

finding recorded in the impugned order. In the

impugned order winding up is directed as a 'natural

consequence' to the finding that PACL is running a

CIS. Second reason is that if the contention of SEBI

is accepted, it would have the effect of rending entire

Chapter IX nugatory. It is a cardinal principle of

interpretation that a statute has to be read in a manner

that meaning could be given to all provisions and no

provision is rendered otiose. In support of the above

contention reliance is placed on Apex Court decision

in case of Borosil Glass Work Ltd. Employees Union

vs D. D. Bambode and Ors. Reported in (2001) 1

SCC 350.

v) Argument of SEBI that the order of the Apex Court

must be assumed to have been delivered consistent

with the provisions of law and therefore, it cannot be 26

contemplated that the powers of SEBI under

regulation 65 and Section 11B remain unfettered by

the decision the decision of the Apex Court, is

without any merit, because, specific directions given

by the Apex Court negate the above contentions

raised by SEBI. The question of fact as to whether

PACL is CIS or not is effectively decided for the first

time by the impugned order, which gives PACL right

to accept the order and seek registration or to

challenge the decision that PACL is running CIS.

Regulation 9, 9A, 10,11,12,68 and 70 of CIS

Regulations set out separate and independent

procedure where a party seeks to apply for

registration. If PACL had refused to register or the

application of PACL was rejected then winding up

under regulation 73 could be ordered by following

the mandatory procedure set out therein. Therefore,

argument of SEBI that regulation 65 is a supervening

power is incorrect.

w) Right of PACL to contend that it is not a CIS cannot

be confiscated in the manner suggested by SEBI. If

this Tribunal or ultimately the Apex Court holds that

PACL is not running a CIS, then implementing the

order of SEBI before such order being passed by this

Tribunal or Apex Court would directly affect the 27

fundamental right guaranteed by the Constitution to

PACL to carry on its business. PACL is entitled to

equal protection of law and in this case the law laid

down in the CIS Regulations provides for an

opportunity of registration and that opportunity is

taken away arbitrarily in violation of Article 14 of the

Constitution.

x) Having rejected the without prejudice proposal

submitted by PACL on 11.08.2014 by offering to

repay the money to the eligible customers, the WTM

could not have relied upon the said without prejudice

proposal to support the conclusion arrived at namely,

that the 'natural consequence' of the activities of the

appellant being found to be a CIS "...was to

immediately prevent the entity from continuing with

such activity and to direct the entity to refund monies

collected...". Since the proposal dated 11.08.2014

was made without prejudice to all rights and

contentions of PACL, the proposal and admissions

made therein cannot be the basis to deprive or take

away the right of PACL to register under the CIS

Regulations, assuming such a right exists.

y) Section 23 of the Evidence Act 1872 specifically

provides that admissions will not be relevant where 28

they are given with an express condition that such

admissions will not be given in evidence.

Consequently, the proposal submitted by PACL

being explicitly 'without prejudice', the admission

contained therein could not be relied upon in the

impugned order. In support of the above contention

reliance is placed on a decision of the Calcutta High

Court in case of Ajit Kumr Bose vs Snehalata Biswas

reported in (1968) ILR 1 Cal 127.

z) Apart from the above, it would be wholly iniquitous

to deprive PACL of its right under the CIS

Regulations to register as a pre-existing CIS, only on

account of the admissions contained in the without

prejudice proposal. An admission must be accepted

as a whole or not at all. In the present case, since the

proposal was categorically rejected, it was

impermissible in law to rely on the admissions made

in the said without prejudice proposal. In support of

the above contention reliance is placed on a decision

of the Apex Court in case of Haji C.H. Mohammad

Koya vs T.K.S.M.A. Mathukoya reported in (1979) 2

SCC 8.

aa) Assuming that the without prejudice proposal is

liable to be treated as deemed proposal under 29

regulation 74, even then the procedure prescribed

under regulation 73 cannot be given a go by as would

appear from a plain reading of regulation 74.

Accordingly, counsel for PACL submitted that the impugned order

being wholly unsustainable in law, deserves to be quashed and set aside

by allowing the appeal.

5. Mr. Nayar learned Senior Advocate appearing on behalf of some

of the appellants argued by his oral/written submissions as follows:-

a) The impugned judgment and order is passed in

violation of the procedure prescribed by the Hon'ble

Supreme Court of India in its order dated 26.02.2013

and hence fit to be set aside on this count only. Para

4 & 8 of the Apex Court order leave no manner of

doubt that SEBI was required to follow a two stage

procedure, first stage being determination of the

question as to whether the business of PACL is

covered under CIS and Second stage was to depend

on the outcome of the first stage i.e. if PACL was

running a CIS then to issue fresh notice and take

fresh proceedings to determine the consequential

action to be taken. Instead of following the two stage

procedure prescribed by the Apex Court, the WTM

has held that PACL is running a CIS without

obtaining registration under CIS Regulations and as a 30

natural consequence ordered winding up which is

directly in violation of the Apex Court order. Since,

specific procedure prescribed by the Apex Court is

not followed, the impugned order is liable to be set

aside in its entirety and require the WTM to decide

afresh both the issues independently.

b) There is no provision for determination by SEBI as

to whether an entity is running a CIS or not.

Therefore, the Apex Court devised the two stage

procedure. In terms of the Apex Court order the

WTM was bound to follow both the procedures.

Since the WTM failed to follow the second

procedure, impugned order is bad in law.

c) Neither the SEBI Act nor the CIS Regulations

postulate that running CIS is ipso facto illegal. The

only requirement under those provisions is that it

must be registered with SEBI. Therefore, even if it is

held that PACL is running a CIS, the procedure

prescribed under Chapter IX of the CIS Regulations

ought to have been followed by involving PACL and

its investors. Failure on part of WTM to follow the

second stage procedure is therefore contrary to the

dictum laid down by the Apex Court as also the

provisions contained in Chapter IX of the CIS 31

Regulations. Once the Apex Court has prescribed a

procedure for doing a thing in a particular manner

then, it has to be done in that matter alone and it is

not open to SEBI to follow one part and ignore the

other part.

d) SEBI is not justified in contending that PACL has

raised the plea of two stage procedure belatedly,

because, there was no occasion for the appellants to

presume that the WTM would not follow the two

stage procedure prescribed by the Apex Court. It is

only when it became apparent that the WTM may

bypass the special procedure, the WTM was

reminded of his obligation to follow the two stage

procedure. However, WTM failed to follow the two

stage procedure in defiance of the Apex court order.

e) Argument of SEBI that by not following the two

stage procedure, principles of natural justice have not

been violated is untenable, because, by not following

the two stage procedure, PACL is deprived of the

opportunity to seek registration under the CIS

Regulations. In fact the failure to follow the two

stage procedure has prejudiced not only PACL but

also its investors.

32

f) The business activities of PACL are akin to that of

real estate construction companies, which purchase

land, make their plans for constructing flats, sell

those "planned to be constructed" flats to customers

and thereafter construct the flats. At the beginning of

the transaction, customers of these companies are

issued allotment letters and only when construction is

complete, the customers have the option of getting

sale deeds executed in their favour or they have the

option of selling the flats, which is merely allotted to

them, at any prior stage. Moreover, at the time when

the customer books a flat and is allotted the same,

there is just barren land and no flats but allotment

letters are still issued and over a period of time, flats

are constructed. The business activities of PACL are

identical to the aforesaid description and if it is held

that PACL is running a CIS then every real estate

company constructing flats would have to be held to

be running a CIS, which can certainly not be the

case.

g) The business activities of PACL do not satisfy the

conditions prescribed under Section 11AA (2) of the

SEBI Act, because, PACL admittedly has a huge

land bank and therefore it is not as if the payment

made by the investors is pooled for the purpose of 33

the scheme. There is no question of making payment

under the scheme to receive profit from the scheme

as the transaction is simpliciter that of sale and

purchase of land and it is just that the payment of

consideration by the customer is planned as per his

needs. There is no scheme or arrangement as such

but a straight forward real estate transaction with the

various plans only being with respect to the mode of

payment of the consideration amount. If the meaning

which is being sought to be given by SEBI to Section

11AA(2)(ii) of the Act is to be accepted then every

transaction of sale and purchase of property would

amount to a CIS.

h) Once the transaction is complete and the sale deed is

executed, PACL does not manage the property and it

is the customer who is in charge. The example of a

transaction of sale and purchase of a flat would again

be relevant in this context as the builder constructs

the flats and retains it in his possession till all

payments are made by the customer and thereafter,

the flat is transferred to the customer, and the

customer comes in control and is free to manage the

flat. Similar is the case with PACL. However, if the

meaning which is being sought to be given by SEBI

to Section 11AA(2) (iii) of the Act is to be accepted 34

then every transaction of sale and purchase of

property would amount to a CIS. Similarly, Section

11AA(2)(iv) is clearly not attracted as once the land

is sold, the investors have full day to day control over

the land, which they have purchased. This fact is

clearly proved by the report of Justice K. Swami

Durai. Since the requirements of Section 11AA(2) of

the SEBI Act are not met in the case of PACL, it

could not have been held that PACL has been

running a CIS.

i) The fact that PACL has not been running a CIS is

clearly demonstrated by the reports submitted by

Justice K. Swami Durai. A perusal of the said final

report (pgs 122-132 of the appeal paperbook)

indicates that all the objections of SEBI were found

to be "unfounded and untenable". Justice K. Swami

Durai visited the lands being sold by PACL to its

customers and found that levelling and fencing had

been done and irrigation facilities laid out. He also

found that some customers of PACL, who were in

possession of their agricultural land, had stationed

their own manpower and were developing their land

and even cottages etc. had been constructed. The

conclusions of Justice K. Swami Durai in his final

report at para 13, leave no manner of doubt that the 35

transactions being carried out by PACL were real

estate transactions. Relying on this report, to which

SEBI had no objection, the Hon'ble Delhi High

Court, by its order dated 03.03.2003 (pg 133-134 of

appeal paperbook) discharged the notice against

PACL.

j) It has been admitted in no uncertain terms by SEBI

that it is not challenging the correctness of Justice K.

Swami Durai reports. If that is the case and the said

reports clearly establish that activities of PACL are

indeed genuine real estate transactions, then the

WTM could not have held that PACL was running a

CIS. If the findings recorded in Justice K. Swami

Durai reports establish on a question of fact, that the

transactions of PACL were indeed real estate

transactions, then whatever was the scope of enquiry

entrusted to him, does not make any difference. If

findings are recorded on questions of fact, and these

findings are not disputed, and these findings of fact

lead to certain inferences/conclusions, then such

inferences cannot be ignored only because it was not

the scope of the enquiry to make such conclusions.

k) It has been argued on behalf of SEBI that even if

Justice K. Swami Durai report were to be accepted, it 36

certifies the genuineness of only 0.03% of the cases

and in the balance 99.97% cases, sale deeds have not

been executed and therefore report of Justice K.

Swami Durai does not held PACL. What the report

shows is that PACL was the owner and in possession

of land, it was executing sale deeds in favour of its

customers after developing the agricultural lands and

the customers were coming into physical possession

of their lands and doing whatever they wanted, be it

constructing cottages, planting trees etc. This report

therefore proves the bonafides of the business model

of PACL. What percentage of customers actually

chose to get sale deeds executed or what percentage

chose to opt out and sell the land before getting sale

deeds executed is something which is not within the

control of the company and is immaterial. As long as

the customers of PACL have the option of getting

sale deeds and coming into possession and they

actually exercise this option and either get sale deeds

executed in their favour or choose to opt out, no fault

can be found with the business model of PACL per

se. It is a real estate transaction simpliciter and

cannot be held to be a CIS.

l) Much has been said by contending that the land

being sold is indeterminate and can be changed by 37

PACL at any stage and therefore this is not a genuine

real estate transaction. It is submitted that from the

documents produced and relied by SEBI itself, which

indeed were supplied to it by PACL, it is apparent

that shortly after a customer approaches PACL, a

specific plot is allotted to him or her and this is the

plot, which is actually sold to that particular

customer. Although there may be a clause in the

agreement that PACL can change the location of the

plot, this has never been done and the customers

have been sold the plots, which they have allotted

and there is no material to show otherwise.

m) It has further been argued on behalf of SEBI that the

realizable value of plots is actually not the value of

plots but some return promised on the investment

made by the customer based on some formula. It is

submitted that argument is not correct because there

in no material to show that there was any

mathematical formula. Further, it is not as if some

flats or big tracts of land are being sold that the

location will make much of a difference to the value.

What is in issue are very small sized barren

agricultural plots mostly in rural areas. Moreover,

being in the real estate industry for a long time,

PACL has the necessary expertise to assess the value 38

of a plot or type of plots that can fetch after a given

period of time.

n) Without prejudice and in the alternative it is

submitted that even if it is found and held that PACL

is running a CIS even then, the natural consequence

of such a finding can never be to order winding up

and refund the monies of investors; and by doing so,

the WTM has acted in breach of the Regulations,

particularly Chapter IX thereof.

o) Running a CIS is ipso facto not illegal and only

registration is required. The only requirement, in law,

for running a CIS is registration with SEBI, and once

that is done, there is no bar on running a CIS. When

law provides that a CIS can seek registration and

continue its activities then such a right cannot be

taken away by the regulator. In the impugned

judgment and order, the WTM has categorically held

that natural consequence of his finding that PACL

was running a CIS, would be to direct it to stop its

activity and refund monies to is investors. When the

Regulations provide that any person can run a CIS

subject only to registration then even if the WTM

found that PACL was running a CIS, he had to give

the opportunity of registration to PACL. Even if 39

PACL was running a CIS, it could continue to do so,

as long as it sought and obtained registration with

SEBI. The impugned order is therefore completely in

breach of the regulations and therefore fit to be set

aside. A direction of winding up and refund of

monies can never be the natural consequence of a

finding that a person is running a CIS.

p) SEBI had also originally offered registration to

PACL by notices dated 30.11.1999 followed by

second notice dated 10.12.1999. It is therefore

apparent that at least in 1999, the understanding of

SEBI also was that running a CIS is not illegal per se

and even if PACL was running a CIS, it was only

required to register itself with SEBI. Now that the

Hon'ble Supreme Court, by a consent order dated

26.02.2013, has revived these two notices dated

30.11.1999 and 10.12.1999, and in these two notices

SEBI is requiring PACL to seek registration, SEBI

cannot be allowed to say that PACL cannot now seek

registration. The moment the Hon'ble Supreme Court

revived the two notices and directed SEBI to proceed

in terms thereof, the offer of registration given in the

said two notices also got revived and SEBI cannot be

permitted to back away. SEBI cannot be allowed to

say that it would adjudicate on the two notices but 40

would not provide PACL the opportunity specifically

provided in the two notices.

q) If at all SEBI was of the view that although the two

notices had been revived but the opportunity of

registration could still not be provided to PACL,

despite the regulations and despite the order dated

26.02.2013, nothing prevented SEBI from seeking a

clarification from the Hon'ble Supreme Court.

Failure to do so and its subsequent conduct, indicates

that SEBI had decided that it cared two hoots about

the orders of the Hon'ble Supreme Court. The

cavalier attitude of SEBI, in this regard can also be

gauged from the supplementary show cause notice it

sent to PACL on 14.06.2013 wherein there is no

mention of registration or any advise to seek

registration. Therefore, it can be safely inferred that

SEBI had decided at that stage itself that it would not

afford the opportunity of registration to PACL, the

orders of the Hon'ble Supreme Court or the

provisions of the regulations notwithstanding. The

entire exercise undertaken by the WTM was

therefore nothing more than a sham because SEBI

had pre judged the issue.

41

r) PACL cannot be faulted for trusting that the

regulator would act in terms of its own notices and

not resile, particularly when it had been directed to

do so by the Hon'ble Supreme Court. PACL could

not have sought registration earlier because, on

issuance of two notices/orders dated 30.11.1999 and

10.10.1999 which were stayed and ultimately set

aside by the Rajasthan High Court. Till the Rajasthan

High Court decision was set aside by the Apex Court

on 26.02.2013 there was no occasion for PACL to

seek registration as CIS. After the decision of the

Apex Court, PACL could seek registration as CIS

only when SEBI declared that PACL was running a

CIS. Since, the WTM has failed to give an

opportunity to register as CIS the impugned order is

bad in law.

s) Argument of SEBI that PACL had two windows of

opportunity under the regulations, once under

regulation 5 in the year 1999 and the second time in

2014 under regulation 74A and since PACL did not

avail this opportunity, it has missed the bus is

without any merit. When there was a positive

declaration that PACL is not running a CIS, then

PACL was not expected to seek registration. Since

the proceedings were pending before the WTM, 42

SEBI could very easily have conveyed to PACL that

it had a two month opportunity for registration.

However, the WTM merrily proceeded without even

a whisper in this regard.

t) Regulations 68 to 72 provide for an existing CIS to

seek registration and provide the procedure for

making such application. Once the WTM held that

PACL was running a CIS, the next step, as per the

regulations, would have been for PACL to seek

registration under regulation 68 read with regulation

5. This opportunity has been denied to PACL by the

impugned judgment and order and therefore the same

is fit to be set aside.

u) Even if PACL failed to make an application for

registration or was denied registration by SEBI or

failed to comply with conditions of provisional

registration if granted, it had to be wound up in the

specific manner provided by regulation 73. In such a

case, regulation 73 provides for a detailed and

specific procedure which has to be followed. As is

evident, the entire procedure prescribed under

Chapter IX, particularly regulation 73 has been given

a complete go bye by the WTM in the impugned

judgment and order. Regulation 73 had been placed 43

in the statute book with a particular object and this

object was to create a situation where the investors

could make an informed decision as to what they

wanted to do with their investment, after all

information was provided by the CIS, under the

supervision of SEBI. The very object of the

regulations is being sought to be defeated by the

impugned directions, which are ex-facie in breach of

the regulations.

v) Argument of SEBI that the without prejudice

proposal sent by PACL would be deemed to be one

under regulation 74 also is of no avail because even

if that were the case, even then the procedure

prescribed by regulation 73 cannot be given a go by.

w) Argument of SEBI that powers under regulation 65

read with Section 11B of the Act override Chapter IX

and justify the impugned directions is completely

untenable. Regulation 65 is part of chapter dealing

with "Procedure in case of default". The invocation

of powers under this chapter presuppose the

existence of a default. In the present case, the

question of any default would arise only after PACL

is found to be a CIS. This determination takes place

only on 22.08.2014 and therefore any default can 44

take place only thereafter. However, by the same

order, power under regulation 65 is sought to be

invoked and the impugned directions are sought to be

justified on that basis. This is nothing but a fraud

being played by the regulator. After holding PACL to

be a CIS, it had to be given some opportunity,

particularly that provided under Chapter IX, and

without doing there could be no default and without

default there would be no invocation of regulation

65.

x) In any event, there is nothing in the regulations,

which indicates that regulation 65 would override the

provisions of Chapter IX. There is no quarrel with

the proposition that SEBI wields wide powers under

regulation 65 as also under Section 11B but that does

not mean that these powers can be used to frustrate

the other provisions of the regulations. An

interpretation whose effect is that one provision

completely abrogates another provision can never be

a correct interpretation.

y) Argument of SEBI that it has the power under

regulation 9(d) not to consider an application for

registration if the applicant is not a fit and proper

person for grant of registration and this was such a 45

case is fallacious, because to invoke this power, there

has to be first, an application by PACL seeking

registration; and secondly, a consideration by SEBI

of such application by PACL; and thirdly, an order

giving reasons for invoking such power. Admittedly,

none of above three grounds are available in the

present case and thus it can be safely said that there

was no invocation of regulation 9(d) by SEBI and

SEBI could not have invoked the said regulations.

z) Argument of SEBI that PACL is not disclosing its

assets despite directions by this Hon'ble Tribunal is

completely incorrect. In the affidavit filed before

this Tribunal on 07.03.2015 it was pointed out that

much prior to the impugned order being passed, CBI

had raided the corporate office of PACL as also the

store/godown where title deeds of lands purchased by

PACL and its associate companies were kept. CBI

simply took away everything in sight. After doing so,

CBI has been opening the huge tin boxes one by one

and thereafter issuing seizer memos. Whatever

seizure memos have been supplied by CBI so far,

have been sent by PACL to SEBI and as and when

the seizure memos are being provided, they are being

sent to SEBI. Since the CBI team took away

whatever was there, therefore PACL is handicapped 46

in providing the details of these assets on its own.

What this entire exercise however shows is that the

assets are substantial, that is why it is taking so long

to prepare even seizure memos and they are safe,

being in custody of the CBI.

Accordingly, Mr. Nayar submitted that the impugned order ought to be

quashed and set aside.

6. Mr. Subramaniam learned Senior Advocate appearing on behalf

of appellants in Appeal No. 95 of 2015 while adopting the argument of

the counsel for other appellants submitted orally and by written

submissions as follows:-

a) In the impugned order the Whole Time Member

("WTM") of SEBI has accepted the findings

recorded in the report of Justice K. Swami Durai

(Retd.) that the properties conveyed by PACL to its

customers were genuine and excluded those

properties from purview of the impugned order.

Once part of the properties belonging to PACL are

excluded from the purview of the impugned order it

cannot be said that all conditions set out under

Section 11AA (2)(i) to (iv) have been satisfied,

because, the statute does not contemplate that only

part of the contributions pooled for acquiring the

property be treated as CIS. In other words, if some of 47

the properties conveyed to the customers on the basis

of the contributions received from them are

excluded, then, the requirement of Section

11AA(2)(i) cannot be said to have been complied

with.

b) PACL holds large land bank and enters into

agreement with the customers for the development of

the plot of land only. The business model never

involved a practice of collecting money from the

customers and thereafter allocating land plots to the

customers from the pool of land. Once contributions

or payments received from the customers covered in

the report of Justice K. Swami Durai (Retd.) are

treated as separate and not part of the pool, it is

apparent that all contributions or payments have not

been pooled or utilized for the purposes of the

scheme. In such a case Section 11AA 2(i) & (ii)

would have no application at all because, the said

Section applies only if the contributions are pooled

as a whole and not in part.

c) Once the investments or property or contribution

covered by Justice K. Swami Durai (Retd.) report are

excluded, from the purview of CIS then it is apparent 48

that the ingredient of Section 11AA(2)(iii) are also

not complied with or available so as to hold that rest

of the investments or property or contribution are

covered by CIS.

d) Report of Justice K. Swami Durai (Retd.) clearly

shows that the customers have day to day control

over the management and operation of the scheme.

Since that report is accepted, it is apparent that the

requirement of Section 11AA (2)(iv) are not

complied and it could not be said that the scheme

floated by PACL constituted CIS.

e) WTM of SEBI is not justified in approbating and/or

reprobating by accepting the report of Justice K.

Swami Durai (Retd.) and excluding the contributions

or payments made by the customers from the

purview of the impugned order on the one hand and

holding that all the resources have been pooled, on

the other hand, a finding which is unsustainable and

impossible to arrive at.

f) Regulations 68 to 74 contained in Chapter IX of the

CIS Regulations envisage that where any

company/person believes that the scheme floated by

it does not fall within the mischief of Section 11AA,

then it is open to SEBI on consideration of material 49

facts to declare that the said scheme satisfies all the

provisions of Section 11AA (2)(i) to (iv) and

thereafter give an opportunity to obtain provisional

registration under regulation 68. Therefore, unless

there is a declaration that the scheme that is operated

is a CIS, neither regulation 68 nor regulation 70

would come into play.

g) Regulation 69 is inapplicable in the instant case, as

PACL has not launched any new CIS after the

declaration of the schemes of PACL as CIS.

h) Winding up of any existing CIS under regulation 73

arises only if there is failure to apply for registration

or if provisional registration is not granted or, having

obtained provisional registration has failed to comply

with the conditions set out in regulation 71. In the

impugned order, WTM of SEBI has ignored the

procedure prescribed under regulation 73.

i) In the impugned order PACL is denied an

opportunity to repay to the existing investors in

violation of regulation 74 read with regulation 73.

j) Failure to give an opportunity to PACL to register

under CIS Regulations is in contravention of the 50

Apex Court order and also renders the provisions of

regulation 74A otiose which is impermissible in law.

k) First show cause notice issued in the year 1999 was

not addressed to appellants in Appeal no. 95 of 2015.

Supplementary show cause notice issued to the

appellants contains insufficient averments and

therefore on the basis of supplementary show cause

notice penalty could not be imposed on appellants in

Appeal No. 95 of 2015 and hence the impugned

order is liable to be quashed and set aside.

7. Mr. Kamdar learned Advocate appearing on behalf of PACL

Customer Association (Misc. Application No. 88 of 2015 in Appeal No.

368 of 2014) while adopting the arguments advanced by counsel for

appellants tendered an affidavit filed by Mr. B.S. Rajawat on behalf of

the Association. In that affidavit it is stated that as on date the

Association represents more than 4.5 lac customers of PACL. It is stated

in the affidavit that the members of the Association are satisfied with the

activities of PACL qua its customers, because, PACL has been allotting

land to its customers faithfully. Customers have been investing in large

numbers emboldened by the fact that the High Court as well as the Apex

Court have permitted PACL to carry on its business activities. It is

further stated in the affidavit that even if the business carried on by

PACL is held to be CIS, the Association must be heard before deciding

the future course of action. If PACL does not seek registration or 51

registration is refused then the procedure prescribed under regulation 73

of the CIS regulations must be followed by forwarding the information

memorandum to the customers so that they can make an informed

decision as to what they would want to do with their money. It is further

stated in the affidavit that by that time the Association is confident that

more than 25% of the customers of PACL would want to continue with

the schemes.

8. Mr. Gaurav Pachnanda learned Senior Advocate appearing on

behalf of Mr. Balkaran Singh (applicant in Misc. Application No. 129 of

2015 in Appeal No. 368 of 2014) submitted that the applicant be

impleaded as party respondent in Appeal No. 368 of 2014 because

pursuant to a Memorandum of Understanding ('MOU' for short)

executed on 19th February 2015 by and between M/s. Pearl Group (i.e.

PACL Ltd. and its subsidiaries/ associate companies including its

directors Mr. Tarlochan Singh, Mr. Sukhdev Singh, Mr. Gurmeet Singh,

Mr. Subrata Bhattacharya and Mr. Gurjant Singh Gill and Mr. Balkaran

Singh, the said Mr. Balkaran Singh has been appointed as an Additional

Director on the Board of PACL with effect from 5th February 2015

along with one Mr. Anil Choudhary Legha as Additional Director.

Without allowing the application for impleadment, we permitted counsel

for Mr. Balkaran Singh to make submissions as intervener. Accordingly,

counsel for Mr. Balkaran Singh submitted that as per MOU dated 19 th

February 2015 Mr. Balkaran Singh was to hold 65% shareholding of

PACL and the remaining 35% shareholding of PACL was to be with the 52

Pearl Group. Counsel further submitted that Mr. Balkaran Singh will be

taking complete control of the management and the Board of Directors

of PACL and is at present actively participating in the day to day affairs

of PACL. He further submitted that steps are being taken to ensure that

funds for repayment to the eligible investors are made available and for

that purpose sought time. When asked as to how much time would be

required to arrange funds for repaying to customers counsel, for

Mr. Balkaran Singh had no answer.

9. Mr. Padhi, learned Advocate appearing on behalf of applicant in

Misc. Application No. 171 of 2015 in Appeal No. 368 of 2014 Vakola

Welfare Association (Regd.) adopted arguments advanced by counsel

for SEBI.

10. Mr. Khambata learned Senior Advocate appearing on behalf of

SEBI extensively argued in support of the impugned order and also gave

written submissions. Since we agree with most of the submissions,

instead of separately recording the said submissions, we propose to deal

with the said submissions at appropriate places in the subsequent

paragraphs of this Judgment.

11. We have carefully considered rival submissions.

12. First question that falls for consideration in these appeals is,

whether SEBI is justified in holding that the schemes floated by PACL

are CIS as contemplated under Section 11AA of the SEBI Act. 53

13. Before considering merits of rival contentions, we may quote

Section 11(1), 11(2)(c) as amended by Act 9 of 1995, Section 12(1B)

inserted by Act 9 of 1995 and 11AA (1) & (2) inserted to SEBI Act by

Act 31 of 1999 which read thus:-

11. Functions of Board

(1) Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by such measures as it thinks fit.

(2)Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide for-

(c) registering and regulating the working of venture capital funds and collective investment schemes, including mutual funds;

Section12(1B) (with effect from 25.01.1995)

Section 12 (1B)No person shall sponsor or cause to be sponsored or carry on or cause to be carried on any venture capital funds or collective investment scheme including mutual funds, unless he obtains a certificate of registration from the Board in accordance with the regulations:

Provided that any person sponsoring or causing to be sponsored, carrying or caused to be carried on any venture capital funds or collective investment scheme operating in the securities market immediately before the commencement of the Securities Laws (Amendment) Act, 1995 for which no certificate of registration was required prior to such commencement, may continue to operate till such time regulations are made under clause

(d) of sub-section (2) of Section 30." (emphasis supplied) 54 Section11AA(1)&(2)(with effect from 22.02.2000)

"Collective Investment Scheme

11AA. (1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) shall be a collective investment scheme.

(2) Any scheme or arrangement made or offered by any company under which,

(i) the contributions, or payments made by the investors, by whatever name called, are pooled and utilized for the purposes of the scheme or arrangement;

(ii) the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable, from such scheme or arrangement;

(iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors;

(iv) the investors do not have day-to-day control over the management and operation of the scheme or arrangement."

14. Prior to insertion of Section 11AA to the SEBI Act with effect

from 22.02.2000, the expression 'Collective Investment Scheme' was

defined under regulation 2(2) of the CIS Regulations which came into

force with effect from 15.10.1999. On insertion of Section 11AA,

regulation 2(2) of the CIS Regulations was substituted by providing that

the expression 'Collective Investment Scheme' under the CIS

Regulations shall have the same meaning assigned to it under Section

11AA of the SEBI Act.

55

15. Even before CIS Regulations were framed by SEBI, Section

12(1B) inserted with effect from 25.01.1995 barred any person to

sponsor or carry on CIS after 25.01.1995 unless that person obtains a

certificate of registration from SEBI. Proviso to Section 12(1B),

however, permitted a person operating CIS prior to 25.01.1995 to

continue with that CIS till such time regulations were made by SEBI.

SEBI framed and notified CIS Regulations with effect from 15.10.1999.

As per regulation 68 read with regulation 5 of CIS Regulations, a person

operating a CIS on 15.10.1999 was obliged to make an application in the

prescribed form seeking registration within a period of two months from

15.10.1999.

16. PACL incorporated on 13.02.1996 (i.e. after Section 12(1B)

came into force) launched its first scheme on 30.05.1996 without

obtaining registration from SEBI. Over the next 15 years PACL floated

67 schemes. Out of 67 schemes floated by PACL, schemes 1 to 9

commenced on 30.05.1996 were closed on 30.09.2002. Schemes 10 to

27 commenced on 30.05.1996 were closed on 15.12.1997. Remaining

schemes floated after 01.10.2002 had varying tenure, some of which

have already been closed.

17. Since some of the schemes floated by PACL were existing on

the date on which CIS Regulations came into force on 15.10.1999,

PACL was required to seek registration within two months of CIS

Regulations coming into force, only if the schemes were covered under 56

CIS. When SEBI by its communications dated 30.11.1999 and

10.12.1999 informed that the schemes floated by PACL were covered

under CIS and called upon PACL to comply with SEBI Act and CIS

Regulations, by seeking registration within the stipulated time in terms

of regulation 5 read with regulations 68 or wind up the schemes and

repay the amount collected from the customers as stipulated under

regulation 73/74 of the CIS Regulations, PACL contended that the

schemes floated by it were not covered under CIS and challenged the

communications of SEBI by filing Writ Petition before the Rajasthan

High Court. The Rajasthan High Court initially stayed the said

communications of SEBI dated 30.11.1999 and 10.12.1999 and

ultimately by its order dated 28.11.2003, quashed the aforesaid

communications of SEBI by holding that the schemes floated by PACL

were not covered under CIS. In the meantime in a PIL filed before the

Delhi High Court it was alleged that various companies including PACL

were running CIS without obtaining certificate of registration from

SEBI. On receiving report submitted by Justice Swami Durai (Retd.) to

the effect that 14150 sale deeds executed by PACL in favour of its

customers were genuine, the Delhi High Court dropped PACL from the

list of respondents in the PIL filed before it. Delhi High Court has not

considered the question as to whether the schemes floated by PACL

were CIS or not.

18. Apex Court by its order dated 26.02.2013 set aside the aforesaid

decision of the Rajasthan High Court and directed SEBI to treat the two

communications dated 30.11.1999 and 10.12.1999 as show cause 57

notices and pass fresh order on the question as to whether the business

carried on by PACL falls under the category of CIS or not and

depending upon that decision to proceed further in accordance with law

after giving prior notice to PACL. Thereupon, SEBI carried out further

investigation and issued supplementary show cause notice on

14.06.2013 and after giving personal hearing to the appellants passed the

impugned order on 22.08.2014.

19. In the impugned order, it is observed that as per the schemes

floated by PACL, the corpus was to be invested in barren land which

was to be developed into fertile agricultural land by PACL. The schemes

of PACL were for various durations ranging from 6 years to 15 years.

The schemes of PACL contemplated allotment of smaller unit of land

out of large tract of land owned by either PACL or by the associates of

PACL within 270 days or within 90 days as the case may be, from the

date of investment. After the allotment, PACL claimed that it would

develop and maintain the lands in consultation with agro consultants and

experts by demarcating, fencing, clearing, cultivating, planting and

raising crops, trees, plants, saplings etc., use of fertilizers and pesticides,

irrigation, harvesting and other activities allied and incidental thereto. At

the time of investment by the investor, PACL neither had ownership of

the land nor was it identified. Investment was invited on the assurance

that PACL would arrange the land for the investor. PACL offered the

land units at a uniform price irrespective of the location and condition of

the land. PACL offered profits by way of appreciation in the price of

land unit, in certain cases earning from the produce of the land and at the 58

end of investments tenure, offered to buy-back the land at a value which

was informed to the investor as an expected value at the time of

investment.

20. As rightly contended by counsel for SEBI, following facts

noticed in the impugned order establish that the contributions made by

the investors were pooled and utilized for the purposes of the scheme as

provided under Section 11AA(2)(i) of the SEBI Act:-

a) PACL collects money from customers/ investors

against the purported sale of plot/land. The

application form and the agreement are the primary

documents taken by PACL from a customer for

subscribing to its schemes. The documents such as

application form and the agreement prepared by

PACL contain a clause that the customer is applying

for a plot of agricultural land and that the

development and maintenance of the said plot shall

be by PACL. Customer cannot enter into an

agreement unless he/she enters into development

agreement with PACL.

b) At the stage of submitting the application form and

entering into agreement, PACL does not identify the

land to be sold to an applicant. On the contrary the

agreement records that PACL is in the process of

'making arrangement for purchasing/procuring the 59

land'. Thus, the documents on record reveal that on

the date of application/agreement, PACL is only

making arrangements for procuring the land. If the

transaction of PACL were real estate transactions,

then PACL would have disclosed the location of the

land/land availability at the time of application itself.

By not providing such details at the time of

application and informing about the same after

passage of substantial time indicates that PACL pools

the money received from the customers for

purchasing the land.

c) The registration letter also does not identify the land

or even the specific State in which the land will be

allotted. It only provides for the plot size. The

registration letter also provides for the 'expected

value' of the land which has not yet been allotted and

as such the location of the plot/ land is undisclosed.

The expected value is computed by a mathematical

formula and is uniform. It is not computed on a plot

by plot basis. Moreover, costs of all plots across India

is also uniform regardless of location and quality.

Thus, all plots are treated as a homogeneous

commodity. While allotting the land to the customers

by way of allotment letter, PACL reserves its right to

change the location of the allotted of land. 60

d) Argument of PACL that under the Cash Down

Payment Plan ('CDPP Plan') the land is allotted to

the customers within a period generally not

exceeding 270 days from the date of receipt of

consideration and under the Investment Payment Plan

('IPP Plan') the land is allotted within a period

generally not exceeding 90 days from the date of

receipt of 50% of the consideration amount, clearly

shows that PACL does not identify any specific land

to the customer till the stage of allotment. While

precise location of the land sold to a customer is

indeterminate, expected value of land is mentioned in

the registration letter, which indicates that PACL

pools the money received from the customers.

e) In all documents pre-printed by PACL, namely

Clause 7(g) of the Rule book, Condition No. 16 of

the General Terms and conditions of the application

form and clause 1 of the Agreement printed by PACL

specifically provide that the land units offered to its

investors being smaller in size and the land laws

prohibit division of land into smaller units or division

into smaller sizes may not be otherwise feasible or

practical, the ownership of land will be transferred to

the applicant/ land Unit Holder in joint holdings out 61

of the larger land units as may be permissible. Thus,

the customers/ investors would have the requisite

shares along with other allottees/ transferees in a

particular piece of land.

f) Clause 14 of the Agreement stipulates that PACL

shall keep accounts with reference to income

expenditure incurred or to be incurred pertaining to

the development and maintenance of the entire

project site. This clause suggests that PACL pools the

money and carries out the purported development on

large scale.

g) The Agreement places an obligation on PACL to

provide common facilities and services, such as,

irrigation and drainage system, pipelines, electrical

lines, motor pump sets, temporary sheds, structures

etc. Admittedly, PACL is an aggregator of land.

Thus, the terms and conditions of the agreement

which PACL enters into with its investors clearly

shows that PACL pools the money collected from the

customers for the purpose of its scheme i.e. procuring

large tracts of land and developing the same.

h) In the impugned order it is recorded that 64% of the

total consideration is towards development and other 62

charges and 36% of the consideration is towards the

cost of the plot. Thus, cost of development of the

land is more than the cost of the land itself. Clause

14 of the agreement provides that PACL shall keep

accounts with reference to the income and

expenditure incurred or to be incurred pertaining to

the development and maintenance of the entire

project. Thus, it is evident that 64% of the total

consideration is pooled in, purportedly for

development of entire project site.

In these circumstances, decision of WTM that the schemes floated

by PACL satisfy the conditions set out under Section 11AA(2)(i)

cannot be faulted.

21. Similarly decision of the WTM that the schemes run by PACL

satisfy the conditions set out under Section 11AA(2)(ii) deserves

acceptance for the following reasons:-

a) Rule Book framed by PACL under the heading

'Aims & Objectives' specified under Rule 2(d) offers

maximum return on investment and benefit to the

unit holders. Rule 5 provides that investment in

PACL is a sound proposition as the price of the land

is increasing year after year, which in turn raises the

value of the units automatically. Rule 6 provides that 63

investment in PACL are fully secured and give high

returns and tax free Agricultural income. Rule 7

provides that the unique features of the schemes of

PACL are that if one invests for a longer period one

gets higher benefit from these schemes i.e. the

income grows in higher proportion as every year

passes. From the Rule Book it is evident that the

investments were sought from the investors with a

view to receive profits, income produce or property.

PACL had contended before SEBI that the Rule

Book is replaced by a book called 'Pearls National

Network'. Neither before the WTM nor before this

Tribunal the said book has been furnished. In these

circumstances, in the absence of any material to

contradict the contents of the Rule Book which is like

a manual containing standard operating procedure,

reliance placed on the said Rule Book cannot be

faulted.

b) Clause 4(a) of the printed application form states that

in case PACL commits breach of the agreement by

not allotting the property in favour of the customer in

the manner agreed to, customer shall be entitled to

terminate the agreement, in which event PACL shall

refund the amounts paid by customer together with 64

simple interest at the rate of 12.5% from the date of

agreement.

c) Admittedly customers of PACL have the option to

retain or sell the plot as they deem fit on expiry of the

agreement. On execution of the sale deed, the sale

deeds are held by the custodial services company and

the customers only get a certified copy of the sale

deed. Although PACL contended that the sale deeds

are deposited with the custodial services company

only in cases where the tenure of the agreement is

continuing and further installments are yet to come, it

is noticed in the impugned order that out of the 500

sample transactions provided by PACL, sale deeds of

334 customers who had opted for Cash Down

Payment Plan, (where the entire consideration is paid

in the beginning itself) were deposited with the

custodial services company and those customers were

given only a certified copy of the sale deed. It is

noticed from sample transactions that at the end of

the term PACL returned the amount to its customers

which is equivalent to the estimated realizable value

as mention in the ledger of the said customer, without

deducting the land tax and other public dues incurred

by PACL.

65

d) Criteria for fixing the 'expected value/estimated

realizable value' is not specified by PACL.

Assuming that PACL does not provide assured

return, mere promise of expected value higher than

the amount invested makes it clear that the

contributions are made with a view to earning profit.

Since the customers of PACL make contributions/ payment with a

view to receive the profits, income and returns on their initial

investments, decision of the WTM that the second condition

stipulated under Section 11AA(2)(ii) of the SEBI Act stands

satisfied cannot be faulted.

22. Decision of the WTM that the schemes run by PACL satisfy the

conditions set out under Section 11AA(2)(iii) deserves acceptance for

the following reasons:-

a) It is admitted by PACL itself that the customers who

invest their money with PACL are mandatorily

required to give the right of development and

maintenance in favour of PACL. The said authority is

given to PACL by the customers as per the

application form and the registration letter itself. The

recitals of the agreement stipulates that PACL would

arrange for purchasing/ procuring land. Clause 3 of

the agreement gives PACL right to develop and 66

maintain the land. Clause 3 further stipulates that

investors/customers shall not ordinarily interfere with

the method and mode of development and

maintenance of the land. The customer or investor

merely has a right to tender suggestion. Clause 5 of

the agreement stipulates that the land shall vest in the

hands of PACL for development, cultivation or

raising crops, planting trees etc.

b) PACL manages the sale of the produce from the land

allotted to the customers. The records maintained by

PACL regarding the net sale proceeds received by

PACL from the sale of the said produce has to be

accepted by the customer and no dispute can be

raised in respect of the same. Clause 4(b) of the

General Terms and Conditions in the application

form stipulates that if PACL commits breach by not

completing the development in the agreed manner the

investor would be entitled to get refund together with

12.5% interest per annum from the date of

agreement. The customer is not entitled to make any

claim for any produce during the period of first six

years. Thus, only customers who have opted for the

plots beyond the period of six years have right to be

credited with sale proceeds of the produce pertaining

to the period beyond six years after deduction of 67

direct/indirect harvesting, marketing, transportation

cost, market taxes and levies etc. and service charges

amounting to 5% of the gross proceeds.

c) The customer has the option to retain or sell the plot

on expiry of the agreement. Under Clause 13 of the

agreement PACL pays the land tax and other public

dues/levies payable in respect of the property for and

on behalf of the customer and get the same

reimbursed from the customer. Under Clause 21 of

the agreement the facility of opting out is available to

the customers under the cash down payment plans.

The payments received under the said plan are

refundable immediately to the customer after

deducting 20% of the consideration comprising

various cost and other incidental expenses. However,

while repaying the customers who had preferred to

opt out have been repaid almost exact amount of the

expected value without making any deduction of 20%

as stated in the agreement.

d) Thus, the three main elements of the scheme floated

by PACL i.e. i) acquisition of land ii) development of

land iii) sale of land, are managed by PACL on

behalf of the investors.

68

e) Mr. Sukhdev Singh, Managing Director of PACL on

14th May, 2013 stated before SEBI that all business

plans are inclusive of land cost and development

charges and therefore there is no scope for the

customer to opt for self development of the plot in

the existing plans. PACL has not produced any

document evidencing the alleged self development

option being implemented.

f) PACL manages and provides the facilities and

services such as irrigation and drainage system,

pipelines, electrical lines, motor pump sets,

temporary sheds, structures etc.

g) Even-though the customer is stated to be an absolute

owner and in exclusive possession of the agricultural

land sold to him, in fact the customer has no

exclusive ownership rights over the aforesaid

facilities and in fact, has been barred from interfering

with the aforesaid facilities and services in any

manner, by the terms and conditions recorded in the

sample agreements to sell and the sample sale deeds

furnished by PACL.

h) In all the 500 sample documents examined by SEBI,

PACL had acquired special Power of Attorney in its

favour from the purchasers to do various acts and 69

things on behalf of the purchaser. Accordingly, the

WTM has concluded that the customer does not

manage his investments in the scheme rather his

investments are managed and utilized of PACL.

For all the aforesaid reasons decision of the WTM that PACL is

managing the property, contribution or investment forming part of the

scheme, on behalf of the investors and hence condition set out under

Section 11AA(2)(iii) are satisfied cannot be faulted.

23. Decision of the WTM that the schemes run by PACL satisfy the

condition set out under Section 11AA (2)(iv) deserves acceptance for

the following reasons:-

a) Clause 11 of the General Terms and Conditions of

the application form stipulates that the possession of

the land if allotted to the customer/investor would

remain with PACL. Clause 13 stipulates that

customers shall have right to retain or sell the land on

expiry of the tenure of the agreement. Clause 14

stipulates that PACL shall have first charge on the

said property on account of its unpaid installments

for services and development charges and other

incidental expenses. Clause 15 stipulates that PACL

has right to discontinue/ change/ amend/ modify or

alter prospectively any of the Rules/Regulations and

plans with or without notice to the investors. Clause 70

16 stipulates that in case of joint sale deed, the title

deeds of the land shall be kept in the safe custody of

the trustees appointed by PACL. These conditions

contained in the General Terms and Conditions of the

application form are also incorporated in the

agreement which the investor executes with PACL.

b) Clause 1 of the agreement stipulates that only

symbolic possession of the plot shall be handed over

to the investors or customers immediately after the

registration. Clause 3 of the agreement gives absolute

discretion to PACL to manage development of the

property including survey, demarcation, fencing,

clearing, cultivation, planting and raising of crops,

etc., use of fertilizers, irrigations, harvesting, etc. The

customers have no control or say in the aforesaid

aspect of the scheme. The customer has mere right to

tender suggestion.

c) PACL has absolute discretion to allot any piece of

land and/or change the location of the land at any

point of time. Even otherwise since large number of

customers approximately 5.85 crore in number, own

small pieces of lands ranging from 150 square yards

to 3000 square yards, it is not feasible for any 71

investor to have control over the land of PACL or the

development activities carried on by PACL.

d) In all 500 random sample documents examined by

SEBI, PACL had acquired special Power of Attorney

in its favour from the purchaser. In the absence of

any document produced by PACL evidencing

implementation of the alleged self development

option, the WTM has drawn adverse interference that

PACL used to take special Power of Attorney from

all the customers with a view to keep the transactions

within its control.

e) PACL obtains the authority from its customers for

development and maintenance of the plots of land.

The land remains in the possession of PACL and only

a symbolic possession of the plots are handed over to

the customer, on the ground that the fragmentation of

the plot into smaller sizes may not be practical or

permissible under the applicable revenue laws.

f) On execution of the sale deed PACL has stated t hat,

the sale deeds are held with its custodial services

company and that the customers only gets a certified

copy of the sale deed for the reason that the tenure of

the agreement being continuing and further

installments are yet to be received.

72

g) Clauses contained in the agreement to the effect that

PACL shall have the right to develop and maintain the

property and the customer shall not ordinarily interfere,

clearly shows that the contribution/investment made

by customers as well as plot of land are managed by

PACL on behalf of its customers.

Thus, in the facts of present case since all conditions set out under

Section 11AA(2) are satisfied the WTM of SEBI was justified in

holding that the schemes operated by PACL constituted CIS.

24. As rightly contended by the counsel for SEBI, facts narrated

above, are comparable with the facts in case of PGF Ltd. particularly

facts set out in para 45 and 47 of the Apex Court order. As held in para

40 of the Apex Court order, object of Section 11AA is not intended to

affect sale and development of agricultural land, but to protect the

interest of investors by regulating the schemes so that gullible investors

reap the promised benefits and are not defrauded. Therefore, reliance

placed by the WTM on decision of the Apex Court in case of PGF Ltd.

cannot be faulted.

25. Strong reliance was placed by counsel for appellants on the report

submitted by Justice K. Swami Durai (Retd.) to Delhi High Court on the

basis of which the Delhi High Court had deleted the name of PACL

from the list of respondents in the PIL filed before the Delhi High Court. 73

The task assigned to Justice K. Swami Durai (Retd.) by the Delhi High

Court was to ascertain genuineness of 14150 sale transactions entered

into by PACL with its customers. Fact that 14150 sale transactions were

found to be genuine by Justice K. Swami Durai does not affect the

merits of the impugned order because, whether the schemes floated by

PACL were covered under CIS or not, was neither an issue raised nor

considered by Justice K. Swami Durai. Only issue considered therein

was, whether, the 14150 sale deeds executed by PACL were genuine or

not. In fact pursuant to the subsequent order passed by Delhi High

Court, Justice K. Swami Durai has verified and held that in all 19284

sale deeds executed by PACL in favour of its customers were genuine.

Thus, neither Justice K. Swami Durai nor the Delhi High Court have

considered the question as to whether the schemes floated by PACL

constitute CIS or not. Therefore, reliance placed on the report submitted

by Justice K. Swami Durai is totally misplaced.

26. It is relevant to note that Justice K. Swami Durai in his several

reports had directed PACL to apply for and obtain the requisite

encumbrance certificate from the concerned Sub-Registrar which would

reflect that the names of investors have been duly entered in the land

records. There is no indication that even one such certificate was

obtained by PACL in respect of 19284 sale deeds registered. Therefore,

fact that 19284 sale deeds verified by Justice K. Swami Durai have been

excluded from the purview of the impugned order would not in any

affect the decision of SEBI in holding that the schemes floated by PACL

constitute CIS.

74

27. It was strenuously argued by counsel for appellants that once part

of the properties belonging to PACL are excluded from the purview of

the impugned order (by accepting report of Justice K. Swami Durai) it

cannot be said all conditions set out under Section 11AA (2) have been

satisfied. There is no merit in the above contention, because, firstly,

customers who were excluded from the purview of the impugned order

represented 0.03% whereas, the customers who are victims of investing

in the schemes of PACL represent 99.97%. If the contention of the

appellants is accepted it would mean that under the schemes floated by

PACL if Section 11AA(2) is violated in case of 99.97% investors, then

on account of 0.03% investors being excluded, PACL cannot be

declared as CIS under Section 11AA of SEBI Act. Accepting such an

argument would defeat the object with which the provisions are enacted

and would amount to promoting dishonesty. Secondly, 0.03% cases are

left out not on the ground that those cases fall outside the purview of

Section 11AA. Thirdly, even in respect of those cases, PACL has not

obtained the encumbrance certificate as directed by Justice K. Swami

Durai which would have established the status of the land holders after

the sale deeds were registered. Therefore, merely because, 0.03% sale

transactions covered by the Justice K. Swami Durai's report have been

excluded in the impugned order, appellants are not justified in

contending that 99.97% sale transactions cannot be declared to be

covered under CIS.

75

28. Reliance placed on the decision of the Rajasthan High Court dated

28.11.2003 holding that the schemes of PACL are not covered under

CIS is misplaced. That decision was rendered while considering the

prima facie view of SEBI in the year 1999 that the schemes of PACL are

covered under CIS. Much water has flown thereafter. Various factors

noticed in the impugned order passed after detailed investigation on

22.08.2014 were not before the Rajasthan High Court. Therefore,

reliance placed on the Rajasthan High Court decision which is set aside

by the Apex Court is totally misplaced.

29. Finding of fact recorded in the impugned order is that in t he guise

of selling agricultural lands, PACL has collected ` 49,100 crore from

5.85 crore customers over a period of 15 years and so far PACL has

issued sale deeds in respect of 19284 investors. According to PACL,

value of the total lands held by PACL in the form of stock in trade as on

31.03.2014 was ` 11,706.96 crore. Lands held by PACL are situate in

different parts of the country. However, all those lands are allegedly sold

to the customers at a uniform price by treating all lands alike

irrespective of the State in which it is situated. Apart from the above,

under the schemes, PACL is unilaterally entitled to change the location

of the plot allotted to a customer. Thus, a person to whom a plot of land

is allotted in Tamil Nadu may be unilaterally altered by PACL and

allotted a plot of land situate either at Orissa or Rajasthan. Since the

agreement contained a buy-back option at a predetermined price, the 76

WTM arrived at a conclusion that the alleged land transactions are

nothing but sham CIS transactions.

30. SEBI was duty bound to protect the interest of investors by

ensuring that the investors get back their money with promised returns.

Since the disparity between the amounts collected from the customers

by promising fertile agricultural lands with high returns and the lands

actually held PACL was abnormal and inspite of colleting ` 49,100

crore from 5.85 crore customers over the past 15 years since PACL had

executed only 19284 sale deeds, the WTM was justified in directing

PACL to stop collecting money from the investors so that no more

gullible investors become victims of the schemes operated by PACL.

The WTM was also justified in directing PACL to wind up the existing

schemes and refund money to the customers with promised return.

31. The without prejudice proposal put up by PACL during the course

of hearing before SEBI was merely an eye-wash, because in the said

proposal nothing was disclosed as to how the claim of 5.85 crore

customers from whom ` 49,100 crore was collected would be met in the

next five years, especially when the value of the lands held by PACL

was only ` 11,706.96 crore. In fact, even before us, counsel for

Mr. Balkaran Singh appointed as additional director of PACL, pursuant

to Memorandum of Understanding dated 19.02.2015 submitted that

Mr. Balkaran Singh would be taking over the management of PACL by

acquiring 65% shareholding and that he would require time to make

arrangements to pay the amounts due to the customers. When asked as 77

to how the amounts would be arranged and how much time

Mr. Balkaran Singh would require to arrange funds, counsel had no

answer. In these circumstances, in our opinion, the WTM was justified

in rejecting the without prejudice proposal made by PACL.

32. For all the aforesaid reasons the decision of SEBI in holding that

PACL is not engaged in genuine sale of agricultural land but is engaged

in running sham CIS and accordingly directing PACL to wind up its

existing schemes and refund money to the customers with the promised

returns cannot be faulted.

33. Appellants however strongly contend that assuming the schemes

operated by PACL constitute CIS, then, as per the Apex Court order,

SEBI could initiate proceedings and pass consequential order, only after

the decision of SEBI holding that the schemes operated by PACL

constitute CIS is upheld ultimately by the Apex Court.

34. Para 4 & 8 of the Apex Court order dated 26.02.2013 on which

considerable arguments were advanced by counsel on both sides read

thus:-

"4. After hearing the respective counsel and after noticing the orders dated 30.11.1999 and 10.12.1999 impugned in the writ petition filed before the High Court, which were set aside by the order impugned in these appeals, as well as, the order dated 24.06.2002 which order also got merged in the order impugned in these appeals, it was suggested to the learned counsel whether the impugned orders of the 78

appellant dated 30.11.1999 and 10.12.1999, themselves can be treated as show cause notices and an opportunity to be extended afresh to the first respondent company before passing final orders on the question as to whether or not the business of the first respondent company will fall within the category of Collective Investment Scheme (hereinafter being referred to as "CIS"). Further, depending upon the outcome of any such fresh orders to be passed by the appellant, further proceedings can be initiated by the appellant in accordance with law.

8. We also make it clear that the appellant shall pass fresh orders as regards the business activity of the first respondent Company as to whether it falls under the category of CIS or not and depending upon the ultimate order to be passed it may proceed further in accordance with law. The appellant shall before taking any further action give prior notice to the first respondent Company."

35. From the aforesaid order it is clear that the Apex Court required

SEBI, first to hear PACL on the issue as to whether the schemes of

PACL fall within the category of CIS or not and thereafter depending

upon that decision proceed to take further course of action after giving

prior notice to PACL.

36. In the ordinary course, further course of action that could be taken

after holding that the schemes of PACL constitute CIS were, either to

direct PACL to comply with CIS Regulations by seeking registration

under regulation 68 read with regulation 5 or to direct winding up by 79

following the procedure prescribed under regulation 74 read with

regulation 73 of the CIS Regulations. Apex Court decision, however, did

not preclude SEBI from exercising power under Section 11/11B in

exceptional cases like the present one, if the transactions were found to

be sham transactions and were detrimental to the interests of investors.

In other words, while directing SEBI to follow the procedure prescribed

under the CIS Regulations, Apex Court did not bar SEBI from

exercising power under Section 11/11B of the SEBI Act, in the interest

of investors if the situation so demands.

37. Where a person carries on business under a bonafide belief that

such business is not covered under CIS and hence does not seek

registration, then, such person on being found to be carrying on CIS may

be permitted to seek registration under the CIS Regulations. However,

where a person in the guise of carrying on real estate business is found

to be carrying CIS which is sham and detrimental to the interests of

investors, then, permitting such person to seek registration or permitting

that person to wind up the scheme by following the procedure prescribed

under the CIS Regulations would be travesty of justice and wholly

prejudicial to the interests of investors.

38. Argument of the appellants is that the Apex Court order

contemplated two stage hearing i.e. in the first stage to pass an order on

the question as to whether the schemes of PACL constitute CIS or not

and if held to be CIS, then initiate second stage proceedings for passing

consequential order, only if the decision of SEBI holding that the 80

schemes of PACL are covered under CIS is finally upheld by the Apex

Court. There is no merit in the above contention, because, protection of

investor interest is the paramount consideration under the SEBI Act and

once it is found that the CIS operated is detrimental to the interest of

investors, then SEBI instead of following the procedure prescribed

under CIS Regulations, is duty bound to take immediate steps to protect

the interest of investors by issuing appropriate direction under Section

11/11B of SEBI Act. It is only in respect of those schemes covered

under CIS which are operated in a manner not detrimental to the interest

of investors, the question of following the procedure prescribed under

the CIS Regulations arises. Even in such cases, consequential order like

provisional registration has to be passed immediately after holding that

the schemes are covered under CIS and SEBI cannot wait till the issue

relating to CIS is finally determined by the Apex Court. Any scheme

once held to be covered under CIS has to be regulated forthwith by

SEBI and it is not open to SEBI to wait till its decision holding that the

schemes are covered under CIS is upheld by this Tribunal or ultimately

by the Apex Court.

39. In the present case, facts on record demanded immediate action

under Section 11/11B of the SEBI Act and if immediate action was not

taken interests of crores of investors would have been jeopardy.

Therefore, in the facts of present case, decision of SEBI in invoking

jurisdiction under Section 11/11B of SEBI Act read with regulation 65

of CIS Regulations immediately after concluding that the schemes

floated by PACL are covered under CIS, cannot be faulted. 81

Consequently, question of permitting registration under regulation 68

read with regulation 5 or to direct winding up under regulation 73/74 of

the CIS Regulations did not arise in the present case.

40. It is contended on behalf of the appellants that in para 38 of the

impugned order the WTM has erroneously held that the schemes

operated by PACL are liable to be wound up as a natural consequence of

holding that the schemes are covered under CIS. On first blush, the

argument looks attractive. However, on a deeper consideration it is seen

that winding up is not ordered simply on account of the schemes being

covered under CIS, but winding up is ordered mainly on arriving at a

conclusion that PACL is operating nothing but a money mobilizing

scheme and the claim of PACL that it is running real estate business is a

facade and sham to camouflage their activity as CIS (Page 311 & 322 of

the Memorandum of Appeal). Since we concur with the view of SEBI

that PACL in the guise of running real estate business was running CIS

which was detrimental to the interest of investors, decision of SEBI in

directing PACL to wind up its schemes and repay the money collected

from the investors with promised return cannot be faulted.

41. It is contended on behalf of the appellants that the value of the

total lands held by PACL as disclosed in the without prejudice offer

made during the course of hearing before the WTM was based on book

value and not based on market value. When asked as to what would be

the market value of the lands held by PACL, counsel for the appellants

stated that they are not in a position to state the market value of the 82

lands, because, the land documents are in the custody of CBI. Although

the land documents are in the custody of CBI, admittedly the lands are

in the custody of PACL and if appellants are unable to state the value of

the lands in their custody, it is reasonable to hold that the barren lands

acquired by PACL continues to be barren land. Thus, it is apparent that

as against the amount of ` 49,100 crore collected from 5.85 crore

investors promising them agricultural land, the value of the land held by

PACL as on 31.03.2014 only is ` 11,706.96 crore. Since the lands held

by PACL are wholly disproportionate to the amounts collected from the

customers and there is nothing on record to suggest that PACL has any

other assets, the WTM was justified in rejecting the without prejudice

proposal and in the interest of investors directing PACL to wind up its

schemes in exercise of the powers conferred under Section 11/11B of

SEBI Act read with regulation 65 of CIS Regulations.

42. Strong reliance was placed by counsel for appellants on decision

of this Tribunal in case of Alchemist Infra Reality Ltd. (supra). In that

case, the scheme floated by Alchemist, after the CIS Regulations came

into force was held to be CIS and since the said CIS was carried on

without obtaining registration from SEBI, the CIS was ordered to be

wound up under Section 11,11B of SEBI Act read with regulation 65

and 73 of CIS Regulations. While upholding the order of SEBI and

rejecting the argument of Alchemist that regulation 73 cannot be applied

to a CIS floated after the CIS Regulations came into force, this Tribunal

in para 17 held that the provisions for winding up contained in

regulation 73 is applicable to CIS existing at the time when the CIS 83

Regulations were introduced as also to the CIS which may have been

launched at any point of time thereafter. Whether a CIS floated and

operated after the CIS Regulations came into force without obtaining

registration from SEBI was entitled to seek registration under regulation

73 read with regulation 68 was neither an issue raised by Alchemist nor

decided by this Tribunal. Only issue raised and decided by SEBI as also

by this Tribunal in Alchemist was that a CIS floated after the CIS

Regulations came into force without obtaining certificate of registration

from SEBI is liable to be wound up under the regulation 65 read with

regulation 73 of the CIS Regulations. Therefore, the argument that in

view of the decision of this Tribunal in case of Alchemist Infra Realty

Ltd. (supra) PACL has a right to seek registration under CIS Regulations

cannot be accepted.

43. Argument of SEBI that the decision of this Tribunal in case of

Alchemist Infra Realty Ltd. (supra) is 'per incuriam' is wholly

unjustified to say the least. Since the decision of SEBI that a CIS

floated and operated after the CIS Regulations came into force without

obtaining registration from SEBI is liable to be wound up under

Regulation 65 read with Regulation 73 was upheld by this Tribunal,

SEBI is not justified in finding fault with the decision of this Tribunal in

Alchemist. If on hindsight SEBI considers that in case of Alchemist

winding up could be ordered only under regulation 65 and not under

regulation 73, then, in the first instance SEBI must have the audacity to

state that its decision in case of Alchemist Infra Realty Ltd. (supra) to 84

the extent it ordered winding under regulation 73 was per incuriam. SEBI cannot merely state that it has now altered its view and continue to

contend that the decision of this Tribunal in case of Alchemist (supra) is

per incuriam. In other words, without admitting that its decision in case

of Alchemist directing winding up under Regulation 73 was per

incuriam i.e. the said decision was rendered in ignorance or

forgetfulness of regulation 68, SEBI is not justified in alleging that the

decision of this Tribunal in case of Alchemist is per incuriam.

44. Argument of the appellants that they have a fundamental right to

carry on CIS under the Article 19(1)(g) of the Constitution of India by

seeking registration of CIS operated by them under CIS Regulations is

without any merit because right to carry on business is subject to

carrying on business in accordance with law and in the present case,

once it was found that the land transactions under the schemes operated

by PACL were sham transactions and were detrimental to the interest of

the investors, then it was the bounden duty of SEBI to direct winding up

such schemes and direct PACL to refund the amount collected from the

customers with promised return within the stipulated time.

45. In support of the contention that SEBI was bound to follow the

directions contained in the Apex Court order in entirely, reliance was

placed on a decision of the Apex Court in the case of Tirupati Balaji

Developers (P) Ltd. (supra). That decision has no relevance to the facts

of the present case, because of the overriding power conferred on SEBI

under Section 11/11B of SEBI Act to take appropriate steps to protect 85

the interest of investors. By no stretch of imagination it can be said that

the Apex court directed SEBI to consider granting registration or

winding up the schemes of PACL under the CIS Regulations, even if the

schemes were operated in a manner which were prejudicial to the

interest of investors. Therefore, the directions given by the Apex Court

in relation to the consequential order being subject to the powers of

SEBI to take remedial measures in the interest of investors under

Section 11/11B, in the facts of present case, no fault can be found with

the decision impugned in these appeals.

46. Similarly, decision of the Apex Court in case of L.K. Ratna

(supra) is distinguishable on facts. Admittedly, by show cause notices

dated 30.11.1999, 10.12.1999 and supplementary show cause notice

dated 14.06.2013, appellants were called upon to show cause as to why

PACL should not be directed to comply with the CIS Regulations and

appropriate directions should not be issued, if necessary, under Section

11/11B of SEBI read with regulation 65 of CIS Regulations. After

considering the cause shown and after hearing the appellants it was

deemed fit to pass consequential order under Section 11/11B of SEBI

Act. Hence, the above decision has no relevance in the facts of present

case.

47. Argument that once the schemes of PACL were held to be

covered under CIS, regulation 74A was attracted and therefore PACL

was entitled to seek registration within two months of CIS Regulations

coming into force is also without any merit. Regulation 74A inserted to 86

CIS Regulations with effect from 09.01.2014 is applicable only to

deemed CIS covered under the proviso to Section 11AA(1) inserted with

retrospective effect from 18.07.2013. As per the proviso to Section

11AA(1), pooling of funds under any scheme involving corpus amount

of `100 crore or more which are not registered and not covered under

Section 11AA(3) are deemed to be an existing CIS. Regulation 74A

provides that such deemed CIS shall comply with Chapter IX of CIS

Regulations by seeking registration under regulation 5 within two

months of regulation 74A coming into force. Obviously, pooling of

funds under any scheme involving corpus amount of `100 crore or more

which satisfy the conditions set out under Section 11AA(2) would be

outside the purview of deeming fiction introduced under the proviso to

Section 11AA(1). Regulation 74A is restricted to CIS which are

deemed to be CIS under the proviso to Section 11AA(1) and 74A is not

intended to offer amnesty to the CIS which were covered under Section

11AA(1) prior to the insertion of proviso to Section 11AA(1) of SEBI

Act. Since the schemes operated by PACL satisfy the conditions set out

under Section 11AA(2) the said schemes would be CIS covered under

Section 11AA(1) and therefore appellants are not justified in contending

that the schemes of PACL fall under the category of deemed CIS

covered under the proviso to Section 11AA(1) and consequently,

appellants are not justified seeking registration under regulation 74A of

CIS Regulations.

87

48. An affidavit was filed on behalf of PACL Customer Association

stating therein that at present the Association represents more than 4.5

lac customers of PACL and the said customers are satisfied with the

activities of PACL qua its customers. It is also stated that PACL has

been allotting land to its customers faithfully. When questioned as to

whether the members of the Association have got sale deeds executed in

their favour even though the period specified in the schemes have

expired, counsel for the Association had no answer. Since, all the sale

deeds executed by PACL have been verified by Justice K. Swami Durai

and have been excluded in the impugned order, it is apparent that the

claims made by the members of the Association is without any merit. In

these circumstances, contention put forth by the Association cannot be

sustained. Thus, in the facts of present case, decision of SEBI in holding

that in the guise of running real estate business PACL is running sham

CIS which are detrimental to the interest of investors and accordingly

directing PACL and its directors to wind up the existing CIS and refund

the money collected from the customers with promised return cannot be

faulted.

49. To sum up:-

a) By inserting Section 12(1B) to SEBI Act legislature has

made it mandatory for any person to obtain a certificate of

registration for operating CIS with effect from 25.01.1995.

In respect of CIS operating prior to insertion of Section

12(1B) for which no certificate of registration was required, 88

proviso to Section 12(1B) provides that such CIS may

continue to operate till such time regulations are made by

SEBI. Regulation 5 of the CIS Regulations framed by SEBI

which came into force with effect from 15.10.1999

mandatorily provide that any person operating a CIS prior

to the commencement of CIS Regulations shall subject to

the provisions of Chapter IX of CIS Regulations make an

application to SEBI for grant of a certificate within a period

of two months from 15.10.1999. Thus, operating CIS

without obtaining a certificate of registration from SEBI is

illegal after the CIS Regulations came into force.

b) Where a person is found to be operating a CIS after the CIS

Regulations came into force, without obtaining a certificate

of registration, then, in the interest of investors, SEBI may

under Section 11/11B of SEBI Act direct that person either

to wind up the CIS or comply with the CIS Regulations by

seeking certificate of registration from SEBI.

c) Admittedly, some of the schemes floated by PACL were

existing on 15.10.1999. In respect of those schemes, PACL

was required to make an application seeking certificate of

registration under regulation 5, only if the schemes floated

by PACL constituted CIS under the SEBI Act. 89

d) By two communications dated 30th November, 1999 and

10th December, 1999 SEBI informed PACL that the

schemes floated by PACL were CIS and called upon PACL

to comply with SEBI Act and CIS Regulations by seeking

registration in terms of regulations 5 read with regulation

68 or wind up the schemes and repay to the customers as

stipulated under regulation 73/74 of the CIS Regulations.

e) Since the aforesaid communications were stayed and

ultimately set aside by the Rajasthan High Court on 28 th

November, 2003 on ground that the schemes floated by

PACL were not CIS, PACL was not required to obtain

certificate of registration from SEBI for operating the

schemes floated by it.

f) Apex Court on 26th February 2013 set aside the decision of

the Rajasthan High Court dated 28th November, 2003 and

directed SEBI to treat the communications dated 30 th

November, 1999 and 10th December, 1999 as show cause

notices and permitted SEBI to issue supplementary show

cause notice to PACL after carrying out necessary

inspection, investigation, inquiry and verification of the

accounts and other records of PACL. Apex Court further

directed SEBI to pass fresh orders on the question as to

whether the schemes floated by PACL were covered under

the category of CIS or not and depending upon that 90

decision proceed further in accordance with law and before

taking any future action SEBI was directed to give prior

notice to PACL. Accordingly, on completion of

investigation, SEBI issued supplementary show cause

notice on 14th June, 2013 and after hearing the appellants

impugned order was passed on 22.08.2014.

g) For the reasons stated in the impugned order, decision of

SEBI that in the guise of running real estate business,

PACL is running sham CIS which are detrimental to the

interest of investors and consequently directing PACL to

wind up the existing CIS and refund the money collected

from the investors with promised return cannot be faulted.

h) Argument of the appellants that the decision of the Apex

Court dated 26th February 2013 contemplated two tier

procedure is not correct. Apex Court order required SEBI to

hear the appellants on the issue as to whether PACL was

covered under CIS and also on the issue as to what future

course of action should be taken if PACL is held to be

running CIS. Thus the Apex Court order emphasised on

issuing notice of hearing on both issues and did not curtail

the powers of SEBI to issue appropriate directions in the

interest of investors under Section 11/11B of SEBI Act.

i) Argument of the appellants that in view of the two tier

procedure prescribed by the Apex Court, after holding that 91

the schemes of PACL constitute CIS, SEBI could not have

passed consequential order till the decision of SEBI holding

PACL to be covered under CIS is finally upheld by the

Apex Court is without any merit. If that contention is

accepted, it would mean that till the SEBI order on CIS

attains finality, Apex Court has prohibited SEBI from

taking action against PACL, even if, the CIS run by PACL

are sham and detrimental to the interest of investors. We do

not agree with the aforesaid interpretation of the Apex

Court order put forth by the appellants.

j) In the present case, in the guise of selling agricultural land,

PACL has collected ` 49,100 crore from 5.85 crore

customers by promising them that the investments in the

schemes of PACL are highly profitable. Admittedly, value

of the total lands held by PACL in the form of stock in

trade as on 31.03.2014 was ` 11,706.96 crore. In such a

case, permitting PACL to operate CIS by seeking

registration under CIS Regulations would have be travesty

of justice. Accordingly, no fault can be found with the

decision of SEBI in directing PACL to wind up all existing

schemes and refund the monies collected from the investors

with the return which are due to its investors. 92

k) Appellants are directed to comply with the directions

contained in the impugned order of SEBI dated 22.08.2014

within a period of three months from today.

50. For all the aforesaid reasons Appeal Nos. 368 of 2014, 369 of

2014, 370 of 2014 and 95 of 2015 as well as the Miscellaneous

Application Nos. 88 of 2015, 129 0f 2015 and 171 of 2015 are dismissed

with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member 12.08.2015 Prepared & Compared By: PK