Pancard Clubs Limited vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date : 07/12/2016

Misc. Application No.331 of 2016 In Appeal No.52 of 2016

Pancard Clubs Limited 111/113, Kalyandas Udyog Bhawan, Near Century Bhavan, Prabhadevi, Mumbai - 400 051. ... Applicant/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

Ms. Sandhya Iyer a/w Ms.Nikita Panhalkar, Advocates i/b Vaish Associates for the Appellant.

Mr. Shyam Mehta, Senior Advocate a/w Mr. Mihir Mody, Mr. Saurabh Bachhawat and Mr. Vivek Rana, Advocates i/b K. Ashar & Co. for the Respondent.

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

Per : Justice J.P. Devadhar (Oral)

1.

On 7th March, 2016, Appeal No.52 of 2016 was filed by the appellant to

challenge the order passed by the Whole Time Member ("WTM" for short) of

Securities and Exchange Board of India ("SEBI" for short) on February 29,

2016. By that order, the WTM of SEBI has, inter alia, restrained the appellant

from collecting any money from the investors or launch or carry out any

Collective Investment Schemes ("CIS" for short), including the schemes

which have been identified as CIS. By the said order, the appellant has also

been directed to wind up the existing CIS and refund through bank-demand 2

draft or pay order, the monies collected by the said company under the

schemes with returns which are due to its investors as per the terms of offer

within a period of three months from the date of the said order.

2. On 6th December, 2016, appellant has filed the present Misc.

Application No.331 of 2016 seeking an order directing SEBI to produce all

documents, internal notings, replies, complaints, correspondences and

communications relied upon by SEBI, on the basis of which, SEBI during the

period from 2001 to 2013 had held that the schemes floated by the appellant

were not covered under the CIS.

3. It is contended by the Counsel for the appellant that having taken

consistent stand during the period from 2001 to 2013, that the schemes floated

by the appellant are not covered under the CIS, it is not open to SEBI to

change their stand arbitrarily and by the impugned order hold that the

schemes floated by the appellant constitute CIS and impose harsh

punishment against the appellant and its directors. It is submitted that if

anytime during the years 2001 to 2010 it was told that the schemes floated by

the appellant constitute CIS then the appellant would have made suitable

changes in its business model and in that event, situation as of date would not

have arisen. In these circumstances, it is submitted that it is absolutely

essential to direct SEBI to produce all documents and correspondence

exchanged and office notings during the period from 2001 to 2013.

4. We see no merit in these above contentions.

5. In our opinion, the present Misc. Application is filed in gross abuse of

process of law and with ulterior motives for the following reasons:- 3

(a) If the correspondence exchanged between the appellant and

SEBI during the period from 2001 to 2013 was relevant for

deciding the issues raised in the Appeal, then the said plea

would have been raised in the memorandum of Appeal itself.

Very fact that the said plea is raised belatedly by filing the

present Misc. Application after about 9 months from the date of

filing of the Appeal and after the Appeal itself has been posted

for final hearing since last several dates, clearly shows that the

present Misc. Application is filed as an afterthought and not

with bona fide intentions.

(b) It is relevant to note that in the impugned order the WTM of

SEBI has specifically admitted that in the past SEBI had taken a

view that the schemes of the company did not constitute CIS

and has recorded the reasons for which it is now held that the

schemes floated by the Appellant constitute CIS. In these

circumstances, seeking copies of the documents and the

correspondence exchanged between the parties during the

period from 2001 to 2013 is wholly irrelevant for deciding the

issues raised in the Appeal.

(c) Fact that the appellant had implemented its schemes on the

footing that the said schemes do not constitute the CIS cannot

be a ground for the appellant not to pay the amounts due to the

investors on the respective maturity dates. From the grievances

made by the investors in the Misc. Applications filed before us,

it is apparent that lakhs of investors from whom the monies

have been collected have not been paid their dues even after the 4

maturity date. In spite of this Tribunal repeatedly seeking

information from the appellant regarding the number of

investors and the amount collected from such investors, the

amounts due to the investors on maturity, amount paid to the

investors on maturity and the balance amount payable to the

investors even after the maturity period is over, the appellant is

not in a position to submit that information till date.

6. In these circumstances, we dismiss the Misc. Application with costs

quantified at Rs.1 lac to be paid by the appellant to SEBI within a period of

two weeks from today. Counsel for the appellant states that SEBI may recover

the cost of Rs.1 lac imposed on the appellant from the bank account of the

appellant which is attached by SEBI.

7. Misc. Application is disposed of accordingly.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

07/12/2016 Prepared & compared by-ddg