JUDGMENT
Kumar Rajaratnam, J. (Presiding Officer)
1. All these appeals are taken up for final disposal with the consent of parties.
2. In all these appeals the appellants challenge the order of the respondent date 15-11-2002. The operative portion of the order reads as under:
“Now, therefore in exercise of the power conferred upon me under Section 11B of the SEBI Act, 1992, read with Regulation 65 of the said Regulations, I hereby debar the company/its promoters/directors/ managers/persons in charge of the business of its schemes (as given in Annexure A) from operating in the capital market and from accessing the capital market for a period of 5 years from the date of this Order:
3. A common order has been passed against the appellants and the matter arises as a result of the common question of law and facts and by consent a common order is passed by this Tribunal.
4. The appellants according to the respondent come within the existing Collective Investment Scheme. SEBI pursuant to Public Notice dated 18-9-1997 directed all the collective investment schemes to file certain information about their scheme on 15-1-1998. On 18-5-1998 SEBI asked these entities to show cause why action should not be initiated for not furnishing the information as required. Consequent to the notification of SEBI (Collective Investment Schemes) Regulations, 1999, according to SEBI, every person who immediately prior to the commencement of the said Regulations, operating a collective investment scheme, was required to make an application to SEBI for grant of registration within a period of two months from the date of notification, under the provisions of the said Regulations, It was the contention of SEBI that the appellants come within the provisions of SEBI (Collective Investment Schemes) Regulations, 1999. Show cause notice dated 12-5-2000 was issued to the appellants asking it to show cause as to why action should not be taken. It was contended before the respondent that the appellants do not come under scheme. However, it was also submitted by the appellants that although they did not come under the Scheme they would be prepared to redress all investors’ grievances if any. The appellants were granted an opportunity of personal hearing on 18-9-2001 during which the company was directed to obtain confirmation of all the investors specifically stating that the company has discharged all its contractual obligations and directed compliance by December 2001. It is submitted, the appellants did not comply with this direction. Final opportunity was given to the appellants by the respondents on 14-1-2002. As per the impugned order at page 3, the case of the appellants is as follows:
“(a) That as per auditor certificate dated 9-1-2002, out of the total 324 purchasers/investors, 77 per cent of the investors have given undertaking/confirmation stating that the land has been registered in their favour.
(b) That though the company has completed registration in favour of 95 per cent of the investors, it is yet to receive the undertaking/ confirmation from the rest 18 per cent of the investors. Regarding the remaining 5 per cent, it was informed that these investors have not come forward in spite of letters written to them at the address available with the company.”
5. The respondent noted the factual position and the Chairman, SEBI directed the appellants in the following manner:
“(i) write to those investors in whose name the land is yet to be registered and simultaneously issue a fresh advertisement in one national daily and one regional daily having vide circulation in the place where the registered office of the company is situated.
(ii) submit to SEBI the audited certificate that the company has discharged all of is obligations to the investors in the scheme and that there are no claims/grievances pending against the company within three months from the date of intimation form SEBI ie. February 11, 2002.”
6. The impugned order further states that the appellants did not comply with the two directions given by the Chairman.
7. It is in these circumstances the impugned order was passed. The learned Counsel for the appellant submitted that, with regard to the first direction advertisement was given in one National daily and one Regional daily having vide circulation and this advertisement was given on 17-5-2002 and 31-5-2002.
8. With regard to the second direction i.e. audited certificate that the company has discharged all its obligations to the investors in the scheme, it is fairly conceded by the learned counsel for the appellant that there has been delay in producing the certificate. The reason given was that the delay was neither intentional nor wilful. The delay was due to lack of funds and the fact that the scheme was completed long ago. However, it is common ground that a certificate was in fact given by the auditors dated 24-8-2002. According to the appellants this certificate was given before impugned order was passed but according to Mr. Subhash Jha, the learned Counsel for the respondent, the certificate was received by SEBI on 28-11-2002, after the impugned order was passed. The certificate of the auditor dated 24-8-2002 reads as follows:
“This is to state that I have verified the Publication effected on 17-5-2002 by M/S. BEAUTY GREEN FARMS PRIVATE LTD., having its registered office at No. 3, B.N. Road, T. Nagar, Chennai – 600 017 in NEW INDIAN EXPRESS (English Daily Newspaper) and DINAMALA (Tamil Daily Newspaper) and later the records submitted by the Company.
“I certify that the Company has discharged all its obligations to the Purchasers in the scheme and that there are no claims/grievances pending against the Company.”
9. It appears that the second direction was not complied within the time given by the respondent but was complied with, even according to the respondent on 28-11-2002 after the impugned order was passed. It was submitted by the learned Counsel for the respondent that this could not have been considered by the respondent in view of the fact that the certificate was furnished after the impugned order was passed. However, in view of the fact that substantial justice will be done to both the parties and taking into account the facts and circumstances of the case it would be appropriate to remand the matter to the respondent for the respondent to consider this certificate and pass appropriate order. The respondent is also at liberty to pose any other question which would refer to redressal of the grievance of the investor, if any, and the appellant shall abide by any other direction given by the respondent. Equally the appellant will be permitted to submit all legal arguments that are available and produce whatever documents that are necessary to show that the appellants had: (a) complied with the schemes (b) the appellant do not come under Collective Investor Scheme. It is entirely up to the respondent to consider these materials and pass fresh orders as expeditiously in accordance with law. In this view of the matter the impugned order is set aside.
10. However, it is made clear that during the pendency of the matter before the respondent the appellant shall not access to the capital market as mentioned in the impugned order. The appellants have also filed an affidavit stating that the appellants have discharged all their obligations to the investors and also there are no investor grievance pending against the company. This affidavit is also taken on record and this affidavit shall also be considered by the respondent while disposing of the matter.
11. The appeals are disposed of accordingly. No order as to costs.