SECURITIES AND EXCHANGE BOARD OF INDIA VS IL AND FS SECURITIES SERVICES LTD. AND ORS.
SECURITIES AND EXCHANGE BOARD OF INDIA VS IL AND FS SECURITIES SERVICES LTD. AND ORS.
Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले
NONREPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
I.A. NO.6482 OF 2022
IN
CIVIL APPEAL NOS. 53955398 OF 2019
SECURITIES AND EXCHANGE BOARD
OF INDIA …..APPELLANT (S)
VERSUS
IL AND FS SECURITIES SERVICES
LTD. AND ORS. .….RESPONDENT(S)
AND IN THE MATTER OF:
DALMIA CEMENT (BHARAT) LTD. …..APPLICANT/
RESPONDENT NO.5.
J U D G M E N T
Vineet Saran, J.
This is an application for modification of the order dated
21.09.2021 passed in I.A. No.84110 of 2021 in CA. Nos.5395
5398 of 2019.
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2. The short dispute in the present matter is with regard to
the release of the mutual funds in favour of the
applicant/Respondent No.5, which are of the value of about 350
crores.
3. Earlier, by order dated 27.08.2019, this Court had given
the option to applicant/Respondent No.5 to get mutual funds
converted/encashed and the amount was to be deposited in a
fixed deposit account of a nationalized bank. The said order was
modified by this Court by a detailed order dated 16.03.2021
passed in I.A. No.100812/2020 in C.A. Nos.53955398 of 2019,
the operative portion of which is extracted below:
“10. Therefore, we modify the Interim
Order dated 27.08.2019 to the extent that the
Mutual Fund units of Respondent No.5
Applicant, kept with the Respondent No.1ISSL,
be released in favour of the Respondent No.5
Applicant by way of transfer of the said Mutual
Fund units and crediting the same in the demat
account of the Respondent No.5Applicant. This
is subject to the Applicant furnishing requisite
Bank Guarantee of equivalent value as the
Mutual Fund units, to the satisfaction of the
Trial Court. The Respondent No.5Applicant
shall comply with this requirement within one
month of filing of application for release of
Mutual Fund units (along with a copy of this
order) before the Trial Court. The Trial Court
shall also dispose of such application
expeditiously. It is clarified that the Interim
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Order dated 27.08.2019 shall continue to
operate as it was as against the other
parties/nonApplicants herein”
4. Another application, I.A. No.84110/2021, was filed
by the applicant/Respondent No.5 and this Court further
modified the earlier order on 21.09.2021, operative portion of
which reads as under:
“That instead of bank guarantee for a sum of
Rs.344.07 crore, which has been furnished by
applicant/Dalmia in terms of our order dated
16.03.2021, the applicant/Dalmia shall now
furnish a bank guarantee for a sum of Rs.100
crores and further it shall furnish a security to
the extent of Rs.300 crores of an unencumbered
asset, the value of which may be duly certified
by the Chartered AccountantcumValuer, who
have no conflict of interest having regard to the
parties involved and interest in the subject
matter and may be any one of the following.
1. PricewaterhouseCoopers Private Limited
2. Ernst and Young
3. KPMG
The bank guarantee already furnished by
the applicant/Dalmia to the extent of Rs.344.07
crores shall stand discharged on the
applicant/Dalmia fulfilling the above conditions
to the satisfaction of the Trial Court. The
applicant/Dalmia shall also file an affidavit
before this Court to the extent that the asset,
which is being furnished as security, is an
unencumbered property.”
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5. The present application, I.A. No.6482 of 2022, has been
filed by the applicant/Respondent No.5 for a further modification
of the order dated 21.09.2021, the prayers of which read as
under:
“a. Allow the present Application
seeking modification of order dated 21.09.2021
passed by this Hon’ble Court in IA No.84110 of
2021; and/or
b. Modify the order dated 21.09.2021
passed by this Hon’ble Court in IA No.84110 of
2021 in Civil Appeal No.5395 of 2019 and
direct the Chief Metropolitan Magistrate (East),
Karkardooma Courts, Delhi to return/release
the original Bank Guarantee No.
OGT0005210053201 dated 23.03.2021 of the
IndusInd Bank Limited in the sum of INR
344.07 Crores, furnished by Dalmia Cement
(Bharat) Ltd./applicant pursuant to order dated
16.03.2021 passed by this Hon’ble Court, to
the Applicant on such terms and conditions as
may be deemed fit by this Hon’ble Court; and
c. Pass such other order(s) as this
Hon’ble Court may deem fit.”
6. The submission of Shri Guru Krishna Kumar, learned
Senior Counsel appearing for applicant/Respondent No.5 is that
subsequent to the passing of the order dated 21.09.2021, a
supplementary chargesheet has been filed by the Economic
Offences Wing (hereinafter referred to as “EOW”), in which a
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clear finding against the ISSL/Respondent No.1 and
Allied/Respondent No.4 has been recorded to the extent it has
been found that “after settlement of above trades by ISSL out of
the funds of Allied, the securities fraudulently pledged by Allied
became free from collateral and ought to have been rightfully
returned to its original/rightful owner i.e. Complainant and ISSL
cannot have any claim of any nature over the said securities”
(Complainant was the applicant/Respondent No.5).
7. It has been further contended that the Serious Fraud
Investigation Office (for short ‘SFIO’) reported prima facie finding
that the buying and selling of illiquid contracts was a preplanned synchronized activity wherein the exchange platform
was used to camouflage a financial transaction. As such, the
SFIO has also recorded a clear finding that the ISSL has
fraudulently allowed movement of collaterals. It has been
submitted that although the matter is still under investigation
but prima facie view of EOW and SFIO are both clearly against
the ISSL/Respondent No.1 and Allied Financial Services Pvt.
Ltd./Respondent No.4. It is contended that the
applicant/Respondent No.5 is incurring huge expenses/costs by
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furnishing bank guarantee and the alternative provided by order
dated 21.09.2021 to furnish bank guarantee for a sum of Rs.100
Crores and further to furnish security to the extent of Rs.300
Crores of unencumbered asset is inequitable and unreasonable
in the facts and circumstances of the case, as admittedly the
securities/mutual funds belong to the applicant/Respondent
No.5, who should be given superdari of the same without
imposing any such conditions.
8. Shri K.V. Viswanathan and Shri Sidharth Luthra,
learned Senior Counsel appearing for the Respondent No.1 have
vehemently opposed the prayer for any further modification of
the order dated 21.09.2021. They have submitted that the
conditions imposed in the order dated 21.09.2021 are fully
justified. It is contended by them that though the EOW has on
09.11.2021 filed a supplementary chargesheet against
Respondents No.1 and 4 but the fulcrum of this chargesheet is
the order of the SEBI dated 02.07.2021, which was passed prior
to 21.09.2021. It is contended that though observations have
been made in the SFIO report, the same are not final as the
matter is still under investigation.
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9. Shri Pratap Venugopal, learned counsel appearing for the
SEBI and Shri Sandeep Bisht, learned counsel appearing for
Respondent No.4/Allied and Shri Rishi K. Awasthi, learned
counsel appearing for the retail investors have also opposed this
prayer for any further modification of the order dated
21.09.2021.
10. We have heard learned counsel for the parties at length
and perused the record. In our view, the subsequent
supplementary chargesheet submitted by the EOW, and relied
upon by the learned counsel for the petitioner, ought not to be
ignored while considering this matter. In its earlier orders, this
Court has clearly found that the securities need to be released in
favour of the applicant/Respondent No.5. The only question is
with regard to the mode and manner of the securities to be
furnished by the applicant/Respondent No.5. It is not disputed
that the petitioner has, in terms of the order dated 16.03.2021,
complied with the condition of furnishing bank guarantee of
Rs.344.07 Crores.
11. In paragraph 20 of this application filed by the
applicant/Respondent No.5, it is stated that the applicant is a
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public limited company, having sound financials with a strong
balancesheet and other financial statements (assets of INR
18,556 Crores and turnover of INR 8,779 Crores during financial
year 202021). The same is not denied by the other parties who
have filed their respective replies to this application.
12. Keeping in view the aforesaid facts and circumstances,
we are of the opinion that the operative part of the order dated
21.09.2021 deserves to be modified and, accordingly, the same is
modified to the extent that instead of bank guarantee for a sum
of Rs.344.07 Crores, which has been furnished by
applicant/Respondent No.5, in terms of order dated 16.03.2021,
the applicant/Respondent No.5 shall now furnish bank
guarantee for a sum of Rs.100 Crores and it shall further furnish
a corporate guarantee to the extent of Rs.300 Crores. The bank
guarantee earlier furnished by the applicant/Respondent No.5 to
the extent of Rs.344.07 Crores shall stand discharged on the
applicant/Respondent No.5 fulfilling the above condition to the
satisfaction of the Trial Court concerned.
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13. It is again clarified that any observation made in this
order shall not affect the merit of the case and the appeals will be
heard on merit.
14. With the aforesaid directions, the I.A. No.6482 of 2022 is
disposed of.
………..………………………………..J
(VINEET SARAN)
………..………………………………..J
(J.K. MAHESHWARI)
New Delhi
April 11, 2022.
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