SC Constitutes High-Powered Sale Committee To Auction Assets Of Sai Prasad Group Of Companies; Grants Interim Bail To Directors
The Supreme Court has constituted a High-Powered Sale Committee (“HPSC”) to auction the immovable assets of Sai Group of Companies, to the extent they are required to satisfy the investors’ claims and liquidate all other statutory liabilities of the Companies.
The Court appointed Justice S. Ravindra Bhatt, Former Judge, Supreme Court as the Chairperson of HPSC.
The Court also granted interim bail (accused in many FIRs) to its directors to facilitate the sale and disbursement process.
The Bench of Justice Surya Kant and Justice KV Viswanathan observed, “Since SEBI with its bona fide pursuits to liquidate the assets and generate funds to satisfy the claims of investors, has already auctioned some of the assets, it has taken a very fair stand through its learned Senior Counsel, agreeing to the constitution of a High-Powered Sale Committee (hereinafter, “HPSC”) to auction the immovable assets of the companies, to the extent they are required to satisfy the investors’ claims and liquidate all other statutory liabilities of the Companies. In this regard, the Petitioners, as well as SEBI, have submitted their comprehensive notes of suggestions to work out the modalities… Keeping these exceptional and peculiar circumstances in view, we deem it fit to invoke our powers under Article 142 of the Constitution of India, so as to do complete justice between the parties and hence, constitute the HPSC comprising of the following: Hon’ble Mr. Justice S. Ravindra Bhatt, Former Judge, Supreme Court of India – Chairperson…”
Senior Advocate Vinay Kumar Garg appeared for the Petitioners whereas Senior Advocate Garima Prasad appeared for the Respondents.
The Petitioners, who are family members, are the Directors of Sai Prasad Properties Ltd.. The Petitioners also floated various other companies, known as the Sai Group of Companies, i.e.: (i) M/s Sai Prasad Properties Ltd. (“SPPL”); (ii) M/s Sai Prasad Foods Ltd. (“SPFL”); (iii) M/s Sai Prasad Corporation Ltd. (“SPCL”); and (iv) M/s Shree Sai Space Creations Ltd. (“SSSCL”).
SEBI received a complaint alleging illegal mobilisation of funds by SPFL, which is one of the companies of Sai Prasad. the Whole Time Member of SEBI (“WTM”) issued an interim order-cum-show cause notice, inter alia, directing SPFL and its Directors to refrain from collecting any more money from investors, under the existing schemes or any new schemes.
SEBI, once again passed an order against SPFL and its Promotors/Directors, restraining them from collecting any money from the investors, launching or carrying out any Collective Investment Schemes, and alienating/disposing/selling any of the assets of the Company, except for the purpose of refund to its investors.
SEBI received a letter from the Registrar of Companies, Goa, Daman & Diu informing that upon inspection conducted under Section 209A of the Companies Act, 1956, it was found that SPPL had been accepting investments from their associates for a period of 4 to 9 years and had also been executing joint venture agreements. SEBI was then requested to take appropriate action against SPPL for violating Section 11AA of the SEBI Act, 1992.
After various other complaints and upon investigation, SEBI found a prima facie violation of Section 11AA (2) of the SEBI Act, consequently, an interim order-cum-show cause notice was issued, directing SSSCL, another company, and its Directors to abstain from collecting any money from the investors and from launching or carrying out any Collective Investment Schemes.
WTM further directed SSSCL to wind up the existing Collective Investment Schemes, refund the monies collected by it under such schemes and submit a compliance report including the trail of funds claimed to be refunded, bank account statements indicating the refunds to investors, and replies from the investors acknowledging such refunds. In addition, proceedings under Chapter VI-A of the SEBI Act, 1992 were also initiated, and an Adjudicating Officer was appointed to inquire into the violations.
Various FIRs were also registered against the Petitioners and they were subsequently arrested. Most of these FIRs were registered under Sections 406, 420 and 34 of IPC read with Sections 3, 4, 5, 6 and 10 of the Prize Chits Act and Section 3 of the Maharashtra Protection of Interest of Depositors (in Financial Establishment) Act, 1999 (“MPID Act”).
Considering the facts and circumstances of the case, the Court while invoking its power under Article 142 of the Constitution, instituted the HPSC to auction the immovable assets of the companies, to the extent they are required to satisfy the investors’ claims and liquidate all other statutory liabilities of the Companies.
The HPSC will comprise six members and may, at its discretion, associate A Chartered Accountant; a Civil Engineer; an Architect; or any other expert.
The Court directed, “The HPSC shall: (i)Firstly, obtain all property documents/original title deeds and other relevant records from the SEBI/EOW/MPID Court, Mumbai and Sub-Registrars of different States, where the properties of M/s Sai Prasad Group of Companies are located; (ii)A database of the property documents, along with material details, shall be created; (iii) Arrangements shall be made for safe storage, digitalisation, and unique number marking of the property documents/original title deeds and other jewellery items; (iv) In this regard, SEBI with the help of Stock Holding Document Management Services Ltd., will provide the necessary facilities;…”
Further, the HPSC shall take necessary steps to ensure that all the properties are shown to be entrusted/encumbered in its favour in the State Government land records and shall appoint a pool of Certified Valuers to evaluate the Company's assets in each State.
As regards the liquidation process, the Court ordered, “We hereby confer and vest all the powers of a Civil Court in the HPSC for taking necessary actions to speed up the liquidation of the Companies' properties; The HPSC, with the help of experts, will prepare a list of properties already sold under the supervision of the MPID Court, Mumbai, as well as a separate list of the properties that are yet to be sold; The HPSC will engage/appoint e-auction service providers for auctioning of the assets; Similarly, expert agencies may be empanelled for the valuation of the assets for initiating the public auction process and its advertisement; The final decision regarding the disposal of the assets shall be at the complete discretion of the HPSC and once the sale is made the property shall vest in the buyer, free from all encumbrances.”
The Court also laid the process for the refund of the investors, and duties and obligations to be carried out by the Petitioners. The Court fixed the honorarium of the HPSC and other remunerations.
The Court directed, “The States of Chhattisgarh, Maharashtra, Madhya Pradesh, Rajasthan, Uttar Pradesh and Haryana are hereby directed through their Chief Secretaries and Financial Commissioners (Revenue), to extend full cooperation and provide complete assistance as may be required by the HPSC for the purpose of execution and fulfilment of the assigned task. There must not be any delay on their part to comply with the instructions as may be received from the Chairperson of the HPSC…Similarly, the Directors General of Police of the above-mentioned States are directed to provide assistance, if so required for the purpose of securing and protecting possession of the properties of the Companies.”
Cause Title: Balasaheb Keshawrao Bhapkar & Ors. v. (Securities and Exchange Board of India & Ors. (Neutral Citation: 2024 INSC 525)
Appearances:
Petitioners: Senior Advocate Vinay Kumar Garg, AOR T. R. B. Sivakumar, Advocates Rajendra Singhvi, Shrikant Mishra and Arundhati Chakraborty.
Respondents: Senior Advocate Garima Prasad, AOR Prashant Singh, Advocates Sharanya Sinha, Harshita Nigam.