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Issues Involved:
1. Authority of State to seal business premises. 2. Compliance with SEBI regulations. 3. Legality of collective investment schemes. 4. Petitioners' right to operate business and bank accounts. Issue 1: Authority of State to Seal Business Premises The petitioners challenged the respondent State's authority to seal their business premises, arguing that the State had no legal basis for such action. The petitioners' counsel contended that the company was engaged in real estate business, not non-banking finance business, and had been exonerated by the Circle Officer, Ramgarh in 2012. However, the district administration raided and sealed the office without prior notice in February 2013. The State justified the action u/s 94 of the Cr.PC, citing complaints and the need to protect investors. The court found that the State acted within its authority due to the complaints and the public notice by RBI about illegal deposit acceptance. Issue 2: Compliance with SEBI Regulations SEBI argued that the petitioners were operating a collective investment scheme without registration, violating the SEBI Act, 1992. SEBI had issued a show-cause notice in November 2012, which the petitioners responded to inadequately. SEBI's findings indicated that the petitioners' schemes involved pooling of resources, profit expectations, and management by the company, fitting the definition of a collective investment scheme u/s 11AA of the SEBI Act. The court noted SEBI's ongoing inquiry and directed SEBI to conclude it within six weeks. Issue 3: Legality of Collective Investment Schemes The court examined SEBI's findings that the petitioners' schemes were collective investment schemes requiring registration, which the petitioners lacked. SEBI's analysis of documents showed that the petitioners accepted contributions for land development without allotting specific plots, managed the land on behalf of investors, and pooled resources, indicating a collective investment scheme. The court referenced the Supreme Court's judgment in P.G.F. Ltd v. Union of India, which upheld the constitutionality of section 11AA of the SEBI Act and imposed costs for frivolous litigation. Issue 4: Petitioners' Right to Operate Business and Bank Accounts The petitioners sought to unseal their premises and operate their bank accounts, arguing that no interim or final order from SEBI restrained their activities. SEBI countered that allowing the petitioners to operate would enable continued violations. The court, considering SEBI's findings and the need to protect investors, refused to unseal the premises. However, it directed SEBI to conclude its inquiry within six weeks, allowing the petitioners to challenge any adverse orders in appropriate forums. Conclusion: The court dismissed the writ petition, upholding the State's authority to seal the premises due to investor protection concerns and SEBI's findings of regulatory violations. The court directed SEBI to complete its inquiry promptly, allowing the petitioners to seek legal recourse against any adverse decisions.
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