2024 (7) TMI 935 - SC - SEBI

Liquidation of attached assets - time-bound public auctions - refund of the due amount to all the investors as well as various statutory, foreseen or unforeseen liabilities - Direction to SEBI to liquidate the attached assets in a time-bound manner and disburse the sale proceeds to genuine investors as early as possible - HELD THAT - The entire process in the case in hand might take more than a year, it seems to us that fixation of monthly honorarium may not be desirable. Similarly, we do not want to leave it for the learned Chairperson or members of the HPSC to fix their own honorarium as it is likely to cause embarrassment to them. Considering all these aspects in view, we issue the following directions - (i) The Chairperson of the HPSC shall be entitled to an honorarium of Rs. 2 lakhs per sitting day, when effective proceedings are held. This will be in addition to travelling, boarding and other miscellaneous expenses as may be incurred in discharging the assigned responsibilities; (ii) The learned Member, who is a former Judge of the High Court shall be entitled to an honorarium of Rs. 1.50 lakhs per sitting day, when effective proceedings are held. This will be in addition to travelling, boarding and other miscellaneous expenses as may be incurred in discharging the assigned responsibilities; (iii) The Member nominated by SEBI shall not be entitled to any remuneration since he is a full-time officer of SEBI. However, he shall be entitled to travelling, boarding, and other miscellaneous expenses as may be incurred in discharging the assigned responsibilities; (iv) The Member Secretary cum Nodal Officer of the Committee shall be entitled to an honorarium of Rs. 75 thousand per sitting day, when effective proceedings are held. This will be in addition to travelling, boarding and other miscellaneous expenses as may be incurred in discharging the assigned responsibilities; (v) Remuneration of experts like Chartered Accountant, Civil Engineer, Architect, Certified Valuer etc. shall be determined by the HPSC; and (vi) The expenditure towards honorarium, hiring of office, secretarial assistance, as well as for following the prescribed procedure of auction, etc., shall be reimbursed from the sale proceeds. The initial expenditure shall be reimbursed from the sale proceeds of the properties which have already been sold, namely, the amount which the SEBI will transfer to the Escrow Account. 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. 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. In addition, the HPSC, if so required, may deploy private guards for the protection of the properties of the Companies. SEBI and the Petitioners are also directed to extend full cooperation to the HPSC. To facilitate the sale and disbursement process and keeping in mind the period of incarceration already undergone, Petitioner Nos. 1 and 2 are directed to be enlarged on interim bail to the satisfaction of the MPID Court, Mumbai in Case No. 7 / 2016. This will be treated as interim bail in all of the FIRs. We order this on the basis of the special facts of the case, in exercise of our power under Article 142 of the Constitution of India. HPSC shall be at liberty to seek further guidelines or clarifications as may be required, for which its Member Secretary cum Nodal Officer shall be at liberty to move an appropriate application before this Court.

Summary

Issues Involved:
1. Liquidation of attached assets.
2. Distribution of sale proceeds to genuine investors.
3. Identification of genuine investors and the amount deposited by them.
4. Constitution and functioning of a High-Powered Sale Committee (HPSC).
5. Obligations of the Petitioners and their Companies.
6. Administrative and secretarial requirements.
7. Remuneration of HPSC members.
8. Cooperation from State authorities and SEBI.
9. Interim bail for Petitioner Nos. 1 and 2.

Issue-wise Detailed Analysis:

1. Liquidation of Attached Assets:
The petitioners sought directions for SEBI to liquidate the attached assets within six months or allow them to assist in the liquidation process. The Supreme Court acknowledged the complexity of liquidating properties spread across different states and the challenges faced by SEBI and the MPID Court in Mumbai. It was noted that SEBI had already auctioned some assets but faced difficulties due to various legal and logistical issues.

2. Distribution of Sale Proceeds to Genuine Investors:
The petitioners requested that SEBI distribute the amount from the liquidation to genuine investors promptly. SEBI's forensic audit revealed that the companies owed Rs. 4700 crores to investors. The Court emphasized the need for a structured approach to refunding investors and decided to constitute a High-Powered Sale Committee (HPSC) to oversee the liquidation and distribution process.

3. Identification of Genuine Investors and the Amount Deposited by Them:
The petitioners also sought to assist SEBI in identifying genuine investors and the amounts they deposited. The Court directed the HPSC to identify the number of investors and determine the refund amounts in consultation with relevant agencies and the companies.

4. Constitution and Functioning of a High-Powered Sale Committee (HPSC):
The Court constituted the HPSC to handle the liquidation of assets, comprising:
- Hon’ble Mr. Justice S. Ravindra Bhatt, Former Judge, Supreme Court of India (Chairperson).
- Dr. Justice Satish Chandra, Former Judge, High Court of Allahabad (Member).
- A nominee of SEBI (Member).
- State representatives from Chhattisgarh, Maharashtra, Madhya Pradesh, Rajasthan, Uttar Pradesh, and Haryana.
- Mr. Pardeep Kumar Sharma, Registrar (Retd.), Supreme Court of India (Member Secretary-cum-Nodal Officer).
- The Deputy Secretary, Department of Home, Government of Maharashtra (Secretary to HPSC).

The HPSC was tasked with obtaining property documents, creating a database, ensuring properties are encumbered in its favor, appointing certified valuers, and engaging e-auction service providers.

5. Obligations of the Petitioners and their Companies:
The petitioners and their companies were directed to submit details of all immovable assets and jewelry items to the HPSC and hand over original title deeds. They were also required to execute necessary sale deeds as per HPSC instructions and cooperate in resolving any pending title disputes.

6. Administrative and Secretarial Requirements:
SEBI was instructed to assist the HPSC in setting up its office, providing infrastructure, and engaging secretarial assistance. The HPSC was to open a dedicated website for auction processes and handle claims, objections, and representations. The entire process was to be concluded within one year.

7. Remuneration of HPSC Members:
The Court fixed the honorarium for HPSC members as follows:
- Chairperson: Rs. 2 lakhs per sitting day.
- Former High Court Judge Member: Rs. 1.50 lakhs per sitting day.
- SEBI nominee: No remuneration, but entitled to expenses.
- Member Secretary-cum-Nodal Officer: Rs. 75 thousand per sitting day.
- Remuneration for experts to be determined by HPSC.
Expenses were to be reimbursed from the sale proceeds.

8. Cooperation from State Authorities and SEBI:
The Court directed the Chief Secretaries and Financial Commissioners (Revenue) of the concerned states to provide full cooperation and assistance to the HPSC. The Directors General of Police were also instructed to assist in securing and protecting the properties. SEBI and the petitioners were directed to extend full cooperation to the HPSC.

9. Interim Bail for Petitioner Nos. 1 and 2:
Considering the period of incarceration already undergone, the Court granted interim bail to Petitioner Nos. 1 and 2, directing their release to the satisfaction of the MPID Court, Mumbai. This interim bail was to apply to all FIRs against them.

Conclusion:
The Supreme Court's judgment meticulously addressed the liquidation and distribution of assets, the constitution and functioning of the HPSC, and the cooperation required from various stakeholders. It aimed to ensure the timely refund of investors' money while balancing the legal and logistical challenges involved.