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TMI Blog2018 (3) TMI 1293X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 3. A perusal of the impugned order would show that it has been passed by the Recovery Officer in exercise of powers conferred upon him under Section 20A (1) (b), 11 (2) (i) (a) of the Security and Exchange Board of India Act, 1992 (in short, the SEBI Act) read with Section 226 and Second Schedule of the Income Tax Act, 1961. 4. The basis for passing the impugned order is order of the Securities and Exchange Board of India is Board (in short "Board") dated 21.06.2013. The reason as to why the Board proceeded to pass said order is broadly as follows: - 4.1 It appears that a company by the name: Alchemist Infra Reality Ltd. (for short "Alchemist") had launched collective investment scheme via which moneys in excess of `1087 crores were collected from investors as on March 2011. The Board found fault both with Alchemist and its Directors and accordingly by order dated 21.06.2013 issued a slew of directions. These directions were issued by the Board in exercise of powers vested in it under Section 19 read with Sections 11 and 11 (B) of the SEBI Act as well as Regulations 65 and 73 of the SEBI (Collective Investment Schemes) Regulations, 1999 (in short "1999 Regulations"). The oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the money collected with returns which were due to the investors as per terms of the offer made to them. The time frame given for this purpose was three months which was to commence from the date of its order. In addition to the aforesaid, other directions were also issued with which I am not presently concerned, though they have been extracted hereinabove. 5.1 More importantly, Alchemist and its Directors which included the petitioner were restrained from accessing the security market and were prohibited from buying, selling or otherwise dealing in securities market till all the collective investment schemes were wound up by Alchemist and all moneys mobilized via such schemes were refunded to its investors with returns due against them. 6. Insofar as the operative directions are concerned, there is difference of view as between the petitioner and the respondents as to what is the scope, effect and ambit of those directions. The difference, to put it precisely, emanates from directions contained in paragraph 50 (b) and 50 (c) of the Board's order. A close perusal of the directions contained therein would show that while Alchemist and some of its Directors, i.e., Brij Mohan Mah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner that since he was Director for some period of time, the injunction contained in paragraph 50 (c) of the order of the Board would apply to him as well, which was that he could not access the securities market and was prohibited from buying, selling or otherwise dealing in securities till all collective investment schemes are wound up and moneys refunded to the investors by the Directors mentioned in paragraph 50 (b) of the Board's order. It is, precisely, for this reason that the petitioner says that he is not aggrieved by the order of the Board. 10. On the other hand, Mr. Neeraj Malhotra, senior counsel who appears on behalf of SEBI says that this writ petition is not maintainable for the reason that the petitioner can take recourse to the alternative remedy. In this regard, learned counsel drew my attention to Section 15T of the SEBI Act and also drew my attention to Clause 11 of the Second Schedule to the Income Tax Act, 1961. Mr. Neeraj Malhotra submits as against the order of the Board, appeal lies under Section 15T of the SEBI Act and, likewise, as against the order impugned which is the order of the Recovery Officer, the petitioner could prefer objections under Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it does not meet with the grievance of the petitioner which is that before passing the impugned order of attachment, no notice as was required to be issued under Clause 2 of the Second Schedule of the Income Tax Act, 1961 was served upon him. Counsel for petitioner also relies upon Clause 3 of the very same schedule to emphasize the fact that the moratorium of 15 days provided in Clause 2 for payment dues was so sacrosanct that that no recovery proceedings could be initiated before the expiry of said time frame which commenced from the date when notice was served on the petitioner. For a greater clarity, Clause 2, 3 and Clause 11 of Second Schedule of the Income Tax Act, 1961 are extracted hereafter: - 2. When a certificate has been drawn up by the Tax Recovery Officer] for the recovery of arrears under this Schedule, the Tax Recovery Officer shall cause to be served upon the defaulter a notice requiring the defaulter to pay the amount specified in the certificate within fifteen days from the date of service of the notice and intimating that in default steps would be taken to realise the amount under this Schedule. 3. No step in execution of a certificate shall be taken until ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of or in trust for some other person, or partly on his own account and partly on account of some other person, the Tax Recovery Officer shall make an order releasing the property, wholly or to such extent as he thinks fit, from attachment or sale. (5) Where the Tax Recovery Officer is satisfied that the property was, at the said date, in the possession of the defaulter as his own property and not on account of any other person, or was in the possession of some other person in trust for him, or in the occupancy of a tenant or other person paying rent to him, the Tax Recovery Officer shall disallow the claim. (6) Where a claim or an objection is preferred, the party against whom an order is made may institute a suit in a civil court to establish the right which he claims to the property in dispute; but, subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive." 15. A close perusal of Clause 2 would show that after the recovery certificate is drawn up by the Recovery Officer for recovery of arrears, he is required to serve upon the defaulter a notice demanding the payment of money referred to in the recovery certificate. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Second Schedule of the Income Tax Act, 1961. 19. Accordingly, the impugned order is set aside giving liberty to the Recovery Officer to issue a fresh demand notice pursuant to the recovery certificate drawn up by him as required under Clause 2 of the Second Schedule of the Income Tax Act, 1961. The only caveat being is that since moneys have already been transmitted to the Board, it will retain the same in trust till such time the Recovery Officer passes a final order after issuance of notice, giving due opportunity to the petitioner to respond to the same. 19.1 In case the Recovery Officer agrees with the contention of the petitioner that in terms of the order of the Board, he could not have been characterized as the defaulter, the logical corollary would be that the Board would have to return the moneys held in trust by it. Needless to say if the Recovery Officer reaches a contrary conclusion, then, the Board would continue to hold the moneys and use the same as mandanted by law. 20. With the aforesaid observations, the writ petition is disposed of. 21. At this stage, Mr. Neeraj Malhotra, learned senior counsel advances further submissions. First, that under Section 19 the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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