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TMI Blog2021 (3) TMI 1280X X X X Extracts X X X X X X X X Extracts X X X X ..... deed, we find it imperative to note that we do not wish to express any opinion on the merits of the allegations made by the parties against each other at this stage. There are some merit in the Applicant s contention that if they are compelled to encash the Mutual Fund units at this juncture, they would be deprived of increase in value of the securities. The Courts must adopt a pragmatic approach in such matters which touch upon high value commercial assets. At the same time, if it is subsequently proved that the Applicant was indeed hands in glove with Respondent No. 4 Allied, the other parties should not be left remediless. Hence, looking to the facts and circumstances, we find that the ends of justice would be served if the Mutual Fund units are released to the Respondent No. 5Applicant subject to provision of appropriate guarantee. The interim order is modified to the extent that the Mutual Fund units of Respondent No. 5-Applicant, kept with the Respondent No.1- ISSL, 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.5-Applicant. This is subject to the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uences explained, we are inclined to pass the following interim directions: 1. The National Security Clearing Corporation Limited will honour F O Segment contract which had matured on 27th June, 2019 and has not been paid in view of the interim order passed by this Court on 26th June, 2019 in I.A. No. 91268/2019 in Civil Appeal No. 5104-5105/ 2019. The interim order is vacated, clarifying that the payments would be without prejudice to the rights and contentions of all the parties and subject to the final outcome and directions that this Court would pass. 2. Option is given to Novjoy Emporium Private Limited, OCL India Limited and Dalmia Cement East Limited to ask for conversion/sale/encashment of the mutual funds which were purportedly furnished as a security by Allied Financial Services Private Limited. Similar option is also given to 44 parties who had preferred Appeal No. 257/2019 before the Securities Appellate Tribunal, Mumbai. 3. On the option being exercised, IL FS Securities Services Limited shall convert/encash the mutual funds, and the amount realised would be deposited in a fixed deposit in a Nationalised Bank for a period of six months to earn maximum inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges that the show cause notice evidences ISSL s active participation in the fraud committed by Allied. vi. On 12.11.2019, EOW filed a chargesheet against inter alia ISSL and Allied under Sections 406/420/467/468/471/120B/34 IPC in the court of the Learned Chief Metropolitan Magistrate, Karkardooma (East), Delhi (hereinafter Trial Court ). As per the findings in the abovementioned chargesheet, Allied and ISSL allegedly colluded with each other and fraudulently transferred the Mutual Fund units from the demat accounts of OCL and DCEL to their own accounts and related entities by forging the signatures of the authorized signatories of OCL and DCEL on 66 Delivery Instruction Slips. vii. On 13.12.2019, the Trial Court took cognizance against inter alia Allied and ISSL and issued summons. Thereafter, the Applicant herein preferred an application under Section 457/451 of the Code of Criminal Procedure, 1973 (hereinafter CrPC ) before the Trial Court seeking release of possession of stolen Mutual Fund units on superdari as its rightful owner during pendency of the trial. However, ISSL filed objections to the said application contending that the said application was not maintainab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances warranting modification of the Interim Order. In fact, ISSL has itself filed a complaint before the EOW which has now culminated into an application under Section 156(3) of the CrPC before the Magistrate. That on perusal of such application, it is apparent on the face of the record that the Applicant herein was complicit in the fraud committed by Allied in the transfer of the subject Mutual Fund units to ISSL. It has been further contended that Allied and the Applicant herein had a private arrangement wherein the subject Mutual Fund units were provided by the Applicant to Allied as a loan for the purpose of generating income through fees/consideration/ commission in affiliate companies of the Applicant. Therefore, the custody/ownership of the Mutual Fund units are the subject matter of investigation and trial. Pending adjudication of the question of fraud, the present Application ought not to be allowed and is liable to be dismissed in limine. 7. The learned senior counsel for Respondent No. 4Allied, Mr. Ranjit Kumar, learned counsel for the 44 Retail Investors, Mr. Keshav Mohan and learned senior counsel for the appellantSEBI, Mr. Chander Uday Singh have also each res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o note that we do not wish to express any opinion on the merits of the allegations made by the parties against each other at this stage. Nevertheless, we understand the Applicant s concern that the value of the Mutual Fund units is likely to appreciate over time. This Court in the Interim Order had envisaged the deposit of the Mutual Fund units with Respondent No. 1 ISSL for a maximum period of six months. However, at the time of passing of the Interim Order, it could not have been contemplated by this Court that a pandemic situation would arise in the near future. The same has considerably delayed hearing of the Accompanying Appeal, and consequently the resolution of the case. We find some merit in the Applicant s contention that if they are compelled to encash the Mutual Fund units at this juncture, they would be deprived of increase in value of the securities. The Courts must adopt a pragmatic approach in such matters which touch upon high value commercial assets. At the same time, if it is subsequently proved that the Applicant was indeed hands in glove with Respondent No. 4 Allied, the other parties should not be left remediless. Hence, looking to the facts and circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08.2019 shall continue to operate as it was as against the other parties/non- Applicants herein. With these observations and directions, this I.A. stands disposed of. It is, however, made clear that any observations made hereinabove would not affect the merits of the appeals as we have considered the case only with regard to the disposal of the present Application and have not gone into the questions raised in the main appeals. <!--[if gte mso 9]> <![endif]--><!--[if gte mso 9]> Normal 0 false false false EN-US X-NONE <![endif]--><!--[if gte mso 9]> ..... X X X X Extracts X X X X X X X X Extracts X X X X
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