Securities & Exchange Board Of ... vs Crb Capital Markets Ltd & Ors.
2013 Latest Caselaw 2518 Del

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*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+ COMPANY PETITION NO. 379/2009 & CO. APPL. NO. 710/2010

      SECURITIES & EXCHANGE BOARD OF INDIA
      (TRUST PET. NO.3/1997)        ..... Petitioner

             Through:         Mr. Neeraj Malhotra & Mr. Shailendra Singh,
                              Advocates

                     versus

      CRB CAPITAL MARKETS LTD & ORS.                         ..... Respondent

             Through:         Mr. Sudhanshu Batra, Sr. Advocate with Mr.Bhuvan
                              Gugnani, Adv. for R-1, 2 & 3.
                              Ms. Francesca Kapoor, Advocate for R-4-IIT
                              Corporate Services Ltd.


      CORAM:
      HON'BLE MR. JUSTICE SUDERSHAN KUMAR MISRA

SUDERSHAN KUMAR MISRA, J.

1. Proceedings in the matter were initially commenced before the High Court of Bombay in Trust Petition No. 3 of 1997 moved by the Securities Exchange Board of India (SEBI) praying, inter alia, that respondent No.3, CRB Asset Management Company Ltd., and the respondent No.4, IIT Corporate Services Ltd., be permanently restrained from acting as an Asset Management Company and as custodian of CRB Mutual Fund or of any scheme framed by that Mutual Fund. It was prayed that an Administrator or Special Officer be appointed for respondent No.2, 3 and 4, i.e., CRB Trustees Ltd.; CRB Asset Management, and IIT Corporate Services Ltd.;

and to take charge of all the properties and assets of the said respondents, as well as the assets of mutual funds and the schemes mentioned in the petition, "for such period as this Hon‟ble Court may deem fit and proper for managing affairs of respondent No.2, 3 and 4". Other directions to respondents 2, 3 and 4 to render complete accounts as well as to hand over all records and books to the petitioner were also sought. In this regard, counsel for the petitioner clarifies that, in fact, it was intended to seek a direction to hand over records etc. to the Administrator/Special Officer whose appointment was sought by this petition. Other interim orders were also sought during the pendency of the petition.

2. Consequent upon this, and after a couple of changes, ultimately, Mr. M.L.T. Fernandes came to be appointed as Provisional Administrator of the CRB Trustees Ltd. and CRB Asset Management, respondent Nos.2 and 3 herein. Mr. Fernandes continued to function as such till his demise on 24 th February, 2012. No further arrangements have been put in place thereafter.

3. It is stated at the bar that originally, as envisaged under the Regulation 14 of the SEBI Regulations, the Mutual Fund in question, i.e., CRB Mutual Fund, was duly constituted in the form of the Trust and the instrument of Trust was in the form of a registered Deed that was executed by the sponsor, CRB Capital Markets Ltd., i.e., the respondent No.1 herein, in favour of the Trustees named in that Trust Deed. CRB Mutual Fund, as constituted, in terms of the relevant Regulations, in turn, floated the Arihant Mangal Scheme.

4. For the purpose of understanding the method by which the Mutual Fund in question has been constituted, inter alia, Regulations 14, 17 and 20 of the SEBI Regulations, 1996 are important. Regulations 14, 17 and 20 state as follows:

"14. A mutual fund shall be constituted in the form of a trust and the instrument of the trust shall be in the form of a deed, duly registered under the provisions of the Indian Registration Act, 1908 (16 of 1908), executed by the sponsor in favour of the trustees named in such an instrument.

17. (1) No trustee shall initially or any time thereafter be appointed without prior approval of the Board.

(2) The existing trustees of any mutual fund may form a trustee company to act as a trustee with the prior approval of the Board.

20. (1) The sponsor or, if so authorized by the trust deed, the trustee, shall appoint an asset management company, which has been approved by the Board under sub-regulation (2) of regulation

21. (2) The appointment of an asset management company can be terminated by majority of the trustees or by seventy-five per cent of the unitholders of the scheme.

(3) Any change in the appointment of the asset management company shall be subject to prior approval of the Board and the unitholders.

5. Counsel for the SEBI submits that, as a matter of fact, in this case also, the trustees of the mutual fund, which was constituted in terms of aforesaid Regulation 14, had formed a Trust Company to act as trustee after

obtaining prior approval in this behalf from SEBI. That Trust Company was named CRB Trustees Ltd., which has been arrayed as respondent No.2 to this petition.

6. Counsel further submits that as envisaged under regulation 20 (1), the CRB Asset Management Company came to be appointed which was duly approved by SEBI under Regulation 21(2).

7. Admittedly, the Scheme, namely, Arihant Mangal Scheme, floated by the Mutual Fund, with which this petition is concerned, was a, "close ended scheme". In other words, the period for which the scheme was to run was specified at the stage of promulgation of the scheme. The said scheme, which envisaged issuance of units at Rs.10 for cash at par with a minimum target amount of Rs.101 crores, was approved by the petitioner on 27 th May, 1994, subject to certain terms. It was open for public subscription from 19th August, 1994 and closed on 20th September, 1994. The duration of the scheme was for five years. According to both counsel, the duration was to be reckoned from 20th September, 1994, when the scheme was closed for public subscription; and, reckoned from that date, the scheme was to come to an end on 19th September, 1999.

8. This litigation has a chequered history and, at one stage, matters went up to the Supreme Court of India, which then directed the petition to be transferred to this Court, where it was renumbered as Company Petition No. 379/2009. During the pendency of these matters, the first respondent-CRB Capital Markets Ltd., being the sponsor of the scheme, had also filed a number of applications seeking various directions to the Provisional

Administrator appointed by the Bombay High Court, as aforesaid. At one stage, respondent No.1 had also sought removal of the Provisional Administrator on various grounds. Be that as it may, the fact remains that by this time, the duration of the scheme itself is over. It came to an end on 19 th September, 1999.

9. Admittedly, even according to the counsel for the petitioner, the functioning of the Scheme is regulated by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, and the procedure for winding up of a close ended mutual fund scheme, such as the instant one, is contemplated under Regulations 39 to 41 thereof. The said Regulations read as follows:

"Winding Up

39. (1) A close-ended scheme shall be wound up on the expiry of duration fixed in the scheme on the redemption of the units unless it is rolled over for a further period under sub-regulation (4) of regulation 33.

(2) A scheme of a mutual fund may be wound up, after repaying the amount due to the unit holders,--

(a) on the happening of any event which, in the opinion of the trustees, requires the scheme to be wound up; or

(b) if seventy-five per cent of the unit holders of a scheme pass a resolution that the scheme be wound up; or

(c) if the Board so directs in the interest of the unitholders.

(3) Where a scheme is to be wound up under [***] sub-regulation (2), the trustees shall give notice disclosing the circumstances leading to the winding up of the scheme:--

(a) to the Board; and

(b) in two daily newspapers having circulation all over India, a vernacular newspaper circulating at the place where the mutual fund is formed.

Effect of winding up

40. On and from the date of the publication of notice under clause (b) of sub-regulation (3) of regulation 39, the trustee or the asset management company as the case may be, shall--

(a) cease to carry on any business activities in respect of the scheme so wound up;

(b) cease to create or cancel units in the scheme;

(c) cease to issue or redeem units in the scheme.

Procedure and manner of winding up

41. (1) The trustee shall call a meeting of the unitholders to approve by simple majority of the unitholders present and voting at the meeting resolution for authorising the trustees or any other person to take steps for winding up of the scheme:

Provided that a meeting of the unitholders shall not be necessary if the scheme is wound up at the end of maturity period of the scheme. (2)(a) The trustee or the person authorised under sub-regulation (1) shall dispose of the assets of the scheme concerned in the best interest of the unitholders of that scheme.

(b) The proceeds of sale realised under clause (a), shall be first utilised towards discharge of such liabilities as are due and payable under the scheme and after making appropriate provision for meeting the expenses connected with such winding up, the balance shall be paid to the unitholders in proportion to their respective interest in the assets of the scheme as on the date when the decision for winding up was taken.

(3) On the completion of the winding up, the trustee shall forward to the Board and the unitholders a report on the winding up containing particulars such as circumstances leading to the winding up, the steps taken for disposal of assets of the fund before winding up, expenses of the fund for winding up, net assets available for distribution to the unit holders and a certificate from the auditors of the fund.

(4) Notwithstanding anything contained in this regulation, the provisions of these regulations in respect of disclosures of half-yearly reports and annual reports shall continue to be applicable 76[until winding up is completed or the scheme ceases to exist].

Winding up of the scheme

42. After the receipt of the report under sub- regulation (3) of regulation 41, if the Board is satisfied that all measures for winding up of the scheme have been complied with, the scheme shall cease to exist."

10. When the matter came to be filed by the petitioner before the Bombay High Court, the Scheme in question was extant. At that juncture, the Bombay High Court, inter alia, appointed late Sh. M.L.T. Fernandes as the Provisional Administrator of the Scheme and, therefore, from the date the first Provisional Administrator was appointed, in effect, the Provisional Administrator became responsible for the management and functioning of the said Scheme in place of the trustees of respondent No.2, i.e., CRB Trustees Ltd.

11. The matter has been heard for some time with regard to the feasibility of the matter being disposed off in its entirety with the appointment a Committee of three members to wind up the Mutual Fund Scheme in question, which had, admittedly, come to an end on 19th September, 1999, being a close ended Scheme.

12. Counsel for the SEBI states, on instructions, that, under the circumstances; and keeping in view the fact that the Scheme itself has come to an end, all that remains to be done is for the Scheme to be wound up in terms of the SEBI Regulations. Under those Regulations, respondent No.2, who was constituted as the Trustee of the Scheme in question, is responsible for winding up the same in terms of the Regulations; however,

in this case, in fact, one of the important precursors, which led to the very institution of this petition, were communications received by the petitioner from the Directors of the aforesaid Trust Company, i.e., respondent No.2 herein, that they had resigned from the Board of that Company. Notwithstanding the fact that their resignations were not accepted by the Board of the Company, it is, however, undeniable that all the Directors were now reluctant to carry out their duties; and their reluctance has been communicated to SEBI in around middle of the year 1997, i.e., nearly 16 years ago. Furthermore, on the application of the SEBI alleging that the interests of all the beneficiaries / unitholders of the Scheme, including their interests in securities etc. that have been purchased by the fund, required protection, inter alia, because the aforesaid directors of the Trust Company were uninterested in functioning; the affairs of the mutual fund were also placed by the Court in the hands of a Provisional Administrator from 3 rd June, 1997 onwards. In other words, from 3rd June, 1997 onwards, the entire administration and functioning of the scheme was placed beyond the purview of the respondents under the direct control of a Provisional Administrator answerable to the court before which he was bound to file regular reports.

13. Regulation 39, which has been reproduced above, provides for the winding up of Mutual Fund schemes. Sub-clause (1) thereof postulates that a close ended scheme, such as the one at hand, shall be wound up on expiry of the duration fixed in the scheme on the redemption of the units. Also Regulation 41, which is titled, "Procedure and Manner of Winding Up", and which has also been reproduced above, shows that while in the case of an

open ended scheme, the trustee is obliged to call a meeting of the unitholders for authorizing the trustees or, "any other person", to take steps for winding up the scheme; however, such a meeting is not necessary if the scheme is wound up at the end of its maturity period, i.e., it is a close ended scheme, such as the one at hand. Further, sub-regulation 2(a) of the same Regulation mandates that the trustee or the person authorized under sub-regulation (1) shall dispose off the assets of the scheme in the best interest of the unitholders of that scheme. From this, a logical inference can, therefore, be drawn that although, in a close ended scheme which has to automatically be wound up at the end of its maturity period, no meeting of the unitholders as contemplated under Regulation 41(1) need be called; however, the obligation to wind up the scheme in the manner provided remains. The manner provided in regulation 41(1) is obviously that it can be wound up either by the trustees or, by "any other person".

To put it differently, in the case of an open ended scheme, two decisions are required in connection with its winding up. First, a decision to wind up a scheme is required to be taken in terms of any one of the three sub-clauses of Regulation 39(2); thereafter, a further decision will also be required under Regulation 41(1) to authorize either the trustees, or, "any other person" to carry out the process of winding up. However, in case of a close ended scheme which automatically comes to an end on its date of maturity, the first decision to wind it up is not necessary; and all that is required is that the process of winding up has to be carried out on the expiry of the duration fixed in the scheme itself in terms of Regulations 39(1) and

41. This being the case, the only difference between the two types of

schemes is that whilst the open ended scheme requires a positive decision to be made to wind it up; no such decision is required in the case of a close ended scheme. However, to my mind, the obligation created under the Regulations as regards the procedure and manner of winding up would not vary notwithstanding the fact that in terms of the proviso to Regulation 41(1), in the case of a close ended scheme, the meeting of unitholders envisaged in the said Regulation to approve by simple majority, a resolution for authorizing the trustees, "or any other person", to take steps for winding up of the scheme, is not required. It cannot be read to mean that, "any other person" can only be authorized to take steps to wind up the scheme as an alternative to the trustees taking the same steps, only in the case of an open ended scheme alone. There seem to be no earthly reason to read the provision in such a way. To my mind, even in the case of a close ended scheme, where no decision is required to be taken separately for winding up the scheme, the same options as regards the process that may be put in operation for securing the winding up should be available to all schemes. It, therefore, follows that in the case of a close ended scheme also, it would be within the powers of the trustees to authorize, "any other person", to take steps for winding up of the scheme. In the instant case, since the trust company and the trustees are no longer functioning; and the court has taken over its functioning by the appointment of the Provisional Administrator in the circumstances aforesaid; to my mind, that decision now falls within the purview of the Court.

14. Therefore, looking to the special circumstances in this case, and keeping in mind the fact that a Provisional Administrator appointed by the

Court has been looking after the management and administration of the Scheme ever since the year 1997; the fact that the last Provisional Administrator, Sh. M.L.T. Fernandes, has passed away in February 2012; and there also is no trustee available to administer the scheme; and with a view to doing complete justice in the matter which has been pending in the courts for the last 16 years; and as prayed for by counsel for both parties; it would be in the fitness of thing if matters are now brought to a close with this Court constituting a special committee to carry out the functions of the Trustee and to proceed to wind up the Scheme in terms of the aforesaid Regulations 41 and 42 of the Securities Exchange Board of India (Mutual Funds) Regulations, 1996, with full power to act in this behalf in a manner similar to that of regularly constituted trustees, as contemplated under the said Regulations. This would include the power, inter alia, to dispose off all the securities of Arihant Mangal Scheme, presently lying with respondent No.4, IIT Corporate Services Ltd., and all other securities, wherever they may be; and to distribute the sale proceeds thereof to all the unitholders at the Net Asset Value (NAV), which is to be ascertained by the committee after following the prescribed procedure in terms of provisions of the aforesaid SEBI (Mutual Funds) Regulations, 1996.

15. Consequently, a Committee is now constituted, consisting of Sh. S.C. Das, Ex Executive Director, SEBI (suggested by counsel for the petitioner); Sh. M.D. Kanther, (suggested by counsel for the respondent No.1); and Sh. S.K. Tandon, retired Additional District Judge, Delhi, who shall be the Chairman of the Committee. Since this Committee is being put in place to carry out the work of the trustees, it is noteworthy that its composition also

meets the requirements of Regulation 16(5) of the SEBI Regulations prescribing the composition of the Trustees. Regulation 16(5) states as follows:

"Two-thirds of the trustees shall be independent persons and shall not be associated with the sponsors or be associated with them in any manner whatsoever"

16. During the course of hearing, and after examining the question of premises for the Committee at length, all parties agreed that the Committee would require some premises measuring about 1000-1500 sq. ft. The ex- management of respondent No. 1 has agreed to provide the services of a minimum of three dealing assistants; one peon and one stenographer to the Committee, to begin with. It would, of course, be open to the Chairman of the Committee to request the respondent/ex-management for the staff to be either increased or decreased, as he deems fit. All other necessary equipment in the form of computers, printers, stationery etc. shall also be made available by the ex-management. In this context, Counsel for the ex- management informed the Court that they have obtained premises at 201, II Floor, Priyadarshini Vihar, Delhi-110092 measuring 1300 sq. feet at a rent of Rs. 45,000/- per month. Counsel for SEBI states that since the premises are stated to be commercial premises, he does not have any objection to this.

17. To enable the aforesaid Committee to carry out its functions, the complete records lying at the office of the erstwhile Provisional Administrator, Late Sh. M.L.T. Fernandes, be transferred from Mumbai to Delhi at a place and time convenient to the Chairman of the Committee.

The other modalities of the transfer may be finalized by the Chairman himself in consultation with the parties and members of the Committee.

18. Under the circumstances, therefore, and for the removal of any doubts, the Committee is empowered to take all or any of the following steps:

(i) Transfer the records from Mumbai office of the erstwhile Provisional Administrator to its own office at Delhi.

(ii) Reconstitute the Board of CRB Asset Management Co. Ltd. and CRB Trustees Ltd.

(iii) Appoint a Custodian to carry out the custodial services of the assets of Arihant Mangal Scheme of CRB Mutual Fund (hereinafter called the Scheme) and for de-materialization of the securities held by CRB Mutual Fund.

(iv) Appoint a SEBI registered Registrar and Share Transfer Agent for maintaining the records of the unit holders and for de- materialisation of securities in place of M/s. Sharex Dynamic India Pvt. Ltd.

(v) Appoint SEBI registered Stock Broking Firm.

(vi) To open Demat account with a SEBI registered Depository Participant.

(vii) To open one or more Bank accounts, as required, with two signatories.

(viii) Dispose of the assets of the scheme at the best available market price and in the best interest of the unit holders of the Arihant Mangal Scheme.

(ix) Appoint Statutory Auditors of M/s CRB Asset Management Company Limited and M/s CRB Trustee Limited as required under Section 224 of the Companies Act, 1956.

(x) The proceeds realized from the sale of assets of the scheme be first utilized towards discharge of such liabilities as are due and payable under the scheme including the making of appropriate provision for meeting the expenses connected with its winding up. The balance shall thereafter be paid to the unit holders in proportion to their respective interest in the assets of the scheme.

In this context, counsel for SEBI submits that his client‟s decision to move the Court was, inter alia, predicated on the abandonment of their duties by all the trustees of the trust company, namely, CRB Trustees Ltd., respondent No. 2 herein, which ultimately led to the appointment of the Provisional Administrator; and which also obliged his clients, i.e. SEBI, to provide funds to the tune of Rs. 10 Lacs for establishment and administrative expenses. Under the circumstances, the sum of Rs. 10 Lacs, which is stated by counsel for SEBI to have been paid by

SEBI to the Provisional Administrator appointed by the Bombay High Court, for meeting the establishment and administrative expenses be reimbursed to SEBI in the first instance from the proceeds realised by the Committee after the sale of the securities. Counsel for the ex-management also has no objection to this.

(xi) The balance remaining in the hands of the Committee after deducting all other expenses shall be paid to the unit holders in proportion to their respective share to the units held by them under the scheme.

(xii) As agreed by all counsel, including counsel for SEBI, the Committee shall also compute the Net asset value of Arihant Mangal Scheme, according to the relevant rules and regulations, and publish the same in at least two daily newspapers at intervals of not exceeding one week.

(xiii) Compute and carry out valuation of investments made in Arihant Mangal Scheme.

(xiv) Wind up the „Arihant Mangal Scheme‟ of CRB Mutual Fund as per SEBI Mutual Fund Regulations.

(xv) File Audited Annual Accounts as required under Section 220 of the Companies Act, 1956, Annual Returns as required under Section 159 read with Section 161 of the Companies Act, 1956 of

M/s CRB Asset Management Company Ltd. and M/s CRB Trustee Ltd. before the Registrar of Companies.

(xvi) Maintain statutory records, Registers, Forms, Returns etc. as are required to be maintained under the following Sections of the Companies Act, 1956.

             (i)     Register of Investment under Section 49.
             (ii)    Register of Members under Section 150.
             (iii)   Index of Members under Section 151.
             (iv)    Annual Returns under Section 159.
             (v)     Books of Accounts under Section 209.
             (vi)    Register of Contracts under Section 301.

(xvii) File Income Tax or any other Returns, Forms etc. of CRB Asset Management Company Limited and CRB Trustee Limited as required under Section 139 and other applicable Provisions of the Income Tax Act, 1961.

(xviii) File appeal, revisions against ex-parte orders passed by Income Tax, SEBI and/ or any other statutory authority in relation to CRB Trustee Ltd. and CRB Asset Management Co. Ltd.

(xix) Obtain internal audit reports at regular intervals from independent auditors appointed by the Committee.

(xx) Hold meeting of Committee as may be deemed fit and proper.

(xxi) Maintain records of the decisions of the Committee at their meetings and of the minutes of the meetings.

(xxii) On the completion of the winding up, it shall forward to the SEBI and the unit holders a report on the winding up containing particulars such as circumstances leading to the winding up, the steps taken for disposal of assets of the fund before winding up, expenses of the fund for winding up, net assets available for distribution to the unit holders and a certificate from the auditors of the fund.

19. As regards CRB Asset Management Company Ltd., which was arrayed as respondent No. 3 in the petition moved by SEBI before the Bombay High Court, the said respondent was appointed as an Asset Management Company in terms regulations 20, 21 and 22 of the SEBI (Mutual Fund) Regulations, 1996. As required under regulation 20(2) thereof, SEBI had granted approval to the said company in terms of regulation 21(2) which was subject to the terms and conditions mentioned in Regulation 22 thereof. Regulations 20(2) and 20(3) provide that the appointment of an Asset Management Company, such as respondent No. 3, can be terminated either by majority of the trustees or by 75% of the unitholders of the scheme and further, that any change to the appointment of the Asset Management Company shall be subject to prior approval of SEBI as well as unitholders. Admittedly, the trustees of the trust company have expressed their disinclination to discharge their duties as such more than 17 years ago. At the same time, there is no gainsaying the fact that the

petitioner, Securities Exchange Board of India (SEBI) has been constituted with the object of protecting the interest of investors and to regulate the securities market and/or matters connected therewith or incidental thereto, and to that extent, is interested in safeguarding the interest of the unitholders of the scheme. In these circumstances, counsel for SEBI as well as counsel for the ex-management of respondent No. 1 company i.e., the sponsor, are agreed that the interest of all stakeholders is best served by termination of the appointment of the aforesaid CRB Asset Management Company, i.e. respondent No. 3 herein. This Court also feels that upon consideration of all the facts and surrounding circumstances, and since a special committee has been appointed to wind up the scheme, the appointment of the aforesaid CRB Asset Management Company be terminated. However, as regards the liabilities of that company, its directors and officers, the provisions of Regulation 25(6) are relevant. It states as follows:

"Notwithstanding anything contained in any contract or agreement or termination, the asset management company or its directors or other officers shall not be absolved of liability to the mutual fund for their acts of commission or commission, while holding such position or office."

It is, therefore, made clear that the termination of appointment of respondent No. 3 by this Court does not absolve the company, its directors or other officers of liability to the mutual fund for their acts of commission or omission, if any, that may come to light. It is ordered accordingly.

20. Furthermore, keeping in mind the special circumstances, and the fact that the matter has remained sub judice; as well as the administration by

successive Provisional Administrators appointed by the court, which had effectively divested the management over the control of the affairs of the respondent companies as well as of the mutual fund, it would be manifestly unjust to visit the ex-management of the respondent companies with any penalties or sanctions for non compliance with any statutory obligations during the period the matter has been sub judice and the affairs of mutual fund have been under the control and supervision of the Administrator and the court exclusively.

Under the circumstances, therefore, a general direction is issued to the Income Tax Authority, Registrar of Companies; or any other statutory authority to the effect that all the sanctions or adverse orders passed against any of these respondent companies or their employees, directors etc. shall stand withdrawn.

21. It is, however, made clear that as regards any claim in respect of respondent No.2 and 3, of any statutory authority, or any liabilities with regard to the period before the appointment of the Provisional Administrator; it would be open to the authorities to proceed as per law, whilst at the same time, it would be open to the respondent Nos.2 and 3, their directors and officials to take the defence on facts that they were either unable or prevented from compliance due to intervening orders of the court. Such a plea, if taken, will be duly considered.

22. Securities pertaining to the Arihant Mangal Scheme are stated to be lying with respondent No. 4, IIT Corporate Services Ltd. The said respondent has also moved Co. Appl. No. 710/2010. In this application, IIT

Corporate Services Ltd. has sought discharge from acting as the custodian of the securities pertaining to the Arihant Mangal Scheme held in the name of CRB Trustees Ltd. account CRB Mutual Fund and to move all records and share certificates etc. pertaining to that scheme from its office; and to surrender the same to the "Provisional Administrator/Official Liquidator".

23. Looking to the circumstances and the fact that by this order, a separate committee for winding up the affairs of the Arihant Mangal Scheme has been appointed, it would be in the fitness of things to direct the Committee acting through its Chairman to also take charge of the aforesaid securities pertaining to the scheme which are lying with the custodian, IIT Corporate Services Ltd., i.e. respondent No. 4 herein, after proper verification and inventorisation to be carried out at the premises of respondent No. 4 with the requisite cooperation of the said respondent. For this purpose, considering the importance of the matter, the Chairman shall depute both the members of the Committee to go to Bombay. After the proper inventorisation, the said records may be shifted by the committee to its own premises at Delhi from where it shall be functioning in terms of this order.

24. Counsel for the aforesaid IIT Corporate Services Ltd. states that her client‟s only desire is that these records be removed from their office as early as possible so that valuable space does not remain tied down, and that they do not have any further claims in this regard. It is, therefore, made clear that nothing further is to be paid by either the Committee or the ex-

management or anyone else for that matter, to respondent No. 4 on any account.

Prior intimation shall be given to respondent No. 4, IIT Corporate Services Ltd. as well as to counsel Mrs. Francesca Kapur (Chamber No. 131, Delhi High Court, New Delhi), for all further steps proposed to be taken in this regard by the Committee.

25. In addition to the above, the Committee is also authorized to carry out certification of securities transacted during the period 22.05.1996 to 22.05.1997 after laying down the certification procedure and giving due publicity in two newspapers. While laying down a certification procedure, the Committee shall also keep in mind the procedure laid down by the Bombay High Court. The Committee is fully empowered in this behalf to seek information, summon records and seek verification of facts, on affidavits or otherwise, as it may think fit, from any person or Authority. Keeping in mind the relevant circumstances, the Committee is at liberty to seek transfer of all funds that were deposited by Reliance Infrastructure Ltd. which have been mentioned in the separate orders passed by this Court disposing off Co. Appl. No. 1145/2009 and 1941/2010; which funds are now lying with the Registrar of this Court along with all accrued interest; to a Bank Account to be opened by the Committee for this purpose. It would be open to the Committee to direct disbursement of the same to the party found entitled to the same after completion of the certification process, along with any further amounts that may have been deposited or accrued by way of interest thereon.

Since the committee is being empowered to carry out the aforesaid certification procedure with a view to satisfying the object of the interim orders passed by the Bombay High Court instituting such a procedure on 22.01.1999, which was amended on 4.5.1999, the Committee is requested to proceed with this work along with the process of winding up at the outset itself, in parallel with its other work and make every endeavour to complete this process within six months.

26. It would also be open to the Committee to appoint any Advocate or any other expert, if it considers it necessary for more effectively carrying out its functions; and for also approaching the court from time to time, if it is so advised, for any clarification/ modification/ directions that may be necessary for effective winding up of the scheme.

It is expected that the Committee shall move with sufficient despatch since the matter is very old and a large amount of money of small investors is also involved. Both counsel feel that with the Committee members meeting about 3-4 times a week, the work of the Committee is likely to be completed within a year. The Chairman of the Committee shall be paid a fee of Rs. 1,00,000/- per month and each member shall be paid Rs. 75,000/- per month. It shall be open to the Chairman to recruit administrative staff and fix a reasonable compensation in this regard commensurate to the work to be done. The term of the Committee is fixed at 12 months from today. It is also expected that the staff made available to the Committee by the respondents or recruited by it, shall render service at least eight hours a day

and 5 days a week. Reliable records in this regard be also kept. The Committee shall also file quarterly interim reports before this Court.

27. The petition as well as Co. Appl. No. 710/2010 stand disposed off.

SUDERSHAN KUMAR MISRA, J.

MAY 29, 2013 rd