Securities Appellate Tribunal
Mrs. B.V. Pushpavathi & Ors. vs Sebi on 5 July, 2021
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved on: 28.06.2021
Date of Decision : 05.07.2021
Misc. Application No. 483 of 2020
(Urgent Hearing)
And
Misc. Application No. 484 of 2020
(Condonation of Delay)
And
Misc. Application No. 201 of 2021
(Production of additional documents)
And
Appeal No. 468 of 2020
1.Mrs. B.V. Pushpavathi, W/ o Mr. D.H. Jayanna R/o Sri Vinayaka Nilaya, A Block, 3rd Main, Sharavathi Nagara, Shivamogga - 577201.
Karnataka.
2. Mr. S. Sundrarajan, S/o P. Swaminathan, R/o B 1401, Purva Swanlake, Kelambakkam, Chennai - 603103. Tamilnadu.
3. Mrs. Indumathi C. W/o Balavikram B. No.275-A-3, S.M.V. Nest, 5th Main, K.R. Garden, Murugeshpalya Bengaluru - 5600 17, Karnataka.
4. Mrs. Sudha Banakar, W/ o B. Shekarappa.
R/o No.481, "Saraswathi", 2 9th Cross, Rashi Residency, Magadi Main Road, Kadabagere (Post), Bengaluru North - 562130. Karnataka.
5. Mr. Deepak Kumar, S/o Tejpal Singh, R/o Flat No.106, H Block, "Prateek Laurel", Sector- 120 Noida, Gautambudh Nagar District - 201 301. State of Uttar Pradesh.
6. Dr. Gangadhar S. Umrani S/o Shankar G. Umarani, R/o Ganga Hospital, Mayur School Road, Gokak- 591307, Belgaum District, Karnataka.
7. Mrs. Geetha R. W/o R. Ramamurthi, R/o Flat No.A-406, Ecolife Eon, Balagere Road, Varthur, Bengaluru - 560087, Karnataka.
8. Mr. Kailasapathy Raman S/o K.P.K. Raman R/ o No. 91, Isha, Signature Villas, Veerathamman Kovil Street, Perumbakkam., Chennai- 600100, Tamilnadu.
9. Mrs. Padma Priya W/o Mani Ganapathi Ramachandran No. 206, Deccan Enclave, 72, T.M. Maistry Street, Vannanthurai, Chennai -600041, Tamilnadu.
10. Mr. Sadashiv V. Pujari S/o Vishwanath R/ o 116, Sri Sadashiv Krupa, 28th Cross, 12th Main, BSK 2nd Stage, Bengaluru- 560070, Kamataka.
11. Mrs. Ritu Khandelwal W/o Sharad Khandelwal 3 R/o No.509, Benaka Towers, 16th 'D' Main 2nd Cross, HAL 2nd Stage, Bengaluru - 560008. Karnataka.
12. Mr. Sirajulla Ghouse Khan S/o Late Ghouse Khan R/o No.l9, Gulmohar, Flat No.302, Rangojirao Road, Basavanagudi, Bengaluru - 560004, Kamataka.
13. Mr. Amith Kumar Singhvi S/o Gajendra Singhvi, R/o # C 3045, D.L.F. Westend Heights D.L.F. New Town, Akshaynagar, Begur Hobli, Bengaluru - 560 068 Karnataka.
14. Mr. Yogeesh Kumar S/o Kamalaksha Shettigar No.l28, Dream Meadows, Brook Field, Near Ryan Intemational School, Kundanahalli, Bengaluru - 560037 Karnataka.
15. Mr. Bhagwan G Belani S/o Late. G.B. Belani R/o No.51, Shiv Shakthi, 2nd Cross, T.P. Venugopal Layout, Ganganagar, Bengaluru- 560032, Karnataka.
16. Mrs. Devineni Rajyasree W/o Devineni V.S.K. Rangarao R/ o Flat No.327, Road No.25, Jubilee Hills, Hyderabad- 500033. Telangana.
17. Mr. M. Ramadoss S/o D. Muthukrishnan R/ o 246, 4th Cross, 1st Stage, 2nd Block, BDA Layout, Nagarabhavi, Bengaluru- 560072, Karnataka.
18. Dr. Pandya Rajendra S/o Late. R.B. Pandya R/o 3556, 9th Main, BSK 2nd Stage, Bengaluru- 560070, Karnataka.
419. Ms. Sai Lakshmi Sathyanaryana D/o Sathyanarayana R/o No.349/8, 7th Floor, 8th Cross, Satya Naivas, Wilson Garden, Bengaluru - 560027, Karnataka.
20. Mr. Mohammed Tafseeruddin S/o Mohammed Zahiruddin # C- 1102, Salarpuriya Serenity Apartments, 5th Main Road, 7th Sector, HSR Layout, Bengaluru-560 102, Karnataka.
21. Mrs. Padmaja Totakura W/o Venkata Rangam Totakura Flat No.109, Samhitha Maruthi Homes, Chinnappanahalli, Marathahalli, Bengaluru- 560 037, Karnataka.
22. Mr. Ajay Kumar S.H. S/o S.N. Hiriyanna R/ o No.l71, Opperetelaan, 3543BP Utrecht, Netherland.
23. Mr. Abdul Shakeel Chisty S/o Late. Abdul Razack R/ o No.672, 6th 'C' Main, 3rd Phase, J.P. Nagar, Bengaluru- 560 078, Karnataka.
24. Mr. Saravana Barani. S S/o R. Srinivasan R/o Apartment No.302, "Krishvi LaPalma", 68 Jogupalya Main Road, Opp: Corporation Ground, Ulsoor, Bengaluru - 560008, Karnataka.
25. Mrs. Soubhagya Latha Gopiraju W/o Phani Kotamraju R/o 45A, Percival Road Rugby, United Kingdom, CV22 5JT.
26. Mr. A.R. Venkata Subramanyam S/o A.S. Ramachandra Chetty 5 # 104, North Block, Sapthagiri Nivas, 8, 28th A Main, Annayappa Reddy Layout, J.P. Nagar fith Phase, Bengaluru - 560078, Karnataka.
27. Mr. K. Anji Reddy Konatham S/o Late. K. Venkata Reddy R/o No.21 , Crescent Seven Hills NSW 214 7, Sydney, Australia.
28. Mr. R. Jaffer Khan S/o T.A. Rasheed Khan R/o Plot No. l-B, Mancholai First Main Road, Kalaimagal Nagar, Ekkattu Thangal, Chennai - 600 032. Tamilnadu.
29. Mr. Chinnaiyan Thirumalai S/o Mr. Chinnaiyan Chettiar R/o Block Jade, Flat Flat No.11 C, Olympia Opaline, 33 Rajivgandhi Salai, Navalur, Chennai, Kancheepuram District, Tamilnadu- 603103.
30. Mrs. Lakshmi W/o Nataraj R/o No.49-301, 9th Cross, Kempaiah Layout, Guddadahalli, Hebbala, Bengaluru- 560 032, Karnataka.
31. Smt. Nalam Vimala @ Vimala Nalam W/o Bala Gangadhar Nalam R/o No.13-112, Ravella Hotel Lane, Piduguralla, Guntur District-522413 Andhra Pradesh.
32. Mrs. M.G. Meenakshi, W/o Ramachandraiah, R/o No.3, Sagar 1st Sagar Coconut Garden, 1st Main Road, Chalukyanagar, Nagarbhavi Main Road, Bengaluru - 560072, Karnataka.
33. Mr. Amith Kumar V. V. Pujari S/o Vishwanath 6 R/o 116, Sri Sadashiv Krupa, 28th Cross, 12th Main, BSK 2nd Stage, Bengaluru- 560070, Karnataka.
34. Mr. Manikandan Muthuswamy S/o Muthuswamy Sundara R/o Unit 24, 131-133, Jersey Street North, Asquith, Sydney, Australia.
35. Mr. Sujan Sanisetty S/o Nageswara Rao, R/ o P 248, 9th Main, 11th Cross, LIC Colony, Jeevanbhima Nagar, Bengaluru- 560 075. Karnataka.
36. Mr. Muhammad Talha S/o Late Shafeeq Easa R/ o No.202, Elegant Smith, 17 Harris Road, Benson Town, Bengaluru - 560 046, Karnataka.
37. Mr. Ajay Ashish S/o Mit Lal Gope R/o C-001, Euphoria Apartment, Ashwini Layout, Egipura, Bengaluru - 560 04 7, Karnataka.
38. Mr. Bhagya Prasad S.H. S/o Sitaram K.H. R/ o No.2464, 24th Main, BSK II Stage, Bengaluru- 560070. Karnataka.
39. Mr. Hijas M. S/o Ismail P.A. # T2A 503, Godrej Woodsman Estate Hebbal, Bengaluru - 560024 Karnataka.
40. Mr. Krishnaraj Bonagiri S/o Gopalappa Bonagiri # Ramashraya Stationary Mart, Market, Dharawad - 580001 Karnataka.
741. Mr. Subramani Kannappan S/o N. Kannappan 4323 Torres Ave, Fremont, CA, USA, 94536.
42. Mrs. P. Revathi W/o S. Suresh Kumar # 0005, Wama Ibbanee, 76, Kasavanahalli Main Road, Bengaluru- 560 035. Karnataka.
43. Mrs. Kavitha Sheshadri W/o M.V. Sheshadri R/o # 602, Dheeraj Valley, Building No.2 A, Sai Baba Complex, Goregaon (E), Mumbai-400063, Maharashtra.
44. Mr. Prabhakar Kini S/o M. Gopal Kini Rio# Bl202, Mantri Gardens, 1st Block, Jayanagar, Bengaluru - 560 011, Karnataka.
45. Mr. Rinku Jacob Raju S/o Dr. E.C. Raju R/ o # Elengikkal, Ayamanam P.O. Kottayam - 686015 Kerala.
46. Mr. Kovur Sudhakar S/o Late. Kovur Ramaiah Setty R/o No.15/824, Kamalanagar, Anathapuramu Town and District. Andhra Pradesh.
47. Mr. Mohammed Ayub S/o Abdul La tiff, Ramaiah Setty R/o Plot No.11, 11th Cross, Bharathinagar, Vayalur Main Road, Trichy - 6200 17. Tamilnadu.
48. Mr. Sivakrishna Jayavaram S/o Narasimhulu Jayavaram R/o No.12, 2nd Cross, Akkamma Block, Dinnur Main Road, R.T. Nagar, Bengaluru - 560032, Karnataka.
849. Mr. Rajath Ramakrishna Holla S/o K.J. Ramakrisha R/o No.3, 1st floor, 3rd Cross, Nehrunagar, Bengaluru- 560020, Karnataka. ..... Appellants Versus
1. Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051.
2. The Manager, Securities and Exchange Board of India, Bengaluru Local Office, 2nd Floor, Jeevan Mangal Building, No.4, Residency Road, Bengaluru - 560 025. Karnataka.
3. M/s. Puravankara Ltd.
(Formerly known as Puravankara Projects Ltd.) Registered Office at No.l30/ 1, Ulsoor Road, Bengaluru - 560 042.
Karnataka. ... Respondents Mr. B. Shekarappa, Advocate for Appellants.
Mr. Pradeep Sancheti, Senior Advocate with Mr. Mihir Mody, Mr. Arnav Misra and Mr. Mayur Jaisingh, Advocates i/b K Ashar & Co. for Respondent No. 1.
Ms. Kunjal Patil, Advocate i/b. King Stub and Kasiva for Respondent No. 3.
CORAM : Justice Tarun Agarwala, Presiding Officer Justice M.T. Joshi, Judicial Member Per : Justice Tarun Agarwala, Presiding Officer 9
1. The present appeal has been filed against the communication dated June 15, 2020 and July 6, 2020 whereby the complaint of the appellants were disposed of on the SCORES platform. The respondent no. 3, M/s.
Puravankara Ltd. is a real estate company and had entered into a joint development agreement dated October 19, 2006 with the land owner for developing / constructing office space on the land in question. Subsequently, the respondent no. 3 obtained permission to construct office space project building from the Bengaluru Development Authority in the year 2013.
Respondent no. 3 in the year 2014 launched a monthly rental scheme inviting investors to buy 650 sq. ft. of office space by investing in Rs. 43 lakh. Based on the scheme, the appellants entered into an agreement for sale to buy 650 sq. ft. of office space on the 4th floor of the project. Subsequently, a sale deed was executed in the year 2015 between the appellants and the respondent no. 3. Further, lease deed, lease management agreement, maintenance agreement and declaration-cum-
undertaking and other documents were also executed. In 2016 the respondent no. 3 informed the appellants that the office space was given for sub-lease to a tenant on a monthly rent.
102. It transpires that some dispute arose with regard to the rent under the rental agreement based on which a legal notice dated February 23, 2020 was issued requiring Securities and Exchange Board of India ('SEBI' for short) to take appropriate action. Thereafter, a complaint dated April 2, 2020 was issued. In this complaint it was alleged that the respondent no. 3 had violated the Collective Investment Scheme (CIS) under the SEBI Act, 1992 and SEBI (Collective Investment Scheme) Regulations, 1999 ('CIS Regulations' for short). It was alleged that as per the terms and conditions of the agreement for sale, lease deed, lease management agreement etc. the scheme initiated by the respondent no. 3 constituted a CIS under Section 11AA of the SEBI Act.
3. The respondent SEBI after examining the complaint and all the relevant documents disposed of the complaint holding that the respondent no. 3 had not violated Section 11AA of the SEBI Act or the CIS Regulations. The SEBI in the impugned communication held as follows:-
i. The contribution of each investor has culminated into conveyance of immovable property being undivided office space and there is a separate registered sale deed for each of the investors.11
ii. The investors are holding the property in joint possession as per the property records and they have right to seek separate possession and also right to sell the property to any third party.
iii. The company has stated that few of the investors have also sold their units acquired subsequently.
iv. The investors are paying property tax and maintenance charges.
v. The investors also have the right to mortgage the property and many of them have availed loans for the investment by mortgaging the said property.
4. We have heard Shri B. Shekarappa, the learned counsel for the appellants, Shri Pradeep Sancheti, the learned senior counsel for respondent no. 1 SEBI and Ms. Kunjal Patil, the learned counsel for respondent no. 3.
5. The appellants contended that a fraud was played by the respondent no. 3 and that a perusal of the agreement for sale will indicate that it was nothing but a CIS. In this regard, the learned counsel has invited our attention to various clauses of the agreement for sale based on which it was contended that the order of SEBI was incorrect and requires reconsideration.
126. Having heard the learned counsel for the parties, we are of the opinion that in order for a scheme to come under a CIS it must satisfy the four ingredients of Section 11A(2) of the SEBI Act, namely:-
(i) the contributions or payments made by investors, by whatever name called, are pooled and utilized solely for the purpose of such scheme or arrangement;
(ii) the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable, from such scheme or arrangement;
(iii) the property, contribution or investment forming part of the scheme or arrangement, whether identifiable or not, is managed on behalf of investors;
(iv) the investors do not have day to day control over the management and operation of the scheme or arrangement.
7. In the present case, we have gone through the memo of appeal and other documents referred in the memo of appeal.
We have also perused the agreement for sale and we do not find anything to indicate any of the conditions existing which could lead to an inference that the respondent no. 3 had floated a CIS. In our view the respondent no. 3 scheme was not in a nature of CIS and therefore we are of the opinion that 13 the complaint of the appellants were rightly disposed of by the authority of SEBI. We find that in the instant case pursuant to an agreement for sale a sale deed was executed and ownership was transferred. The appellants are in joint possession of the property and are absolute owners of their investment. We do not find that the respondent no. 3 had assured any return of the investments made by the appellants.
We are of the opinion that in the instant case none of the four conditions as stipulated under Section 11A(2) of the SEBI Act are existing. Prima facie, it appears that the dispute between the appellants and the respondent no. 3 is in respect of the non-receipt of the rent as per the agreed terms of the lease and the sub-lease of the agreement which is outside the purview of SEBI.
8. For the reasons stated aforesaid, we do not find any error in the impugned communication. The appeal is dismissed with no order as to costs.
9. The present matter was heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor a certified copy of this order could be issued by the registry. In these circumstances, this order will be digitally signed by the Private Secretary on 14 behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Parties will act on production of a digitally signed copy sent by fax and/or email.
Justice Tarun Agarwala Presiding Officer Justice M.T. Joshi Judicial Member 05.07.2021 RAJALA Digitally signed by RAJALAKSHMI KSHMI HDate:
NAIR msb 2021.07.08 H NAIR 10:31:12 +05'30'