Securities Appellate Tribunal
Mr. Hanif J. Siwani And Anr. vs Sebi on 29 May, 2018
Author: J. P. Devadhar
Bench: J. P. Devadhar
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision: 29.05.2018
Misc. Application No. 43 of 2018
And
Appeal No. 44 of 2018
1.Mr. Hanif J. Siwani H.M. Geneva House, 14, Cunningham Road, Bangalore, Karnataka - 560052.
2. Mr. Maheboob J. Siwani H.M. Geneva House, 14, Cunningham Road, Bangalore, Karnataka - 560052. .....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. Mr. Ajay Tyagi The Chairperson, Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051.
3. Shri G. Mahalingam The Whole Time Board Member, Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051.
4. Ms. Madhabi Puri Buch The Whole Time Board Member, Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051.
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5. Mr. D.V. Shekhar The General Manager & Recovery Officer, Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ......Respondents Ms. Ankita Chatterjee, Advocate i/b Siddiquee and Associates for Appellants.
Mr. Gaurav Joshi, Senior Advocate with Tomu Francis and Mr. Vivek Shah, Advocates for Respondents.
CORAM : Justice J. P. Devadhar, Presiding Officer Dr. C. K.G. Nair, Member Per : Dr. C.K.G. Nair, Member (Oral) Misc. Application No. 43 of 2018:-
By this Misc. Application appellants seek condonation of 3 days delay in filing Appeal No. 44 of 2018. For the reasons stated in the Misc. Application, the delay is condoned. Accordingly, Misc. Application is disposed of with no order as to costs.
Appeal No. 44 of 2018:-
1. This appeal has been filed to challenge the order of the General Manager & Recovery Officer of Securities and Exchange Board of India ('SEBI' for short) dated December 28, 2017 whereby the request of the appellants for refund of the Earnest Money Deposit ('EMD' for short) given to SEBI for participating in e-auction has been rejected. 3
2. Facts relevant to the matter are as follows:-
(a) Appellants are in the business of real estate as a residential and commercial developer in Bangalore functioning since 1991.
Pursuant to a recovery proceedings initiated by SEBI against Parasrampuria Plantations Ltd. SEBI issued e-auction sale notice in its website on December 22, 2016 relating to three properties situated at (1) Village - Belpada, Taluka - Alibaug, Dist. Raigad, (2) Village - Sakurli & Dehane, Taluka - Shahpur, Dist. Thane and (3) Village - Dehane, Taluka - Shahpur, District, Thane. Further, on December 30, 2016 SEBI published the e-auction sale notice in Times of India and Loksatta. SEBI arranged an inspection of the said three properties, related documents and any other clarification relating to them on January 23, 2017. This date was also indicated in the notice of sale. On February 3, 2017 separate bids for the three properties were submitted by the appellants along with the EMD and a declaration to the effect that the terms and conditions of the notice of sale in respect of the three properties have been read and accepted by the appellant;
(b) The e-auction was to take place on February 8, 2017 between 10:30 am and 11:30 am. However, the appellants did not participate in the e-auction and on February 8, 2017 appellants sent a communication to SEBI indicating their non- participation in the e-auction since they were not interested to buy the properties as the same were not suitable for industrial purpose as they are mangroves. Therefore, they requested 4 SEBI to refund their EMD. SEBI, in response, on February 23, 2017, informed the appellants that as per the terms and conditions of the notice of sale only if a higher bidder is available refund of EMD to the unsuccessful bidder would be made. Accordingly, in respect of one property at Belpada since a higher bidder was available EMD shall be refunded. However, in respect of the other two properties since the appellants were declared as the highest bidder they were directed to pay the remaining amount also stating that if the remaining amount is not paid the EMD for those two properties shall be forfeited in accordance with law. Following a few further communications to SEBI reiterating their request for refund of EMD, on November 4, 2017 appellant send a legal notice to SEBI calling upon SEBI to refund the two EMDs of Rs. 12,60,000/- and Rs. 8,64,700/-. Appellants were afforded an opportunity of personal hearing by SEBI on December 4, 2017 vide SEBI's letter dated November 29, 2017. Vide letter dated November 30, 2017 appellants raised a preliminary objection regarding the jurisdiction of SEBI to hear the appellants and decide the matter. However, on December 4, 2017 advocate for the appellants along with their Chief Financial Officer attended the personal hearing. Thereafter, on December 28, 2017 impugned order was issued by General Manager & Recovery Officer of SEBI rejecting the request for refund of the two EMDs of Rs. 12,60,000/- and Rs. 8,64,700/-.
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3. Ms. Ankita Chatterjee, learned counsel appearing on behalf of the appellants submitted that in the e-portal hosted by SBI Capital Markets Ltd. which conducted the e-auction on behalf of SEBI, the nature of property type had been given as "industrial lands / plots." However, later on actual verification, it was found by the appellants that the properties were actually agricultural lands in the form of mangroves. Therefore, the e-auction details were not correctly given and hence the appellants were misguided and therefore they are not in a position to take possession of the properties. She further submitted that prior to bidding they could not visit the properties but they relied on the e-auction details and submitted the bid documents to SEBI on February 3, 2017. Subsequently, on actual site visit the appellants found that the lands/plots are agricultural lands/plots and hence did not participate in the e-auction held on February 8, 2017. Therefore, since SEBI has misguided the appellants they are entitled to receive the EMD which has been rejected by the impugned order. Therefore, the impugned order is not sustainable in law. On a specific query as to why appellants did not visit the properties before submitting their bids along with depositing substantial amount of EMD, learned counsel for appellants could not provide any reasonable explanation.
4. Shri Guarav Joshi, learned senior counsel appearing on behalf of SEBI explained the details of the e-auction process and the documents which are provided to the public for submitting bids and participating in the e-auction. SBI Capital Markets Ltd. has been engaged by SEBI since a long time and from June 13, 2012 ABC Procure of e-Procurements Technologies Ltd. ('ABC' for short) was engaged by SBI Capital Markets Ltd. as an e-auction service provider. Neither in the e-auction sale notice issued by SEBI in their website on December 22, 2016 nor in the e-auction sale notice 6 published by SEBI in the newspapers on December 30, 2016 in the description of lands/plots it was indicated that they were industrial lands/plots. In fact, along with e-auction sale notice all details of the lands along with conditions of tender-cum-e-auction, bid form, declaration form; general guidelines to bidders etc. were also given. Property details were also part of these documents. It is only in the document given by the ABC that the words "industrial lands/plots" appeared. This may be due to some automatic features provided by this platform. However, since no other documents indicated in any manner that the properties were industrial lands/plots and in any case appellants were expected to inspect the properties and all the documents relating to the properties prior to submitting their expression of interest and EMD and the appellants for inexplicable reason did not do the same despite SEBI organizing such an inspection on January 23, 2017 appellants cannot claim ignorance of the nature of property and withdraw their application for bidding at a later stage. Moreover, audit trail of the e-procurement site indicates that appellants had downloaded the terms and conditions and all other relevant documents prior to submitting their bids along with EMD on February 3, 2017.
5. Learned senior counsel for SEBI further submitted that the notice for sale also stated that "potential bidders should make their own independent enquiries regarding the encumbrances, litigations, attachments, acquisition liabilities of the property, title, survey number/plot number and claim/rights/dues etc. in respect of the properties put on auction, prior to submitting their bid. The auction advertisement does not constitute and will not be deemed to constitute any commitment or any representation of SEBI/the Agency. The properties are being sold with all the existing and future encumbrances, whether known or unknown to SEBI/the Agency. 7 SEBI/the Agency shall not be responsible in any way for any third party claims/rights/dues, etc and the notice also clearly show that all properties are auctioned on "as-is- where-is" basis. The learned counsel also relied on the order of the Apex Court in the matter of Punjab Urban Planning and Development Authority and Others vs. Raghu Nath Gupta and Others, (2012) 8 Supreme Court Cases 197 regarding the meaning of 'as-is- where- is' basis.
6. We do not find any merit in the submissions made by appellants. The facts recorded in para 2 and 3 above clearly indicate that it was incumbent on the appellants to verify the documents and do a site inspection before participating in the bid process. Appellants are not able to furnish any convincing reason as to why they could not do so; the only argument of appellants is that in the e-auction platform of ABC engaged by SBI Capital Markets Ltd. property type was indicated as "industrial lands/plots". However, the entire documentation made available by SEBI through their notices dated December 22, 2016 and December 30, 2016 did not make any indication that the lands were industrial. It was also made clear that the e-auction-cum-sale notice in respect of these properties was the result of attachment proceedings against Parasrampuria Plantations Ltd. which was supposed to be in the business of plantations rather than industrial constructions. The appellants are not ignorant of real estate business as they themselves are in the real estate business since 1991. We agree that the e-auction site of ABC did not correctly portray the type of land but we do not agree that the appellants entered into the bid process only based on this information. Therefore, having accepted the terms and conditions of the e-auction-cum-sale notice of SEBI issued with complete documentation on December 22, 2016 and December 30, 2016 by SEBI and nowhere in these 8 documents there has been any indication that the properties were industrial lands/plots and because the terms and conditions, inter alia, stating that EMD will be paid back to only unsuccessful bidders, were accepted by the appellants, we find no fault in the Recovery Officer's order whereby the request for refunding the EMD to the appellants was rejected. However, we also direct SEBI to ensure that their outsourced agencies should furnish correct and full information in future.
7. Accordingly, appeal is dismissed with no order as to costs.
Sd/-
Justice J.P. Devadhar Presiding Officer Sd/-
Dr. C.K.G. Nair Member 29.05.2018 Prepared and compared by:msb