Thread by @GSLChambers

The Karnataka High Court will shortly resume the hearing on plea challenging validity of Regulations 39 to 41 of #SEBI (Mutual Fund) Scheme, 1996 relating to winding up on MF schemes.

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The bench will today hear the Criminal writ petition transferred from Chennai.

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Adv. Nithyaesh Natraj is advancing arguments on behalf of the Petitioner.

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Complaint already submitted to EOW on 11.05.2020
Hence, compliance of section 154(3) is complete.

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Bench: Is EOW a police station as under the meaning of Cr.P.C?

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Advocate Rajgopal S R for Respondent/ EOW -
Yes, EOW is a police station.

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Advocate Rajgopal we have forwarded the complaint to SEBI as the complaint of the Petitioner does not come under the ambit of EOW.

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Advocate Natraj: The petitioner appeared before the EOW on 19.06.2020 and submitted various documents to the EOW.

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Advocate Natraj: The petitioner appeared before the EOW on 19.06.2020 and submitted various documents to the EOW.

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Bench: Has the EOW sent any communication to the petitioner/ complainant that FIR cannot be registered?

Advocate Rajgopal: We will check

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Bench: Is EOW a police station or not?

Advocate Natraj: Yes it is as per GO-1657.

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Bench: In case EOW has already forwarded the complaint to SEBI, so can this court go into the veracity of that communication and set aside that communication?

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Advocate Rajgopal: The said communication has been forwarded to the Petitioner that the case connot be registered by EOW on 19th.

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Advocate Natraj: My petition is for registration of FIR under section 5 of the Tamil Nadu Protection of Interests of Depositors Act, which is a stand-alone act.

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There is no legal bar for SEBI to register complaint (On the basis of complaint of petitioner) as SEBI is also a stand alone enactment.

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Bench: Is your submission from yesterday that unit holder is the principal and AMC its agent?

Yes, as there is a principal agent relationship.

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Advocate Rajagopal produces the communication in which EOW has recorded that complaint of the petitioner has been forwarded to SEBI, Chennai.

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Now after hearing the arguments in the criminal petition, court is proceeding to arguments of the Impleadment application filed before the Gujarat High Court.

Arguments to be addressed by Advocate Puneet Jain.

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Advocate Jain: SEBI act is a statutory act and SEBI has been formed for the protection of the investors but they are actually doing some other things.

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The manner in which SEBI has acted has not worked in the interets of the investors.

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Legal notices, complaints sent to SEBI, however no reply has come from SEBI.

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The winding up action has converted the open ended scheme into a close ended scheme.

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Under SEBI act there is no provision of making any complaint to SEBI.

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So any complaint sent to SEBI is taken as a representation and then SEBI takes suo-moto action upon the same.

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If SEBI deals with the matter, then there is scope of any appeal against the same and neither the same in amenable to civil jurisdiction of courts.

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Conjoint reading of section 15(i), 15(t), 15(y) of SEBI act, the jurisdiction of civil court is barred which entails that any and every action can only be taken by SEBI.

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There is no complaint mechanism under the SEBI act.

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As a result of section 15(j)(b) SEBI can alone look into the violations in capital market and therefore, SEBI alone can adjudicate upon the same without the intervention or participation of the complainant.

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So SEBI ought to have looked after the interest of the invertors, which it has not done.

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Principle of "Parens Patriae" is applicable in the present matter.

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SEBI has been made the face of the investors as per the principle of Parens Patriae.

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The scheme of the act is that investors cannot approach civil courts unless and until SEBI passes any order.

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If SEBI fails to act, then constitutional court shall have the jurisdiction to look into the matter.

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SEBI in pursuance of winding up order of FT in its letter dated 07.05.2020 directed FT to make endeavours to pay the unit holders.

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As per the SEBI act, SEBI does not have power to issue advisories, hence the letter dated 07.05.2020 shall be treated as directory.

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And non compliance of the same shall be punishable under section 25(a).

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Circular dated 20.05.2020 of SEBI allowing selling of securities on the stock exchange, which entails the fact that the scheme was still continuing.

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Schemes under winding up on par with close ended scheme or a segregated portfolio which is contrary to interest of investors.

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Bench to further hear the arguments on the impleadment application in the Writ Petition before the Gujarat High Court tomorrow at 10:30 AM.

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