Mohd. Tanveer Ahmed And Others vs Securities And Exchange Board Of India And Others

Tarun Agarwala, Presiding Officer

In view of the order of Supreme Court in Suo Moto Writ Petition (Civil) No. 3 of 2020 dated March 23, 2020, March 8, 2021, April 27, 2021 and January 10, 2022, the delay in the filing of the appeal is condoned. The Misc. Application no. 614 of 2022 in Appeal no. 340 of 2022 is allowed.

Both the appeals have been filed against the common order dated February 5, 2021 passed by the Whole Time Member (“WTM” for convenience) of the Securities and Exchange Board of India (“SEBI” for convenience) directing the appellants to refund the money received from its clients/ investors as fee on account of carrying investment advisory activities without getting itself registered under Section 12(1) of the Securities and Exchange Board of India Act, 1992 (“SEBI Act, 1992” for convenience) read with regulation 3 of the SEBI (Investment Advisers) Regulations, 2013 (“IA Regulations 2013”).

The appellants were further debarred from accessing the securities market till the expiry of three years from the date of completion of refund to the investors. Further, other directions were also issued.

The facts leading to the filing of the present appeal is, that the appellants started their investment advisory activities from the year June 2015 onwards. A complaint was received by SEBI from an investor who alleged that the appellants had assured high profits and after the money was transferred the company was neither replying nor providing any records for the payments made.

Based on the investigation, it was observed that the appellants were engaging and providing investment advisory services without obtaining a certificate of registration from SEBI and were also promising assured returns to the investors.

Accordingly, an interim order dated November 28, 2018 was passed issuing a slew of directions directing the appellants to cease and desist from acting as an investment advisor and not to divert any funds or dispose of or alienate any assets. The appellants were also directed to withdraw the advertisements, representations, literatures, brochures with regard to their activities and were also restrained from accessing the securities market. By the interim order the appellants were directed to show cause as to why the services offered by the appellants should not be held as an investment advisory services in terms of the IA Regulations, 2013 and their advisory activities should not be treated as an unregistered activities in violation of Section 12 of the SEBI Act. The show cause notice also directed the appellants to show cause why the amount of money collected by them should not be refunded to the investors.

The WTM after considering the reply has passed the impugned order holding that the activities carried out by the appellants were investment advisory services and the appellants were not registered under Section 12 of the SEBI Act read with Regulation 3 of the IA Regulations, 2013. The WTM further held that the activities carried out was providing an assured return which was wholly illegal and, consequently, directed the appellants to refund the amount within three months.

We have heard Shri Asit Singh, the learned counsel for the appellant and Mrs. Rathina Maravarman, the learned counsel for the respondent.

We find that admittedly, the appellants were carrying out advisory services without getting themselves registered under the SEBI Act and its Regulations. The activities that the appellants were carrying out were thus unlawful. The appellants are thus liable to refund the amount collected by them to the investors. The direction given by the WTM does not suffer from any error of law.

We find that the controversy involved in the present appeal is squarely covered by a decision of this Tribunal in Eprofitzone Fincap Consultant Private Limited & Ors. vs SEBI (Appeal no. 490 of 2022 decided on August 25, 2022), Shri T. Prabhu vs SEBI (Appeal no. 1019 of 2022 decided on January 3, 2023) and Murugan Deivendran vs SEBI (Appeal no. 309 of 2022 decided on November 16, 2022).

For the reasons stated aforesaid, the appeals lack merit and are dismissed.

This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges.