Judgment sc-2013-6-32-85

A disclose that PGF Limited under the guise of sale and development of agricultural land in units of 150 sq. yrds. i.e. 1350 sq. ft. and its multiples offered to develop the land by planting plant, trees etc., and thereby the customers were assured of a high amount of appreciation in the value of the B land after its development and attracted by such anticipated appreciation in land value, which is nothing but a return to be acquired by the customers after making the purchase of the land based on the development assured by the PGF Limited, part . with their monies in the fond hope that such a promise would c be fulfilled after successful development of the bits of land purchased by them.

52Copy pinpoint52. The above conclusion of ours can be culled out from the sample documents placed by the appellants before the Court. The appellants, however, failed to supply any material till date to demonstrate as to how and in what manner any of the lands said to have been sold to its customers were developed and thereby any of the customer was or would be benefited by such development. It is imperative that the transaction of the PGF Limited vis-a-vis its customers has necessarily to be examined as to its genuineness by subjecting itself to the statutory requirement of registration with the second respondent followed by its monitoring under the regulations framed by the second respondent. All the above factors disclose that the activity of sale and development of agricultural land propounded by the PGF Limited based on the terms contained in the application and the agreement signed by the customers is nothing but a scheme/arrangement. Apart from the sale consideration, which is hardly 1/3rd of the amount collected from the customers, the remaining 2/3rd is pooled by the PGF Limited for the so called development/improvement of the land sold in multiples of units to different customers. Such pooled funds and the units of lands are part of such scheme/ arrangement under the guise of development of land. It is quite apparent that the customers who were attracted by such schemes/arrangement invested their monies by way of

P.G.F. LIMITED & ORS. v. UNION OF INDIA 81 [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.] contribution with the fond hope that the various promises of the A PGF Limited that the development of the land pooled together would entail high amount of profits in the sense that the value of developed land would get appreciated to an enormous extent and thereby the customer would be greatly benefited monetarily at the time of its sale at a later point of time. It is B needless to state that as per the agreement between the customer and the PGF Limited, it is the responsibility of the PGF Limited to carry out the developmental activity in the land and thereby the PGF Limited undertook to manage the scheme/arrangement on behalf of the customers. Having regard c to the location of the lands sold in units to the customers, which are located in different states while the customers are stated to be from different parts of the country it is well-neigh possible for the customers to have day to day control over the management and operation of the scheme/arrangement. In D these circumstances, the conclusion of the Division Bench in holding that the nature of activity of the PGF Limited under the guise of sale and development of agricultural land did fall under the definition of collective investment scheme under Section 2(ba) read along with Section 11 AA of the SEBI Act was perfectly justified and hence, we do not find any flaw in the said conclusion.

53Copy pinpoint53. We, therefore, hold that Section 11AA of the SEBI Act is constitutionally valid. We also hold that the activity of the PGF . Limited, namely, the sale and development of agricultural land squarely falls within the definition of collective investment scheme under Section 2(ba) read along with Section 11AA (ii) of the SEBI Act and consequently the order of the second respondent dated 06.12.2002 is perfectly justified and there is no scope to interfere with the same. In the light of our above conclusions, the PGF Limited has to comply with the directions contained in last paragraph of the order of the second respondent dated 06.12.2002. We also hold that while ensuring compliance of the order dated 06.12.2002, the second respondent shall also examine the claim of the PGF Limited H

82 SUPREME COURT REPORTS [2013] 6 S.C.R.

A that it had stopped its joint venture scheme as from 01.02.2000 is correct or not by holding necessary inspection, enquiry and investigation of the premises of the PGF Limited in its registered office or any of its other offices wherever located and also examine the account books other records and based B on such inspection, enquiry and investigation issue any further directions in accordance with law. Whatever amount deposited by the PGF Limited pursuant to the interim orders of this Court relating to joint venture scheme shall be kept in deposit by the second respondent in an Interest Bearing Escrow Account of c a Nationalized Bank. The second respondent shall also verify the records of the PGF Limited relating to the refund of deposits of the customers who invested in the joint venture schemes and ascertain the correctness of such claim and based on such verification in the event of any default noted, appropriate further action shall be taken against the PGF Limited for settlement 0 of the monies payable to such of those investors who participated in any such joint venture schemes operated by the PGF Limited. It will also be open to the second respondent while carrying out the above said exercise to claim for any further payment to be made by the PGF Limited towards settlement of such claims of the participants of the joint venture schemes and charge int(!rest for any delayed/defaulted payments. As far as the deposit made by the PGF Limited with the second respondent on the ground that the such amount could not be disbursed to any of the investors for any reason whatsoever the second respondent, based on the verification of the records of the PGF Limited, arrange for refund/disbursement of such amount back to the participants of the joint venture schemes with proportioriate interest payable on that amount. The above directions are in addition to the directions made by the Division G Bench of the High Court.

54Copy pinpoint54. Having noted the conduct of the PGF Limited in having perpetrated this litigation which we have found to be frivolous and vexatious in every respect, right from its initiation in the , H High Court by challenging the vires of Section 11AA of the SEBI

P.G.F. LIMITED & ORS. v. UNION OF INDIA 83 [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.] Act without any substantive grounds and in that process prolonged this litigation for more than a decade and thereby provided scope for defrauding its customers who invested their hard earned money in the scheme of sale of land and its development and since we have found that the appellants had not approached the Court with clean hands and there being very many incongruities in its documents placed before the Court as well as suppression of various factors in respect of the so called development of agricultural land, we are of the view that even while dismissing the Civil Appeal, the PGF Limited should be mulcted with the exemplary costs. We also feel it c appropriate to quote what Mahatma Gandhi and the great poet Rabindranath Tagore mentioned about the greediness of human being which are as under:

"Earth provides enough to satisfy every man's need, but not every man's greed. D

-Mahatma Gandhi-

The greed of gain has no time or limit to its capaciousness. Its one object is to produce and E consume. It has pity neither for beautiful nature nor for living human beings. It is ruthlessly ready..without a moment's hesitation to crush beauty and life olit of them, molding them into money."

-Rabindranath Tagore- · F

55Copy pinpoint55. In this respect, it will be worthwhile to note what thel'GF Limited disclosed before the second respondent in its letter dated 15.01.1998 alongwith the covering letter dated 20.05.2002. The details mentioned therein disclose that the total G amount received by the PGF Limited under different schemes ,from 01.01.1997 to 31.12.1997 was approximately Rs.186.84 crores. Its paid up capital was stated to be Rs.94,90,000/- and it mobilized Rs.815.23 crores under joint venture schemes from 01.04.1996 to 30.06.2002. The future liabilities towards joint H

84 SUPREME COURT REPORTS [2013] 6 S.C.R.

A venture schemes was projected in ii sum of Rs.655.41 crores. Total outstanding liabilities payable to investors under the old closed schemes as on 30.06.2002 was stated to be Rs.497 crores. As against the above, till 31.10.2002, the PGF Limited stated to have made a net payment of Rs.115.93 crores leaving B the balance due in a sum of Rs.393.69 crores approximately. The above details have been noted by the second respondent while mentioning the submission of the PGF Limited in its order dated 06.12.2002. Thus, we are convinced that the PGF Limited deliberately did not furnish the amounts till this date what C Was collected from the customers who made their investments in the so-called venture of sale and development of agricultural lands. Therefore, it is explicit that the PGF Limited was playing a hide and seek not only before the second respondent, but was also taking the Courts for a ride. We have noted in more than one place in our order that inspite of our repeated asking 0 the appellants did not come forward to disclose the details of any development it made in respect of the lands alleged to have been sold to its customers. There is also no valid reason for not disclosing the details before the court. As in one of its activities, namely, joint venture scheme alone, it had mobilized E Rs.815.23 crores, it can be easily visualized that in its activities of sale and development of land such mobilization would have far exceeded several thousand crores. In such circumstances, the appeal is liable to be dismissed which may have costs.

56Copy pinpoint56. Apart from imposing cost for having wasted the precious time of the High Court as well as of this Court, in order to ensure that none of the investors/customers of the PGF Limited, who have parted with their valuable savings and earnings by falling a prey to the promise extended to them are deprived of their investments, we feel it just and necessary to direct for proper investigation both by the Central Bureau of Investigation as well as the Department ,of Income Tax and in the event of any malpractice indulged in by the PGF Limited, to launch appropriate proceedings, both Civil, Criminal and other actions against the PGF Limited, as well as, all those who

· P,G.F. LIMITED & ORS. v. UNION OF INDIA 85 [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.] were responsible for having indulged in such malpractice. We A also direct the second respondent to proceed with its investigation/enquiry and inspection of the PGF Limited as well as all its other officers and other premises and after due enquiry to be carried out in accordance with law, take necessary steps for ensuring the refund of the monies collected by the PGF B Limited In connection with the sale and development of land to its various customers. In order to enable the second respondent to carry out the various directions contained in this judgment, we direct the PGF Limited to appoint a nodal officer, not below the rank of a Director, of its company who shall be responsible for furnishing whatever information, documents, account books or other materials that may be required by the second respondent, the Central Bureau of Investigation as well as the Income Tax Authorities. While intimating appointment of such nodal officer, the PGF Limited shall also furnish the contact number i.e., landline/mobile numbers, e-mail address and other details of its nodal officer, its registered office, administrative office and other offices. It is made clear that if the PGF Limited failed to comply with any of the directions contained in this judgment, the second respondent shall be at liberty to bring it to .the notice of this Court by filing appropriate application for initiating necessary proceedings against the PGF Limited- appellant No.1, its Chairman-cum-Managing Director-appellant No.2 and other Directors and other responsible officers. With the above directions, the appeal stands dismissed with cost of Rs.50,00,000/-(Rupees fifty lacs only) to be deposited by the F PGF Limited with the Registry of the Supreme Court within eight weeks from the date of receipt of copy of this judgment. On such deposit being made, the Registry shall arrange to deposit the said sum with the Supreme Court Legal Services Committee. In the event of PGF Limited failing to comply with G the direction for payment of costs within the stipulated time limit, the Registry shall bring the same to the notice of the Court for initiating appropriate proceedings against the PGF Limited for non-compliance. K.K.T. Appeal dismissed. H