Jermyn Capital LLC V.
Securities & Exchange Board of India&Ors  INSC 1071 (14 May 2009)
JURISDICTION CONMT.PET.(CIVIL)NO.17/2009 IN CIVIL APPEAL Nos. 1268 & 7428
OF 2008 JERMYN CAPITAL LLC ... Petitioner(s) Versus SECURITIES & EXCHANGE
BOARD OF INDIA&ORS ... Respondent(s) ORDER This contempt petition has been
filed alleging willful and deliberate disobedience and non-compliance of the
order passed by this Court on 5th December, 2008, while disposing of Civil
Appeal No. 1268 of 2008 and C.A.(D)No.5526 of 2008. By the said order, we had
disposed of the the said two appeals on the basis of an earlier order passed by
the Securities Appellate Tribunal in a Misc. Application in Appeal No.21 of
2006 dated 8th May, 2006, by which the Tribunal had permitted the petitioner to
sell its share and securities, which were being held by the Committee, through
recognised stock exchanges in accordance with law and through the registered
stock brokers and to credit the sale proceeds in the bank account maintained by
the appellant with the ICICI Bank.
It appears that
pursuant to the said order some of the shares were sold by the appellant and
the amounts which were received on account of such sale were deposited in the
account of the appellant in the ICICI Bank.
Certain other shares
which had remained unsold were the subject matter of the two appeals which were
disposed of by us earlier. By the said order of 5 th December, 2008, following
the order passed by the Securities Appellate Tribunal, we had given leave to
the petitioner to sell off the remaining shares as was indicated in Annexure D
to the affidavit, in the manner indicated in the order passed by the Appellate
Tribunal on 8th May, 2006. We had also directed that the sale proceeds were to
be deposited in the ICICI Bank and that the same should be invested in
short-term fixed deposits -3- along with the amounts which have already been
received and which have been deposited with the Bank and that the said fixed
deposits were to be kept renewed till a final decision was taken by the
Securities and Exchange Board of India (SEBI). We had remitted the matter to
the SEBI with a request to dispose of the same expeditiously, preferably within
a period of six months from the date of the communication of the order.
Pursuant to the said order, an attempt was made by the petitioner to sell the
remaining shares, but were prevented from doing so on account of the objection
of the Reserve Bank of India that even if the shares were sold, the sale
proceeds could not be deposited in an interest-bearing account of the investor.
The objection taken
on behalf of the SEBI was that since the registration of the petitioner had
expired, after sale of the shares, the petitioner could not be allowed to
deposit the sale proceeds in the account held by it in ICICI Bank.
As far as the ICICI
Bank is concerned, -4- the objection taken was that the amount which had
already been deposited with the Bank had been frozen on account of the expiry
of the registration, and, as such, the same could not be frozen and no
withdrawal could be permitted and furthermore, since the registration had
expired no on-line transactions could be undertaken.
The stand taken by
the CBI is that the account of the petitioner could not be operated for the
purpose of withdrawal of any amounts from the account. There was no embargo,
however, for depositing the amounts in the account, except for the objection
taken by the RBI that it could not be deposited in an interest bearing account.
It is in this
background that when we took up the application for contempt that certain
suggestions were made regarding the manner in which the securities which were
yet to be sold could be disposed of having regard to the instability of the
market conditions so that the petitioner could be insulated against loss on
account of the fluctuating market.
-5- Since in our
order we had directed that the amounts already deposited in the account would
also be included in the amounts to be obtained after sale of the shares and be
invested in fixed deposits, which appears to be contrary to the Rules and
Regulations of the Reserve Bank of India, we direct that the appellant shall be
entitled to sell the shares which are being held by I.C.I.C.I.(Securities) as
Custodian and the sale proceeds will be deposited with SEBI. The amounts which
are already lying in the frozen account of the petitioner with ICICI Bank, will
also be released and made over in favour of SEBI. The amounts so received by
SEBI shall thereafter be invested by SEBI in short-term fixed deposits in a
public sector bank which are to be kept renewed till the final decision of the
matter pending before SEBI, as was directed by our earlier order of December
05, 2008. It is also made clear that the disbursement of the amounts, so
invested, together with accrued interest, will be subject to the final decision
-6- Since the
registration of the petitioner has expired preventing any further on-line
transactions, ICICI Bank will be entitled to process and record the
transactions manually and all parties shall act on the basis of such manual
The period for
completing the investigation is extended till 31st August, 2009.
As far the contempt
petition is concerned, having regard to the facts indicated hereinabove, we are
not inclined to proceed any further with the contempt proceedings, which are,
The application for
modification, being I.A.No.1 of 2009, filed by the Reserve Bank of India, is
also disposed of by this order.