Morgan Stanley Mutual Fund: Arvind Gupta vs Kartick Das: Securities And Exchange Board Of India

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1994 Supreme(SC) 590

SUPREME COURT OF INDIA
(M.N.VENKATACHALIAH, C.J.I., AND S. MOHAN AND DR A.S. ANAND, JJ.
Civil Appeal No. 4584 of 1994{From the Judgment and Order dated 4-1-1994 of the Calcutta District Consumer Disputes Redressal Forum in C.D.F. Case No. 35 of 1994}.
MORGAN STANLEY MUTUAL FUND
Versus
KARTICK DAS
Civil Appeal Nos. 4587 and 1994{From the Judgment and Order dated 5-1-1994 of the Delhi High Court in W.P. No. 14 of 1994} DR ARVIND GUPTA Versus SECURITIES AND EXCHANGE BOARD OF INDIA AND OTHERS.
Civil Appeal Nos. 4584 and 4587 of 1994, decided on May 20, 1994
Advocates appeared :
Ashok H. Desai and Arun Jaitley, Senior Advocates (R. Karanjiwala, Ms Dina Wadia, Ms Nandini Gore and Ms M. Karanjiwala, Advocates, with him) for the Appellant. In-person in Petition No. 321 of 1994.
K. V. Vishwanathan and L.P. Agrawala, Advocates, for the Respondents.

Advocates:
ARUN JAITLEY, ASHOK DESAI, DINA VADIA, K.V.VISHWANATHAN, L.P.AGRAWALA, M.KARANJAVALA, NANDINI GORE, R.KARANJAWALA

Headnote:
Companies Act, 1956 - Sections 55, 63 and 68 - SEBI Act, 1992 - Sections 11(2)(e),30 and 1(3) - Control Act, 1947 - Sale of Goods Act, 1930 - Section 2(7) and clause (6) of Section 2 - Domestic mutual fund registered - Memorandum and Article of Association - Sought to stay the public - Appellant is a domestic mutual fund registered with Securities and Exchange Board of India (hereinafter referred to as SEBI) under Registration No. - Appellant is managed by a Board of Trustees. Pursuant to SEBI Regulations, investment management company of appellant, Morgan Stanley Asset Management India Private Limited was registered with SEBI - Under such registration Morgan Stanley Asset Management India Private Limited is constituted as the asset management company of appellant - Morgan Stanley Asset Management India Private Limited is it subsidiary of Morgan Stanley Group - Held, appellant has suffered immensely because it has not even been served with copy of order of injunction. The application of respondent is clearly actuated by mala fides - Forum should have examined whether ex parte injunction without notice to opposite side could ever be granted at all - Grounds urged in injunction application were insufficient for the grant of such a relief - There is an increasing tendency on part of litigants to indulge in speculative and vexatious litigation and adventurism which the for a seem readily to oblige – Court think such a tendency should be curbed - Having regard to frivolous nature of complaint think it is a fit case for award of costs, more so, when appellant has suffered heavily – Court award costs in favour of appellant - It shall be recovered from the first respondent - C.A. No. 4584 of 1994 arising out of SLP (C) No. 272 of 1994 is allowed accordingly. Civil Appeal No. 4587 of 1994 - C.A. No. 4587 of 1994 arising out of SLP (C) No. 321 of 1994 is dismissed

JUDGEMENT:

MOHAN, J.- Leave granted.

2. The appellant is a domestic mutual fund registered with Securities and Exchange Board of India (hereinafter referred to as SEBI) under Registration No. MF/005/93/1 dated 5-11- 1993. The appellant is managed by a Board of Trustees. Pursuant to the SEBI (Mutual Fund) Regulations, the investment management company of the appellant, Morgan Stanley Asset Management India Private Limited was registered with SEBI on 5-11-1993. Under such registration Morgan Stanley Asset Management India Private Limited is constituted as the asset management company of the appellant. Morgan Stanley Asset Management India Private Limited is it subsidiary of Morgan Stanley Group Inc. which holds 75 of equity, the balance being held by Indian shareholders such as Housing Development Finance Corporation (HDFC), Stock Holding Corporation of India etc. Morgan Stanley Asset Mana-enient India Private Limited was ranted certificate of incorporation on 18-10-1993 by the Registrar of Companies, Bombay. Its Memorandum and Article of Association have also been approved by the SEBI as per the provisions of the said Regulations.

3. The draft scheme of the appellant was approved by the Board of Trustees by Circular Resolution dated 8-1 1-1993. This was forwarded to SEBI for its approval on 10- 11- 1993. The scheme was duly scrutinised and examined by the SEBI and SEBI gave its approval and certain amendments were suggested. Upon receipt of such approval for the scheme, the appellant and the Investment Manager took necessary steps to begin marketing the scheme by issue of advertisements. All advertisements and publicity material were approved by SEBI in writing before publication as required by the Regulations. Pursuant to such approval tile appellant commenced advertising the public issue.

4. On 13-12-1993 the advertisements and hoardings were released. One Piyush Aggarwal filed a suit before the learned Sub-Judge, Tees Hazari Courts, Delhi for injunction restraining the public issue from being floated by the appellant. On 24-12-1993 an interim order was passed. Aggrieved by the same, the appellant moved the High Court in CM(M) No. 543 of 1993. On 3-1-1994 the said order passed by the learned Sub-Judge was stayed. That was subsequently confirmed on 4-1-1994. One Dr Arvind Gupta filed Writ Petition No. 14 of 1994 against SEBI. In effect, he sought to stay the public issue from being floated. That writ petition was rejected.

5. On the same rounds, as were urged in the writ petition, the respondent moved the Calcutta District Consumer Disputes Redressal Forum seeking to restrain the public issue from being floated. The principal grounds taken were that the appellants Offering Circular was not approved by the SEBI. There are several irregularities in the same. The basis of allotment is arbitrary, unfair and Unfair. The appellant was seeking to collect money by misleading the public.

6. The following order was passed on 4-1-1994 by the Calcutta District Consumer Disputes Redressal Forum : "Petitioner files the complaint today.

Considering the utmost urgency of the case as cited by the learned lawyer for the petitioner we are inclined to pass an interim order otherwise the application would be frustrated. Accordingly we direct OP 1 and OP 2 and its men, agents, collecting banks not to proceed any further with the issue of 30 crores Morgan Stanley Growth Fund Units due to be opened on 6-1-1994 till proper clarification is made in its prospectus and with the leave of this learned Forum. OP 3 i.e. SEBI is also directed not to issue clearances until Regulation 28 of Schedule V of SEBI Regulations is complied with by the OP 1 and OP 2.

OP 4 and OP 5 i.e. the bankers to the offer are specifically restrained from accepting any application form of Morgan Stanley Growth Fund from anybody until further orders from this learned Forum.

OPs are at liberty to apply for vacation/variation of this order. Nex