Points Of Law : Ends of justice would be served if the Mutual Fund units are released to the Respondent No. 5-Applicant subject to provision of appropriate guarantee.

ORDER

1. This is an application preferred by the Respondent No. 5-Dalmia Cement (Bharat) Ltd. (hereinafter 'Applicant') with a prayer to modify an interim order of this Court dated 27.08.2019 (hereinafter 'Interim Order') passed in Civil Appeal Nos. 5395-5398 of 2019 (hereinafter 'Accompanying Appeal'). Further, to that effect, direct the Respondent No. 7-National Securities Depository Limited (hereinafter 'NSDL') to release/transfer Mutual Fund units in favour of Respondent No. 5-Applicant herein, by crediting the same in their demat account maintained by NSDL.

2. For ready reference, the Interim Order dated 27.08.2019 is extracted below:

"Permission to file appeal is granted.

We have heard learned counsel for the parties and in view of the urgency and consequences explained, we are inclined to pass the following interim directions:

1. The National Security Clearing Corporation Limited will honour F & O Segment contract which had matured on 27 th June, 2019 and has not been paid in view of the interim order passed by this Court on 26 th June, 2019 in I.A. No. 91268/2019 in Civil Appeal No. 5104-5105/2019. The interim order is vacated, clarifying that the payments would be without prejudice to the rights and contentions of all the parties and subject to the final outcome and directions that this Court would pass.

2. Option is given to Novjoy Emporium Private Limited, OCL India Limited and Dalmia Cement East Limited to ask for conversion/sale/encashment of the mutual funds which were purportedly furnished as a security by Allied Financial Services Private Limited. Similar option is also given to 44 parties who had preferred Appeal No. 257/2019 before the Securities Appellate Tribunal, Mumbai.

3. On the option being exercised, IL & FS Securities Services Limited shall convert/encash the mutual funds, and the amount realised would be deposited in a fixed deposit in a Nationalised Bank for a period of six months to earn maximum interest. The deposit would be in the name of IL & FS Securities Services Limited and abide by further orders/directions of this Court.

4. The question of jurisdiction of Securities and Exchange Board of India, Securities Appellate Tribunal and the plea of IL & FS Securities Services Limited relying upon clause (5) of Chapter VII of the Bye-Laws framed by the National Security Clearing Corporation Limited are left open and would be decided at the timeof final hearing.

List the matters after four weeks."

I. Respondent No.5-Applicant's Submissions:

3. Certain facts pertaining to the Applicant's submissions are outlined in brief below:

i. Mutual fund units worth INR 344.07 crores belonging to the Applicant (hereinafter 'Mutual Fund units') were lying in two demat accounts of OCL India Limited (hereinafter 'OCL') and Dalmia Cement East Limited (hereinafter 'DCEL') which were erstwhile subsidiaries of the Applicant and have now merged with it. The said demat accounts were opened with NSDL through its participant, Respondent No. 4-Allied Financial Services Private Limited (hereinafter 'Allied').

ii. The Applicant states that the demat accounts were not trading accounts and that no power of attorney or authorization was given by the Applicant to Allied to deal with the Mutual Fund units in any manner whatsoever. The Mutual Fund units were not in physical form but in digitalized form, kept in the demat account of the Applicant.

iii. The Applicant alleges that Allied had fraudulently and unauthorizedly placed the Applicant's Mutual Fund units as security with Respondent No.1-IL & FS Securities Services Ltd. & Ors. (hereinafter 'ISSL') as collateral for Allied's own transaction, i.e., margin obligations.

iv. Aggrieved by the alleged fraudulent activities of Allied, the Applicant lodged a complaint dated 8.02.2019 with Respondent No. 1-Securities and Exchange Board of India (hereinafter 'SEBI) and a complaint dated 15.02.2019 with the Economic Offences Wing, Delhi Police (hereinafter 'EOW') against Allied, ISSL, NSDL