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2025 Supreme(Del) 390
IN THE HIGH COURT OF DELHI AT NEW DELHI
Prathiba M. Singh, J.
Securities & Exchange Board Of India (Trust Pet. No.3/1997) - Petitioner
Versus
CRB Capital Markets Ltd. - Respondent
CO.PET.379 of 2009 & CO.APPL. 420 of 2022, 351 of 2023, 546 of 2023, 37 of 2024, 38 of 2024, 39 of 2024, 203-04 of 2024, 506 of 2024, 403-04 of 2025
Decided On : 01-09-2025
For the Petitioner: Mr. Pratap Venugopal, Sr. Adv. with Mr. Abhishek Baid and Mr. Praneet Das
For the Respondent: Mr. Avneesh Garg, Ms. Pavitra Singh & Ms. Iptisha, Advs., Mr. Praveen Suri & Mr Sumit Pandey, Mr. Rajat Bhalla, Adv., Ms. Ruchi Sindhwani, Adv.
The court emphasized that the Special Committee's disbursement to CRB Group members violated an existing judicial embargo, highlighting its duty to prioritize unit holders' interests and ensuring transparency in fiduciary actions.
Headnote:(A) Securities and Exchange Board of India Act, 1992 - Section 11B; Indian Trusts Act, 1882 - Winding up of mutual fund schemes - The court found that the Special Committee violated an embargo against payments to connected entities, resulting in disbursements of approximately Rs.131.90 crores. The committee's function was criticized for lack of transparency and accountability, with a forensic audit ordered to review its actions. (Paras 98-140)
Issues: Whether the interim order’s embargo on payments to CRB Group merged into the final order.
Findings of Court:
The Special Committee failed to act in the best interest of unit holders and allowed payments against previous judicial orders.
Result: Applications for an audit and dissolution of the Special Committee were accepted.
JUDGMENT :
Prathiba M. Singh, J.
INDEX
| i. | Background a. Arihant Mangal Growth Scheme, CRB and SEBI |
| ii | Submissions on behalf of parties a. Submissions on behalf of SEBI b. Submissions on behalf of M/s Rommel Investment Pvt. Ltd c. Submissions on behalf of the Special Committee d. Submissions on behalf of the Ex-Management |
| iii | Analysis and Findings a. Preliminary Objections and Respective Findings b. Case on Merits - Applicability of Doctrine of Merger c. Propriety of the Functioning of the Special Committee d. Objections Concerning the Proposed Mode of Disposal of Unclaimed Redemption Amounts |
| iv | Conclusions and Relief a. Forensic Audi by SEBI b. Constitution of a Special Cell c. Refund by CRB Group d. Unclaimed Redemption Amounts |
1. These are various applications filed by the Securities and Exchange Board of India (hereinafter ‘SEBI’) and certain other applicants in Co.Pet 379/2009. The said company petition i.e., Co.Pet 379/2009 (earlier Trust Petition 3/1997) was filed by SEBI under Section 11B of SEBI Act, 1992 and Indian Trusts Act, 1882 inter alia seeking to appoint any fit and proper person/entity to take charge of all the property and assets of Respondent No. 2, 3 and 4 i.e., CRB Trustees, CRB Asset Management Company, and IIT Corporate Services respectively and the assets of the Mutual Funds and the Arihant Mangal Growth scheme for such period as the Court may deem fit and proper. Pursuant to the said prayer, the final order dated 29th May, 2013, disposed of the main petition upon setting up a Special Committee which was entrusted with various functions, including the function to -
(i) wind up the Arihant Mangal Growth Scheme launched by Respondents 2, 3 and 4,
(ii) to liquidate the assets lying under the said scheme and redeem the investments made by the unit holders of the said scheme.
The applications presently before the Court primarily relate to challenges to proper functioning of the said Special Committee.
2. Considering that the present matter has remained pending for over 28 years (1997–2025), the Court finds it appropriate to set out the background and relevant developments, in order to properly appreciate the submissions advanced and effectively address the issues arising for consideration. The applications before the Court primarily pertain to four parties, namely, the Ex- Management (i.e., Respondent nos. 1, 2, 3), SEBI, the Special Committee, and M/s. Rommel Investments Ltd. Given that each of the parties became involved at different stages of the proceedings, the relevant facts pertaining to each party are delineated separately under distinct subheadings corresponding to the respective parties.
Arihant Mangal Growth Scheme, CRB and SEBI
3. The case originates when Respondent No.1 - CRB Capital Markets Ltd. (hereinafter ‘CCML’), a wealth management firm founded by C.R. Bhansali approached SEBI in 1993 for establishing a mutual fund by the name ‘CRB Mutual Funds’. For the purposes of managing this mutual fund, CCML proposed to set up -
an Asset Management company under the name ‘CRB Asset Management Company Limited’, and
a Trust under the name ‘CRB Trustees Limited’
in terms of SEBI (Mutual Fund) Regulations, 1993 (hereinafter ‘the 1993 Regulation’), which was subsequently replaced by SEBI (Mutual Fund)
Regulations, 1996. (hereinafter ‘the 1996 Regulation’). Pursuant to the said proposal, a trust deed was signed on 15th December, 1993, between CCML, designated as the ‘Settlor’, and CRB Trustees Ltd., designated as the ‘Trustee’. Similarly, CRB Asset Management Company was also set up in terms of Regulation 19 of the 1993 Regulations in the year 1994.
4. Thereafter, CRB Mutual Funds, as a part of its Mutual Funds activities, launched the ‘Arihant Mangal Growth Scheme ’ in August 1994. The said scheme was a close-ended scheme which was to operate for a period of 5 years from the date of allotment. The
