IN THE MATTER OF
MOJO LTD. AND ANR.............................P ETITIONERS
V.
S.L.P. NO/2015
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INDEX OF AUTHORITIES
-INDIAN CASES1. Bharat Heavy Electricals Ltd. v. Income Tax Office, [1983] 5 ITD 361 (Delhi)...........................13
2. Bharti Airtel Ltd. and Ors. v. Union of India, AIR 2015 SC 2583.................................................11
3. Central Inland Water Transport Cor. Ltd. & Anr. v. Brojo Nath Ganguly, AIR 1986 SC 1571......12
4. Centre For Pil & Anr. v. Union of India, AIR 2011 SC 1267.........................................................11
5. D.K. Trivedi v. State of Gujarat, AIR 1986 SC 1323......................................................................4
6. Fertilizer Corporation Kamgar v. Union of India, AIR 1981 SC 344............................................13
7. Greenpeace India Society v. Union of India and Anr., 2015 Indlaw DEL 98.................................13
8. GVK Industries Limited and Anr. v. Income Tax Officer and Anr., (2011) 4 SCC 36.....................6
9. H.R. Kapoor v. Securities and Exchange Board of India, 2008 Cri LJ 4632...................................6
19. Meekin Transmission Ltd and Anr. v. State of Uttar Pradesh, 2009 (238) ELT 554 (All.)...............9
20. N. Narayanan v. Adjudicating Officer, SEBI, AIR2013SC 3191.....................................................5
21. N. Rangachari v. Bharat Sanchar Nigam Ltd., 2007 Cri LJ 2448....................................................6
22. Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd., AIR 2003 SC 2629.................................12
23. P. G. F. Ltd. and Ors. v. Union Of India and Anr., AIR 2013 SC 3702............................................1
24. P.G.F. Ltd. v. Union of India, 2004 Indlaw PNH 159......................................................................3
25. Paramount Bio-Tech Industries Ltd. v. Union of India, [2004] 49 SCL 77 (All).............................2
26. R.K. Garg v. Union of India, AIR 1981 SC 2138............................................................................2
27. Ram Kanai Singh v. Mathewson AIR 1915 PC 27..........................................................................7
28. Ratnabali Capital Markets Ltd v. SEBI, AIR 2008 SC 290...........................................................13
29. Rattan Chand Hira Chand v. Askar Nawaz Jung and Ors., (1991) 3 SCC 67................................13
30. RBI v. Peerless General Finance and Investment Co. Ltd. and Ors., (1987) 1 SCC 424.................4
31. S.D. Bhattacharya v. SEBI, CWP No. 3352 of 1998.......................................................................4
32. Saghir Ahmad v. The State of U. P. and Ors., AIR 1954 SC 728...................................................11
REGARD TO THE CIRCUMSTANCES THAT HAVE BEEN PRESENTED IN THE INSTANT CASE,
RESPONDENTS
THE PETITIONERS
OF THE
UNDER
PETITIONERS.
ARTICLE 136
LEAVE PETITION.
ARTICLE 136 JURISDICTION
I.
II.
III.
AND
DREAMZZ LTD.
ARE LIABLE TO BE
PUBLIC INTEREST?
AMALGAMATED
IN
It is submitted that Dreamzz is liable for the act amounting to fraud. Firstly, Dreamzz
violated the SEBP (Collective Investment Schemes) Regulations. Secondly, Dreamzz violated
the SEBP (Prevention of Fraudulent and Unfair Trade Practices regarding Securities Market)
Regulations. Thirdly, by violating the provisions of SEBP Act, Dreamzz incurred the liability.
II.
It is submitted that Mojo and Dreamzz should be treated as single economic unit. Firstly,
Dreamzz essentially carries out the instructions given by its parent company, Mojo. Secondly,
the element of control is a central issue to lift the corporate veil. The fraudulent activities of
the companies in the present case make Mojo pertinently liable for the acts of Dreamzz.
III.
THAT MOJO LTD. AND DREAMZZ LTD. ARE LIABLE TO BE AMALGAMATED IN PUBLIC
INTEREST.
It is submitted that Mojo Ltd. and Dreamzz Ltd. are liable to be amalgamated in public
interest. Firstly, the amalgamation being a reasonable exercise of the governments powers
shall be exercised by the government. Secondly, the amalgamation sought to be made is in
the interest of public since it shall facilitate the efficient repayment to the investors of Durga
Scheme, who have been fraudulently usurped of their hard earned savings.
(i)
It is submitted that Dreamzz has violated Regulation 25(1) which provides that advertisement
in respect of every scheme shall be in conformity with the Advertisement Code as specified
in the Seventh Schedule.
Honble Supreme Court in the case of R.K. Garg v. UOI4 has observed that Attractive
schemes, craftily thought of, were put in place followed by tantalizing advertisements to lure
the aam aadmi to invest his hard earned money with the promise of hefty returns, if he were
to invest.
It is herein submitted that in the factual matrix5 surrounding the case there is a clear violation
of the Seventh Schedule. Firstly, in the present case the promotional statements like
significantly higher returns are unclear and vague, whereas in Clause (1) (a) of the Schedule
it is provided that the scheme advertisement clear. Secondly, Dreamzz in promotion of the
Scheme has promised returns that were significantly higher than the prevailing market rates,
however, in Clause (1) (c) it is provided that the advertisement shall not contain such
statements which promise an appreciation of rapid profits. Thirdly, famous personalities have
been used for endorsement of the scheme in order to make it more lucrative, which is in
violation of Clause (4) of the Schedule. There was a promise of high returns although such
returns were not commercially viable and were apprehended as unrealistic. 6
(ii)
It is humbly submitted that the main objective of the Scheme was to invest the monies in
volatile sectors such as a real estate with a promise of significantly high returns 8. Further,
Article 5 of the Trust Deed states that the proceeds of this issue shall be utilized for meeting
the general day to day requirements of the Dreamzz for carrying out its various construction
and development activities.9 However, according to SEBP, returns were being paid out by
accepting further deposits from different set of investors. Placing reliance on the case of
Sahara India v. SEBI10, it is submitted that such fraudulent accounting and non-disclosure of
the material illegality and irregularity has been the root cause of the default which led to
investors being duped of their hard earned savings.
(iii)
It is submitted that according to Regulation 17(1) and Fourth Schedule, which incorporate
Contents of Trust Deed, Dreamzz was under the obligation to not to invest the corpus of the
scheme in other scheme; carry on and conduct its business in a proper and efficient manner;
furnish the trustee such information as the trustee requires with respect to all matters relating
to the scheme or otherwise relating to the affairs of the scheme. Return is sine qua non for
7 P.G.F. Ltd. v. Union of India, 2004 Indlaw PNH 159.
8 Fact Sheet 5.
9 Article 5, Trust Deed, Annexure I.
10 Sahara India Real Estate Corporation Limited and Ors. v. Securities and Exchange Board
It is submitted that Dreamzz violated the Code of Conduct of the Scheme provided in Third
Schedule of the CIS Regulations. It is herein submitted that in the factual matrix surrounding
the case there is a clear violation of the Third Schedule as the fundamental obligation of the
CIMC is protection of interest of the investors 12. Placing reliance on the case of M.J. Shivani
v. Karnataka13, it is submitted that the default by Dreamzz led to investors being deceived of
their hard earned savings. Furthermore, Clause (4) of the Schedule provides that conflict of
interest shall be avoided by the CIMC, which has been violated by Dreamzz in paying off the
returns other set of investors which leads to violation of the Code of Conduct which requires
the
CIMC
to
disclose
explicit
information
about
the
investment,
material
illegality/irregularity. Henceforth, from the perusal of factum in the instant matter Dreamzz
has violated the CIS Regulations.
11 P.G.F. Limited and Ors. v. Union of India (UOI) and Anr., AIR 2013 SC 3702.
12 S.D. Bhattacharya v. SEBI, CWP No. 3352 of 1998; See also Delhi Cloth and General
Mills Co. Ltd. v. Union of India and Ors., (1983) 4 SCC 166; Reserve Bank of India v.
Peerless General Finance and Investment Co. Ltd. and Ors., (1987) 1 SCC 424; Narendra
Kumar Maheshwari v. Union of India, 1990 (Supp.) SCC 440.
13 M.J. Shivani and Ors. v. State of Karnataka, AIR 1995 SC 1770; D.K. Trivedi v. State of
Gujarat, AIR 1986 SC 1323; Satpal & Co. v. Lt. Governor of Delhi, AIR 1979 SC 1550;
Quarry Owners Association v. State of Bihar, AIR 2000 SC 2870.
4
deceived
the
investors
of their
investments
and
committing
fraud 15.
Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulation, 2003.
5
16 H.R. Kapoor v. Securities and Exchange Board of India, 2008 Cri LJ 4632; see also N.
Rangachari v. Bharat Sanchar Nigam Ltd., 2007 Cri LJ 2448; Sushila Devi v. Securities and
Exchange Board of India, (2008) 1 Comp LJ 155 (Del); Col. B.S. Sarao v. Securities and
Exchange Board of India, (2008) 3 Comp LJ 242 (Del).
17 State of Bihar v. Deokaran Nenshi, AIR 1973 SC 908; Vishnu Prakash Bajpai v. SEBI,
2782; See also, GVK Industries Limited and Anr. v. Income Tax Officer and Anr., (2011) 4
SCC 36; Chairman, SEBI v. Shriram Mutual Fund and Anr., (2006) 5 SCC 361 ; Union of
India and Ors. v. Dharamendra Textile Processors and Ors., (2008) 13 SCC 369.
6
19 Hackbridge Hewittic and Easun Ltd. v. GEC Distribution Transformers Ltd., (199 2) 74
Com Cases 543 (Mad).; Krishi Foundry Employees Union v. Krishi Engines Limited And
Ors.,[2003] 117 Comp Cas 340; Maharashtra State Electricity Distribution Co. Ltd. v. Central
Electricity Regulatory, 2011 Indlaw APTEL 138.
20 Salomon v. Salomon & Co. [1895-99] All ER Rep 33; See also Ram Kanai Singh v.
852 (CA), State of U.P. and Ors.v. Renusagar Power Co. and Ors., AIR 1988 SC 1737.
7
(Gau); Samayanallur Power Investment Pvt. Ltd. v. Covanta Energy India (Balaji) Ltd. and
Anr., 130 Comp Cases 21.
24 State of U.P. and Ors. v. Renusagar Power Co. and Ors, 1988 AIR 1737; See also,
Exclusive Motors Pvt. Ltd. v. Automobili Lamborghini SPA, [2014] 121 CLA 230 (CAT).
25 Vivendi SA v Richards [2013] EWHC 3006 (Ch), [2013] B.C.C. 771, Secretary of State
for Trade and Industry v. Becker [2003] 1 B.C.L.C 555 (Eng.); Ultraframe (UK) Ltd. v.
Fielding [2005] EWHC 1638; Re, Unisoft Group Ltd. (No. 3) (1994) 1 BCLC 620 (Eng.);
Ionic Metalliks vs. Union of India, 2015 GLH (2)156.
26 Re Hydrodam (Corby) Ltd., [1994] 2 B.C.L.C. 180 (Eng.).
27 Life Insurance Corporation of India v. Escorts Ltd. and Ors., AIR 1986 SC 1370.
8
It is submitted that the doctrine of lifting of corporate veil can be applied in cases where the
controlling interest is an issue. It is contented that Mojo had a controlling interest in the
business Dreamzz.32Shares represent congeries of rights and controlling interest 33 is an
incident of holding majority shares. Shareholders holding a controlling interest can determine
28 Littlewoods Mail Order Stores Ltd. v. IRC [1969] 3 All ER 855 CA, Also see Premlata
(Gau).
30 Meekin Transmission Ltd and Anr. v.State of Uttar Pradesh, 2009 (238) ELT 554 (All.)
31 Woolfson v. Strathclyde Regional Council (1978) SLT 159.
9
36 Fact Sheet 5.
37 Fact Sheet 9.
38 Draft Notification, Annexure II.
39 Companies Act, 1956 [Act 1 of 1956].
40 State Of U.P. and Ors. v. Renusagar Power Co. and Ors., AIR 1988 SC 1737.
41 Constituent Assembly Debates [8th Sept. 1949]; See also Saghir Ahmad v. The State of U.
42 Centre For Pil & Anr. v. Union of India, AIR 2011 SC 1267.
43 Bharti Airtel Ltd. and Ors. v. Union of India, AIR 2015 SC 2583.
44 Central Inland Water Transport Corporation Limited and another v. Brojo Nath Ganguly,
AIR 1986 SC 1571; See also, Sri Sankari Prasad Singh Deo v. Union of India and State of
Bihar, AIR 1951 SC 458; Rai Sahib Ram Jawaya Kapur and Ors. v. State of Punjab, AIR
1955 SC 549.
12
45 Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd., AIR 2003 SC 2629; See also, The
Basti Sugar Mills Company v. State of Uttar Pradesh, AIR 1979 SC 262; Maharashtra Apex
Corporation v. Sandesh Kumar A. and Ors., AIR 2006 Kant 138.
46 Greenpeace India Society v. Union of India and Anr., 2015 Indlaw DEL 98; See also,
Article 161, The Constitution of Pentos, 1950; State of Uttar Pradesh v. Babu Ram Upadhya,
AIR 1961 SC 751.
47 Fertilizer Corporation Kamgar v. Union of India, AIR 1981 SC 344.
13
48 Rattan Chand Hira Chand v. Askar Nawaz Jung and Ors., (1991) 3 SCC 67.
49 Fact Sheet 9.
50 Bharat Heavy Electricals Ltd. v. Income Tax Office, [1983] 5 ITD 361 (Delhi); Ratnabali
and Ors. v. State of Punjab and Ors. , 2013 Indlaw PNH 781; M. Bhaskaran Reddiar v. The
District Collector, 2007 Indlaw MAD 542.
14
Or any other relief that the Honble Court may be pleased to grant in the interests of
Justice, and Good Conscience
All of which is respectfully submitted & humbly prayed.
12