Supreme Court Forms Committee Led By Justice Ravindra Bhat To Address Investor Claims On Sai Group Of Companies

To deal with investor claims pertaining to the Sai Group of Companies, which are accused of illegal mobilization of funds, the Supreme Court recently invoked its power under Article 142 of the Constitution to appoint a High Powered Sale Committee (HSPC), to be headed by its former judge Justice S Ravindra Bhatt. It also granted interim bail to two founder-Directors of the companies, taking into account their incarceration of over 8 years.

The judgment was delivered by a bench of Justices Surya Kant and KV Viswanathan, which was dealing with a writ petition filed by petitioners/accused, praying inter-alia that Security and Exchange Board of India (SEBI) be directed to liquidate their attached assets in a time-bound manner and distribute the sale proceeds to genuine investors as early as possible.

Considering that the petitioners were desirous of refunding the investors' amounts, but the agencies involved lacked the requisite infrastructural capacity to conduct public auctions of the attached/immoveable properties, the court passed its order:

"...we deem it fit to invoke our powers under Article 142 of the Constitution of India, so as to do complete justice between the parties and hence, constitute the HPSC".

It was noted that innocent investors had been eagerly awaiting refund of their hard-earned money for more than a decade.

The HPSC appointed by the court comprises: (a) Justice S Ravindra Bhatt, Former Judge, Supreme Court (Chairperson); (b) Dr. Justice Satish Chandra, Former Judge, High Court of Allahabad (Member); (c) A SEBI nominee, preferably an officer in the rank of Director (Member); (d) Pardeep Kumar Sharma, Registrar (Retd.), Supreme Court (Member Secretary-cum-Nodal officer) and others.

In the judgement, the court has delineated the manner in which the HSPC shall auction the assets, accommodate the sale proceeds in a dedicated account and carry out the refund process. It has also laid down the obligations of the respective parties, the necessary secretarial-cum-administrative requirements, and remuneration payable.

In special facts of the case, the court has also granted interim bail to two petitioners (one already being on bail), who spent over 8 years in custody as undertrials.

Factual background

The petitioners, a family of three (father, mother and son), floated certain companies viz. M/s Sai Prasad Properties Ltd. (ii) M/s Sai Prasad Foods Ltd. (iii) M/s Sai Prasad Corporation Ltd. and (iv) M/s Shree Sai Space Creations Ltd. (cumulatively known as the Sai Group of Companies). Subsequently, SEBI received complaints with regard to their companies, which alleged illegal mobilization of funds. Accordingly, SEBI issued show cause notices to the petitioners and directed that they shall not collect any money from investors or carry out any Collective Investment Schemes.

In due course, penalties were imposed on the petitioners and recovery proceedings for a sum of Rs. 30,561,041,451 initiated. All the immovable properties and jewelries owned by the petitioners' companies were also attached.

In 2015, an FIR under Sections 3, 4, and 5 of the Prize Chits and Money Circulation Scheme (Banning) Act, 1978 was registered against the petitioners in Chhattisgarh. They were arrested pursuant to this case in 2016. Thereafter, multiple other FIRs were registered in the states of Chhattisgarh, Maharashtra, Madhya Pradesh, Rajasthan, Uttar Pradesh and Haryana.

While petitioner Nos.1 and 2 continued to remain in custody, petitioner no.3 (son) was released on bail by the Chhattisgarh High Court in 2023. In April, 2024, it was directed that he shall not be arrested in any fresh case against the petitioners on the same or related issues, until further orders.

Case Title: Balasaheb Keshawrao Bhapkar & Ors. v. Securities and Exchange Board of India & Ors., WP (Crl.) No. 546 of 2023

Click here to read/download judgment