There is no question—and there will be never be a question—of anything being done 'in sealed cover': Bombay HC to Anugrah Stock & Broking

A number of petitions were filed with the Bombay High Court alleging that Anugrah Stock & Broking Pvt. Ltd. caused extensive financial and monetary loss. These petitions filed under section 9 of the Arbitration and Conciliation Act 1996 invoked an arbitration petition mandated by the Rules of the NSE.

The background of the case is that Anugrah Stock & Broking Pvt. Ltd. lured investors in the pretext of promising very high returns. Recently it was found by the petitioners that there were unauthorised and illicit transactions being carried out and that the petitioners were put to huge and significant losses. The collective losses of the petitioners ran into crores of rupees.

Justice Gautam Patel of the Bombay High Court appointed a court receiver for all fixed assets of Anugrah. He lashed out at Anugrah Stock & Broking Pvt. Ltd. for submitting additional material in a sealed cover and not filing a clean copy of its affidavit.

The Court also directed all petitioners to include Teji Mandi Analytics as respondent in the case, if not already done, through amended petitions. 

The bench clarified that it will not accept any submission in sealed cover saying "Anything that I can see, all parties before me are entitled to see." Justice Patel says, "I am told that Mr Rohan Cama's clients (Anugrah) have put some additional material in a sealed cover. Of course, that has not been made available to me because these hearings are conducted online. In any case, I am making it abundantly clear that at least in my Court there is no question—and there will be never be a question—of anything being done 'in sealed cover'."

The Judge said, "Anything that I can see, all parties before me are entitled to see. That is all there is to it. This is the only method that I know of to ensure an open and transparent decision-making process. Those details will, therefore, need to be set on affidavit. I am also making it clear that it is not possible for any party to unilaterally decide to put material into a sealed cover. Since I have made it clear that I am not permitting any sealed cover submissions there is no question of any party arrogating to itself any such right or privilege of any such nature in any circumstances."

Mr. Cama, representing Anugrah, expressed apprehension that the additional material if not submitted in a sealed cover will find its way to the press. Justice Patel, however, said it was not his concern.

"The fourth estate will do its job and I will do mine. I decide matters before me on the basis of the papers filed in Court, not newspapers delivered to my doorstep. The press exists for a reason. It has a purpose, one that it serves. I cannot and will not curtail the rights of the free press at the instance of this or that party. I refuse to proceed on the basis that the press is always irresponsible. There will be no gag orders here," the judge said.

Justice Patel, further said, "The choice before Anugrah is, therefore, clear. It may choose not to file whatever it has said in sealed cover and then take the consequences that follow, or it will file whatever it has said in that sealed cover on affidavit and serve this on all parties."

Fixed assets worth Rs. 32 crore was disclosed by Anugrah Stock and Broking including its offices at Ahmedabad, two adjoining flats in Mumbai, two office premises at Jogeshwari's Lotus Corporate Park. In addition, there were two BMWs, including one sports model with an acquisition price of Rs. 1.13 crore and another BMW car bought at Rs. 91 lakh, one Mercedes-Benz (Rs. 61 lakh). The Court said that, Anugrah will need to explain the provenance of these funds, especially in light of its showing in the same affidavit that it has negligible liquidity today.

The Court observed that the assets listed by Anugrah were way too below than the claims submitted by petitioners, which would be about Rs. 100 crore and therefore the Court directed the Court receiver to take symbolic possession of all assets listed by the brokerage except the flat and cars of the Directors. The court also clarified that they cannot do any transaction related with these assets.

Senior advocate Birendra Saraf, advocate Ravi Hegde and other associates from Parinam Law Associates represented many investors; and advocate Aditya Mehta appearing for a few petitioners sought an injunction from the court on all the assets mentioned in the affidavit. Anugraha was represented by Advocate Rohan Cama and others and Teji Mandi by Advocate Ativ Patel.

During the hearing, Advocate Saraf submitted before the court that it is not a question of only wealthy investors being duped but there are pensioners who have lost their life savings and others of modest means who were promised high returns but are today left with nothing at all.

"The disclosures so far made do not even begin to address of fraction of the entirety of the aggregate claims that lie against Anugrah," the court noted.

The court, after going through Anugrah's affidavit, asked why an injunction order should not be passed and court receiver appointed across all its assets, including those bank accounts. Responding to this, Mr. Cama, counsel for Anugrah, informed the bench that the brokerage's bank accounts were frozen by the Securities and Exchange Board of India (SEBI). He also assured the court that Anugrah would not transact in any of the bank accounts listed in the affidavit.

When 'asked to deposit passports of directors of Anugrah, the counsel for Anugrah informed the bench that the passports are already with the economic offences wing (EOW) of Mumbai police.

Justice Patel also asked Dr. Saraf's Attorneys to nominate one person from their firm to serve as a single-point contact person to co-ordinate all these matters and collate necessary information in tabular form including all claims.

The matters have been listed for 5 October 2020.