M/S. P.G.F. LIMITED & ORS. versus UNION OF INDIA & ANOTHER

Citation: [2013] 6 S.C.R. 32 · Decided: 12-03-2013 · Supreme Court of India · Bench: B.S. CHAUHAN · Disposal: Dismissed
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Judgment (excerpt)

A 
B 
c 
[2013] 6 S.C.R. 32 
M/S. P.G.F. LIMITED & ORS. 
v. 
UNION OF INDIA & ANOTHER 
(Civil Appeal No.6572 of 2004) 
MARCH 12, 2013 
[DR. B.S. CHAUHAN AND FAKKIR MOHAMED 
IBRAHIM KALIFULLA, JJ.] 
Securities and Exchange Board of India Act, 1992. 
ss. 11 AA - Constitutional validity of - Held: The provision 
is constitutionally valid - It does not intrude into the specific 
activities of sale of agricultural land and development - The 
provision cannot be struck down on the ground of legislative 
o competence, being in conflict with Entry 18 of List /I of Seventh 
Schedule of the Constitution - Constitution of India, 1950 -
Schedule V/I, List /I, Entry 18. 
s.2(ba) and 11AA(2) - Collective Investment Scheme -
Whether covers appellant-Company's business activity of 
E 
sale and development of agricultural land - Held: The activity 
of the company is nothing but a scheme/arrangement in the 
guise of sale and development of agricultural land - The 
agreement between the investors and the company shows that 
it was one-sided and arbitrary and there was uncertainty in the 
F 
transactions to the disadvantage of the investors - Therefore 
the business activity squarely fell within the definition of 
Collective Investment Scheme uls. 2(ba) rlw. s. 11 AA(2) - In 
view of the fact that the whole attempt of the Company was 
vexatious, and it perpetuated the present litigation with evil 
G 
intention, exemplary cost of Rs. 50 lakhs imposed -
Appropriate inquiry and investigation directed to be 
conducted by CBI and Income Tax Department apart from the 
inquiry by the second respondent. 
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32 
P.G.F. LIMITED & ORS. v. UNION OF INDIA 
33 
Practice and Procedure - Writ petition - Challenging 
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validity of provision of law - Held: In such cases, it is 
imperative to examine at the threshold, by applyng the 
principle of lifting of veil as to whether such challenge is bona 
fide or there is any hidden agenda in perpetrating such 
litigation - Writ court should also keep in mind certain criteria 
B 
for the purpose of entertaining such challenge and also while 
granting interim relief in such cases. 
Words and Phrases - 'Collective Investment Scheme' -
Meaning of, in the context of s. 11 AA of Securities and C 
Exchange Board of India Act. 
The appellant-Company was involved in business 
activity of sale of agricultural land, sale and development 
of agricultural land and joint ventures scheme. The 
second respondent by a public notice as well as by 
D 
specific letter called upon the appellant-company to 
furnish certain details regarding its Collective Investment 
Schemes. It also asked the company to get itself credit 
rated from credit rating companies approved by the 
second respondent. Thereafter the second respondent 
passed an order dated 20.2.2002 in exercise of its powers 
u/s. 11 B of SEBI Act, issuing stringent directions against 
E 
F 
the appellant-company. The order was challenged. The 
High Court directed the Company to furnish the details 
required by the second respondent and also directed the 
respondent to give personal hearing to the company. In 
compliance with the Court direction, second respondent 
passed its order dated 6.12.2002 l)olding that the 
business activity of the company i.e. sale and 
development of. agricultural land and its joint venture 
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schemes were Collective Investment Schemes and 
directed the Company neither to collect money from 
investors nor to launch any new Scheme as it had failed 
to comply with the statutory requirement as provided 
under SEBI (Collective Investment Schemes) Regulation, 
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34 
SUPREME COURT REPORTS 
[2013) 6 S.C.R. 
A 
1999. It also directed the Company to refund the money 
collected under the schemes, to the investors as per 
terms of the offers. 
The company challenged the order dated 6.12.2002 
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contending that its business activities in sale of 
agricultural land and sale and development of 
agricultural land would not fall within the category of 
Collective Investment Scheme specified u/s. 2(ba) r.w. 
s.11AA of SEBI Act. The Company also challenged the 
C vires of s.11AA of SEBI Act. The High Court dismissed 
the petition holding that the business activities of the 
Company were Collective Investment Schemes falling uf 
s. 11AA (2)(ii) and (iv) of SEBI Act and therefore the 
second respondent was authorized to proceed against 
the Company. The Court also held that s.11AA was valid 
D as Union of India was competent to introduce the said 
provision. Hen
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