IN THE SUPREME COURT OF INDIA     CIVIL APPELLATE JURISDICTION

CONMT.PET.(CIVIL)NO.17/2009

IN      

   CIVIL  APPEAL Nos. 1268 & 7428    OF  2008                    

   JERMYN CAPITAL LLC                                      

...   Petitioner(s)

                     Versus    

SECURITIES & EXCHANGE BOARD OF INDIA&ORS    

...  Respondent(s)

O R D E R  

This  contempt  petition  has  been  filed   alleging  willful  and  

deliberate disobedience and non-compliance of the order passed by this Court  

on 5th December, 2008, while disposing of  Civil Appeal No. 1268 of 2008 and  

C.A.(D)No.5526 of 2008.  By the said order, we had disposed of the the said two  

appeals  on  the basis  of  an  earlier  order  passed  by the Securities  Appellate  

Tribunal in a Misc. Application in Appeal No.21 of 2006 dated 8th May, 2006,  

by which the Tribunal had permitted  

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the petitioner  to sell  its share and securities,  which were being held by the

Committee,  through   recognised stock exchanges in accordance with law and  

through the registered stock brokers and to credit the sale proceeds in the bank  

account maintained by the appellant with the ICICI Bank.   

It appears that pursuant to the said order some of the shares were  

sold by the appellant and the amounts which were received on account of such  

sale  were  deposited  in  the  account  of  the  appellant  in    the  ICICI  Bank.  

Certain other shares which had remained unsold were the subject matter of the  

two appeals  which were disposed of by us earlier.   By the said order of 5th  

December,  2008,  following  the  order  passed  by  the  Securities  Appellate  

Tribunal, we had given leave to the petitioner to sell off the remaining shares as  

was indicated in Annexure D to the affidavit, in the manner indicated in the  

order passed by the Appellate Tribunal on 8th May, 2006.  We had also directed  

that the sale proceeds were to be deposited in the ICICI Bank and that the  

same should be invested in short-term fixed deposits  

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along with the amounts which have already been received and which have been  

deposited  with  the  Bank  and  that  the  said  fixed  deposits  were  to  be  kept  

renewed till a final decision was taken by the Securities and  Exchange Board  

of India (SEBI).  We had   remitted the matter to the SEBI with a request to  

dispose  of  the  same expeditiously,  preferably  within a period of  six  months  

from the date of the communication of the order.  Pursuant to the said order,

an attempt was made by the petitioner to sell   the remaining shares, but were  

prevented from doing so on account of the objection of the Reserve Bank of  

India  that  even  if  the  shares  were  sold,  the  sale  proceeds    could  not  be  

deposited in an interest-bearing account of the investor.

The  objection  taken  on  behalf  of  the  SEBI  was  that  since  the  

registration of the petitioner had expired, after sale of the shares, the petitioner  

could not be  allowed to  deposit the sale proceeds in the account held by it in  

ICICI Bank.   

As  far  as  the  ICICI   Bank  is   concerned,  

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the objection taken was that  the amount which had already been deposited  

with the Bank  had   been frozen on account of the expiry of the registration,  

and,  as  such,  the  same  could  not  be  frozen  and  no  withdrawal  could  be  

permitted  and  furthermore,  since  the  registration  had  expired  no  on-line  

transactions could be undertaken.

The stand taken by the CBI is that the account of the petitioner could  

not  be  operated  for  the  purpose  of  withdrawal  of  any  amounts  from  the  

account.  There was no embargo, however, for depositing the amounts in the  

account,  except  for  the  objection  taken  by  the  RBI  that  it  could  not  be  

deposited in an interest bearing account.

It is in this background that when we took up the application for  

contempt that certain suggestions were made regarding the manner in which  

the securities which were yet to be sold could be disposed of having regard to  

the instability of the market conditions so that the petitioner could be  insulated  

against   loss on account of the fluctuating market.

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Since  in  our  order  we  had  directed  that  the  amounts  already  

deposited in the account would also be included in the amounts to be obtained  

after sale of the shares and be invested in fixed deposits,  which appears to be  

contrary to the Rules and Regulations   of the Reserve Bank of India, we direct  

that   the appellant shall be entitled to sell the shares which are being held by  

I.C.I.C.I.(Securities) as Custodian and the sale proceeds will be deposited with  

SEBI.   The  amounts  which  are  already  lying  in  the  frozen  account  of  the  

petitioner with ICICI Bank, will also be released and made over in favour of  

SEBI.   The amounts so received by SEBI shall thereafter be invested by SEBI  

in  short-term  fixed  deposits  in  a  public  sector  bank  which  are  to  be  kept  

renewed  till  the  final  decision  of  the  matter  pending  before  SEBI,  as  was  

directed  by our earlier order of December 05, 2008.  It is also made clear that  

the disbursement of the amounts, so invested, together with accrued  interest,  

will be subject to the final decision of SEBI.  

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Since the registration of the petitioner has expired preventing any  

further on-line transactions, ICICI Bank will be entitled to process and record  

the transactions manually and all parties shall act on the basis of such manual  

recording.

The period for completing the investigation is extended till 31st August, 2009.

As far the contempt petition is concerned, having regard to the facts indicated  

hereinabove, we are not inclined to  proceed any further with the contempt  

proceedings, which are, accordingly, dropped.

The application for modification, being I.A.No.1 of 2009, filed by  

the Reserve Bank of India, is also disposed of by this order.

              ...................J.

                             (ALTAMAS KABIR)   

   ...................J.     (CYRIAC JOSEPH)

   New Delhi,

        May 14, 2009.