- (1.) The aam aadmi of the country, over the years, has been drenched in a series of crises arising either due to nature's fury or the greed of fellow human beings like him, and is often found at the receiving end without the possibility of recovery of lost ground. Disaster management groups have been brought into existence by the State to tackle natural calamities. Indeed they toil hard, whenever called upon, to give succour and relief to the affected people. The purpose sought to be achieved by the disaster management system being noble and attempts to save the aam aadmi being sincere and laudable, none can possibly have any grievance in respect of its functioning except the bereaved who silently mourn the loss of their near and dear one. However, disasters which are man-made belong to classes of their own. From times immemorial, men have been attracted to the triumvirate of 'W's. Investment companies had mushroomed in the last century comprising of people, having no scruples and sense of morality. They cashed on the opportunity to enrich themselves by luring the aam aadmi with a triumvir, i.e. 'wealth'. 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. The gullible aam aadmi having numerous responsibilities to shoulder, which perhaps may not have been possible without liquid cash, relied whole-heartedly on such companies without even thinking of the risk factors and the need to take an informed decision and plunged towards disaster investing whatever he had with the cherished hope of obtaining the returns that were promised. Little did he know that such companies had surfaced to swindle him. Out of the innumerable people who had invested, some had received returns early prompting them to invest even that. Darkness, however, was not too far away. Soon, the returns stopped coming and the deposits were not returned on the due dates. With depletion of funds, gradually the companies went into liquidation and all the money that the aam aadmi had invested was practically gone. Faced with such a situation where everything seemed to be lost, people started taking their own lives. One may not be able to count the number of such unfortunate people who survived, losing everything in the process and being reduced to mere animal existence. In this State, people would not easily forget the untold misery and tragic circumstances brought about by the 'Sanchaita' syndrome in the eighties. Those at the helm of the affairs responsible for taking policy decisions had to act. Though the Security and Exchange Board of India (hereafter the SEBI) was authorized under the Securities and Exchange Board of India Act, 1992 (hereafter the SEBI Act) to register and regulate "Collective Investment Scheme" (hereafter CIS), absence of a suitable regulatory framework hindered orderly development of the market for units/instruments. The jurisdiction of the SEBI was limited to protection of the interest of the investors in securities and it could not take steps to protect the interest of investors in CIS units, which were not securities. A committee was constituted under the Chairmanship of Dr. S. A. Dave, known as the Dave Committee. It submitted a report highlighting the high risks that were associated with the ventures and recommended remedial measures. It was suggested that appropriate regulatory framework ought to be introduced to curb the menace of the aam aadmi being swindled because of the inability on his part to take a well informed decision and to arrest the pernicious innovations thought of by the swindlers to make easy money at the cost of the aam aadmi. The representatives of the people entrusted with making laws were quick to respond. The Parliament effected amendments in the SEBI Act by the Securities Law (Amendment) Act, 1999 (hereafter the 1999 Amending Act) with effect from 22nd February, 2000. The amendments, inter alia, included amendment of the definition of "securities" in the Securities Contract (Regulation) Act, 1956 (hereafter the SCR Act) to include within its ambit the units or any other instruments issued by any CIS to the investors in such schemes, and insertion of clause (ba) in sub-section (1) of Section 2 and introduction of Section 11AA in the SEBI Act. The amendments in the SEBI Act, as aforesaid, also necessitated framing of appropriate regulations, resulting in the SEBI (Collective Investment Scheme) Regulations, 1999 (hereafter the CIS Regulations) being brought into existence. Undoubtedly, such measures were in the nature of 'damage control' intended to save the aam aadmi from ruination.
(2.) It is the constitutional validity of clause (ba) of sub-section (1) of Section 2, Section 11AA, the third proviso to clause (f) of sub-section (4) of Section 11 and sub-section (1B) of Section 12 of the SEBI Act and Regulations 2(1)(b)(i), 3, 5, 9, 13, 14, 65, 73 and 74 of the CIS Regulations that are questioned by the petitioners in this writ petition under Article 226 of the Constitution dated July 19, 2011. Incidentally, this is the third round of litigation between the parties.
(3.) The first petitioner (established in 1999) is a public limited company and registered under the Companies Act 1956. Real Estate Development is its principal business. The second petitioner is the Chairman of the first petitioner.;