One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.
Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.
TL;DR: When a company against which SEBI has passed a final order is not listed on the SCORES portal, you cannot file a claim online. Your best option is to directly approach SEBI by sending a physical representation along with supporting documents, and simultaneously explore civil remedies like filing a recovery suit before a civil court or approaching the Company Law Board for oppression and mismanagement.
Key Facts of the Case
- Investments were made in a company (substituted as "Vimal Alloys Ltd.") in 2013 under a Redeemable Preference Share/Monthly Income Scheme.
- In 2016, the investment was converted into shares of another company (substituted as "Apex Holdings Pvt. Ltd.") through a broking firm (substituted as "Apex Stock Broking Pvt. Ltd.").
- SEBI passed a Final Order on 12 June 2024 against Vimal Alloys Ltd. for operating an illegal collective investment scheme.
- Neither Vimal Alloys Ltd. nor Apex Stock Broking Pvt. Ltd. is listed on the SCORES portal.
- The client's emails to the SEBI helpline and follow-ups in July 2024 went unanswered.
- The client possessed original certificates and receipts for the investments.
- The office of Advocate Sudhir Rao was approached after initial attempts to contact SEBI yielded no response.
The Direct Legal Answer
Your core problem is straightforward: SEBI has acted, but you can't use the SCORES portal to submit your claim. Here's the thing — the SCORES portal is designed for companies that are either registered with SEBI or under active proceedings. When a company has vanished from the system, the portal won't help.
Can I still file a claim with SEBI?
Yes. SEBI has a physical representation process. You must send a detailed letter to the SEBI's Office of Investor Assistance and Education (OIAE), along with copies of all your investment documents, the SEBI Final Order, and proof of identity. Keep a copy with an acknowledgement receipt. SEBI may direct the company's assets (if any) to be distributed among investors through a court-appointed receiver or a SEBI-appointed administrator.
What if SEBI doesn't respond?
If emails and physical letters fail, you have two main routes: first, file a complaint with the SEBI Grievance Redressal Cell on the SEBI website. Second — and often more effective — initiate civil recovery proceedings in the civil court or the Company Law Board (now the National Company Law Tribunal). The conversion of shares from Vimal Alloys Ltd. to Apex Holdings Pvt. Ltd. may be challenged as fraudulent or against the original agreement.
Should I approach the police?
If the scheme was a collective investment scheme without SEBI registration, it amounts to a fraud. You can file a First Information Report (FIR) for cheating and criminal breach of trust under the Bharatiya Nyaya Sanhita (BNS) at the police station having jurisdiction over the company's registered office or your area of residence. The police will investigate and may recover some money. But keep in mind — police recovery in such cases is rare without a court order.
Advice in Such Cases
Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation to come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.
Second, immediately preserve all original documents — share certificates, receipts, correspondence, and the SEBI order. Make certified copies. Also, gather bank statements showing transfers. Without these, proving your investment will be difficult.
Third, check if the Apex Holdings Pvt. Ltd. (the second company) is a registered company on the Ministry of Corporate Affairs (MCA) portal. If it is, you may be able to trace its directors and assets. This type of matter requires a lawyer who regularly handles SEBI-related litigation and corporate fraud cases — general civil practitioners often miss the procedural nuances of SEBI's regulatory framework and the interplay between civil recovery and criminal prosecution.
Applicable Sections of Law
This case involves civil recovery and potential criminal fraud. The applicable civil laws include the Indian Contract Act, 1872 (Section 73 for damages for breach of contract, Section 17 for fraud). The Companies Act, 2013 applies if the company was registered under it — specifically Section 447 for punishment for fraud. The Limitation Act, 1963 governs the time limit to file a suit (Article 55 for breach of contract — three years from the date of breach). For criminal aspects, the Bharatiya Nyaya Sanhita (BNS) applies — Section 316 (cheating), Section 317 (cheating by personation), and Section 318 (cheating with knowledge that wrongful loss may ensue). SEBI Act, 1992 (Section 11B for directions, Section 15-UB for recovery of money) also applies.
Limitation Period
The limitation period to file a civil suit for recovery of money invested is three years from the date the money was demanded by you and not returned. In this case, since the investment was in 2013 and converted in 2016, the date of default may be the date the company stopped paying returns or the date of the SEBI order. File your suit immediately — delay beyond the limitation period may bar your claim. You can apply for condonation of delay if there is a good reason, but it is not guaranteed.
Interim Reliefs Available
In a civil suit for recovery, you can seek an attachment before judgment under Order 38 Rule 5 of the Code of Civil Procedure, 1908, if you can show that the defendant is about to dispose of assets. A temporary injunction under Order 39 Rules 1 and 2 CPC can restrain the company from transferring its assets. The court may also appoint a receiver to manage the company's assets or pass a status quo order. These interim measures are crucial early in proceedings to prevent the company from siphoning off money.
If You Are the Victim
- Immediately gather and preserve all original documents — share certificates, receipts, payment proofs, correspondence, SEBI order.
- Send a written complaint to SEBI's OIAE via speed post with acknowledgement due, and a separate email to the SEBI grievance cell.
- Contact your local police station to file an FIR for cheating under BNS if the scheme was clearly fraudulent.
- Consult a lawyer experienced in corporate fraud and SEBI matters to evaluate filing a civil recovery suit or approaching the NCLT.
- Do not sign any new documents or settlement offers from the company without legal advice.
Documents You Must Keep Ready
- Aadhaar card or PAN card for identity proof
- Original share certificates or investment receipts
- Bank account statements showing the payments made
- Copy of the SEBI Final Order dated 12 June 2024
- Correspondence with the company or broker (emails, letters)
- Proof of attempts to contact SEBI (emails, tracking details)
- Certificate of incorporation of the companies (if available from MCA portal)
- Any notice or communication about conversion of shares
What Evidence Is Required?
- Primary evidence: Original share certificates, receipts, and bank statements directly proving the investment.
- Documentary evidence: SEBI Final Order, correspondence with the company/broker, emails to SEBI.
- Secondary evidence: Photocopies of all documents (if originals are not available), witness statements from co-investors.
- Expert evidence: A chartered accountant's report on the investment scheme's lack of SEBI registration, if needed.
- Electronic evidence: Emails, messages, and call recordings (subject to admissibility under the Indian Evidence Act, 1872).
How Courts Typically Approach Such Cases
Civil courts are generally sympathetic to investors who have lost money in unregistered schemes. However, the court will first examine the limitation period. If the suit is within time, the court will look at the original agreements, the SEBI order as evidence of illegality, and the conduct of the investor — whether they acted promptly. Courts often allow recovery against the company and its directors personally if the corporate veil is pierced. The court may also refer the matter to mediation or Lok Adalat for settlement. The likelihood of a favourable decree is higher if you have clear proof of investment and the scheme was fraudulent.
Timeline of Legal Process
- Notice to company: 1-2 weeks after filing the suit.
- Summons and written statement: 30-90 days for the company to respond.
- Framing of issues: 1-2 hearings after written statement.
- Evidence stage: 6-12 months depending on witnesses and documents.
- Arguments and judgment: 2-4 months after evidence.
- Execution of decree: 3-6 months if assets are located, longer if the company is insolvent.
- Appeals: Can add 1-2 years.
Can the Matter Be Settled Out of Court?
Yes. If the company or its directors are willing to repay a portion or full amount, you can settle through a compromise deed before a civil court or at a Lok Adalat. For civil cases, Section 89 of the Code of Civil Procedure, 1908 allows courts to refer disputes to arbitration, conciliation, or mediation. Settlement is advisable if you get a fair offer without a protracted legal battle. But be cautious — do not waive your right to pursue the criminal complaint (if filed) unless the settlement explicitly covers it. The criminal offence of cheating is not compoundable without court permission, so the criminal case may continue even after civil settlement.
Common Mistakes People Make
- Delaying action for years after the default — limitation expires and the company's assets vanish.
- Engaging a lawyer who does not regularly handle SEBI or corporate fraud cases — the procedural and evidentiary nuances (like tracing corporate structures, using SEBI orders as evidence, and filing before the NCLT) are often missed by general practitioners, leading to weaker cases.
- Destroying original certificates or receipts — without them, your claim collapses.
- Signing settlement documents or waivers without reading them carefully — you may lose all rights.
- Posting about the case on social media — this can prejudice your case if the other side uses it against you.
- Not preserving electronic evidence (emails, messages) — courts increasingly rely on such evidence in fraud cases.
FAQs People Normally Have
What if the company has been struck off from the MCA register?
That makes recovery harder but not impossible. You can file a suit against the company and its directors personally under the principle of lifting the corporate veil. Proving that directors acted fraudulently is key.
Can I directly approach the NCLT?
Yes, if the company is registered under the Companies Act, 2013 and there is oppression or mismanagement. You can file a petition under Sections 241 and 242 of the Companies Act. But this is a complex process and requires showing that the affairs of the company are being conducted in a manner prejudicial to public interest or investors.
How much can I recover?
That depends on the company's remaining assets and how many investors have already claimed. Typically, in such schemes, the recovery is pro-rata among all investors after SEBI's efforts or a court-appointed receiver sells assets. Often investors recover only 20-40% of their investment, if at all.
Is the broker Apex Stock Broking Pvt. Ltd. also liable?
Yes, if the broker was involved in the conversion of shares or facilitated the scheme. You can include the broker as a co-defendant in your civil suit. Additionally, filing a complaint with the National Stock Exchange or BSE against the broker (if it is a registered stockbroker) can trigger disciplinary action.
Can I file a class action suit?
Yes, if multiple investors are in the same situation. A group of investors can file a representative suit under Order 1 Rule 8 of the CPC, or a class action under the Companies Act, 2013 (Section 245). This reduces individual litigation costs and strengthens the case.
This article is general legal information, not legal advice. Consult a qualified advocate about your specific situation.
Advocate Sudhir Rao, Supreme Court of India