Supreme Court Modifies Order in Jermyn Capital vs. CBI Case: Bank Guarantee Requirement Removed

The Supreme Court of India recently ruled in favor of M/S. Jermyn Capital LLC Dubai by modifying its earlier judgment and allowing the firm to withdraw a sum of ₹38.52 crore along with accrued interest, unconditionally. The case, which revolved around financial transactions and enforcement orders, was a significant development in corporate financial litigation.

Background of the Case

The case originated from earlier orders concerning financial disputes involving M/S. Jermyn Capital LLC Dubai and the Securities and Exchange Board of India (SEBI). The Securities Appellate Tribunal (SAT) had earlier directed that the sale proceeds, aggregating to ₹38.52 crore, be placed in fixed deposits to earn interest until a final decision was made.

On May 9, 2023, the Supreme Court allowed the appeal and set aside the lower court’s condition requiring the appellant to furnish a bank guarantee for the release of the said amount. However, a modification was sought regarding how the interest accrued on the fixed deposit should be handled.

Arguments Presented

Petitioner’s Arguments

The counsel for Jermyn Capital, led by Senior Advocate Mukul Rohatgi, argued:

The firm should be allowed to withdraw the principal amount along with all accrued interest from the fixed deposit.
The previous orders by SEBI and SAT had directed that the money be placed in fixed deposits to maximize returns, and therefore, the full sum, including interest, rightfully belonged to the petitioner.
The condition of a bank guarantee imposed by the lower court had already been set aside, so the funds should now be released without any further restrictions.

Respondents’ Arguments

The Central Bureau of Investigation (CBI), representing the respondent’s interests, opposed the modification, arguing:

The financial transactions in question had regulatory implications and needed careful judicial scrutiny.
Any unconditional withdrawal of the amount might impact ongoing regulatory proceedings related to securities fraud.
Since the previous ruling had already provided a financial safeguard through fixed deposits, any further relaxation should be carefully evaluated.

Supreme Court’s Judgment

After hearing both parties, the Supreme Court modified its order and ruled:

“As a consequence, the appellant shall be permitted to unconditionally withdraw the aforesaid amount along with the fixed deposit interest amount that has accrued thereon.”
The modification allows Jermyn Capital to receive the full proceeds without any requirement of a bank guarantee or additional conditions.

Implications of the Judgment

This ruling has significant implications for corporate financial disputes, particularly in cases involving securities transactions and regulatory oversight. Key takeaways include:

Unconditional Access to Funds: The ruling sets a precedent where financial entities can claim their rightful funds without unnecessary conditions if no ongoing legal liability is established.
Precedence for Fixed Deposit Interest Inclusion: By allowing the accrued interest to be withdrawn along with the principal, the Court clarified that financial safeguards imposed earlier should not disadvantage the rightful party.
Judicial Review of Financial Safeguards: The case highlights the Supreme Court’s role in balancing regulatory oversight with the financial rights of corporate entities.

Conclusion

The Supreme Court’s ruling in this case reaffirms judicial commitment to ensuring fair financial transactions and enforcement of regulatory decisions. By modifying its earlier ruling and allowing Jermyn Capital to withdraw the full amount, including interest, the judgment provides clarity on handling financial safeguards imposed during litigation.

With this decision, corporate entities engaged in financial disputes can look to this ruling as a benchmark for similar cases where funds are withheld under judicial or regulatory directives. The judgment is expected to influence future corporate financial litigation and enforcement proceedings.

Petitioner Name: M/S. Jermyn Capital LLC Dubai.
Respondent Name: Central Bureau of Investigation & Ors..
Judgment By: Justice Krishna Murari, Justice Sanjay Kumar.
Place Of Incident: India.
Judgment Date: 17-05-2023.

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