Full Judgment Text
REPORTABLE
2024 INSC 525
IN THE SUPREME COURT OF INDIA
CRIMINAL ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO. 546 OF 2023
Balasaheb Keshawrao Bhapkar & Ors. ….Petitioner(s)
Versus
Securities and Exchange Board of India & Ors. ….Respondent(s)
O R D E R
SURYA KANT, J.
1. Petitioner Nos. 1 and 2 are husband and wife, whereas Petitioner
No. 3 is their son. They have invoked the jurisdiction of this Court
under Article 32 of the Constitution, seeking the following directions: -
“ (a) To issue appropriate writ in the nature of mandamus or
any direction or order directing the Respondent No. 1 to
liquidate the attached assets within a period of 6
months and/or, in the alternative, allow the Petitioners
to assist Respondent No. 1 in liquidating the attached
assets;
(b) Direct Respondent No.1 to distribute the amount lying
within it to genuine investors as early as possible;
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(c) Direct Respondent No. 1 to allow the Petitioners to assist
them in identifying genuine investors and also the
amount deposited by them; and
(d) Pass other and further order(s) as this Hon’ble Court
may deem fit in the facts and circumstances of the case. ”
2. The above-stated reliefs have been sought in light of the following
set of events predicated in this factual background: -
(a) Petitioner Nos. 1 and 2 are the founder-Directors of one Sai Prasad
Properties Ltd, incorporated under the provisions of the Companies
Act, 1956. Petitioner No. 3 also joined the aforesaid company as a
Director in 2008, allegedly when he was still studying in college,
and is claimed to have thereafter resigned in the year 2014. The
Petitioners also floated various other companies, known as the Sai
Group of Companies, consisting of:
(i) M/s Sai Prasad Properties Ltd. (hereinafter, “ SPPL ”);
(ii) M/s Sai Prasad Foods Ltd. (hereinafter, “ SPFL ”);
(iii) M/s Sai Prasad Corporation Ltd. (hereinafter, “ SPCL ”); and
(iv) M/s Shree Sai Space Creations Ltd. (hereinafter, “ SSSCL ”).
(b) The Security and Exchange Board of India (hereinafter, “ SEBI ”)
received a complaint dated 02.06.2010 alleging illegal mobilisation
of funds by SPFL. After processing the said complaint and in
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furtherance of the orders passed by the High Court of Madhya
Pradesh and the Department of Financial Services, Ministry of
Finance, the Whole Time Member of SEBI (hereinafter, “ WTM ”)
issued an interim order-cum-show cause notice dated 17.07.2013,
inter alia, directing SPFL and its Directors to refrain from collecting
any more money from investors, under the existing schemes or any
new schemes. SEBI, once again passed an order dated 14.01.2015
against SPFL and its Promotors/Directors, restraining them from
collecting any money from the investors, launching or carrying out
any Collective Investment Schemes, and from
alienating/disposing/selling any of the assets of the Company,
except for the purpose of refund to its investors.
(c) SEBI received a letter dated 17.08.2012 from the Registrar of
Companies, Goa, Daman & Diu informing that upon inspection
conducted under Section 209A of the Companies Act, 1956, it was
found that SPPL had been accepting investments from their
associates for a period of 4 to 9 years and had also been executing
joint venture agreements. SEBI was then requested to take
appropriate action against SPPL for violating Section 11AA of the
SEBI Act, 1992.
(d) A preliminary enquiry was conducted, and after issuing an interim
order-cum-show cause notice dated 17.07.2013, the WTM vide the
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final order dated 14.01.2015 issued directions against SPPL and its
Promotors/Directors, identical to those passed against SPFL
(mentioned in paragraph 2(b) above).
(e) In addition, SEBI received complaints on 23.09.2013 against SPCL
and its sister concerns, alleging collection of money from the public,
through the Collective Investment Schemes. While these
complaints were under investigation, SEBI also received a reference
from the Income Tax Department dated 03.03.2014 alleging the
collection of money from the public by M/s Sai Prasad Group, to
the tune of Rs. 290 crores. WTM once again issued an interim order
on 22.07.2014, followed by a final order dated 01.02.2016,
directing SPCL and its Directors not to collect any money from the
investors or launch or carry out any Collective Investment
Schemes. SPCL and its Directors were further restrained from
accessing the securities market and were prohibited from buying,
selling, or otherwise dealing in the securities market for a period of
four years.
(f) A somewhat similar complaint dated 06.10.2013 was received by
SEBI against SSSCL, alleging the illegal mobilisation of funds
through a joint venture participation project, which was in the
nature of Collective Investment Schemes. Upon investigation, SEBI
found a prima facie violation of Section 11AA (2) of the SEBI Act.
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Consequently, an interim order-cum-show cause notice was issued
on 23.01.2014, directing SSSCL and its Directors to abstain from
collecting any money from the investors and from launching or
carrying out any Collective Investment Schemes. WTM further
directed SSSCL to wind up the existing Collective Investment
Schemes, refund the monies collected by it under such schemes
and submit a compliance report including the trail of funds claimed
to be refunded, bank account statements indicating the refunds to
investors, and replies from the investors acknowledging such
refunds. In addition, proceedings under Chapter VI-A of the SEBI
Act, 1992 were also initiated, and an Adjudicating Officer was
appointed to inquire into the violations.
(g) It may not be necessary to refer to the subsequent events in relation
to the four companies referred to above, except to say that:
(i) Penalties were imposed;
(ii) Recovery proceedings for a sum of Rs. 30,561,041,451.69
(Three Thousand and Fifty-Six Crores approximately) were
initiated; and
(iii) All the immovable properties and jewelleries owned by the
aforesaid companies were attached, including those permitted
to be auctioned by the MPID Court in Mumbai in Case No.
7/2016.
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(iv) The MPID Court and the SEBI, orders dated 30.01.2017
vide
and 10.03.2017 respectively, attached various properties of
the companies and jewellery items. Subsequently, through
various orders passed from time to time, including the one
dated 12.02.2020, SEBI attached additional properties in the
State of Maharashtra and prevented the creation of any further
encumbrances in all the immoveable properties held by the
Petitioners. In furtherance, SEBI sold 100 properties in 7
public auctions to liquidate the movable or immovable assets.
(h) Meanwhile, FIR No. 78/2015 was registered on 16.03.2015 at
Police Sation Rajhara, District Balod, State of Chhattisgarh,
against the Petitioners under Sections 3, 4, and 5 of the Prize Chits
and Money Circulation Scheme (Banning) Act, 1978 (hereinafter,
“ Prize Chits Act ”). It appears that the Petitioners were arrested in
that case on 27.01.2016.
(i) Thereafter, a series of FIRs were registered in the States of
Chhattisgarh, Maharashtra, Madhya Pradesh, Rajasthan, Uttar
Pradesh and Haryana. Most of these FIRs have been registered
under Sections 406, 420 and 34 of IPC read with Sections 3, 4, 5,
6 and 10 of the Prize Chits Act and Section 3 of the Maharashtra
Protection of Interest of Depositors (in Financial Establishment)
Act, 1999 (hereinafter, “ MPID Act ”). It appears that while 28 FIRs
have been registered in the State of Chhattisgarh, 16 FIRs are
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registered in the State of Madhya Pradesh, 11 FIRs in the State of
Rajasthan, 2 FIRs in the State of Uttar Pradesh, and 1 FIR in the
State of Maharashtra and the State of Haryana each.
(j) It further appears that after the Petitioners were arrested on
27.01.2016 in the first case registered in the State of Chhattisgarh,
the Petitioner Nos. 1 and 2 still continue to be in custody of various
courts, as a result of multiple FIRs registered across the country.
Petitioner No. 3, however, was first released on bail by this Court
vide order dated 15.03.2021, but was again arrested on 26.12.2022
by the Chhattisgarh Police in similar cases registered in 2016 and
2019. It appears that he was, however, released on bail by the
Chhattisgarh High Court on 10.04.2023 in MCRC No. 724 / 2023.
Thereafter, vide the order dated 15.04.2024 passed in SLP (Crl.) D.
No. 43363/2023, it has been directed that Petitioner No. 3 shall not
be arrested in any fresh case registered against the Petitioners on
the same or related issues. On 29.04.2024, it was further directed
that Petitioner No.3 shall not be arrested in any of the cases
registered against him until further orders.
3. Having understood the facts, we shall now advert to the
Petitioners’ prayer seeking a direction to SEBI to liquidate the attached
assets in a time-bound manner and disburse the sale proceeds to
genuine investors as early as possible. In this regard, SEBI noted that
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the Forensic Audit conducted by the Economic Offence Wing
(hereinafter, “ EOW ”) revealed that the Companies floated by the
Petitioners were liable to refund Rs. 4700 crores, though as per the
order passed by the WTM the refund amount was initially Rs. 3049
crores only. It is also not in dispute that there are 498+13 immovable
properties owned by the companies; the details whereof have been
furnished before the MPID Court, Mumbai. The parties are broadly ad
idem that the entire liability of each Company regarding refund of the
due amount to all the investors as well as various statutory, foreseen or
unforeseen liabilities, can be extinguished from the sale proceeds of
some of the immovable properties, if not all of them.
4. Since the immovable properties owned by the companies are
spread over different parts of the country, it was sensed unachievable
for either the SEBI or the MPID Court at Mumbai, to liquidate all these
assets through time-bound public auctions, for the reason that the
process postulates various complex questions such as:
(i) What is the exact location of the immovable property in metes and
bounds?;
(ii) Whether or not such property is free from encumbrances?;
(iii) Whether the physical possession of the subject-property is with one
of the companies or not;
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(iv) Whether any civil dispute regarding the title/ownership of such
property is pending before a competent forum?;
(v) What is the market value of the property in the event of its sale in
a transparent manner?;
(vi) Is there any lien of statutory tax, levy, duty, or any other charge
attached to such property?;
(vii) What mechanism shall be evolved for the sale of each property, so
as to fetch the best price?; and
(viii) What is the mandatory procedure to be followed in terms of local
laws for the purpose of registration of the auctioned property and
its mutation in favour of the auction purchaser, etc.
5. Since SEBI with its bona fide pursuits to liquidate the assets and
generate funds to satisfy the claims of investors, has already auctioned
some of the assets, it has taken a very fair stand through its learned
Senior Counsel, agreeing to the constitution of a High-Powered Sale
Committee (hereinafter, “ HPSC ”) to auction the immovable assets of the
companies, to the extent they are required to satisfy the investors’
claims and liquidate all other statutory liabilities of the Companies. In
this regard, the Petitioners, as well as SEBI, have submitted their
comprehensive notes of suggestions to work out the modalities.
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6. We have minutely considered the valuable suggestions given by
learned Senior Counsel/Counsel for the parties for the constitution of
HPSC and have also kept in view exigencies such as that:
(a) Petitioner Nos.1 and 2 are languishing in jail as undertrials for over
8 years;
(b) Innocent investors have been eagerly awaiting the refund of their
hard-earned money for more than a decade;
(c) Despite its best intentions and commitment, SEBI is facing an
uphill task in conducting public auctions in a timebound manner;
(d) SEBI or MPID Court, Mumbai do not have the readily available
infrastructural and strategical facilities to identify each property, to
have fair assessment of their market value, and then to auction
them to fetch the true market value;
(e) The conclusion of trials in the pending criminal cases is marred by
uncertainty; and
(f) The Petitioners have shown their bona fide towards refunding the
investors' amounts, and any further delay in this regard, will be
prejudicial to one and all.
7. Keeping these exceptional and peculiar circumstances in view, we
deem it fit to invoke our powers under Article 142 of the Constitution of
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India, so as to do complete justice between the parties and hence,
constitute the HPSC comprising of the following:
(a) Hon’ble Mr. Justice S. Ravindra Bhatt, Former Judge, Supreme
Court of India – Chairperson;
(b) Dr. Justice Satish Chandra, Former Judge, High Court of
Allahabad – Member;
(c) A nominee of SEBI who shall be an officer preferably in the rank of
its Director – Member;
(d) States of Chhattisgarh, Maharashtra, Madhya Pradesh, Rajasthan,
Uttar Pradesh and Haryana are hereby directed to appoint one of
their officers of the Revenue Department, not below the rank of
Collector, to assist the HPSC in relation to the properties situated
within that State. The Collector shall be obligated to provide the
requisite information, in writing, and shall sign the proceedings as
State Representative;
(e) Mr. Pardeep Kumar Sharma, Registrar (Retd.), Supreme Court of
India is hereby appointed as the Member Secretary-cum-Nodal
officer of the HPSC. He shall be the Principal Custodian of all
records and shall coordinate between the Chairperson and
Members of the Committee as well as the State Authorities to give
effect to the task assigned to the HPSC;
(f) The Deputy Secretary, Department of Home, Government of
Maharashtra, who is the Officer in charge of the EOW, shall act as
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Secretary to the HPSC for the purpose of securing title/ownership
records or other relevant documents from different States and shall
be jointly responsible along with Member-Secretary for
maintenance and custody of record;
(g) The HPSC may, at its discretion, associate:
(i) A Chartered Accountant; or
(ii) A Civil Engineer; or
(iii) An Architect; or
(iv) Any other expert, from time to time as and when required;
(h) The HPSC shall:
(i) Firstly, obtain all property documents/original title deeds and
other relevant records from the SEBI/EOW/MPID Court,
Mumbai and Sub-Registrars of different States, where the
properties of M/s Sai Prasad Group of Companies are located;
(ii) A database of the property documents, along with material
details, shall be created;
(iii) Arrangements shall be made for safe storage, digitalisation,
and unique number marking of the property
documents/original title deeds and other jewellery items;
(iv) In this regard, SEBI with the help of Stock Holding Document
Management Services Ltd., will provide the necessary facilities;
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(i) The HPSC shall take necessary steps to ensure that all the
properties are shown to be entrusted/encumbered in its favour in
the State Government land records;
(j) The HPSC shall appoint a pool of Certified Valuers to evaluate the
Company's assets in each State;
(k) We hereby confer and vest all the powers of a Civil Court in the
HPSC for taking necessary actions to speed up the liquidation of
the Companies' properties;
(l) The HPSC, with the help of experts, will prepare a list of properties
already sold under the supervision of the MPID Court, Mumbai, as
well as a separate list of the properties that are yet to be sold;
(m) The HPSC will engage/appoint e-auction service providers for
auctioning of the assets;
(n) Similarly, expert agencies may be empanelled for the valuation of
the assets for initiating the public auction process and its
advertisement;
(o) The final decision regarding the disposal of the assets shall be at
the complete discretion of the HPSC and once the sale is made the
property shall vest in the buyer, free from all encumbrances.
(p) The Petitioners or their nominees will be at liberty to join the
auction proceedings and bring prospective buyers. They may
submit their suggestions to the HPSC, if any. However, the HPSC
will have full discretion to decide on those suggestions, and the
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Petitioners shall not be entitled to agitate on such issues before this
Court or any other forum;
(q) The objections, if any, submitted by the Companies against the
Forensic Audit Report and which are stated to be pending before
the MPID Court, Mumbai, are directed to be decided within two
months. A copy of the order shall be forwarded by the MPID Court
to the HPSC for its information and record; and
(r) SEBI is directed to provide a separate account where the sale
proceeds shall be deposited. Such account shall be jointly operated
by the Chairperson or his nominee Member along with the Member,
nominated by SEBI.
Refund Process
8. Having delineated the manner in which the HSPC will auction the
assets and accommodate the sale proceeds in a dedicated account, the
following process may be undertaken for the refund to investors:
(i) The HPSC shall identify the number of investors and database of
such investors, in consultation with all the concerned agencies /
State Representatives and, if so required, the Representatives of the
Companies;
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(ii) The HPSC shall thereafter determine the amount to be refunded to
each investor;
(iii) The HPSC shall determine a threshold recovery limit beyond which
the refund process can be started;
(iv) The HPSC shall also decide upon a category of investors based on
their investment amount so that the refund can be done in a
segregated and simultaneous manner;
(v) As already stated, the HPSC shall open an Escrow Account with a
bank designated by SEBI, transfer all amounts from the account
monitored presently by the MPID Court, Mumbai, and deposit all
sale proceeds in that interest-bearing account;
(vi) The HPSC shall decide the nature of documents to be sought from
the investors to determine their claims and the mode of application
by the investors (online/physical) to determine their eligibility for
refund, as well as the mode of refund (online/draft/both); and
(vii) Investor’s claims shall be invited through a public notice that shall
be widely publicized in one English newspaper and in one
vernacular newspaper, popular in the State.
Obligation of the Petitioners and their Companies
9. Having regard to the duties and obligations to be carried out by
the Petitioners and their companies, the following may be done:
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(i) The Petitioners and their Companies shall forthwith submit details
of all the immovable assets/jewellery items to the HPSC and shall
also handover original title deeds or other relevant documents as
may be in their possession;
(ii) The Petitioners and their Companies shall execute the necessary
sale deeds within the time frame and as per the instructions of the
HPSC after the sale is confirmed and the full consideration is
received in the bank account to be operated by HPSC; and
(iii) In the event of any pending title dispute, the HPSC shall determine
the rights of the Sai Prasad Group of Companies in such properties
for the limited purpose of auctioning them. Except for when there
are legal impediments, such property shall be auctioned without
any delay, and the Petitioners or the authorised representatives of
their Companies will execute the necessary documents, including
sale deeds, in such cases also.
Secretarial cum Administrative requirements
10. With respect to the administrative or secretarial assistance that is
necessitated in the course of dealing with these directions, the following
may be adhered to:
(i) SEBI will assist HPSC in the opening of its office, for the purpose
of overall coordination and receiving correspondence from the
stakeholders. HPSC will also arrange other infrastructure and may
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engage secretarial assistance as may be necessary for its smooth
functioning. If the SEBI has any adequate office space and
infrastructure at a place where the HPSC decides to set up its
Principal Office, SEBI may provide the same without prejudice to
its right to recover user charges, which will be determined by the
HPSC;
(ii) Needless to say, the office space shall be sufficient for carrying out
meetings, sitting of secretarial services, maintenance of records,
etc.;
(iii) The HPSC shall open a dedicated website for the auction / e-
auction/advertisement / refund process etc.;
(iv) The claims / objections / representations etc., as may be received
by HPSC shall also be disposed of at its end;
(v) The HPSC shall fix a time line for every action and endeavour to
conclude the sale process as early as possible and within the time
frame so determined; and
(vi) We will at this stage request the HPSC to make an endeavour to
conclude the entire process within one year.
Remuneration
11. Finally, keeping in mind the distinct responsibilities and
obligations to be shouldered by the HPSC, it is imperative to also
address the remuneration of the learned Chairperson along with all the
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members. In this regard, learned Senior counsel for the parties have
referred to two orders passed by this Court as `guidelines’.
th
The first order is dated 4 May, 2022 passed in Writ Petition (C)
No.995 of 2019 (National Spot Exchange Ltd. v. Union of India & Ors.)
wherein, a `Supreme Court Committee’ headed by a former Chief
Justice of the High Court was constituted for the purpose of sale of the
attached properties and disbursement of sale proceeds amongst the
investors. This Court, instead of fixing the honorarium, observed that
th
“the learned Judge will fix his own fee”. The second order dated 29
March, 2023 was passed in I.A. No.56308 of 2023 in Writ Petition (C)
No.191 of 2022 (Pinak Pani Mohanty v. Union of India & Ors.) wherein
also a High-Powered Committee headed by a former Judge of this Court
was constituted to supervise and monitor the disbursement of an
amount of Rs. 5000 crores to the depositors of the Sahara Group of Co-
operative Societies. In that case, an honorarium of Rs. 15 lakhs per
month was ordered to be paid to the learned former Judge of this Court,
besides Rs. 5 lakhs per month to the learned amicus curiae.
12. Having bestowed our thoughtful consideration on these two orders
and after taking note of the fact that the entire process in the case in
hand might take more than a year, it seems to us that fixation of
monthly honorarium may not be desirable. Similarly, we do not want to
leave it for the learned Chairperson or members of the HPSC to fix their
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own honorarium as it is likely to cause embarrassment to them.
Considering all these aspects in view, we issue the following directions:-
(i) The Chairperson of the HPSC shall be entitled to an honorarium of
Rs. 2 lakhs per sitting day, when effective proceedings are held.
This will be in addition to travelling, boarding and other
miscellaneous expenses as may be incurred in discharging the
assigned responsibilities;
(ii) The learned Member, who is a former Judge of the High Court shall
be entitled to an honorarium of Rs. 1.50 lakhs per sitting day, when
effective proceedings are held. This will be in addition to travelling,
boarding and other miscellaneous expenses as may be incurred in
discharging the assigned responsibilities;
(iii) The Member nominated by SEBI shall not be entitled to any
remuneration—since he is a full-time officer of SEBI. However, he
shall be entitled to travelling, boarding, and other miscellaneous
expenses as may be incurred in discharging the assigned
responsibilities;
(iv) The Member Secretary cum Nodal Officer of the Committee shall be
entitled to an honorarium of Rs. 75 thousand per sitting day, when
effective proceedings are held. This will be in addition to travelling,
boarding and other miscellaneous expenses as may be incurred in
discharging the assigned responsibilities;
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(v) Remuneration of experts like Chartered Accountant, Civil Engineer,
Architect, Certified Valuer etc. shall be determined by the HPSC;
and
(vi) The expenditure towards honorarium, hiring of office, secretarial
assistance, as well as for following the prescribed procedure of
auction, etc., shall be reimbursed from the sale proceeds. The
initial expenditure shall be reimbursed from the sale proceeds of
the properties which have already been sold, namely, the amount
which the SEBI will transfer to the Escrow Account.
13. The States of Chhattisgarh, Maharashtra, Madhya Pradesh,
Rajasthan, Uttar Pradesh and Haryana are hereby directed through
their Chief Secretaries and Financial Commissioners (Revenue), to
extend full cooperation and provide complete assistance as may be
required by the HPSC for the purpose of execution and fulfilment of the
assigned task. There must not be any delay on their part to comply with
the instructions as may be received from the Chairperson of the HPSC.
14. Similarly, the Directors General of Police of the above-mentioned
States are directed to provide assistance, if so required for the purpose
of securing and protecting possession of the properties of the
Companies.
15. In addition, the HPSC, if so required, may deploy private guards
for the protection of the properties of the Companies.
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16. SEBI and the Petitioners are also directed to extend full
cooperation to the HPSC.
17. To facilitate the sale and disbursement process and keeping in
mind the period of incarceration already undergone, Petitioner Nos. 1
and 2 are directed to be enlarged on interim bail to the satisfaction of
the MPID Court, Mumbai in Case No. 7 / 2016. This will be treated as
interim bail in all of the FIRs. We order this on the basis of the special
facts of the case, in exercise of our power under Article 142 of the
Constitution of India.
18. The HPSC shall be at liberty to seek further guidelines or
clarifications as may be required, for which its Member Secretary cum
Nodal Officer shall be at liberty to move an appropriate application
before this Court.
………………………………J.
(SURYA KANT)
………………………………J.
(K.V. VISWANATHAN)
NEW DELHI
DATED: 15.07.2024
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