Existence of a franchise agreement and director control negates liability for unauthorized investment advisory services.

The Appellant, a proprietary concern of Jaydeepgiri Goswami, was issued a Show Cause Notice (SCN) following a complaint by Mr. Chirag Sadhu alleging the provision of unregistered investment advisory services and failure to refund ₹77,000 paid for an IPO allotment.

SEBI’s examination alleged the Appellant operated a website claiming over 10 years of experience and collected ₹1.88 Crores between 2020-2021.

The Appellant contended he was merely a "franchise partner" or mediator for Noticees Nos. 2 to 4 (the owners of Shivaay Investment Pvt. Ltd.), who defrauded him and 35 other investors.

He produced a "Franchise Partnership Agreement" showing the private company bound itself to provide shares while he acted as an authorized person.

The CGM, SEBI, passed an impugned order on October 25, 2023, directing a refund of advisory fees on a joint and several basis.

The Appellant challenged this with a 509-day delay, citing personal tragedies, including his sister's death from cancer and his father's illness.

1. Whether the inordinate delay of 509 days in filing the appeal should be condoned given the Appellant's personal circumstances and pursuit of criminal remedies.

2. Whether the Appellant acted as an independent investment adviser in violation of SEBI regulations or was a victim/agent of the primary fraudsters (Noticees Nos. 2 to 4).

The court primarily considered Section 12(1) of the SEBI Act, 1992, and Regulation 3(1) of the SEBI (Investment Advisers) Regulations, 2013, regarding mandatory registration for investment advisors.

It also referenced Regulation 2(1)(c) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 (PFUTP), regarding deceptive websites.

Procedurally, the Tribunal applied principles of "sufficient cause" for condonation of delay under the Limitation Act/tribunal rules, taking into account humanitarian grounds and the Appellant's bona fide conduct.

The Tribunal found that the Appellant had "come clean" and consistently cooperated with SEBI during the examination.

Evidence, including the "Owner-Franchise Partnership Agreement" and MCA records, revealed that Noticees Nos. 2 to 4 were the actual directors of the company and the faces on the website, which used their DIN numbers to deceive the public; the Appellant's name was notably absent from the site.

The Tribunal noted that the Appellant was a young graduate operating during the COVID-19 period who had siphoned no funds for himself; rather, the funds were accounted for as "loans" to Noticees Nos. 2 to 4, who had siphoned the money.

Furthermore, the original complainant had withdrawn his grievance after being paid.

The Tribunal linked the law to the facts by concluding the Appellant acted as an employee or commission agent rather than an independent adviser, and his personal hardships (family cancer/deaths) justified the condonation of delay.

The Tribunal held that there was no evidence to suggest the Appellant independently indulged in investment advisory activities.

The delay was condoned due to sufficient cause involving family medical crises and the Appellant's active pursuit of criminal cases against the primary fraudsters.

All pending applications were disposed of with no order as to costs.