Investors must pursue claims through the Supreme Court-appointed committee’s settlement mechanism.

The petitioners claimed to have invested amounts with respondent No. 2, M/s Golden Forests (India) Limited: petitioner No. 1 invested ₹50,000, while petitioners Nos. 2 and 3 allegedly invested ₹25,000 each. The company issued investment receipts and represented that specified maturity amounts would be paid under the relevant scheme.

After maturity, the amounts were allegedly not disbursed. Petitioner No. 1 submitted an application dated 18 September 2020 seeking payment.

The petitioners filed a writ petition under Article 226 seeking payment of the invested amounts with interest from the company, the concerned authorities, and/or the official liquidators.

During the proceedings, they relied upon directions issued by the Supreme Court in National Investor Forum v. M/s Golden Forests (India) Limited and an order dated 26 August 2021 issued by the committee constituted pursuant to those directions. However, the petitioners admitted that they had not yet submitted their claims before the committee.

Whether the petitioners could seek a writ direction for immediate payment of their invested amounts and assured maturity benefits when the Supreme Court-appointed mechanism for settlement of investors’ claims was already available but had not been invoked by them?

Whether the writ petition should be disposed of by granting liberty to the petitioners to submit their claims, supported by the prescribed documents, before the committee constituted pursuant to the Supreme Court’s directions?

The Court exercised its jurisdiction under Article 226 of the Constitution but applied the principle that an effective court-sanctioned mechanism should ordinarily be pursued where it has been established for settlement of claims against a company.

It relied upon the directions of the Supreme Court in National Investor Forum v. M/s Golden Forests (India) Limited dated 18 June 2003, under which a provisional liquidator and a mechanism for settlement of investors’ claims were put in place.

The committee’s order dated 26 August 2021 provided that an investor’s claim could be honoured upon production of either the original or notarised copy of the company’s receipt, or proof of payment from the investor’s bank account to the company.

The petitioners’ grievance concerned non-payment of matured investments, but the Court noted that the Supreme Court had already created a specific mechanism to protect investors and facilitate settlement of claims, particularly those of small investors.

Since the petitioners had admittedly not submitted their claims before that committee, the Court found that no useful purpose would be served by keeping the writ petition pending for replies from the respondents or by issuing a direct payment order at that stage.

The appropriate course was therefore to require the petitioners to use the existing claim-settlement process and furnish the documents identified by the committee.

It granted liberty to the petitioners to submit their claims before the committee constituted pursuant to the Supreme Court’s directions dated 26 August 2021, along with the requisite documents. The committee was directed to consider and decide any such claim in accordance with law.

The petition was accordingly finally disposed of, with no order as to costs.