Bombay High Court dismisses PIL seeking regulation of Timeshare companies, imposes ₹25,000 costs

The Bombay High Court on Wednesday dismissed a public interest litigation (PIL) petition seeking regulation of timeshare companies and also imposed costs of ₹25,000 on the petitioner, Securities & Time Share Owners Welfare Association [Securities & Time Share Owners Welfare Association v. SEBI & Anr.]..A bench of Chief Justice Dipankar Datta and Justice Abhay Ahuja observed that the petition could not have been filed as a PIL as it sought neither enforcement of fundamental rights nor purity in administration. “The present petition, in our considered view, cannot be styled or filed as a Public Interest Litigation as it is neither for enforcement of fundamental rights of marginalized and deprived sections of the society nor for preservation of ecology and environment nor for purity in public administration and probity in governance but seeking directions to the respondents (Securities and Exchange Board of India) to either enforce the provisions pertaining to CIS Regulations against Timeshare companies, which we have found to be without any merit or in the alternate, issue directions to formulate regulations, which we have already held to be de hors the scope of our constitutional mandate under Article 226 (of the Constitution),” the Court said.Justice Abhay Ahuja who authored the main judgment imposed costs of ₹25,000 to be paid by the petitioner-association to SEBI within 2 weeks. CJ Datta in a short opinion concurred with Justice Ahuja’s reason to dismiss the petition.The CJ termed the plea as carrying the attractive brand name of ‘public interest litigation’. “There is no semblance of public interest, much less substantial public interest, for entertaining this petition. To discourage such misadventures, I would have imposed exemplary costs but have since decided to agree with what His Lordship has imposed,” the CJ opined..The petitioner had moved the court claiming that the rights of several million residents of India were adversely affected due to malfunctioning, fraud, misrepresentation and other wrongful and/or illegal activities of various timeshare companies. Timeshare properties are those in which multiple parties hold right to use the property during their allotted period of time. Such properties are usually resorts/ vacation units and various companies use such properties during their allotted period.“Most of the Timeshare companies have a corpus accumulated through pooling of investors’ fund of over ₹100 Crores and they would fall under the definition of CIS as a scheme or arrangement in section 11AA(1) of the SEBI Act”, the petitioner argued. The plea, therefore, sought regulation of the timeshare companies as CIS. Alternatively, the petitioner requested the Court to issue directions to SEBI to formulate suitable legislation to regulate timeshare companies. SEBI, on the other hand, contended that timeshare was an investment in a holiday scheme which gave an entitlement to a holiday and that the schemes of all timeshare companies could not ipso facto be said to be falling within the definition of CIS under the SEBI Act and the CIS regulations."All timeshare companies cannot be considered as CIS unless they satisfy the conditions mentioned in section 11-AA and that will have to be interpreted and analyzed according to the facts and circumstances of each scheme," the market regulator contended.SEBI also informed the Court that only after it receives any complaint, would it ascertain whether a scheme between the investor and the so called timeshare company is a CIS or not..Agreeing with SEBI’s contention, the Court concluded that it was not necessary for them to issue any directions to the regulator. “True that the innocent and gullible investors need to be protected against the abuse in the name of Time shares. However as mentioned above, SEBI – the Regulator being fully empowered to do so, it would therefore not be necessary for us to give any such directions to the Regulator,” the Court opined. .Advocates NS Nappinai, Navin Sachanandani and Noelle Ann Park appeared for petitioners.Senior Advocate Shiraz Rustomjee with Advocates Mihir Mody Arnav Misra briefed by K Ashar and Co appeared for SEBI.[Read Judgment]