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Informist, Monday, Jan. 5, 2026

 

NEW DELHI – The Supreme Court Monday set aside Securities and Exchange Board of India's six-month ban on Catalyst Trusteeship Ltd. from taking up new assignments as a trustee of alternative investment funds. Allowing Catalyst Trusteeship's plea, the apex court said the punishment to ban the petitioner for six months was disproportionate to the element of negligence attributed to it.

 

The case has its genesis from Brick Eagle India Affordable Housing Trust launching a scheme Brick Eagle India Affordable Housing Fund with a target corpus of INR 5 billion. The settlor of the Brick Eagle trust had appointed Milestone Trusteeship Services Pvt. Ltd. as the trustee and Brick Eagle Capital Advisory LLP as an investment manager of the Trust.

 

According to the private placement memorandum between the parties, the first closing of the scheme was achieved on Aug. 31, 2017, with a capital commitment of INR 1 billion. As per the memorandum, the second closing with a commitment of INR 2 billion ought to have been made within 6 months on or before Feb. 28, 2018 and final closing within 12 months from the date of second closing on or before Feb. 28, 2019. However, the second and final closing of the scheme were not achieved.

 

Thereafter, SEBI conducted an inspection into the affairs of the Brick Eagle trust between Apr. 1, 2019 and Mar. 31, 2020 with respect to the scheme and observed that the Trust had violated Securities and Exchange Board of India (Alternate Investment Fund) Regulations, 2012 and SEBI Circulars. Separate show cause notices were also issued in 2022 to the investment manager and its designated partners, the trustee and the erstwhile directors of Milestone Trusteeship alleging that the latter had failed to comply with the terms and conditions specified in the private placement memorandum by not achieving the second and final closing and thereby violated 2012 regulations and SEBI Circulars.

 

In 2022, Milestone Trusteeship was merged into Catalyst Trusteeship. In 2024, SEBI banned Catalyst Trusteeship from taking up new assignments as trustee of alternative investment funds for a period of one year and restrained it from associating with SEBI-registered intermediaries for a period of three months for violation of 2012 regulations and market regulator's circulars.

 

In an appeal, the Securities Appellate Tribunal set aside the SEBI order restraining the petitioner from associating with market regulator's registered intermediaries for a period of three months. However, it modified the ban regarding new assignments from one year to six months. Challenging the six-month ban also, the petitioner moved the top court.

 

The petitioner argued that the failure to achieve second and final closing were mere technical breaches which have not caused any prejudice to the investors. Such failure was not deliberate by Milestone Trusteeship before merger and after merger, the appellant has done the needful to secure the interest of the investors, Catalyst Trusteeship said.  End

Reported by Surya Tripathi

Edited by Vandana Hingorani

 

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