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SEBI - Case Laws
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2023 (6) TMI 331
Fraudulent activities under SEBI - issue of 80,800 false share certificates, forging signatures of genuine investors on the transfer documents and verifying fake share certificate and forging signatures and approving fraudulent transfer etc. - as per SAT[Mumbai] WTM passed ex-parte ad-interim order correctly in terms of Section 11 in the interest of the investors - HELD THAT:- No good ground and reason to interfere with the impugned judgment and hence, the present appeals are dismissed.
Pending application(s), if any, shall stand disposed of.
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2023 (6) TMI 195
Offence under SEBI - person responsible for the commission of the offence - person responsible for the carrying out the business - liability of director - allegation of Fraudulent and Unfair Trade Practices - Additional Session Judge set aside the summoning order qua the Respondent No. 1 while observing that the Complaint filed did not contain any material to suggest that the Respondent No. 1 herein was responsible for the carrying out the business of IHIL - HELD THAT:- It is now trite law that a Director cannot ipso facto, simply by virtue of being the director of a Company, be arraigned as an Accused by the SEBI [Refer to: SEBI v. Gaurav Varshney [2016 (7) TMI 642 - SUPREME COURT]. By virtue of being a juristic person the acts attributed to a Company are attributed to the officers at the helm of affairs.
Every person responsible for the commission of the offence or with the knowledge of whom the offence was committed, is liable for the offence. There is now burgeoning jurisprudence both under the SEBI Act, and under the Negotiable Instruments Act, 1881 which suggests that the liability is fastened upon an individual by virtue of being in charge, and being responsible when the offence was committed, and not merely on the basis of holding a designation or office in the company.
Even an individual not holding a particular designation in the Company, but who was at the helm of affairs at the relevant time can be held liable. Hence, such vicarious criminality is not attributed to individuals simply by virtue of the position held by them in the company.
The Director or officer of the company needs to have played a role in the functioning of the Company or in the commission of the offence, as recorded in the Complaint, to be arraigned as an Accused. There must be specific averments against the Accused Director detailing the manner in which the Director was responsible for the conduct of the business.
A company may have numerous Directors, however, it is apposite to state that to make each of these Directors accused persons simply by virtue of their position in the Company is not the true import of Section 27 of the SEBI Act.
As stated, there is not even a bald cursory averment which ties Respondent No. 1 to the allegations of price manipulation of IHILs stock. It appears that the Respondent No. 1 has been arraigned as an Accused solely by virtue of him being a Director in IHIL.
On the contrary, the statements of Accused Nos. 16 and 10, categorically stated that the day to day affairs of IHIL were being handled by Mr. Prakash Gupta, Accused No. 16, Shri L.R. Maurya, Accused No. 10 and Shri. Shririam Maurya, Accused No. 11. It must also be noted that the Summoning Order dated 29.03.2000 was quashed qua similarly placed Accused Persons i.e., Mr. Vinod Kumar, also a Director of IHIL, Accused No. 12 and Mr. Pankaj Goel, Accused No. 20. In light of this, this Court does not find any reason to interfere with the order dated 24.03.2009 passed by the Learned Additional Session Judge in Revision Petition.
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2023 (5) TMI 1419
Fraudulent and Unfair Trade Practices under SEBI Act -manipulation or structured trade - imposition of penalties for creating misleading appearance of trading through miniscule trades - HELD THAT:- No arguments / submissions was made against the findings given by the AO with regard to the shares being received off- market by noticees no. 1, 2 and 3. No arguments was raised that the receipt of the shares was with consideration or that the finding of the AO that it was received without consideration is incorrect. The violation of spot delivery u/s 2(i) (a) of the SCRA was also not contested. Consequently, the finding of the AO that the shares of the Company Wisec Global Limited were received by noticees no. 1, 2 and 3 without any consideration from a director of the Company Kolluru Surya Prakash Venkata is affirmed. The violation of Section 2(i) read with Regulations 13, 16 and 18 of the SCRA is also affirmed.
The fact that false information was furnished by noticee no. 1, namely, that the off-market transaction was a loan transaction is also affirmed, since this point was not argued before us.
Thus, it is clear that noticees no. 1, 2 and 3 received the shares of the Company Wisec Global Ltd. from its Director Kolluru Surya Prakash Venkata without consideration and with the sole intention of increasing the price of the scrip which was the motive.
We find that these noticees were selling the shares in miniscule quantities creating NHP and by such trades increased the price of scrip which was manipulative and violative of Regulations 3 and 4 of the PFUTP Regulations.
The contention that there was no manipulation or structured trade is patently erroneous in as much as we find that the trading pattern of the buyers and the sellers was that they traded in close proximity of time inter-se between them.
The buy and sell orders were placed within a short time interval varying from 1 minute to 2,3 or 4 minutes.
Such trading pattern as found by the AO cannot occur by accident or by coincidence. The trading pattern leads to an inference that there was a meeting of minds with a pre-determined plan and, therefore, there was a collusion between the parties. Such trades executed, in our opinion, are not genuine and were done with a fraudulent intent to create artificial volume in the scrip.
Consequently, the findings that noticees no. 1, 2 and 3 have manipulated the price of the scrip through small trades does not suffer from any error of law. The trading pattern of noticees no. 1, 2 and 3 with noticees no. 9, 11 and 12, clearly indicates that these structured trades were done with the intent of creating artificial volumes and misleading appearance of trading with the intent of misleading the investors. Such structured trades were violative of Section 12A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations. The decisions cited by the learned counsel for the appellants are not applicable to the facts of the present case.
For the reasons stated aforesaid, we do not find any error in the impugned order. All the appeals fail and are dismissed with no order as to costs. Misc. Application are disposed off accordingly.
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2023 (5) TMI 1395
Application moved seeking clarification of order - also passing of an appropriate direction thereby directing the learned Additional Session’s Judge-05, Patiala House Court, Delhi to take on record the documents, more specifically stated in para 3 of the application.
HELD THAT:- Admittedly, the petitioner has obtained the certified copies of such documents and has filed before the learned Trial Court but the same were not taken on record by the learned Trial Court, hence this petition.
The arguments raised by the learned counsel for the petitioner is vehemently opposed by the learned counsel for the respondent. He submits the matter is already a disposed of matter and no further directions can be issued.
We agree to the submissions made by the learned counsel for the respondent. If the learned Trial Court had failed to take on record such documents, such an order may be challenged by the petitioner herein before the appropriate forum. The application stands dismissed.
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2023 (5) TMI 1162
Condonation of delay - inordinate delay in approaching the Tribunal - As decided by SAT there is an inordinate delay in approaching the Tribunal with no adequate reason to condone the delay at this belated stage - HELD THAT:- We find no error in the order of the Securities Appellant Tribunal, Mumbai.
Appeal is accordingly dismissed. Pending application, if any, stands disposed of.
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2023 (5) TMI 985
PIL - Suspension of Admission to Dealings on the Exchange - millions of investors who are being duped by the unscrupulous promoters of the companies - Petitioner holding a Bachelor’s Degree in Law stating that he is espousing the cause millions of investors who are being duped by the unscrupulous promoters of the companies as the promoters of the companies vanish after siphoning off the hard-earned money of the investors - Scope of Appeal to Securities Appellate Tribunal.
HELD THAT:- It is the duty of the SEBI to protect the interest of the investor in securities and to promote the development of, and to regulate the securities market by such measures as it thinks fit. Meaning thereby, the SEBI is empowered to take all such measures in the interest of investors and such measures may include regulating the business in stock exchange, registering and regulating the working of stock brokers, performing such functions and exercising such powers under the Provisions SCRA, as may be delegated by the Central Government. The aggrieved investor can certainly prefer an Appeal before the Securities Appellate Tribunal (SAT) in case he is aggrieved in the matter of delisting of the security.
Delisting regulations provide Provisions with respect to the rights of the share-holders and all kind of checks and balances are in place under the Regulations. It is pertinent to note that Section 23(2) of the SCRA gives a special power to SEBI to penalize any person who contravenes the Provisions inter alia Section 21 or Section 21A or Section 22, and a punishment upto 10 years or a fine which may extend up to Rs. 25 crores can be inflicted.
Not only this, as stated in the written reply filed by the SEBI, for vanishing companies, the exercise was undertaken by the Registrars of companies and action has been initiated in the matter against them. Thus in short, the statutory provisions do provide a robust mechanism to safeguard the interest of investors and by no stretch of imagination, it can be said that the interest of investors is not at all protected.
Appeal against any order/ decision for recognized stock exchange before the SAT and any person aggrieved in the matter by the order or decision of the recognized stock exchange or the adjudicating officer or any order made by the SEBI under Section 4B can prefer an Appeal, therefore, an efficacious remedy is also available under the statutory provisions.
The statutory provisions governing the field make it very clear that a transparent mechanism of delisting the securities, adequate participation and/ or representation of public shareholders in the process of delisting is in place, and a remedy is also available to aggrieved investor in the matter of delisting. Not only this, even in case of compulsory delisting, which is a disciplinary mechanism, an aggrieved investor may file an Appeal before the SAT against the decision of the recognized stock exchange delisting the securities under Section 21A(2) of the SCRA.
In the considered opinion of this Court, in view of the reply filed by the SEBI, Government of India and Bombay Stock Exchange, no further orders are required to be passed in the present PIL, and the interest of the investors is certainly protected under the Statutory Provisions governing the field.
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2023 (5) TMI 771
Public issue of shares - payout to the shareholders - Persons acquiring shares to make public announcement in certain cases - accused offered the public to acquire 20% of the capital of M/s. Damania Airways Limited in terms of Clause 40 B of the listing agreement of the Stock Exchange, Mumbai - non-despatch of consideration amounts to a violation of Regulation 20 - acquirers replied to the show cause notice stating inter alia that the liquidity crunch in the market caused the delay and that they had already despatched more than 70% of the consideration.
HELD THAT:- All procedures to the offer, including payment of consideration to the shareholders who have accepted the offer, would be completed within four weeks from the date of closure of the offer. The offer closed on 29 February 1996; Khemkas should have made the payments to the shareholders on or before 28 March 1996. the complainant has produced on record letters from the Manager of the Offer and Khemka Brothers dated 9 April 1996, 25 April 1996, 10 July 1996 and 17 August 1996 wherein it is unambiguously admitting that the acquirers, i.e. Khemka Brothers have not been able to pay the shareholders who have accepted the offer and cited liquidity crunch in the market as the reason for their failure. As has been explained above, the Regulation requires that the payout to the shareholders who have accepted the offer is to be made within four weeks from the closure of the offer. Prima facie failure on the part of the acquirer to meet the obligation amounts to a breach of Regulations 20 and 22. Section 24(1) of the SEBI Act makes it clear that any SEBI Act, Rules and Regulations breach would invite prosecution.
As there was sufficient material available with the complainant, which prima facie indicates a violation of Regulations 20 and 22. Regulation 33 confers discretion on the Board having regard to the facts and circumstances of the case to investigate into the books of account or other records. Based on the report of such investigation under Regulation 36, the Board has the power to issue directions as contemplated under Regulation 39. Regulation 39 expressly saves the power of the Board to initiate criminal prosecution under Section 24 of the Act.
Conjoint reading of Regulation 33, along with Regulation 39, confers discretion on the Board to initiate an investigation if such investigation appears to be necessary to the Board.
In the facts of the case, there was sufficient material to demonstrate that there was sufficient material based on correspondence between the Managers of the accused and the complainant wherein the accused admitted that they have not been able to pay the shareholders who had accepted the offer. Furthermore, the accused cited the liquidity crunch in the market as the reason for their failure. Therefore, in the facts of the case, it is not necessary for the Board to lodge an investigation as per Chapter V into the violation of Regulations 20 and 22.
In the absence of incontrovertible documents such as Form 32 under the Companies Act, 1932 or other material to show the applicant's resignation, the SEBI Special Judge has rightly held that the applicant has failed to make out a case for discharge. Hence, there is no merit in the criminal applications. No case is made out for quashing the complaint or charges.Both criminal applications are dismissed.
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2023 (5) TMI 448
Validity of Second Freeze Order - imposition of Bank Guarantee for repatriation of amount, which was realized in favour of the appellant company - imposition of the bank guarantee and the freeze orders passed by the respondent, were solely imposed on the grounds of criminal proceedings being alive against one Dharmesh Doshi, who is alleged to be connected to the appellant company.
HELD THAT:- While perusing through the documents on record, it has come to notice that the said Dharmesh Doshi, on the basis of whom the condition of bank guarantee was imposed, has now been discharged of the alleged offences by the Trial Court. It is also important to note that the said Dharmesh Doshi , who has been discharged of the alleged crime, was never an employee/share holder/director or a key managerial person in the appellant company - Since the said Dharmesh Doshi was in no way connected to the appellant company herein, the trial faced by him, was in his individual capacity, and not vicariously on behalf of the appellant company.
In such a circumstance, wherein the appellant company and the accused Dharmesh Doshi are two separate entities, and the appellant company is in no way connected to the concerned Investigation, the operation of the freeze order against the appellant company, is not legally tenable - Since the appellant company is not connected to the alleged crime, and has not found mention in the FIR or the chargesheet, the freeze order against the appellant company’s properties is redundant qua the investigation, since the appellant company itself is not necessary for the conclusion of the investigation.
It has also come to notice that the operation of the freeze order has been active for a period of 17 years and has caused huge losses to the appellant company. The purpose of the freeze order, and the bank guarantee in extension of the freeze order, can only be in operation to aid in the investigation against the alleged crime. Since the investigation against the appellant company is redundant, hence, the freeze of the appellant company’s assets and the bank guarantee imposed in furtherance of the freeze order also becomes redundant.
The condition imposed upon the appellant to furnish a bank guarantee by the Courts below, is not liable to be sustained and is therefore set aside - Appeal allowed.
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2023 (5) TMI 447
Filling of a casual vacancy - requirement of approval through a special resolution from the shareholders of the Company, before such appointment - appointment of a person who has attained the age of 75 years - Rejection of waiver application - application was filed for waiver of the fine on account of non-compliance of Regulation 17(1A) of the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015 - HELD THAT:- A reading of Section 152(2) and Section 161(4) makes it clear that a Director can only be appointed by the shareholders of the Company in the general meeting. However, in case where the office of a Director is vacated before his term of office expires which results in a casual vacancy then such casual vacancy can be filled by the Board of Directors which shall subsequently be approved by the members in the immediate next general meeting - from a reading of Section 161(4) of the Companies Act read with the proviso to Rule 4(1) of the Rules it is clear that a casual vacancy which occurs in the office of the Director is required to be filled up by the Board of Directors within three months from the date of such vacancy and such appointment is required to be approved by the members in the next general meeting.
Regulation 25 of the LODR Regulations, 2015 relates to obligations with respect to Independent Director - The said provision provides that where an Independent Director resigns or is removed from the Board of Directors. Such Independent Director is required to be replaced by a new Independent Director within three months from the date of such vacancy - Regulation 17(1A) provides that no person shall be appointed or continue the directorship as a Non- Executive Director who has attained the age of 75 years unless a special resolution is passed to that effect by the members in the general meeting - A perusal of the Regulation 17(1C) indicates that the listed entity shall ensure that the appointment of a person on the Board of Directors is approved by the shareholders at the next general meeting or within a period of three months from the date of appointment whichever is earlier.
Thus, upon the death of Dr. Chauhan on 22nd November, 2020, a casual vacancy in the office of Independent Director came into existence which could be filled up by the Board of Directors under Section 161(4) of the Companies Act read with Regulation 17(1C) of the LODR Regulations and proviso to Rule 4 of the Rules. Such appointment was required to be subsequently approved by the shareholders of the Committee in the next general meeting - the finding of the respondent that no persons can be appointed or continued to be appointed as a Non-Executive Director unless prior approval of the shareholders is made is erroneous.
The impugned order cannot be sustained. No penalty could have been imposed for violation of Regulation 17(1A) of the LODR Regulations. Nothing has been brought on record to indicate violation of any provision of the Companies Act or Regulation 17(1C) of the LODR Regulations.
Appeal allowed.
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2023 (4) TMI 1370
Complaint u/s 200 of Cr.P.C. r/w Sections 24(1), 27 of SEBI against the petitioners -Respondent notified regulations for regulating the activities of Collective Investment Scheme Companies titles as Securities and Exchange Board of India (Collective Investment Scheme) Regulations Act,1999 but petitioners have not complied with the respondent directives meant to protect the interests of the investors
HELD THAT:- No investor or customer has lodged any complaint with the respondent that the petitioners have cheated them and apart from the above said reason, the respondent has not levelled any specific allegation in that regard in the complaint. In the absence of any complaint, there was no cause of action to lodge the complaint. These are all the grounds have to be given into the fulfledged complaint and the complaint was lodged by the respondent, after recording the evidence. The Trial Court found prima-facie made out and had taken cognizance. Therefore, the complaint cannot be thrown out.
As relying on M. Jayanthi [2019 (12) TMI 1319 - SUPREME COURT] and Arvind Khanna [2019 (10) TMI 672 - SUPREME COURT] the points raised by the petitioner cannot be considered by this Court under Section 482 Cr.P.C.
In view of the above discussion, this Court is not inclined to quash the proceedings in C.C.No.6435 of 2004 on the file of the XXIII Metropolitan Magistrate, Saidapet, Chennai. While pending this matter, this Court, by an order dated 25.01.2016, appointed an Auditor of one M/s. Brahmayya & Co., in order to settle the issue. However, the petitioners did not settle the same and nothing proceeded further. Therefore, the appointment of Auditor also now stand cancelled.
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2023 (4) TMI 1269
SEBI power to initiate proceedings against statutory auditor - irregularities and misstatements in the financial statements ignored by auditors - Investigation alleged that CAS and KKM had been acting against the fiduciary capacity, and that instead of working in the interest of shareholders of CG Power, they facilitated the scheme of cleaning up the books of accounts of CG Power, despite being aware of the irregularities and misstatements in the financial statements of CG Power - violation of provisions of section 12A(a), (b) and (c) of the SEBI Act, 1992 and Regulations 3(b), (c) and (d), 4(1) and 4(2)(f) of the PFUTP Regulations, 2003.
Inordinate delay in issuing the SCN i.e. about 5-6 years old - HELD THAT:- There is no provision under SEBI Act which prescribes a time limit for taking cognizance of a breach of the provision of SEBI Act and Rules and Regulations made thereunder. Further, as per Section 11C of SEBI Act, SEBI can initiate investigation at any point of time, for any period of alleged violation or any period of alleged transactions. In this regard, we note that SEBI initiated the investigation as soon as information regarding the issue came to its notice. Examination relating to this case are complex and time consuming process, which may require detailed analysis of the case facts as the current case involves multiple layers of transactions between multiple entities including entities situated in foreign jurisdictions. Subsequently, pursuant to the completion of examination, SCN was issued on October 18, 2021.
Thereafter, we note that all the relevant information relied on for crystallizing the allegations against the Noticees have been provided to them and there was no delay the way it has been argued by Noticee No.1. Further, Noticee No.1 has also not specified how the delay, if any, has caused prejudice to it.
Whether inspection and copies of certain documents sought was not provided? - As all relevant material relied upon in the instant proceedings have been provided to Noticee and exhaustive reply has also been filed by Noticee No.1 as already detailed in the preceding paragraphs. Further, Noticee No.1 has also not sufficiently demonstrated how the documents sought by it were relevant to the allegation in the present case of not disclosing the fact of the case and how this ground of non-availability of information has caused prejudice to it, thus the principles of natural justice have been complied with and the Noticee No.1's request in this regard are without merits.
Default by Auditors - As despite being aware of the irregularities and misstatements in the financials of CG Power, Noticee No. 1 and 2 facilitated the scheme of cleaning of the books of account by the company and allowed to show the financials of the company as true and fair by certifying the same in its audit report for 2016-17 and 2017-18 respectively. Accordingly, I note that by doing so, they have violated the provisions of Sections 12A(a), (b) and (c) of the SEBI Act, 1992 and Regulations 3(b), (c) and (d), 4(1) and 4(2)(f) of the PFUTP Regulations, 2003.
Does the violation, if any, on part of the Noticees attract penalty under Section 15HA of the SEBI Act? - As the alleged violation of the provisions of Sections 12A(a), (b) and (c) of the SEBI Act, 1992 and Regulations 3(b), (c) and (d), 4(1) and 4(2)(f) of the PFUTP Regulations, 2003 stands established against the Noticees and accordingly the Noticees are liable for monetary penalty under Section 15HA of the SEBI Act.
How much penalty should be imposed on the Noticees taking into consideration the factors mentioned in Section 15J of the SEBI Act? - After considering all the facts and circumstances of the case and the factors mentioned in the provisions of Section 15-J of the SEBI Act, and in exercise of the powers conferred upon me under section 15-I of the SEBI Act, read with Rule 5 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules 1995 Penalty of Rs.5,00,000/- (Rupees Five Lakh Only/-) need to imposed. The Noticees shall remit / pay the said amount of penalty within 45 days of receipt of this order through online payment facility available on the website of SEBI
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2023 (4) TMI 720
Petition to remove the name of the petitioners from the "Promoter Group" of Lumax Automotive Systems Limited and reclassify the petitioners as "public group category” - Regulation 24 of Delisting Regulations, 2009 Application - According to respondent No.3-Bombay Stock Exchange (BSE), the Fair Value along with the names of the promoters, as available on the BSE’s records, was included in the Final Public Notice issued by the BSE - respondent No.3 that subsequently, the office of the Official Liquidator, New Delhi in terms of communication dated 24.01.2019, informed respondent No.3 that the petitioner-company was already wound up - HELD THAT:- As seen that the main reason for issuance of the impugned notices is the application of Regulation 24 of Delisting Regulations, 2009 which admittedly did not have any application, therefore, this court finds it appropriate to set aside the impugned notices, as the same are based on wrong presumptions.
Accordingly, the impugned notices qua the petitioners are set aside.The parties are at liberty to take appropriate recourse in accordance with the law, if so advised. If the respondent feels that notwithstanding the non-applicability of Regulation 24 of Delisting Regulations, 2009, they are still empowered to take any further action, the same can be done as per law.
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2023 (3) TMI 1438
Ex-parte ad-interim order with regard to the trades done by the appellants - orchestrated scheme to induce any unsuspecting investors to trade in the shares of the scrip in question featured in the alleged videos which were uploaded on the YouTube channels - alleged fraudulent and manipulative scheme which was violative of Section 12A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations - only allegation against the appellants are that they are volume creators and are connected to noticee no. 1 - HELD THAT:- Ad-interim orders can be passed in case of urgency or where it is found that the noticee is about to dispose of the property. In the absence of any finding that the appellants will defalcate the unlawful gains, the impounding order constitutes malice in law. Further, the power must be exercised with extreme care and caution and should be resorted to only as a last resort or measure. Merely by stating that the appellants may divert the unlawful gains is not based on any cogent evidence rather on surmises and conjectures and formation of unguided subjected satisfaction which is not permissible.
We however find that there is an admission of the appellant Arshad Warsi that he is connected with noticee no. 1 who is alleged to have been the main player in the promoting the videos and thereby misleading the investors. Investigations are still going on and the possibility of the appellants being involved in the manipulative scheme cannot be ruled out. However, at this stage, the impugned order is bereft of any evidence against the appellants requiring passing of such strong and harsh order. However, balance of convenience is required to be considered at this stage.
Considering the aforesaid following directions passed :-
(i). The appellants are restrained from trading in the scrip of Sadhna during the pendency of the investigation.
(ii). The appellants shall deposit 50% of the alleged unlawful gains in an escrow account with a scheduled commercial bank within 15 days from today. For the balance amount, the appellants shall give an undertaking within the same period of 15 days that they will deposit the balance amount within 30 days from the date of final order, if any, passed by the WTM.
(iii). This escrow account shall be kept in an interest bearing escrow account and a lien will be created in favour of SEBI.
(iv). Directions (i), (ii) and (iii) would continue to operate during the investigation.
(v). The appeal is partly allowed.
The impugned order in so far as it relates to the said appellant is quashed. The appeal is allowed. We however restrain the appellant from dealing in the scrip of Sadhna during the pendency of the investigations.
We also direct SEBI to complete the investigation within six months and initiate appropriate proceedings, if any, against the appellants. If the investigations remain incomplete and no proceedings are initiated, it will be open to the appellants to apply for modification of our order.
Any observation, findings given in this order is only tentative in nature and will not affect the investigation. Further, neither party will rely upon any observation / finding in any proceedings before any authority. In the circumstances of the case, parties shall bear their own costs.
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2023 (3) TMI 1404
Unregistered investment advisory activities - Investment Advisers working without obtaining registration from SEBI in violation of the provisions of Section 12(1) of the SEBI Act read with Regulation 3(1) of the Investment Advisers Regulations - Penalty for fraudulent and unfair trade practices
HELD THAT:- SCN does not mention the amount of disproportionate gain or unfair advantage made as a result of the default or the amount of loss caused to an investor or group of investors. However, as stated in Table 2, I find that an amount of ₹2,96,84,143 was credited to the accounts held in the name of Noticee 1 in relation to offering investment advisory services. Thus imposition of minimum penalty is warranted in the instant proceedings, which would be commensurate with the violation committed by Noticees 3 and 4, who were the partners of Noticee 1.
ORDER:
In exercise of the powers conferred upon me in terms of Sections 11, 11B(1) and 11(4) along with Sections 11(4A) and 11B(2) read with of Sections 15HA, 15HB and 19 of the SEBI Act and Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995, hereby issue the following directions:
(a) Noticees 1, 3 and 4 i.e. M/s India investment Financial Services, Anant Rathore and Vijesh Joshi, shall jointly and severally, within a period of three months from the date of coming into force of this Order, refund the money received from any Complainants /investors /clients, as fees /consideration or in any other form, in respect of their unregistered investment advisory activities.
(b) Noticees 1, 3 and 4 shall cause to effect a public notice in all editions of two National Dailies (one English and one Hindi) and in one local daily with wide circulation, inviting claims from Complainants /investors /clients within a period of fifteen (15) days from the date of this Order. The said public notice shall detail the modalities for refund, including the details of the contact persons such as names, addresses and contact details. A period of two (2) months from the date of the publication of the public notice shall be provided to the Complainants /investors /clients for submitting their claims.
(c) The repayments to the Complainants /investors /clients shall be effected only through Bank Demand Draft or Pay Order or electronic fund transfer or through any other appropriate banking channels, which ensures audit trails to identify the beneficiaries of repayments.
(d) After completing the refund as directed in paragraph 29(a) above, Noticees 1, 3 and 4 shall file a report detailing the amount refunded to Complainants /investors /clients, which should be addressed to the "Division Chief, Division of Post-Inspection Enforcement Action, Market Intermediaries Regulation and Supervision Department, SEBI as duly certified by an independent Chartered Accountant and should indicate the amount of refund, mode of payment by bank transactions, name of the parties, communication address, mobile / telephone numbers, etc.
(e) The remaining balance amount shall be deposited with SEBI, which shall be kept in an escrow account for a period of one year for distribution to clients / investors who were availing the investment advisory services from the Noticees. Thereafter, the remaining amount, if any, shall be deposited in the Investors Protection and Education Fund, maintained by SEBI.
(f) Noticees 1, 3 and 4 are restrained from selling their assets, properties and holding of mutual funds /shares /securities held by them in demat and physical form except for the sole purpose of making the refunds /depositing balance amount with SEBI, as directed above. Further, the banks are directed to allow debits only for the purpose of making refunds to the Complainants /investors /clients who were availing the unregistered investment advisory services from the Noticees, as directed in this Order, from the bank accounts of the Noticees.
(g) Noticees 1, 3 and 4 are debarred from accessing the securities market, directly or indirectly, and are prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in any manner whatsoever, for a period of 3 (three) years from the date of this Order or till the expiry of 3 (three) years from the date of completion of refunds to Complainants /investors /clients along with depositing of balance amounts, if any, with SEBI, as directed in paragraphs 29(a) and (e), whichever is later.
(h) Upon submission of the report on the completion of refund to clients/investors to SEBI and deposit of the balance amount, if any, with SEBI, the direction at paragraph 29(f) shall cease to operate within 15 days thereafter.
(i) The Noticees shall not undertake, either during or after the expiry of the period of debarment /restraint as mentioned in paragraph 29(g), either directly or indirectly, investment advisory services or any activity in the securities market without obtaining a Certificate of Registration from SEBI, as required under the securities laws.
(j) Noticees 3 and 4 are also imposed with the penalty,.
(k) Noticees 3 and 4 shall forward the said confirmation of e-payment made in the format as given.
The above direction for refunds /repayment to clients /investors and depositing the balance amount with SEBI, as given in paragraphs 29(a) and (e) above, does not preclude such Complainants /investors /clients from pursuing other legal remedies available to them under any other law against the Noticees for refund of money or deficiency in service.
This Order shall come into force with immediate effect.
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2023 (3) TMI 1335
Utilisation of amount deposited in “Sahara- SEBI Refund Account” - Directions to transfer an amount out of unutilized amount (lying in “Sahara-SEBI Refund Account”) to be disbursed against the legitimate dues of depositors of Sahara Group of Cooperatives Societies - HELD THAT:- Having heard Shri Tushar Mehta, learned Solicitor General appearing on behalf of the Union of India and taking into consideration the facts narrated hereinabove and when it is reported that Rs. 2253 Crores had been taken out of the Sahara Credit Cooperative Society Ltd., i.e., one of the four Sahara Group Multi-State Cooperative Societies and deposited with SEBI in the “Sahara-SEBI Refund Account” and the amount lying in the “Sahara-SEBI Refund Account” is lying unutilized and the genuine depositors of the Sahara Group of Cooperative Societies, which otherwise, shall be entitled to get back their money, the prayer sought in the present application seems to be reasonable and which shall be in the larger public interest / interest of the genuine depositors of the Sahara Group of Cooperative Societies.
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2023 (3) TMI 1334
Allegation on Karvy Stock Broking committed fraud with respect to thousands of investors - petitioners, pray that this court in exercise of power under Article 226 of the Constitution of India should constitute appropriate committee of experts to examine the details of the manner in which the innocent investors have been fraudulently cheated - HELD THAT:- As it is seen that with respect to respondent No. 9-Karvy, the respondent No.3-NSE has taken appropriate steps in accordance with the applicable Bye-Laws. The cases of the individual investors including the petitioners have also been taken into consideration and appropriate orders have been passed therein.
The facts of the present case are to be seen in the right perspective which has been discussed hereinabove and it would clearly reveal that not only the grievance of the petitioners but the grievance of similarly situated investors has also been considered by the appropriate authority as per the procedure prescribed by law. The manner in which grievances have been considered of course, would not be relevant at this stage as the investors and the petitioners would have appropriate remedy to test the validity of those decisions.
Under the facts of the present case, this court is not inclined to accept the prayer for constitution of any individual committee or to monitor the further action to be taken by respondent No.3-NSE. Accordingly, the instant petitions stand dismissed alongwith pending application.
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2023 (3) TMI 1214
Offences by Companies - Prohibition on acceptance of deposits from public - Public issue of debentures without filing any offer document - Responsibility of directors - accused persons also failed to file the Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India and violated the provisions of Section 73 of the Companies Act, 1956, and have also not complied with the aforesaid provisions for public issue of shares and thereby violated provisions of Sections 56, 60 and 70 read with Sections 56, 60 read with Sections 2(36), 73 of the companies Act, 1956 - HELD THAT:- The order of the SEBI passed in April 2016 at page 27 held that the petitioner among some of the other directors had joined the board pursuant to the allotment. So it is apparent that the petitioner is not connected with the allotment of NCDs.
The tenure of the petitioner was from August to November, 2013.Section 27 of the SEBI Regulation relates to procedure for action in case of violation of regulations and inspecting board therein.
The petitioner was a director from August, 2013 (Four months). And documents showing he had submitted his resignation is on record.As per Section 168 of the companies Act, it is the duty of the company who SHALL inform the ROC about the said resignation and process the same.
The petitioner MAY also inform the ROC. Thus the resignation of the petitioner is in accordance with the provision of Section 168 of the Companies Act.
For ‘continuing liability’ which continues till the present.There is thus no such material on record against the Petitioner No. 1 to proceed towards trial and in the interest of Justice the proceedings against the petitioner is liable to be quashed.
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2023 (3) TMI 1078
Exemption from payment of fees for the period for which the erstwhile individual Srikant Mantri has paid to the Board cannot be converted to the corporate entity MFL - Stock broker which requires multiple registrations to operate on more than one stock exchange(s) or a single registration will suffice for all the stock exchanges - HELD THAT:- As decided by this Court in Securities and Exchange Board of India Vs. National Stock Exchange Members Association and Another [2022 (10) TMI 526 - SUPREME COURT] and remains no more res integra in view of the judgment of this Court wherein it has been held that stock broker not only has to obtain a certificate of registration from SEBI for each of the stock exchange where he operates, at the same time, has to pay ad valorem fee prescribed in terms of Part III annexed to Regulation 10 of the Regulations, 1992 in reference to each certificate of registration from SEBI in terms of the computation prescribed under Circular dated 28th March, 2002 and fee is to be paid as a guiding principle by the stock broker which is in conformity with the scheme of Regulations 1992.
Whether the appellant Company is entitled to fee continuity benefits under Para 4 of Schedule III of the Regulations 1992? - When Srikant Mantri transferred his membership card of CSE to the Company, he was not a whole time Director but was only a Director. Neither CSE nor its internal auditors, were clear of the exact date on which Srikant Mantri had acquired 40% shareholding in the appellant Company. As was informed by the Board to the CSE vide letter dated 18th March, 1998 that Srikant Mantri was holding less than 40% of the paidup capital of the corporate entity. It was also recorded by the Tribunal that from the true copies of annual returns provided by the appellant Company, it was revealed that the details of the Directors provided by them nowhere indicate Srikant Mantri as a whole time Director for any of the relevant years.
The designation of Srikant Mantri has been indicated as “Director” in all the relevant years’ Annual Return. It was also established from the copy retrieved from ROC’s office in respect of AGM dated 28th April, 1997 and 19th May, 1999.
Appellant Company was granted registration after para 4 was put in place by notification dated 21st January, 1998 and the appellant Company failed to satisfy that it fulfilled the conditions of para 4 to Schedule III pursuant to which the appellant has claimed his entitlement of fee continuity benefits.
We are satisfied that the appellant Company failed to fulfil the conditions as referred to under Para 4 of Schedule III appended to the Regulations of which a reference has been made.
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2023 (3) TMI 276
Adani Group of companies - Decline in the share price as precipitated by a report published by Hindenburg Research on 24 January 2023 - manipulatIon of share prices - volatility in the securities market - failure to disclose transactions with related parties and other relevant information concerning related parties in contravention of the regulations framed by SEBI - loss of investor wealth in the securities market over the last few weeks because of a steep decline in the share price of the Adani Group of companies - This report inter alia alleges that the Adani Group of companies has manipulated its share prices; failed to disclose transactions with related parties and other relevant information concerning related parties in contravention of the regulations framed by SEBI; and violated other provisions of securities laws - HELD THAT:- SEBI is seized of the investigation into the allegations made against the Adani Group companies. SEBI has not expressly referred to an investigation into the alleged violation of the Securities Contracts (Regulation) Rules 1957 which provide for the maintenance of minimum public shareholding in a public limited company. Similarly, there may be various other allegations that SEBI must include in its investigation.
As a part of its ongoing investigation, SEBI shall also investigate the following aspects of the issues raised in the present batch of petitions:
a. Whether there has been a violation of Rule 19A of the Securities Contracts (Regulation) Rules 1957;
b. Whether there has been a failure to disclose transactions with related parties and other relevant information which concerns related parties to SEBI, in accordance with law; and
c. Whether there was any manipulation of stock prices in contravention of existing laws.
The above directions shall not be construed to limit the contours of the ongoing investigation. SEBI shall expeditiously conclude the investigation within two months and file a status report.
SEBI shall apprise the expert committee (constituted in paragraph 14 of this order) of the action that it has taken in furtherance of the directions of this Court as well as the steps that it has taken in furtherance of its ongoing investigation. The constitution of the expert committee does not divest SEBI of its powers or responsibilities in continuing with its investigation into the recent volatility in the securities market.
In order to protect Indian investors against volatility of the kind which has been witnessed in the recent past, we are of the view that it is appropriate to constitute an Expert Committee for the assessment of the extant regulatory framework and for making recommendations to strengthen it.
The remit of the Committee shall be as follows:
a. To provide an overall assessment of the situation including the relevant causal factors which have led to the volatility in the securities market in the recent past;
b. To suggest measures to strengthen investor awareness;
c. To investigate whether there has been regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to the Adani Group or other companies; and
d. To suggest measures to (i) strengthen the statutory and/or regulatory framework; and (ii) secure compliance with the existing framework for the protection of investors.
The Expert Committee shall be headed by Justice Abhay Manohar Sapre, a former judge of the Supreme Court of India. The Chairperson of the Securities and Exchange Board of India is requested to ensure that all requisite information is provided to the Committee. All agencies of the Union Government including agencies connected with financial regulation, fiscal agencies and law enforcement agencies shall co-operate with the Committee. The Committee is at liberty to seek recourse to external experts in its work.
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2023 (2) TMI 1307
Violation of SEBI Act and PIT Regulations - wrongful gain by making insider trading in the shares of ‘NDTV’ - show cause notice was issued after a period of 4-5 years - allegations are that the appellant Sanjay Dutt being advisor / team member of the NDTV group having complete responsibility and accountability for the Corporate Finance and Strategic Planning Function of NDTV during the relevant period had reasonable access to all the Price Sensitive Information (hereinafter referred to as ‘PSI’), etc. of the company - HELD THAT:- This Tribunal has in number of cases while dealing with this issue had concluded that to penalize an entity for insider trading, it is necessary to find that the trading should be motivated by the PSI in possession of the said entity. In the case of Abhijit Rajan vs. SEBI, [2019 (11) TMI 1598 - SECURITIES APPELLATE TRIBUNAL MUMBAI] this Tribunal has dealt with the said issue and the Hon’ble Supreme Court in the same case of Abhijit Rajan [2022 (9) TMI 1072 - SUPREME COURT] had also confirmed the said decision. The principle is based on a logic that there must be some relation between the trading and the motivation to encash the PSI. The learned WTM however refused to go into this issue.
Since we have no benefit of consideration of issue of delay and the consideration on the issue as to whether the trade was carried by appellant SREPL on the basis of PSI 1, 2, 3 and 4, it would be necessary to remand the matter to the learned WTM to decide all the issues afresh as regards the SREPL, appellant TCPPL and appellant Sanjay Dutt.
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