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SEBI - Case Laws
Showing 121 to 140 of 555 Records
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2022 (8) TMI 656
Insider trading - Freezing of bank account - bank accounts of the petitioner and her fixed deposits were freezed by the 1st respondent during the course of investigation - amounts for creation of fixed deposits and savings accounts in question with Karur Vysya Bank and HDFC Banks in the name of the petitioner were the proceeds of the crime and hence were seized during the investigation - petitioner seeking Writ of Mandamus directing the 1st respondent to defreeze the bank account and fixed deposits of the petitioner and savings bank account held in the respondent Nos. 2 to 4/Banks and for consequential directions - HELD THAT:- Admittedly, the petitioner was not shown as accused by the 1st respondent in CC registered against her sons. She was neither the promoter nor the Director of Satyam Computers Services Limited
Considering the contentions of the learned Special Public Prosecutor of CBI as stated in the counter affidavit by the 1st respondent and the observations of the Hon’ble Apex Court [2018 (5) TMI 931 - SUPREME COURT] in the above aspect that she had made the off market transactions way back in the year 2003 at a price of around Rs.340 per share and the price of the shares rose sharply in the year 2006 touching the figure of Rs.966.80 and that the petitioner, if she was in position of Unpublished Price Sensitive Information (UPSI) would have sold the shares during peek price inspite of selling at depressed price in the year 2003 and cleared her name in the proceedings launched by SEBI and considering that no attachment orders were issued by the Court during the trial or in the final judgment and considering the age of the petitioner who was at the fag end of her life and the submission of the learned counsel for the petitioner that she required money for her expenditure during her old age, it is considered fit to direct the 1st respondent to defreeze the bank accounts and fixed deposits of the petitioner and permit her to operate the accounts and fixed deposits
Writ Petition is allowed directing the 1st respondent to defreeze the bank accounts and fixed deposits of the petitioner by giving a direction to respondent Nos.2 to 4 to allow the petitioner to operate the accounts and fixed deposits.
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2022 (8) TMI 423
Offence under SEBI - Period of limitation - Whether this appeal is maintainable? - HELD THAT:- Any limitation prescribed under Section 468 of CrPC can be overlooked if sufficient cause is made out in the facts and circumstances of the individual case in the interest of justice. The said provision, while trying to balance public interest in initiating criminal prosecutions, has been restricted to peculiarities of individual case while clothing the Court with discretionary power. Such a discretion vested in the Court ought to be a principled exercise, wherein the facts and circumstances portrayed justify such an exercise. The intention of the aforesaid provision is to make the inquiry a question of fact and not of untrammelled discretion as to whether in a particular case, the Court should condone the delay.
The High Court is bound to consider the facts of the present case concerning the modus of initiation of the case and other factors, before considering the aspect of condonation of delay in terms of Section 473 of CrPC. The approach of the High Court of adjourning adjudication of the interim application seeking disclosure of documents cannot be appreciated. Ideally, the High Court ought to have considered the interim application before dealing with the limitation aspect.
Initiation of criminal action in commercial transactions, should take place with a lot of circumspection and the Courts ought to act as gate keepers for the same. Initiating frivolous criminal actions against large corporations, would give rise to adverse economic consequences for the country in the long run. Therefore, the Regulator must be cautious in initiating such an action and carefully weigh each factor.
In ordinary course, this Court would have remanded the matter for adjudication by the High Court on the interim application moved by the appellant seeking such disclosure. However, arguments have been extensively advanced before this Court touching upon important aspects of criminal jurisprudence which require consideration. Moreover, the facts stated above, clearly indicate that the acts which are sought to be prosecuted go back to the year 19921994, and over three decades have passed without there being any end to the litigation. In this regard, the Court intends to examine this important issue and pass appropriate orders to ensure that the adjudication is not delayed unnecessarily, ad infinitum.
Whether SEBI is required to disclose documents in the present set of proceedings? - whether the interim application seeking documents, filed by the appellant herein deserves to be allowed in the instant case? - In this case, the appellant has been pursuing SEBI for these documents as they believe that an attempt is being made by SEBI to suppress the Opinions and Reports as they are adverse to the cause of SEBI.
A cursory glance at the background of the matter would reveal that initially, a complaint was submitted to SEBI on 21.01.2002, wherein the appellant and its directors were purportedly involved in irregularities in allotment of NonConvertible Debentures in the year 1994. Accordingly, an Investigation Report was submitted by the Investigating Authority on 04.02.2005. SEBI in its counteraffidavit has admitted that the aforesaid Report was inconclusive and recommended further enquiry in this regard.
SEBI is a regulator and has a duty to act fairly, while conducting proceedings or initiating any action against the parties. Being a quasijudicial body, the constitutional mandate of SEBI is to act fairly, in accordance with the rules prescribed by law. The role of a Regulator is to deal with complaints and parties in a fair manner, and not to circumvent the rule of law for getting successful convictions. There is a substantive duty on the Regulators to show fairness, in the form of public cooperation and deference.
The duty to act fairly by SEBI, is inextricably tied with the principles of natural justice, wherein a party cannot be condemned without having been given an adequate opportunity to defend itself.
The approach of SEBI, in failing to disclose the documents also raises concerns of transparency and fair trial. Opaqueness only propagates prejudice and partiality. Opaqueness is antithetical to transparency. It is of utmost importance that in a country grounded in the Rule of Law, institutions ought to adopt procedures that further the democratic principles of transparency and accountability. Principles of fairness and transparency of adjudicatory proceedings are the cornerstone of the principles of open justice.
Even for adjudication of condonation of delay under Section 473, CrPC, the modus of initiation of criminal complaint and the conclusions reached therein are relevant in the facts and circumstance of the case.
The simple test in this case is whether SEBI has launched the prosecution on the basis of the investigation report alone. The answer seems to be ‘No’ by SEBI’s own admission in its reply where it states that the investigation report was inconclusive and hence further scrutiny of the transactions by experts was called for. That being the case, further Reports and opinions obtained, from whomsoever it may be, are only an extension of the investigation to help SEBI as a Regulator to ascertain the facts and reach conclusions for prosecution or otherwise.
We do not agree with the contention of the learned Senior Counsel for SEBI that the first opinion of Justice (Retd.) B. N. Srikrishna is covered by ‘legal privilege’ under Section 129 of the Evidence Act. Same is the case with the second opinion of Justice (Retd.) B. N. Srikrishna and the Report of Sh. Y. H. Malegam, which are nothing but a continuation of the fact finding exercise undertaken by SEBI to determine culpability.
Thus we are of the firm opinion that the defence taken by SEBI that they need not disclose any documents at this stage as such a request is premature in terms of the CrPC, cannot be sustained.
SEBI’s attempt to cherrypick the documents it proposes to disclose - There is a dispute about the fact that certain excerpts of the opinion of Justice (Retd.) B. N. Srikrishna, were disclosed to the appellant herein. It is the allegation of the appellant that while the parts which were disclosed, vaguely point to the culpability of the appellant, SEBI is refusing to divulge the information which exonerate it. Such cherrypicking by SEBI only derogates the commitment to a fair trial.. In the case at hand, SEBI could not have claimed privilege over certain parts of the documents and at the same time, agreeing to disclose some part. Such selective disclosure cannot be countenanced in law as it clearly amounts to cherrypicking. Appeal allowed.
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2022 (8) TMI 422
Manipulation of share price - guilty of violating provisions of Section 12A (a), (b), (c) of the SEBI Act read with Regulations 3 (a), 3(b), 3(c), 3(d), 4(1), 4(2)(a), 4(2) (e) and 4(2)(g) of the PFUTP Regulations - imposition of a penalty - huge sale order at a price higher than the last traded price of the company and thereafter to make a self-trade of only one share for that higher price, thus, establishing a new higher LTP - HELD THAT:- In the present case, the WTM, while imposing an order of debarment, has specifically applied her mind to the issue as regards the impact of such a manipulation. While dealing with this aspect, the WTM has observed that the manipulation of the price of scrips seriously impinges upon other counter parties in the securities market. In other words, the impact of a manipulation which is carried out by a participant in the securities market cannot be assessed only in terms of the gain which has been caused to the participants themselves, but in terms of the wider consequences of the action on the securities market.
In N. Narayanan v. SEBI [2013 (4) TMI 652 - SUPREME COURT] this Court observed that Section 12-A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations specifically aim to curb market manipulations which can have an adverse effect on investor confidence and the healthy growth of the securities market.
The securities market deals with the wealth of investors. Any such manipulation is liable to cause serious detriment to investors’ wealth. In this backdrop, the order which has been passed by the WTM cannot be regarded as disproportionate so as to result in the interference of this Court in the exercise of its jurisdiction under Section 15Z of the SEBI Act. Moreover, the WTM has prohibited the appellant from participating in its proprietary account for a specified period, leaving it open to the appellant to continue operation in their broking account. Appeal dismissed.
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2022 (7) TMI 1478
Fraudulent GDR issue - Vintage was the sole subscriber was not intimated to the stock exchange and to the Indian investors and, accordingly, the Company and its Directors were charged with violation of Section 12A of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations - Penalty imposed on directors - HELD THAT:- We are of the opinion that since the loan has been repaid and the GDR proceeds have been utilized in accordance with the objects of the GDR the finding that a fraud was committed by the Company is patently erroneous.
We are of the opinion that when the proceeds have come into the Company and have been utilized by the subsidiary and have been ulitized for the purpose of which the GDR was issued the debarment of the Non-Executive Director for five years and penalty of Rs. 10 lakhs only on the basis that they were signatories to the resolution of the Board of Directors dated 31st March, 2008 appears to be excessive as well as unjustified. Other than this there is no evidence that they were part and parcel in the issuance of the GDR.
A categorical statement has been made by these Directors that they were not involved in the day to day affairs of the Company. In the absence of any finding, merely because they were signatories to the resolution these Non-Executive Directors cannot be held to be part of the fraudulent scheme. The imposition of penalty and the debarment cannot be sustained.
A penalty of Rs. 20 lakhs has been imposed upon the Directors of the Company. We find that in similar circumstances in the case of Visu International Ltd. a penalty of Rs. 10 lakhs was imposed upon the Directors and in Govind Das Pasari a penalty of Rs. 15 lakhs was imposed - penalty of Rs. 20 lakhs is excessive. Considering the fact that they have already undergone debarment for more than three years we think it fit and proper if the penalty is reduced to Rs. 10 lakhs each to be paid by the Directors.
Consequently, while affirming the order of the WTM and AO of the aforesaid violations committed by the Company we reduce the debarment period of the Company and the Managing Director, Director and Independent Director from five years to the period undergone. In so far as the penalty imposed by the AO is concerned, the penalty against the Company is reduced to Rs. 25 lakhs. The penalty against the Managing Director and Director is reduced to Rs. 10 lakhs. The penalty imposed against the Independent Director is quashed. The appeals are partly allowed.
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2022 (7) TMI 1477
Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market - Global Depository Receipts issued to sole subscriber - WTM as debarred from accessing the securities market for a period of five years and imposed a penalty of Rs. 5 lakhs for violation of the provisions of Section 12A(a), (b), (c) of SEBI Act r.w.r. 3(a), (b), (c), (d) and 4(1) of the SEBI (‘PFUTP Regulations’) - HELD THAT:- Merely by participating as an Independent Director in the resolution of the Board of Directors on 16th March, 2010 does not make the appellant a part of the fraudulent scheme and arrangement of the Company with regard to the issuance of the GDR.
Resolution only directs opening of a bank account with EURAM Bank account for the purpose of receiving subscription money in respect of GDR and authorises the Managing Director to sign such documents as required. By being part of such resolution does not make the appellant part of a fraudulent scheme in as much the resolution of 16th March, 2010 does not by itself makes it a fraudulent resolution.
It is the subsequent acts of the Company and its Managing Directors by issuing a pledge agreement for the purpose of providing guarantee to Vintage so that it could secure a loan for the purpose of subscribing to the GDR issue makes it fraudulent. However, there is no evidence to indicate that the appellant was party to the execution of the pledge agreement nor there is anything on record to indicate that he was aware of the loan agreement or the pledge agreement.
A specific assertion was made by the appellant that he was not part of the day to day affairs and management of the Company. This fact has not been disputed by the respondent. Therefore, unless and until there is further evidence to indicate that the appellant had participated in the issuance of GDR and/or knew about the fraudulent scheme, in our opinion, the restraint order passed by the WTM and the penalty imposed by the AO on the ground that the appellant was part of the fraudulent scheme cannot be sustained.
In view of the aforesaid, the impugned orders passed by the WTM and AO cannot be sustained and are quashed. Both the appeals are allowed.
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2022 (7) TMI 1443
Violation of Regulation 11(1) of the SAST Regulations - Non issue of open offer - whether loan agreement did not in any manner transfer control of NDTV to VCPL either directly or indirectly? - As argued essential ingredients to constitute control are right to appoint majority of the directors, holding majority voting rights and/ or control over management and policy decisions of the company which in the instant case is non-existent nor any evidence has come on record to show that VCPL has control over NDTV through any of the aforesaid ingredients as per Regulation 2(1)(c) of the SAST Regulations.
HELD THAT:- This Tribunal in Shubhkam held [2010 (1) TMI 1260 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] that the word “control” is a proactive and not a reactive power. That is to say, it is a positive power and not a negative power. The test of control was whether the acquirer was in the driving seat and whether the driver controlled the steering, accelerator, the gears and the brakes and, if the answer to these questions was in the affirmative, then alone would he be in control of the company. The Supreme Court [2011 (11) TMI 878 - SUPREME COURT] while affirming the decision of this Tribunal in Shubhkam held that the expression “control” denotes only positive control and further the word “control” as contrasted with management means de facto control of actual management or de facto control of policy decisions.
Needless to say here, that the definition of the term “control” in the IBC 2016 is the same/ identical as defined under Section 2(27) of the Companies Act, 2013 and Regulation 2(1)(c) of the SAST Regulations, 1997.
In the present case various clauses are meant to protect the interest of VCPL and the investment made by it. The transaction in the agreement is an amalgamation of rights. It is a loan transaction with an option to acquire 26% equity shares of NDTV as consideration for the provision of the loan. However, the transaction does not justify as being a control transaction. The transaction does not acquire direct or indirect control of NDTV. The intent and language of the loan agreement and call option agreements read with the SAST Regulations makes it clear that there is no direct or indirect control of NDTV by VCPL. The transaction structure does not lead to a conclusion that VCPL has acquired direct or indirect control over NDTV.
Thus the impugned order does not establish how each of the rights, either individually or collectively have led VCPL to acquire indirect control over NDTV. No evidence has come to light to indicate that VCPL is exercising control over the management or policies of NDTV. In the absence of any evidence, the impugned order passed by the WTM cannot be sustained. In our view, the combined reading of the agreement, call option agreements, warrant conversion option and the purchase option does not in any way lead to a conclusion of VCPL acquiring indirect control over NDTV. Thus the direction to VCPL to make an open offer in terms of Regulation 44 of SAST Regulations, 1997 and Regulation 32 of SAST Regulations, 2011 does not arise.
Whether the appellants failed to disclose the loan agreement under Clause 49 of the listing agreement? - Considering the violation of the Code of Conduct, the order of the WTM restraining them from accessing the securities market or from accepting any position of a Director is totally out of context and does not commensurate with the alleged violation especially when no fraud has been committed nor does the loan agreement defraud the investors.
The imposition of penalty of Rs. 25 crores by the AO is also high, excessive and disproportionate to the alleged violation. We find that the AO while considering the factors under Section 25J has noted that the quantifiable gain or unfair advantage accrued to NDTV or extent of loss suffered by the investors as a result of the default cannot be computed. In the absence of any quantification, we are of the opinion, that in the absence of any concealment or causing fraud to the investors or to the minority shareholders, the violation of Clause 49 of the listing agreement only invites a penalty. Considering the factors brought on record, we reduce the penalty from Rs. 25 Crores to Rs. 5 Crores.
Further penalty reduced - As considering the factors involved under Section 23J of the SCRA is concerned, we find that the AO himself has held that the quantifiable gain or unfair advantage accrued to NDTV or extent of loss suffered by the investors as a result of the default cannot be computed.
Consequently, the penalty for mere violation of non-disclosure under Clause 36 of the listing agreement cannot be penalized to the maximum amount quoted in the provision. Considering the facts and circumstances, we are of the opinion that the penalty of Rs. 5 Crores is reduced to Rs. 10 lakhs under Section 23A(a) of the SCRA.
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2022 (7) TMI 1428
Violation of the SEBI Act - misrepresentation of financials and violation of the accounting standards - non-furnishing of information to the Forensic Auditor was violative of Section 11(2)(i) of the SEBI Act - appellants were debarred from accessing the securities market - Penalty imposed - HELD THAT:- A clear finding has been given that there is no misappropriation of the funds of the Company nor there is any manipulation in the price of the scrip. No fraud has been played by the Company and its Directors to its investors and shareholders. Further, finding given is, that the violation of the LODR Regulations gave no disproportionate gain to anyone nor created any unfair advantage to the appellants nor any specific loss was caused to any investor.
Thus, in the absence of any finding of any fraudulent activities or misappropriation of funds or diversion of fund, we are of the opinion that the directions of debarment and the penalty given for violation of the LODR Regulations appears to be harsh and excessive.
In the instant case, the appellants were debarred from accessing the securities market for a period of one year w.e.f. July 08, 2021 this period of debarment has already been undergone by the appellants. Consequently, no further orders are required to be passed on this score. In so far as the penalty is concerned, we are of the opinion, that the quantum is harsh and excessive and does not commensurate with the alleged violation of non-disclosure under the LODR Regulations. Since no disproportionate gain was caused to any person nor caused any loss to any investor nor caused any unfair advantage to the Company or its Directors we are of the opinion that the penalty should be reduced by 75% meaning thereby that a penalty of 25% of the penalty imposed by the WTM would be just and proper in the circumstances of the case.
Accordingly, while affirming the violation committed by the appellants, we reduce the penalty to 25% of the penalty imposed by the WTM. The appeal is partly allowed. In the circumstances of the case, parties shall bear their own costs.
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2022 (7) TMI 774
SEBI Offence - summons issued under Section 11-C(3), (5) & (6) of the Securities and Exchange Board of India Act, 1992 before the learned single Judge - scope of amendment - HELD THAT:- As investigation can be conducted after the Board has reasonable ground to believe that any person associated with the securities market has violated any of the provisions of the Act, rules or regulations. Since Section 11-C was inserted with effect from 29.10.2002, investigation under Section 11-C can be continued for the transactions occurred prior to 29.10.2002 as well, because the investigation is only a process to find facts, collect evidence materials of a suspected offence/contravention, therefore, the same being procedural in nature, it is retrospective in nature also. When the Board sought for information from the appellants who were found to have played a role in the matter of Sai Television, the appellants are duty bound to furnish information as sought for by the Board.
Apex Court also in SEBI v. Ajay Agarwal, (2010 (2) TMI 600 - SUPREME COURT] has held that Section 11-B is procedural in nature that prima facie applies to all actions, pending as well as future. When a provision that provides for imposition of directions which is in the nature of punishment itself is held to be retrospective, Section 11-C can very well be held to be retrospective in operation
A cursory perusal of the above observations clearly tells us that Section 11-C is retrospective in nature only.
Whether Section 11-C(3) covers past transactions also, a clear reading of Section 11-C(1) shows that there are two sub-clauses, namely, Section 11-C(1)(a) and Section 11-C(1)(b), while the former uses the expression " are being" meaning its application to the present transactions, the latter uses the expression "has violated" which clearly means the past transactions as well - As these two clauses are to be read disjunctively and not conjunctively, because even for past transactions the Section 11-C(1)(b) applies. Moreover, the writ petitions are not even maintainable, for the simple reason that when disputed questions have arisen as to whether the appellants/writ petitioners are individual investors or not, it is for them to prove that they are individual investors and that they have not violated any provisions before the Board. Now investigation has been ordered. The appellants have to furnish details/information regarding the transactions done by them during the particular period. On receipt of report from the investigating authority, the Board shall pass an order strictly in accordance with law. If the Board, for the reasons best known to them, comes to the conclusion that the appellants are individual investors and they do not fall within any of the categories of persons mentioned under Section 11-C of the Act, the matter ends therein. If for any reason, the Board comes to the conclusion that the appellants are persons associated with the securities market, they have to work out their remedy by filing appeal before the appellate authority. Therefore, when the appellants have got an effective statutory alternative appellate remedy, this Court finds that the writ petitions are not maintainable. Therefore, in our considered opinion, the findings and conclusions reached by the learned single Judge dismissing the writ petitions do not call for any interference.
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2022 (7) TMI 582
Interpretation of Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 referred to as ‘Takeover Regulations 1997’ - increase in shareholding beyond 15% (beyond the open offer) - to yield greater influence over management of the company - Power to levy penalty - HELD THAT:- As the Board as well as the Adjudicating Officer have treated the expression ‘acquirer’, for the purpose of Regulation 10, to include a ‘person acting in concert’ and the combined shareholding were taken into consideration for deciding whether there was a breach of Regulation 10. Where the ‘acquirer’, including the ‘person acting in concert’, already had shares or voting rights in excess of the prescribed limit, they were not held guilty of violating Regulation 1028.
It is important for the regulator to be consistent and predictable. Further regulations must be clear as ambiguous regulations cause confusion and uncertainty. Regularity and predictability, along with certainty, are hallmarks of good regulation and governance. These principles underpin the ‘rule of law’, check arbitrariness and are read as the intent of the legislation, which the Courts, if need be, will enforce as a principle of interpretation. The Board is entrusted to preform legislative, executive, investigative and adjudicatory functions.
In the context of the present case, it is to be noted that the Board is the draftsman of the legislation having enacted the Takeover Regulations 1997 and hence, their interpretation and understanding of the Regulations is of importance and relevance. In the context of the present case, the Board, nearly five years after the transactions, had issued the show-cause notice and then passed an order taking a view on interpretation of Regulation 10, which was contrary to the view expressed by it in several communications as also orders passed by the adjudicating authority. Past is passed and not present, and by giving ‘retroactive’ operation without good reason.
Regulation 10 of the Takeover Regulations 1997, as interpreted and applied by the Board for over ten years, is sought to be overturned by the Board, thereby, creating penal consequences. This should not be permitted and is hardly acceptable when we apply the principle of good governance and regulation.
Thus on the enforcement of Takeover Regulations 2011, it is clear that Regulation 10 will apply on an acquirer who crosses the threshold of 15%, which under the Takeover Regulations 2011, has been increased to 25%. Further, Regulation 10 would apply both when an individual acquirer or an acquirer in concert with others acquires shares or voting rights beyond the threshold level and such an acquirer would have to comply with the applicable regulation. Takeover Regulations 1997 and Takeover Regulations 2011, therefore, postulate different preconditions and thresholds. Reliance placed upon the Takeover Regulatory Advisory Committee Report would show that there was a rethought and re-examination of Regulation 10 pursuant to which Regulation 3(3) was enacted and made a part of the regulatory mechanism under the Takeover Regulations 2011.
The use of the word ‘may’ in Regulation 44 and the wording of Sections 11(1), 11B and 11(2)(h) reflect that the Board has been conferred a discretion, which in turn also means and should be interpreted as imposing a duty, an aspect which we will elucidate in the subsequent paragraphs. Use of the word ‘may’ over the years is normally construed as permissive and not imperative. The words ‘may’ or ‘shall’ by their very etymological foundation denote discretion and mandatory nature of an act respectively. This Court has, therefore, held that the courts should not readily interpret the word ‘may’ as ‘shall’ unless such interpretation is necessary to avoid absurdity, inconvenient consequences or as mandated by the intent of the legislature which is gathered from the other parts of the statute.
Significantly, in the present case, the investors of the target company have not raised any objection. The impugned order passed by the Whole Time Member does not refer to any market manipulation or fluctuation in share price, which was detrimental to the interests of the investors. It is not the case of the Board that any windfall gains or profits have been made by the respondents on account of violation of Regulation 11(1) of Takeover Regulations 1997. The order passed by the Whole Time Member, in fact, does not take into account the impact of the order on the securities market in case the investors/shareholders in the target company as on 16th June 2007 are given an option to sell their shares on or after 31st December 2012, possibity of distruption on the functioning market place, detrimental impact on the market place/investor confidence, qualitative impact of the retroactive directions on the law’s santity predicated on predicibilty and legal stability, as well as undermining of the people’s faith and trust on the Board as the protector of law. The directions, therefore, cannot be sustained.
There is, as noticed and held below, some merit in the contention of the Board that the Appellate Tribunal could not have imposed penalty under Section 15-H when proceedings under the said Section had not been invoked by the Board and there is no order passed by the adjudicating authority imposing penalty under Section 15-H of the Act. However, the effect of the argument raised by the Board would be that the order passed by the Whole Time Member under Regulation 44 giving directions would be quashed and set aside. The respondents would have, therefore, escaped without having to pay any penalty for violation of Regulation 11(1) of the Takeover Regulations 1997. It is in this factual background we have to decide the present appeals. As noticed above, the respondents have not filed appeals or cross objections challenging the penalty imposed by the Appellate Tribunal for violation of Regulation 11(1) of the Takeover Regulations 1997.
Power of the Appellate Tribunal under section 15T of the Act - Board has contended that the Appellate Tribunal, in the exercise of power under Section 15-T and while considering appeals against proceedings under Section 11 and 11B of the Act and Regulation 44 of the Takeover Regulation, 1997, could not have converted the directions of the Board with monetary penalty under Section 15-H - HELD THAT:- In the context of the present appeal, it is to be noted that in the case of Sunil Krishna Khaitan, an order in the form of directions under Regulation 44 of the Takeover Regulations 1997 was issued. It was this order which was made subject matter of challenge before the Appellate Tribunal.Thus we do not accept the contention of the Board that the Appellate Tribunal while exercising appellate power could not have set aside and quashed the directions given in the appeal.
At the sametime, in Sunil Krishna Khaitan’s case proceedings under Section 15-H for levy of penalty were not initiated and no order of penalty under 15-H was passed by the adjudicating authority. The Appellate Tribunal, therefore, was not hearing an appeal against imposition of penalty under Section 15-H of the Act. Further, an order under Section 15-H of the Act is passed by an adjudicating authority which, while imposing penalty, is required to take into consideration the factors mentioned in Section 15-J.
As referred to Regulation 45 which in sub-regulation (6) refers to different types of penalties which can be imposed on a person violating any of the provisions of the Regulations. The Appellate Tribunal does not have the power for the first time to initiate and thereupon, impose penalty for non-compliance of the provisions of the Regulations under Chapter VI-A of the Act while deciding an appeal against directions issued under Regulation 44 of the Takeover Regulations, 1997. That power is vested with the authority specified in the Act or the Regulations. The Appellate Tribunal is an appellate forum and not the authority empowered to initiate penalty proceedings under Section 15-H or suo moto issue directions under Section 11, 11B or 11(4)(d) of the Act. It can uphold or set aside the direction issued, or modify and substitute the direction issued under Regulation 44 of the Takeover Regulations 1997 read with Sections 11, 11B and 11(4)(d) of the Act. Similarly, Appellate Tribunal can uphold, set aside, modify and even substitute the order of penalty under Chapter VI-A of the Act.
The power to initiate and levy penalty in terms of Section 15-I is vested with an officer to be appointed by the Board, not below the rank of Divisional Commissioner, to act as an adjudicating officer. The adjudicating officer is required to hold an inquiry in the prescribed manner after giving the person a reasonable opportunity of being heard for the purpose of imposing any penalty. Powers are vested with the adjudicating officer to summon and enforce attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document.
The Appellate Tribunal in the case of Sunil Krishna Khaitan, could not have substituted the penalty imposed by the Board under Regulation 44 with that of penalty under Section 15-H. An appropriate view, in our opinion, would be that when the Appellate Tribunal holds that the order passed by the Whole Time member on violation of Regulations 10, 11 and 12 is sustainable, but the directions given in the order under Regulation 44 are not sustainable, it should leave it open to the Board to initiate proceedings and pass an order under Chapter VI-A of the Act.
As held above, in the absence of any cross-appeal or cross-objection by the respondent in Sunil Krishna Khaitan’s case we are not interfering with the order imposing penalty of Rs.25,00,000/- for the violation of Regulation 11(1) of the Takeover Regulations 1997. The said direction has attained finality. At the same time, we are inclined to direct that the Board would give quietus to the matter and should not initiate proceedings under Chapter VI-A of the Act.
Civil Appeals preferred by the Board are dismissed with the clarification as to the power of the Appellate Tribunal under Section 15-T of Chapter VI-A of the Act, which is confined to examination of correctness and legality of the order under challenge.
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2022 (6) TMI 1492
Non utilization of the proceeds of the preferential issue in accordance with the Special Resolution passed under Section 81(1A) of the Companies Act - proposed utilization of the proceeds of the preferential issue as informed to the shareholders in EOGM ignored - proceeds were utilized by the Company for purchasing shares of other companies and extending loans and advances to other companies and entities - HELD THAT:- Admittedly, in the Special Resolution of the Company dated October 1, 2012 the proceeds were required to be utilized for various purposes as stated in the said Notice to the EOGM. Subsequently, the proceeds which were utilized for other purposes was ratified by the shareholders of the Company by a Special Resolution on September 29, 2017.
The shareholders ratified and approved all acts, deed and things done by the Company in entering into and giving effect to the utilization of the proceeds as received in the said preferential issue which was in variation to the objects as stated in the notice of EOGM held on October 1, 2012. Once this Special Resolution dated September 29, 2017 is passed, utilization made by the Company towards purchase of shares and giving loans and advances to other companies and entities becomes the object of utilization of the Company.
Ratifies / ratification means making valid of an act already done. Thus, even though the Company utilized the proceeds of the preferential issue for a different purpose in variance with the objects specified in the notice of the EOGM dated October 1, 2012 such variance in the utilization of the proceeds stood ratified and became authorized and valid pursuant to the Special Resolution dated September 29, 2017.
The ratification done by Special Resolution on September 29, 2017 approved the acts and deeds of the Company which was improperly done or performed in the first instance and, therefore it was incorrect on the part of the AO to hold that passed illegal acts or deeds cannot be legitimized by a subsequent ratification by passing a resolution by the shareholders of the Company. This finding of the AO of the impugned cannot be sustained.
Once the utilization of the proceeds have been ratified by the shareholders of the Company, the acts and deeds done by the Company becomes valid and authorized and therefore there was no variation of the utilization of the proceeds. The show cause notice alleging variation in the utilization of the proceeds is, thus, erroneous.
For the same reason, since the utilization of the proceeds have been ratified, there was no variance in the utilization of the proceeds and consequently there was no violation of Clause 43 of the Listing Agreement.
The impugned orders passed by the AO cannot be sustained and are quashed.
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2022 (6) TMI 1441
Fraudulent GDR issue - fraudulent scheme was devised by the Company and its Directors - Vintage was the only entity which subscribed the entire 1.17 million GDRs of the Company by obtaining a loan from EURAM Bank - Penalty and restraint orders against company and directors - HELD THAT:- In the instant case, the copies of the loan agreement, pledge agreement was obtained from an authenticated source and, therefore the existence of the original document cannot be disputed and, in any case, the appellants especially the Company and Managing Director had copies of these documents if not the original and, therefore, it does not lie in their mouth to contend that the copies annexed to the show cause notice cannot be relied upon.
In any case, we are of the opinion that if copies of the documents and/or its contents thereof are relied by SEBI and the same is disputed by the appellants regarding its existence or its contents then the onus is upon the appellants who disputes it to prove that the document is forged or its contents are manipulated and its signatures are not of their Directors. The onus is upon the appellants and not upon SEBI.
Appellants contended that they were not aware of the pledge agreement and, therefore, the question of disclosing it to the stock exchange did not arise - Since we have already held that the appellants were aware of the pledge agreement non-disclosure of the pledge agreement invited penalty which the AO has rightly penalised the appellants.
Company furnished wrong information to SEBI regarding the subscribers to the issue. The list provided by the Company indicated that a number of subscribers had subscribed to the GDR issue which upon investigation was found to be false and that only one entity had subscribed to the GDR issue. The contention that the Company had only forwarded the letter that was given by the Merchant Banker cannot be accepted. The responsibility at the end of the day is of the Company and, in our opinion, filing false information was solely the responsibility of the Company and cannot be diverted to the Merchant Banker.
A feeble attempt was made contending that there were two dates on the loan agreement, namely, 16th August, 2010 and 26th August, 2010 and, therefore, doubted the authenticity of the said document. In the first blush the argument appeared to be attractive but upon a closer scrutiny of the document we find that the loan agreement was sent by EURAM Bank to Vintage on 16th August, 2010. This offer of a loan agreement was accepted by Vintage when they placed their signature on 26th August, 2010. Thus, we do not find any discrepancy doubting the authenticity of the loan agreement.
Penalty - As excessive penalty imposed upon the Company does not make any sense. In the instant case, there are 70,000 public shareholde Rs. Penalising the Company with such heavy penalty is infact penalising the shareholders which is not justifiable especially for a running company. Money raised through GDRs has been received by the Company and has not been misappropriated. The same has been utilitised for the purpose for which the GDR was issued, namely, for the Company’s subsidiary which fact has not been disputed. Thus, it is not a case of defalcation of the funds.
Even though the appellants had misled the investors into believing that the GDR was successful whereas there was only one subscriber. Further, the loan agreement, pledge agreement was not disclosed to the shareholders and to the stock exchange. Such scheme was totally fraudulent. If the Company had not given security for the loan taken by Vintage then Vintage could not have subscribed to the GDRs and, consequently, the GDR issue would have failed. Thus, by entering into the pledge agreement for facilitating subscription of its GDRs, we are of the view that the appellant had played a fraud on the securities market and misled the investors by creating a false impression and, thus, violated Section 12A of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations.
Directions so issued under Section 11 and 11B of the SEBI Act and the penalty so imposed under Section 15HA are disproportionate and does not commensurate with the violation in view of the directions given in similar matters by the respondent.
A penalty of Rs. 10,00,000/- has been imposed on the Directors only on the strength that they were signatories to the board resolution. In Mr. Gurmeet Singh vs. SEBI [2021 (9) TMI 1519 - SECURITIES APPELLATE TRIBUNAL MUMBAI] and other connected appeals this Tribunal has held that merely being a signatory to a resolution does not mean that these Directors were part of the fraudulent scheme that the respondent was required to show some other evidence to show that these Directors were also part of the fraudulent scheme. Thus the imposition of penalty is excessive.
Consequently, while affirming the order of the WTM and AO of the aforesaid violations committed by the appellants we reduce the debarment period of the Company and the Managing Director from five years to three years. The other Directors have already undergone the debarment period and, therefore, no further order is required to be passed. In so far as the penalty imposed by the AO is concerned, the penalty against the Company is reduced to Rs. 25 lakhs. The penalty against the Managing Director is affirmed. The penalty imposed against the remaining Directors is reduced from Rs. 10,00,000/- to Rs. 2,00,000/-. The appeals are partly allowed. In the circumstances of the case, parties shall bear their own costs.
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2022 (6) TMI 1048
Investment Adviser entitled to charge fee for providing investment advice from a client in the manner as specified by the Board - fixation of a maximum cap of fee which may be charged by Investment Advisor violates any fundamental rights of the petitioners - HELD THAT:- In Ehsan Khalid Vs. Union of India [2013 (10) TMI 851 - SUPREME COURT] the Supreme Court had held that where there is a challenge to a Government policy, particularly economic policy, Court would not interfere in such policy matters in exercise of its power of judicial review unless such policy is found to be grossly arbitrary or unfair or unreasonable or irrational or violative of Constitutional provisions or contrary to statutory provision.
We are of the opinion that it is not the function of this Court to sit in judgment over a matter of economic policy such as that contained in the Regulation 15A and the Circular dt.23.09.2020 though, this Court might feel that a different policy would have been fairer or wiser or more scientific or more logical when such policy is not patently arbitrary, discriminatory or mala fide.
SEBI is an expert body constituted to deal with the securities market and is empowered to regulate activities of various entities including Investment Advisors while protecting the interest of investors.
From a reading of Circular dt.23.9.2020, it is clear that the parties i.e. the client and the Investment Advisors are given a choice to choose between either a fixed fee mode or fee fixed on the basis of AUA. In the later mode, the fee is chargeable on the basis of AUA per annum.
We do not find anything arbitrary or illogical in this arrangement which would prevent Investment Advisors from giving proper advice to clients or dis-incentivising them.
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2022 (6) TMI 991
Contravention of provisions of the SEBI Act - accused company had raised a huge amount of money from general public in contravention of legal provisions and without obtaining approval or clearance from ROC, MCA and SEBI as required under the Companies Act, 1956 and the SEBI Act, 1992 - Liability of directors in alleged offence - accused company did not take any steps for winding up of the scheme or repayment to the investors, nor did it take any steps to comply with the directions of the SEBI issue and has not the refunded money to the investors and caused huge pecuniary damage - acccused no. 2 to 13 in the complaint are the directors/promoters/key management/personnel and persons in charge of and responsible to the Accused No. 1/Company for the conduct of the business and are liable for the violations of sections 56, 60 and 70 read with section 55A and 67 of the Companies Act, 1956.
HELD THAT:- In the instant case the petitioners were directors and not mere name lenders to the company. Two of them had invested Rs. 5.5 lakhs each at the time of incorporation of the company. In the impugned order it has been stated that on the basis of submissions made by accused Kanwal Prakash Singh, Gajendra Pal Singh and Virendra Kumar, the Adjudicating Officer of SEBI found that during the tenure of the petitioners as directors the company issued redeemable preference shares to 3558 persons and collected an amount of Rs. 11,42,63,000/- in the financial years froms 2010-2013 without complying with public issue norms as mandated under sections 56, 60 and 73 of the Companies Act, 1956, read with the Companies Act, 2013. The Adjudicating Officer of SEBI directed the accused persons to refund the money collected by the company to the investors with interest of 15% per annum, compounded at half yearly intervals from the date when the repayments became due till the date of actual payment along with other compliance to be made.
It is therefore apparent that the accused petitioners were fully aware and had knowledge about the activity of the company and also the contraventions of law made by it. The onus therefore shifts upon the petitioners under proviso to section 27(1) of SEBI Act that they had no knowledge about the contravention of the provisions of law committed by the Company in mobilizing such huge amount of funds from public shares.
Order dated 13.10.2015 passed by SEBI reveals that M/s Just-Reliable Projects India Limited has mobilized fund of Rs. 11.43 crores by floating of shares in the market. This Act of the company was not done furtively and surreptitiously. Therefore, the plea of the petitioners that they had no knowledge about the activity of the company is also prima facie unacceptable at this stage.
Gajendra Pal Singh and Kanwal Prakash Singh admitted before the SEBI authorities that they had sent a notice dated 18.6.2010 and 22.6.2010 to Swarup Dutta regarding alleged unilateral decisions taken by him to open bank account, increase share capitals of the company without holding Annual General Meeting and also change in the address of the registered office of the company. The aforesaid acts alleged to have been carried out by Swarup Dutta requires prior Board Resolution of the company. The petitioners who claim to be unaware about the activity of the company are well informed about opening of bank accounts, change of Registered address of the company as well as mobilization of fund to the credit of the company. The petitioners did not hand over the company documents to SEBI as directed in order dated 13.10.2015. Therefore, documentary evidence when produced in course of trial would reveal if the concerned authorities have allowed such course of activity without any Board Meeting of the company and also of the fact if the petitioners really had no knowledge about the mode and manner of functioning of the company.
The petitioners having issued the notice to Swarup Dutta continued to be directors and did not resign from their office. The illegal activity of the company continued while petitioners were fully aware about such activity till 29.07.2011 and Virendra Kumar till 29.3.2012, their respective dates of resignation.
As it is salutary to refer to the decision in the case of Gunmala Sales Pvt. Ltd Vs Anu Mehta and Ors [ 2014 (12) TMI 1116 - SUPREME COURT] wherein it is held that a complaint cannot be quashed merely on the ground that apart from the basic averment no particulars are given in the complaint about his role, because ordinarily the basic averment would be sufficient to send him to trail and it could be argued that his further role could be brought out in the trial. It therefore emerge from the available facts and circumstances and the position of law that there is material averment in the petition of Complaint to disclose that the directors of the accused company were responsible for the conduct of its business. Since the petitioners were adequately notified before the enquiry proceedings were held by the Whole Time Member of SEBI and that they did not comply the order thereafter, learned Judge Special Court, has committed no error in holding that there is a prima facie case against the petitioners to constitute charge against them and thereby the prayer for discharge was rejected. In view of my foregoing discussion find and the impugned order suffers from no illegality, impropriety or irregularity and calls for no interference.
Both the revisional applications filed by the petitioners are accordingly dismissed on contest.
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2022 (6) TMI 874
Implementation of the fraudulent CIS - diversion of funds - as submitted principal perpetrators routed the funds raised from the public and their cooperation grave nature of the charges against the applicant - fake invoices having been generated by the companies in which the applicants were involved - Role of present applicants - Disposal of the present bail applications - HELD THAT:- We have decided the present applications independently of those orders, as the said orders concern directors of PGF/PACL [2013 (3) TMI 390 - SUPREME COURT], whose roles are at considerable variance from the roles attributed to the present applicants by the CBI itself. Suffice it to state that while rejecting Mr. Subrata Bhattacharya’s application for bail, the Supreme Court specifically noted that the matter involved an alleged criminal conspiracy in furtherance of which “the Directors of M/s PGF Limited and M/s PACL Limited are alleged to have illegally obtained a benefit of Rs 45,184 crores at the expense of 5.46 crore investors spread all over the country from sham land transactions.” The Court proceeded on the basis of roles attributed to the applicants therein, as elucidated in the affidavit of the CBI. The applicants in the present case, in contrast, are not directors of PGF/PACL and their roles are required to be independently considered in connection with their applications for bail.
As applying the relevant principles to the facts of the present cases, further incarceration of the applicants, pending conclusion of the trial, is unnecessary and they are liable to be released on bail, albeit with stringent conditions to ensure their presence at the trial and to minimise the risk of prejudice to the prosecution.
As directed that the applicants will be admitted to bail in connection with FIR No. RCBD1/2014/E/ 0004/CBI/BS & FC, registered on 19.02.2014, in Police Station CBI, under Sections 120B/409/411/420/467/468/471/474 of the IPC and Sections 4/5 read with Section 6 of the PCMCS Act.
The applicants will furnish a personal bond in the sum of ₹30,00,000/- [Rupees Thirty lakhs] each, with two sureties each in the like amount, to the satisfaction of the Trial Court. At least one of the sureties in each case will be from the spouse or a blood relative of the concerned applicant.
Each of the applicants will furnish their residential address to the IO, which will be verified by the IO. The applicants will remain resident at the said addresses and will give prior information to the Special Court and the IO in the event of any change of address. The applicants will not leave the country without the permission of the Special Court.
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2022 (6) TMI 522
Maintainability of writ petition - alternative and efficacious mechanism - Inordinate delay in issue of Show cause notice (around 16 years) - Issuance of Global Depository Receipts ('GDRs') by the 4th respondent - As argued petitioners were non-executive directors of the said company between 1998 and 2005 and that in the said capacity of non-executive director, the petitioners were not involved in the day-to-day management and affairs of the said company In the year 2009, the said company amalgamated with the 4th respondent and is no longer in existence. It is the further case of the petitioners that over the past 14 years, they are in no way connected with the company or had any dealings with the company - HELD THAT:- There is no controversy about the fact that the petitioners are non-executive directors. Non-executive directors cannot be held vicariously liable for any act committed by the company unless they have any interest in the affairs of the company or they have involved themselves in the day to-day affairs of the company. However, it is the stand of the respondents that the petitioners were the Chairman/Member of the audit team, which is one of the very crucial teams in the whole of the organisational setup and without whose knowledge and concurrence financial transactions of the nature as pointed out in the show cause notice would not have taken place. However, the said fact is disputed by the learned counsel for the petitioners. Such being the case, this being a disputed question of fact, this Court cannot adjudicate the same in a petition under Article 226 of the Constitution. Therefore, this Court refrains itself from deciding the issue in exercise of its inherent jurisdiction, as this Court is precluded from deciding such disputed questions pertaining to the status of the petitioners as non-executive directors.
In the case on hand, the GDRs pertain to the period 2002, whereas, action has been taken on the petitioners only in the year 2018, after a delay of 16 years. However, it is the case of respondents 1 and 2 that while the respondents were investigating certain other transactions pertaining to other companies, it came to light from the submissions made by Banco Efisa, with whom the company had the Credit Charge Agreement, that similar transaction of this nature has been done by the company in the year 2002, which fact was not within the knowledge of respondents 1 and 2 at any earlier point of time. Though it is pointed out that permission of SEBI is not required for floating GDRs, however, for finalising the process, certain procedural aspects codified by the Reserve Bank of India have to be followed of which one is information to be shared with SEBI. However, the petitioners dispute the said fact.
The fact remains that respondents 1 and 2 have come out with explanation as to the reason for the delay in issuing the show cause notice. True it is that the delay is enormous, but coupled with the reason assigned for the delay in issuing the notice, this Court is of the considered view that the stand of respondents 1 and 2 with regard to the reason for the delay cannot be brushed aside and has to be taken into consideration holistically.
In the case on hand, admittedly, as against the show cause notice issued by respondents 1 and 2, an alternative and efficacious remedy is available to the petitioners before SAT. The said fact is also not disputed by the petitioners. The only claim of the petitioners is that the show cause notice has been issued after an inordinate delay of about 16 years and that the petitioners being non-executive directors, vicarious liability cannot be fastened on them and, therefore, on those grounds, this Court, exercising its inherent jurisdiction could very well quash the show cause notice.
As already pointed out above, Courts shall normally refrain from quashing the show cause notice at the initial stage, unless the said show cause notice has been issued without authority or that the same is patently illegal. In the case on hand, the show cause notice has been issued by the authority, who is competent to issue the same and that there is no illegality in the said show cause notice and, therefore, the ratio laid down by the Hon'ble Supreme Court in Mohd. Ghulam Ghouse case [2004 (1) TMI 378 - SUPREME COURT] stands squarely attracted to the case of the petitioner and, hence, it is incumbent on the petitioners to submit their explanation to the show cause notice and it would not be right on the part of this Court to assume the robes of the adjudicating authority at the initial stage of show cause notice.
SAT is fully competent to decide the issue, including appreciation of disputed facts and the petitioners can place both oral and documentary evidence before SAT, which can go in-depth into the issue to render a finding. This Court, in any way, going into the issues, as raised above, would be nothing but usurping the powers of SAT, which has been vested in it on the basis of a statute. Therefore, the submission of respondents 1 and 2 that the petitioners should ventilate their grievances first before SAT deserves acceptance.
One aspect, which lingers in the mind of this Court is the fact concerning inordinate delay in issuing the show cause notice. Though respondents 1 and 2 have placed certain reasons before this Court, which are the cause for the delay, however, this Court cannot brush aside the fact that the delay is so enormous that the reason assigned by respondents 1 and 2 could be taken merely at face value, without putting it through proper appreciation in the manner known to law. Therefore, this Court, in the interest of justice, feels that the interest of both the parties to the lis requires to be safeguarded.
This Court while disposes of the writ petitions, is inclined to issue the following directions :-
i) The show cause notice issued to the petitioners by respondents 1 and 2 is kept in abeyance for a period of twelve weeks from today. In the meantime, the petitioners are directed to file appropriate petitions/applications before SAT with regard to the issues raised before this Court.
ii) On such application/petition being filed by the petitioners, the period of limitation, if any, shall be computed excluding the period when the matter was sub judice before this Court.
iii) Further, on such application/petition being filed by the petitioners, SAT shall take up the matters and consider the same on merits and accordance with law and pass orders as expeditiously as possible.
iv) Till the time granted by this Court for the petitioners to file petition/application before SAT, no coercive action shall be taken by the respondents 1 and 2 against the petitioners.
v) The petitioners are permitted to canvass all the points that have been raised before this Court in the petition/application that may be filed before SAT.
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2022 (5) TMI 1652
Offence u/s 205(1A) and 205A of Companies Act - criminal proceedings under Section 482 of Cr.P.C - accused company declared a dividend of but failed to deposit the amount in a separate bank account within five days and did not disburse it to the shareholders within thirty days - accused No. l is the Company and other accused persons are Managing Director and Directors of the Company and have declared the dividend to their shareholders and they have not paid to the shareholders.
Offence was committed under the Old Company's Act, 1956 - as contended that the penal provision brought on the statute only to see the dividend shall be payable to the shareholders and once the dividend were already paid, the question of punishing the Company does not arise - HELD THAT:- Admittedly, the dividend was declared by the company on 29-9-2012 and they have not transferred the dividend declared within five days of its declaration to separate account as per Section 205(1A) and they have also not disbursed the dividend within thirty days from the date on which the due payable as per Section 205(1A), if calculated and if the dividend declared on 29-9-2012 within 5 days i.e., on 4-10-2012, they have to deposit in separate account and within 30 days i.e., on 3-11-2012 and they have to disburse the amount to the shareholders. Admittedly, the petitioner-company is defaulter in depositing and disbursing the amount, thereby, committed offence under section 205(1A) and 205A of Companies Act which is punishable under section 207 of the Companies Act.
It is also not in dispute that the SEBI issued notice on 13-2-2013 and on 23-2-2013. The Head HR and Admin. of the Company sent a letter to the SEBI stating that he may require some more time to consult with the Directors as they have traveled to abroad. Subsequently, on 13-3-2013, again Head HR and Admin, of the Company wrote a letter to SEBI stating that they could not make the arrangement for payment of declared dividend and funds and cash flows have been affected badly due to defaulters and delays from their side and also they sought for opportunity to rectify and make the payment of dividends along with simple interest of 12% per annum as per Section 205A(4) of the Companies Act. Subsequently, on 28-6-2013, one Shiva Kumar Reddy, the Managing Director-accused No. 2 send a letter for having paid the dividends with 18% interest p.a. for delayed payments. These documents clearly indicates that the accused-company has committed offence under section 207 of the Companies Act apart from not depositing the amount within five days as per Section 205(1A) of Companies Act.
Calculation of limitation offence under sections 205(1A) and 205A - Contention raised by the learned counsel for petitioners that the limitation point that the last amount was paid on 28-6-2013 as per their own letter, they have admitted that they have paid the entire amount along with interest. Therefore for the purpose of calculation of limitation offence under sections 205(1A) and 205A are the continuing offences until payment was made as on 28-6-2013. Such being the case, the complaint came to be filed in the year March 2016 within three years of the offence committed which is also continuing offence and it is continuing offence, the recurring limitation extends until the payment was made. Therefore, absolutely, there is no delay in filing the complaint and it was barred by the limitation under section 468 of Cr.P.C.
Offence falls under the new Act, but not old Act - It is an admitted fact that the offence was committed under the old Companies Act, 1956 as the dividend declared in September 2012 and it was due for disbursement by 3-11-2012 and the new Companies Act came into force only in the year 2013. Though the complaint came to be filed in the year 2016, but the savings and repealed Act as per Section 465 of the Companies Act which was introduced or inserted only in the year 2020. Therefore, the complaint under the old Act has rightly filed as on the date of filing the complaint, Section 465 was not brought in the statute book. Therefore, the said contention by the petitioner counsel also is not sustainable.
Once the amount has been paid, the penal provision should be exonerated - Here in this case, there is a clear violation of the provision of law for non-depositing the amount within five days and also not disbursing within thirty days and it was paid nearly for three years. Even some of the payments were made after filing of the complaint. Such being the case, the penal provision cannot be exonerated and otherwise, there is no meaning in mentioning the penal provision under the statute book. Therefore, considering all these facts, petitioner has not made out the ground for quashing the criminal proceedings and on the other hand, they have to face the trial before the Court.
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2022 (5) TMI 1613
Settlement applications under SEBI Act - Illegality and irregularities committed by Companies alleged - violations of certain norms and regulations issued by SEBI in relation to minimum public shareholding, disclosures of shareholding details, etc. identity of promoters, valuation, etc. - Petitioners are aggrieved by exit offers given by Respondent-Companies which is alleged to be contrary to the provisions of Securities Exchange Board of India Act, 1992, Rules and Regulations as well as exit circulars.
Applicants filed settlement applications with SEBI in respect of the afore-said SCNs which is as currently pending before the Settlement Division of SEBI - as argued SEBI (Settlement Proceedings) Regulations, 2018 prohibit filing of settlement applications in respect of matters pending that are pending trial before any court.
HELD THAT:- On the perusal of previous orders, no directions are found which restrain SEBI from considering/ adjudicating the settlement applications. It appears that the instant applications have been filed by way of abundant caution at the instance of HPAC.
The Court has considered the objection put forth by Appellant but finds no cogent reason to reject the application. The decision on the settlement applications is the prerogative of SEBI. It is for the SEBI to deliberate and decide the same, in accordance with applicable provisions of SEBI Act, Rules, Regulations, etc. Whether the applications are prohibited or not is not for this Court to determine. Accordingly, the applications are disposed of with a clarification that SEBI shall be free to deal/ adjudicate the settlement applications filed by the Applicants, on its own merits, in accordance with law.
The decision on the settlement applications shall not prejudice the Petitioners and all rights and contentions of the parties herein are left open.
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2022 (5) TMI 1511
Praecipe moved for speaking to the minutes of the order - In 3rd line paragraph 3 of the order, the word "by" shall be replaced with the word "be" - In 4th paragraph, the word "implementation" shall be replaced with the word "impleadment".
Necessary corrections be carried out in the order dated 10.05.2022 and the corrected order be uploaded again.
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2022 (5) TMI 1510
Interim Application filed by SEBI for impleadment in Commercial Suit and for seeking stay / recall of the order passed in Interim Application - HELD THAT:- This Court while granting ad-interim relief by the above orders has directed Defendant No. 2 to call for a meeting of the debenture holders of Defendant No. 1 within two weeks of the order for the purpose of consideration and approval of the beneficial owners or debenture holders and the settlement offer / compromise / arrangement / resolution plan approved by ICA lenders on 19.06.2021 and further directing that the calling / conducting and voting at such meeting would be governed by the terms of the respective debenture trust deeds.
After hearing the parties and considering various orders placed before this Court, it is directed at this stage that the results of the voting of the meeting to be conducted on 13.05.2022 by placed in a sealed envelope before this Court.
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2022 (5) TMI 1314
Insider trading - Selling the shares during the UPSI period - violating Regulation 4(1) of the PIT Regulations - HELD THAT:- Explanation demonstrated the circumstances for selling the shares of the company during the UPSI period in order to avoid the company from down-graded to a nonperforming asset. In our view, such explanation given by the appellants which has not been considered by the WTM is sufficient to prove his innocence of trading while in possession of the UPSI. Such explanation will come within the purview of the proviso to Regulation 4(1) of the PIT Regulations and consequently, the appellants cannot be charged for violating Regulation 4(1) of the PIT Regulations.
A finding has been given that the appellants were aware of the losses incurred by the company and, therefore, they have sold off their shares in order to avoid further losses. In this regard, we find that the financial results were declared on November 29, 2017 on that date the closing price of the scrip of the company was Rs 21.60 per share. The declaration of the financial results on November 29, 2017 did not have a great impact in the price of the scrip on November 30, 2017. We find that the closing price of the scrip of the company on November 30, 2017 was Rs. 20.20 on NSE and Rs. 20.25 on BSE. Thus, there was hardly any price difference in the price of the scrip between 29th and 30th November 2017 and, therefore, it is incorrect to contend that the sale of the shares was made by the appellants for the purpose of avoiding further losses.
We are also find that the sale amount of the shares was not retained by the appellants for their personal use or gain. But the said money was infused in the company for its working capital.
We are satisfied that the appellants have successfully discharged their burden under Regulation 4(1) of the PIT Regulations. We find that in the given circumstances, the appellants cannot be charged for insider trading - For the reasons stated aforesaid, the impugned order cannot be sustained and is quashed. The appeal is allowed.
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