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SEBI - Case Laws
Showing 21 to 40 of 681 Records
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2025 (5) TMI 1622
Reopening of the mutual fund scheme - default by IL & FS group as mala fide or prejudicial to the interests of the existing investors who had suffered losses - HELD THAT:- We note that in reply to the review application the impugned order has been issued after due consideration by the Respondent No. 1. We take note of paragraph 21 of the affidavit in reply filed by the Respondent No. 1 wherein it has been stated that the impugned order has been issued after following the due procedure and that “The reopening of the said scheme was at the direction of the trustees of the AMC and does not amount to contravention of any provisions of the SEBI Act, the Mutual Fund Regulations or the circular”.
Prayer made by the Appellant to review the act of reopening of scheme by Respondent No. 2 and to issue instructions to Respondent No. 2 to distribute the recoveries made from IL & FS to old and existing investors - As we note that Respondent No. 1, SEBI, as the Regulator for Mutual Fund Industry has already examined the issue. SEBI has concluded that the reopening of the scheme was supported by necessary approvals and disclosures ensuring investor protection within the ambit of applicable laws and circulars. In this instance, the default by IL & FS occurred before the issue of SEBI circulars dated December 18, 2018 and November 7, 2019 on creation of a segregated portfolio in Mutual Fund scheme in the event of a credit event.
Therefore, the circulars cannot be made applicable in the present matter.
The creation of a segregated portfolio is purely optional and discretionary for the AMC. Thus, any proceeds realized are to be distributed proportionately amongst all existing investors at the time of realization. The Appellant has not produced any regulatory instruction / circular to the contrary.
We note that the scheme was reopened in January 2021 and new investors have since invested in the scheme leading to increase in the NAV and that the reopening of the scheme and allowing new investors to come in, is as per the market practices. Accordingly, we see no grounds to set aside the impugned order
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2025 (5) TMI 1151
Sentence awarded for offences u/s 12(1B) of the SEBI Act, 1992 and various provisions of the CIS Regulation, 1999 - seeking leniency in sentence awarded to Respondent Vijay Laxmi and has sought enhancement of the sentence - As submitted that the learned Trial Court has erred in relying upon the alleged medical record of the Respondent which were produced before the learned Trial Court at the time of Arguments on Sentence which indicated that she was suffering from ‘Organic Bipolar Disorder’
HELD THAT:- At the stage of Order on Sentence, medical documents of the year 2020-2021, 2022-2023 and 2023-2024 had been filed in support of her medical condition. The medical condition was also held to be apparent from her appearance as she was not responding well to the questions put to her.
Considering her medical condition, it was not considered necessary to get her examined by the Medical Board since it was not a case of Mental unsoundness of mind. However, considering the long trial and her medical condition, she was sentenced to imprisonment of “till rising of the Court” and to pay fine of Rs. 5,00,000/- with further directions that if the fine amount is not paid, the same shall be recovered from her Estate.
The aforesaid observation made by the learned Additional Session Judge in the Order on Sentence clearly reflects application of mind and consideration of all the attending circumstances.
Essentially, the Respondent may have been held guilty of the offences under Section 12 (1B) of SEBI Act, 1992 and Regulation 5 (1), 68 (1), 68 (2), 73 and 74 of the CIS Regulation, 1999, but the sentence is always tailored to the specific role of the convict as well as attending circumstances. It has been clearly noted that the trial took place for a period of twenty years, the travails of which were faced by the Respondent. Her medical condition over a period of time had deteriorated and she suffers from Schizophrenia and delusions hallucination which is a part of ‘Organic Bipolar Disorder’. Suffering from a mental condition does not imply that she is mentally unsound or that the trial/ sentence was required to be suspended till she recovers fully.
Considering Respondent’s age and her medical condition, as was reflected in the medical record, she has been awarded sentence of “till rising of the Court” and to pay fine of Rs. 5,00,000/-, which cannot be stated to inappropriate or inadequate in the given circumstances. There is no ground to justify that the sentence awarded is inadequate. There is no merit in the present Petition.
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2025 (5) TMI 1150
Collective Investment Scheme (‘CIS’) without obtaining registration from the respondent complainant Board - as alleged that the accused persons illegally mobilised funds from the public under CIS in violation of the relevant provisions of the SEBI Act and concerned regulations, whereunder such a practice has been declared as fraudulent and unfair trade practice - limited ground agitated by the petitioner is that the complaint is bereft of necessary averments in relation to his role in the accused company and that the learned Trial Court has erroneously framed charges against him without considering that there is no strong suspicion. No arguments have been made in relation to whether the schemes run by the accused company were in the nature of CIS.
HELD THAT:- The complaint ought not to be quashed before the parties have been allowed to lead evidence if the same contains necessary averments, unless such unimpeachable material is brought by the accused to show that interference of the Court is required and trial should not be allowed to continue against the accused.
Necessary averments have been made in the complaint and a prima facie case is made out against the petitioner considering the orders of the Whole Time Director who found that the schemes run by the accused company are in the nature of CIS. No unimpeachable material has been put forth by the petitioner to show that he was not involved or in charge of the regular affairs of the accused company. On the other hand, it is argued on behalf of SEBI that there is cogent material to show the involvement of the petitioner, including his presence in board meetings as well as him being one of the first Directors and promoter of the accused company. It is relevant to note that the allegations in the present case relate to the very nature of operations of the accused company. While the role of the petitioner would be seen during the course of the trial, at this stage, it cannot be held that merely because the specific role of the petitioner is not spelt out in the complaint, the same is sufficient to exonerate him.
Insofar as the challenge to the order on charge is concerned, it is argued on behalf of the petitioner that strong suspicion is also required for framing of charges, despite which, the charges have been framed by seeing the existence of prima facie case against the petitioner.
As argued that the charges have been mechanically framed by the learned Trial Court. It is apposite to succinctly discuss the statutory law with respect to framing of charge and discharge as provided under Sections 227 and 228 of the Code of Criminal Procedure, 1973 (‘CrPC’).
Trial Court while framing charges is not required to conduct a mini-trial and has to merely weigh the material on record to ascertain whether the ingredients constituting the alleged offence are prima facie made out against the accused persons.
This Court, at the stage of framing of charges, is not required to evaluate the evidence or hold a mini trial. As specifically noted in the case of State of Gujarat v. Dilipsinh Kishorsinh Rao [2023 (10) TMI 1346 - SUPREME COURT] the Court is not required to venture into the probability of conviction at this stage and is only required to look into the prima facie case without delving into the probative value of the material on record. It is correct that grave suspicion is required for framing charges against an accused, however, it cannot be said that no strong suspicion exists against the petitioner merely because the complaint only contains the necessary averments against the petitioner.
As noted above, to quash the proceedings by petition filed under Section 482 of CrPC, the petitioner is to place some unimpeachable and uncontroverted evidence which is beyond suspicion or doubt. Thus, any defence in relation to the petitioner being an inactive Director cannot be probed at this stage in the absence of any direct and unimpeachable material to show the same. In such circumstances, at this stage, in the absence of such evidence, the question as to whether the accused person was responsible for the affairs of the accused company at the relevant time becomes a factual dispute, which is to be seen during trial.
Clear unambiguous averment in relation to the petitioner has been made in the complaint and from the totality of facts, at this stage, it cannot be said that the petitioner was not in charge of, and was responsible to, the company for the conduct of the business of the accused company at the time of commission of offence. Exercising the inherent jurisdiction at this juncture to quash the proceedings, before the respondent has had an opportunity to lead its evidence, will be an abuse of the process of law.
This Court finds no reason to interfere with the order on charge passed by the learned Trial Court or to quash the complaint.
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2025 (5) TMI 1149
Violation of Principle 4 of Schedule A of the PIT Regulations - SEBI imposing a monetary penalty of Rs. 30 lakhs u/s 15I of the SEBI Act upon the appellants - disclosure obligations under PIT Regulations and LODR Regulations - Whether the appellants had an obligation under Regulation 30(11) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR Regulations") to confirm or deny the market rumours regarding the Facebook investment in Jio Platforms Limited ("JPL") during the period prior to formal announcement.
HELD THAT:- Appellants' plea that only till a binding agreement is signed, the information cannot be held as concrete or credible is devoid of merit, which if acceded to, would defeat the spirit of PIT regulations. There would be nothing left in a deal once a binding agreement is signed, as the listed entity has to mandatorily make due disclosure. This implies nonrecognition of Principle-1 as the listed entity is required to make UPSI generally available to public, when it comes to being as a credible and concrete piece of information. If appellants' view is to be accepted, no information relating to a potentially price sensitive transaction, enumerated in Reg. 2(n) of PIT regulations may be treated as UPSI till such a transaction is actually culminated through a binding agreement. That will defeat the very purpose of the said regulations.
There was no need to disclose any information, since the information was already got disclosed in Media and was already 'generally available' - This plea is devoid of merit, as it is the responsibility of the company to give clarity on the matter to the investors and public at large with a credible and concrete explanation. In the absence of this, such a speculative information would keep floating around, which may break the integrity of the securities market. If at this stage, the appellant had disclosed the basic facts about the deal clarifying that no binding agreement has been signed, it would have settled the dust and stabilized speculative trends.
In our view, selective leakage of the information, howsoever accurate or otherwise or complete or in bits and pieces, does not discharge the company from its responsibility of making prompt disclosure to make it generally available, moreso when such information has been classified by company as UPSI. Till the information is disclosed by the company, it remains unauthenticated. The information leaked to news agencies remains selectively available to their subscribers / readers only and cannot be held as 'generally available' to the entire universe of investors of the company, for whom the company appointed a Chief Investor Relations officer to make such UPSI 'generally available'. It takes the characteristics of a 'generally available' information only when the company authenticates it.
Otherwise, it is only a speculative piece of information. This is evident by the fact though there was a price rise of 15% through speculative reporting in Newspapers, etc. on March 24, 2017, but despite of such a steep price rise, later when the company made a formal disclosure on April 21, 2020, making the information generally available, there was a further significant spike of 10% noted in market price. Thus, in respect of a materially price sensitive matter in the nature of significant cross-border investment in a company such as RIL, the information may be held as 'generally available' only when company authenticates it and not merely on the basis of a newspaper leakage, not authenticated by the company.
In terms of the Principle-4, if the information gets selectively disclosed, whether inadvertently or otherwise, whether or not due to anyone's omission or commission, it definitely shows lack of due care by the company. Undisputedly, the company had suo motu not made prompt disclosure of information under the Principle-1. The least the company could have done on noticing selective leakage of the information, was to make a timely and prompt disclosure of information to one and all.
Company was not required to come clean with regard to 'bits and pieces of UPSI' - The news which was flashed globally and was followed in Indian media on March 24, 2017, based on which the Market price was significantly increased, relates to substantial equity infusion in its material subsidiary by Facebook (which was proved to be correct in a few weeks later). By this stage, certainly, such an information had reached a stage to be treated as concrete, while it was certainly credible since signing of NDA between two sides. Hence, we find no merit in the plea that the said information would have been PSI only when valuation figures were to be available after due diligence.
We note that both the sides have extensively debated on LODR Regulations specifically whether Regulation 30(11) is discretionary or mandatory. The respondent's case is that while a listed entity shall be bound to disclose the information to the exchange when called upon to do so, it 'may' on its own initiative also do the same and, therefore, when read together it makes obligatory on the company to make suo motu disclosure, where it has not been asked by the regulator. The appellant's plea is based on interpretation of Regulation 30(10) independent of Regulation 30(11). We are in agreement with Mr. Sancheti that correct interpretation of Regulation 30(11) can be made when read in juxtaposition with Regulation 30(10). The term 'may' used in Regulation 30(11), when read with Regulation 30(10) provides for compliance by the listed entity in the given circumstances, whether in response to any query raised by the exchange or otherwise. Here, 'may' needs to be read as an adjunct to mandatory requirement of Regulation 30(10). This requirement was applicable to all listed entities till the beneficial proviso brought in w.e.f. June 14, 2003, restricted its applicability to only top 100 companies.
However, having held so, we are of the view that this issue is not germane to the violation under PIT Regulation. We have already held in the preceding paragraphs that it was incumbent on the appellant to disclose the information, which is in the nature of UPSI, in terms of Schedule A of the PIT Regulations. We, therefore, limit our observations in foregoing paragraphs to current facts, circumstances and records made available to us.
We find the appellants in violation of Principle 4 of Schedule A of the PIT Regulations and uphold the order of the AO.
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2025 (5) TMI 1148
Insider trading - SCN holding the appellants to be ‘insiders’ under Regulation 2(1)(g)(ii) of the SEBI (PIT) Regulations, based on alleged access to UPSI through (Late) Mr. Rakesh Jhunjhunwala but order holds the appellants as “connected persons” which implies reliance on Regulation 2(1)(g)(i) requiring a distinct and separate legal standard - as alleged that the respondent has effectively modified the basis of the original SCN without due notice or opportunity of rebuttal.
Whether appellants are ‘insiders’ under the PIT Regulations? And if so, whether they are insiders being “connected person” under Regulation 2(1)(g)(i) or by “being in possession having access to UPSI” under Regulation 2(1)(g)(ii)? - HELD THAT:- As we find no ground for holding appellant no. 1 as ‘connected person’ qua Aptech under Regulations 2(1)(g)(i). We have already held that preponderance of probabilities, do not suggest that appellant made trading while he was in possession of or had access to UPSI and hence he cannot be held as an insider under Regulation 2(1)(d)(ii). In view of this, we decide this question in negative.
Whether the trading behaviour of the appellants can be construed to hold that trading by the appellants was guided by the UPSI? - Appellants did not exploit the advantage of having alleged access to UPSI and continued to hold on to it for a long period of 8 years. This substantiates the appellant’s explanation that their trading was made in accordance with their long-term investment strategy about this stock, considering certain positive developments. Moreover, if the company is venturing into education sector, which even in respondent’s view is a new area, (as the company has been in ‘vocational training’), a long-term investment at early stage could perhaps be a prudent investment strategy.
Appellants are right in contending that under the Regulations 2(1)(g)(ii), the onus is on SEBI to prove that appellant had access to UPSI. This is a foundational fact, in terms of Balram Garg decision (SC), which needs to be proved in order to hold the charges of insider trading.
We find no evidence in this regard and preponderance of probabilities also do not indicate that appellants had access to UPSI. On the contrary, the appellant cannot be called upon to prove that their trading was not guided by UPSI. However, appellants attempted to provide reasons for their trading behavior, inter-alia, their perception of positive outlook about Aptech, which respondent attempted to rebut before us. However, in our considered view, since appellants were held as ‘insider’ under Regulations 2(1)(g)(ii) in the SCN, they were under no onus to prove that the trading was not guided by UPSI as onus was on the SEBI and not on them. In view of this, the question B is decided in negative.
We do not find merit in the findings of the respondent that appellants are in violation of PIT Regulations, 2015 with regard to trading in Aptech shares.
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2025 (5) TMI 412
Limitation / restriction upon SEBI for the purpose of termination of services of an ‘Administrator’ appointed by it - Validity of communication withdrawing the petitioner's appointment as Administrator
HELD THAT:- In the present case, the petitioner, having acted as the Administrator for more than three years pursuant to his appointment on 31.05.2019, was duly relieved of his responsibilities vide the communication dated 09.03.2022. A perusal of the communication dated 09.03.2022, reveals that the same does not cast any stigma on the petitioner; rather the said communication acknowledges the efforts made by the petitioner during his term as an Administrator.
Inherently, the petitioner’s appointment as Administrator is not indefinite and can be terminated by the SEBI. As such, the prayer sought by the petitioner that the letter dated 09.03.2022 be declared as null and void and that the petitioner be restored as Administrator, is untenable.
There is no limitation / restriction upon SEBI for the purpose of termination of services of an ‘Administrator’ appointed by it.
It is the common case of the respective counsel for the parties that the petitioner’s remuneration is governed by a circular dated 02.04.2019 issued by the Deputy General Manager, Recovery Division-1, Recovery and Refund Department, SEBI (respondent no. 2) which prescribes a graded payment mechanism depending upon the amount realized by the Administrator by way of sale of assets of the company in question (M/s. En Aromatic & Petro Chemicals Pvt. Ltd.).
The respondent is directed to consider the representation of the petitioner regarding payment of his remuneration; the same may be duly determined in terms of the stipulation contained in the appointment letter dated 31.05.2019, read with the aforesaid circular dated 02.04.2019. Let a reasoned order be passed by the respondent, setting out the monetary entitlement of the petitioner, and the time frame for payment of the same. Let the said order be passed within a period of eight weeks from today. In case any document/s is required from the petitioner for the purpose of assessing his remuneration, the same shall be duly provided by the petitioner.
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2025 (5) TMI 411
Existence of reasons and the belief to warrant an investigation u/s 11-C of SEBI Act - HELD THAT:- The existence of reasonable grounds is sine qua non for directing an investigation under Section 11-C of the Act. Thus, where a review of the material on record indicates that the competent appointing authority has merely reiterated the allegations made in a subsequently withdrawn complaint, and further contains no reference to notices and replies of the petitioner entity to the same, or the compelling circumstances warranting an investigation suo motu into the subsequently withdrawn allegations levelled by the shareholders, the respondent No. 1 cannot be said to have passed an order directing investigation u/s 11-C, upon due application of mind. The said assessment is further bolstered upon perusal of the material on record where the internal notings of the respondent-SEBI, which ordinarily ought to contain the reasons and belief necessitating an investigation u/S 11-C of the Act, 1992, remain unapproved by the competent authority i.e. the Executive Director.
It is a well-settled law that all state action must be reasonable and free from arbitrariness. Thus, where it appears from the perusal of the material on record that respondent No. 1/ Executive Director, SEBI did not possess any relevant reasons to believe, the passing of an order directing investigation under Section 11-C of the Act read with Regulation 5 of the SEBI (PFUTP) Regulations, 2003, cannot be sustainable.
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2025 (4) TMI 460
Offence under SEBI - misleading advertisements issued by VCL with regard to buyback of its shares, issue of bonus shares and preferential issue of shares within 30 days - SEBI's actions in reopening the case and issuing fresh orders after a final order had already been passed - HELD THAT:- It is not open to SEBI to claim that it could pass multiple final orders on the same cause of action. Having undertaken the exercise pursuant to its show-cause notices issued in 2012, SEBI passed the order dated 31.07.2014, in exercise of power under Section 11B of the Act of 1992, with certain directions which attained finality and were given full effect to. That being so, SEBI could not have reopened the entire exercise without just cause so as to pass a fresh order u/s 11B, once again, 4 years later.
We may also note the unconscionable delay on the part of SEBI. Though the WTM of SEBI passed the order on 01.04.2016, requiring an examination afresh and initiation of disgorgement proceedings, it was only on 19.01.2018 that SEBI got around to issuing a show-cause notice proposing disgorgement and then passed an order seven months later. This laidback and indolent approach on the part of SEBI in dealing with the matter needs mention as it does not augur well for a statutory body enjoined with the duty of protecting investors and regulating the securities market which, by its very nature, is volatile, to drag its feet and indulge in unwarranted and unjustified delays.
Viewed thus, we are of the opinion that the entire exercise undertaken by SEBI after the passing of the final order dated 31.07.2014, resulting in the disgorgement order dated 28.09.2018, was unsustainable in law.
Tribunal's authority to direct SEBI to compensate investors who suffered losses due to misleading advertisements - As the compensation claim of Ram Kishori Gupta and Harishchandra Gupta against SEBI stood decided by the Tribunal’s order dated 30.04.2013, which also attained finality, it was not open to them to reopen the same and seek to pin such liability upon SEBI once again. The directions in that regard by the WTMs of SEBI in the orders dated 16.12.2014 and 01.04.2016, culminating in the direction for restitution by the Tribunal in its judgment dated 02.08.2019 in Appeal No. 44 of 2019, cannot be sustained.
It was not for the Tribunal to interpret its earlier order dated 30.04.2013 and give it a different colour, contrary to its plain meaning. Finally, it has been contented before us by SEBI that as only 4 entities, including VCL, out of 22 entities, filed appeals against the disgorgement order dated 28.09.2018, the said order cannot be invalidated against those who had not chosen to file any appeal. We are informed that some of the individuals concerned have expired while most of the corporate entities have become defunct. In any event, as the order suffers from an inherent lack of jurisdiction, being barred by the principle of res judicata/ constructive res judicata, this argument cannot stand.
However, given the fact that VCL and the other entities, who were the appellants before the Tribunal, were held to have indulged in fraudulent acts and transactions and were not innocent or guileless, by any stretch of imagination, the direction of the Tribunal practically rewarding them with costs of ₹2,00,000/- each was entirely unjustified on facts.
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2025 (3) TMI 1491
Dismissal of appeal for want of prosecution due to the appellant's counsel repeatedly seeking adjournments - As decided by SAT [2021 (11) TMI 1219 - SECURITIES APPELLATE TRIBUNAL MUMBAI] as appellant does not want to argue the matter today. The appeal is dismissed for want of prosecution. The present matter was heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor a certified copy of this order could be issued by the registry. The order will be digitally signed by the Private Secretary on behalf of the bench
HELD THAT:- As Tribunal has noted that the appeal was fixed during the COVID-19 pandemic and, therefore, it was not even possible for the members of the Tribunal to sign the order. All that the order records is that on that day, the Advocate for the appellants appeared and sought adjournment. Tribunal goes to the extent of saying that the counsel for the appellants was not interested in arguing the case. That was no ground to dismiss an appeal and especially, during the period affected by COVID-19 pandemic.
The second impugned order is by which an application for restoration of the appeal made by the appellants was dismissed. There was no reason to dismiss the said application. The Tribunal has adopted a hyper-technical approach.
Accordingly, we set aside both the impugned orders and restore Appeal to the file of the Securities Appellate Tribunal.
We make it clear that the appellants shall cooperate with the Tribunal for early disposal of the appeal and shall not seek any adjournments on unwarranted grounds.
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2025 (3) TMI 1404
Setting aside of the cancellation of sale of landed properties in pursuance of e-auction initiated by SEBI upon acceptance of the remaining consideration money and/or appropriate writ for refund of earnest money was dismissed
HELD THAT:- Proceeding whereby e-auction of the properties, confirmation and cancellation of the auction sale was taken in accordance with relevant provisions of the Rules contained in the Second Schedule of Income Tax Act with necessary modifications.
Rule 58 of the Second Schedule of Income Tax Act and the provision contained in Order XXI Rule 86 of the Civil Procedure Code has extended a discretion upon the tax recovery officer/authorities to decide whether to forfeit the EMD or not and if so to what extent.
The facts and circumstances obtaining in the case at hand, no such discretion was exercised by the respondent and the respondent proceeded to forfeit the entire deposit amount in a manner as if it was automatic. Needless to say, no opportunity of hearing was afforded to the appellants. The entire EMD was directed to be forfeited without taking into consideration the loss and damage suffered by the respondent owing to the default on the part of the appellants in making the payment of balance consideration money.
In course of hearing of the instant appeal, the appellants never endeavored to challenge the finding of learned Single Judge whereby learned Single Judge disbelieved the case of the appellant to the effect that he was prevented by the intervention of COVID-19 in making payment of the balance consideration money within time specified in the contract. We, therefore, have no justification to interfere with such finding of learned Single Judge. Accordingly, we uphold the same.
Set aside the impugned judgment and order so far as it relates to the rejection of the prayer of the appellant for return of EMD. The respondent shall proceed to determine the nature and extent of forfeiture of the EMD amount afresh. In doing so, the respondent shall provide sufficient opportunity of being heard to the appellant. The respondent is at liberty to hear any other parties and consult any document as it deems necessary. The respondent shall take a decision in this regard within 8 weeks from date and communicate its decision to the party it heard forthwith thereafter.
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2025 (3) TMI 1256
Penalty u/s 15A(c) - Failure to sign and date the research reports and to maintain records of research recommendations and rationale for arriving at research recommendations - HELD THAT:- To define as a proper “research report” or a “research recommendation” the document ought to have been duly signed and dated. The allegation by the appellant that at the time of inspection, the inspecting team refused to see the rationale is unsubstantiated and vague. On the other hand, the evidence on record being the core finding on inspection clearly shows that the appellant’s claim is untenable and the appellant’s reliance only on pre-inspection questionnaire is wholly unsustainable. We therefore, don’t find merit in the submission of the appellant.
Not maintaining records of ‘Public Appearances’ - No merit in appellant’s contention that publishing the research report on Whatsapp/Telegraph channels does not amount to “Public appearance”. In our considered view, the definition of the term “Public appearance” under Regulation 2(1)(q) of the RA Regulation includes making recommendations/rendering advice relating to securities, on Whatsapp/Telegram channels, in respect of which the appellant is required to make applicable disclosures. We note that the appellant does not maintain any records, whatsoever, in respect of the publication on Whatsapp/Telegram groups, of the research reports/ recommendations.
Thus, we uphold the order of the AO of imposing of penalty under Section 15A(c).
Penalty u/s 15EB - Material change in ‘internal policy’ which was not communicated to SEBI - Appellant is clearly required to have appropriate mechanisms to ensure independence of his research activities. Undisputedly, he is carrying on other business activities in his individual capacity. The same was required to be reported to the respondent at the time of registration and if there was any change, the same affects the independence of his ‘research analyst’ function qua his other businesses, which may create conflict situations, as seen in the case of the appellant. Therefore, failure to report change in Internal policy has rightly been held as violation of the relevant regulation by the respondent.
In view of the same, the appellant’s submission is untenable and it is rejected.
Failure to ensure independence of its research activities from its other activities - It is undisputed that the appellant is an individual and a registered Research Analyst. He also carries on independent business activities in his proprietary capacity, inter alia, a Chartered Accountancy Division, a Spiritual/Vipassana Teaching Division and Manish Goel News Broadcast Division (MGNBD), in which he claims to be only an employee. Though no fee is received by him for making research recommendations in the self-manned RA division, admittedly, he earns fee in the other 3 divisions, including the MGNBD, in which he earns fee by broadcasting the research recommendations (which are made available free by RA division).
Thus, services in all these verticals are singularly provided by the appellant only.
By no stretch of imagination, an arm’s length relationship can be construed within the same ‘individual’. Hence, we uphold the finding of the respondent that the appellant failed to make arm’s length between his RA functions and other functions. Secondly, the argument that the SEBI has given the investment advisory certificate and RA certificate both to the appellant is also incorrect on facts, since the investment advisory certificate was issued to an entity titled MSRAPL (a Company) whilst the RA Certificate was granted to the appellant in his proprietary capacity as an ‘individual’. Moreover, it was the duty of the appellant to have made due disclosure in this regard while making the applications for registration as RA and for investment advisory functions of MGRAPL.
Appellant has carried out his independent business of Chartered Accountancy Division through which he used to solicit the business and admittedly no mechanism was put in place to dealing with a conflict situation between the RA division and that division. In view of this, the appellant’s claim is devoid of merit and is rejected.
Trading in stocks recommended by the appellant during the restricted period - An independent research analyst to do only business activity of ‘research analysis or preparation and/ or publication of research report’, whereas, it is evident that the appellant has been carrying on several business activities in his individual capacity, which shall have a bearing on his independent functioning as an independent research analyst.
Undisputedly, the appellant is a Research Analyst, registered with the SEBI. Since the appellant is not employed as a Research Analyst by any research entity, by implication his case falls under the other alternative category of ‘independent research analyst’ under Regulation 16(2). Therefore, appellant’s contention that prescribed period applies to independent research analyst is baseless and rejected.
Failure to make necessary disclosure in the research report/ recommendations - As we find that no explanation was given by the appellant as to how the research report of ‘Investment Trust of India’ prepared by the appellant reached the client and why the same was not duly disclosed by him. The fact remains that the report has reached the client. Under the circumstances, we find his explanation with respect to violation of disclosure requirement under Regulation 19 as unsatisfactory.
Regarding the second allegation, we find that in terms of the RA Regulations 21(1), the appellant was required to make disclosure in respect of his registration status and details of financial interest in the Company. The screenshots of Telegram Channels provided by the respondent show that no such disclosure was made by the appellant regarding his RA number or financial interest in securities in respect of which recommendations were made. The appellant questioned the authenticity of such screenshots. This contention is wholly untenable because screenshots are from appellant’s phone.
Failure to maintain any record of rationales - There is no evidence on record to prove that the appellant was asked through the PIQ to furnish the rationale of the research recommendations. The respondent has not denied that the rationale were provided through the SCN. There is no conclusive evidence to hold that the appellant was asked but did not provide the rationale during the inspection and that the appellant has been providing recommendations without any underlying research, as undisputedly, considering the client base of the appellant, there have not been statistically significant number of complaints against the appellant, which is not possible if his recommendations were random guesses without supported by research. Therefore, in our view, SEBI’s findings on this aspect are unsustainable.
Non-compliance with the KYC procedure - Relying upon the decision in the case of K. Premchand [1953 (10) TMI 5 - SUPREME COURT] we have already held that it is not possible to construe the possibility of having arm’s length relationship within the appellant’s own various income earning activities in individual proprietary capacity qua his Research Analyst activities. Hence, in our considered view, the fiction of arm’s length does not exist between appellant’s fee-yielding business activities qua the Research Analyst division, which too was a proprietary in his individual capacity only.
Non-disclosure of the term ‘Research Analyst’ in recommendations / respect of 9 stocks on Whatsapp/ Telegram chats - Evidently, the respondent has downloaded the Whatsapp chats in respect of appellant from his specific authorised telephone number. The respondent at every stage and even at the appellate stage asked the appellant to furnish details of the telephone number and the appellant has not denied the contents of the Whatsapp chat, which admittedly contains specific recommendations made by him with respect to the recommendations for 9 stocks. Further, the appellant failed to submit any proper documentary evidence to show that he had complied with the aforesaid regulatory requirements. In view of this we find no merit in the plea of the appellant, in respect of this violation.
Keeping in view the fact that the defaults made by the appellant of the RA Regulations are multiple and repetitive and lack any credible explanation, we hold that the quantum of penalty levied by the AO is justified in view of the provisions of Section 15J of the SEBI Act.
Penalty u/s 15HA - We find that the appellant has not denied violation in respect of one scrip i.e. Swasti Vinayak Synthetics Ltd. in respect of which the recommendation through Whatsapp message of assured high returns was made with the offer of one free service. The same undisputedly, falls within the scope of Regulation 4(2)(k) of the PFUTP Regulations, amounting to furnishing of misleading information. Keeping in view the above, we uphold the action of the AO imposing a penalty of Rs. 15 lakhs under Section 15HA.
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2025 (3) TMI 1145
Penalty u/s 15HB of the SEBI Act - delay in commencing the adjudication proceedings against the appellant - HELD THAT:- A common SCN was issued on September 28, 2021. Since all these complaints are with regard to investment advices given by the appellant, we do not find any error in issuing a common show cause notice, which reduces multiplicity of proceedings. It is settled that where no limitation is prescribed, proceedings have to initiated in a reasonable period. Further, as rightly urged by Mr. Sancheti, appellants have failed to demonstrate any prejudice caused due to the delay. Considering the avowed object of IA Regulations, we find no merit in ground of delay taken by the appellant.
Double jeopardy, SEBI is right in contending that the proceedings before WTM and the AO are completely different under different provisions of the SEBI Act. Therefore, is no merit in this ground.
Denial of natural justice in rejecting the settlement application, as rightly contended by Mr. Sancheti, an appeal against rejection of application for settlement is barred under Section 15JB(4) of the SEBI Act. Hence this ground is also untenable.
Notice for inspection was served on the day of the inspection -We note that the impugned proceedings were started following several complaints received against the appellants. The appellant being a registered Investment advisory firm, was required to abide by the IA Regulations but on inspection in 2015 and later in 2017, it was found to be lacking on several counts. We are persuaded to accept SEBI’s contention that Appellants have not demonstrated any prejudice caused to them. Moreover, during proceedings, appellants were given opportunity to defend their cause. Hence, this ground is also baseless.
Violation-1 - Whether appellant has violated Regulation 15(8) of the IA Regulations (KYC Procedure)? - We are of the vies that the appellant has not complied with the conditions laid down by the SEBI while granting ‘Certificate of Registration’ as an investment adviser conveyed vide letter dated May 19, 2014. Further, even prior to coming into operation of the IA Regulation 2013, appellant was covered by the SEBI circular dated December 23, 2011, which was addressed to SEBI registered intermediaries, even though the same did not specifically use the nomenclature ‘investment adviser’. Further, SEBI’s Circular (dated December 23, 2011) contains guidelines in pursuance of the SEBI KYC Registration Agency (KRA) Regulations, 2011 which required the appellant to upload the KYC data in conformity with details sought in the uniform KYC Form prescribed in the SEBI Circular dated October 5, 2011. It is clear that the appellant has failed to comply with the same.
Appellant vide letter dated July 7, 2015 has admitted that prior to April 1, 2015, it was not downloading KYC Forms from KRA. Therefore, we find no merit in appellant’s ground and hold this point in the affirmative.
Violation-2 - Whether appellant failed to carry out Risk profiling (RP) and violated Regulation 16? - We note that at the time of inspection, the SEBI found the appellant lacking in carrying out complete risk profiling. While some fields were found to be empty in the questionnaire to its clients, important details such as investment objectives were not even captured. The appellant shared details of one party but the SEBI’s findings are based on the evidence recorded at the time of inspection, which remained uncontested. In view of this, we don’t find no merit in appellant’s contention and this point is also held in the affirmative.
Violation-3 - Whether appellant has violated Regulation 17 requiring Suitability assessment to be made for the client before advising any product? - Appellant’s contention that product details were available on the website is not refuted by the SEBI. However, appellant did not carry out specific Suitability Assessment for individual clients before advising any product. This could have exposed the clients to serious risk. Moreover, admittedly the complete product details were not disclosed by the appellant until a client made a specific request for the same, which is a clear violation of Regulation 17 of IA Regulations. Hence we hold this point also in the affirmative.
Violation-4 - Whether appellant has violated Regulation 18 read with clause 5 of Code Of Conduct under Schedule III of IA Regulations, 2013? - On careful consideration, we find that the appellant did not make full disclosure in respect of all material information about all terms and conditions on which services are offered. We find that the appellant’s explanation with regard to the finding of the inspection that the method of calculation used by the appellant for assessing performance track record did not take into account advices provided on all the calls, but covered only such calls which were profit-making is not satisfactory as it does not give correct picture to the clients about the products offered. Therefore, we find no merit in appellant’s contention and hold this point also in the affirmative.
Violation-5 - Whether appellant has violated Regulation 22 of IA Regulations? - We find that the appellant is not a broker and hence execution activities cannot be carried out by it. The appellant has provided execution services to brokers of some of their clients and it was brokers who used to provide execution services and not the appellant. The appellant’s claim that it has not charged any fee for such execution business for client through the brokers, has not been rebutted. Hence, appellant is right in its contention. Accordingly, we hold this point in the negative.
Violation-6 - Whether appellant has violated Regulations 15(1) and 15(9) of IA Regulations read with clauses 2 and 4 of Code of conduct? - Admittedly, Appellant has not contested the complaint and refunded made by the refund only after complaint was filed. We are unable to persuade ourselves to accept appellant’s contention that appellants ‘non-contest’ and refund of money should not be construed as admission of violation. Such violations cause serious prejudice and loss to the clients in Securities market. Hence, in view of appellant’s such conduct, we hold this point also in the affirmative.
Violation-7 - Whether appellant has violated Regulation 19? -Though the Investment advisor Regulations were notified in 2014, ‘Investment advisors’ are certainly ‘Intermediaries’ to covered within the broad definition of ‘Intermediaries’ even prior to issuance of Regulations. Accordingly, this point is also held in the affirmative.
Violation-8 - Whether appellant has violated clause 2 of Code Of Conduct with respect to the complaint of Mr. Mahadeo Sadafule? - We also find that no evidence has been brought on record by the SEBI to corroborate that services were offered without risk profiling. No evidences is placed before us also to demonstrate that assured returns were offered by the appellants and it also not specific case of the complainant. Therefore, we find force in appellant’s argument and find no material in support of SEBI’s allegation that appellant had failed to act with due skill, care and diligence in the best interest of its clients. Accordingly, we hold this point in the negative.
Violation-9 - Whether appellant has charged excess fee in violation of Clause 6 of Code Of Conduct, under Schedule III of IA Regulations, 2013? - Risk Profile document shows that Mr. Sadafule wanted to invest Rs. 6-10 lakhs, but he was charged Rs. 25 lakh as advisory fee, which is unreasonably high even if it is for a period of two and half years as claimed by the appellant. No prudent client would make an advance payment for two and half year, which is much more than the amount of investment made. The appellant’s contention that Mr. Sadafule actually wanted to invest more than Rs. 6-10 lakhs, is not supported by any evidence.
Appellant was bound by the Clause 6 of the COC of the IA Regulations to charge fair and reasonable fee from its client. In view of undisputed fact that appellant has charged Rs. 25 Lakhs as fee and seeks to justify without any material that it was for two and half years, we hold this appoint also in the affirmative.
Violation-10 - Whether appellant is guilty of soliciting of clients through different websites, in violation of Clause 5 of COC under Schedule III of IA Regulations? - Records do not disclose any evidence to substantiate the allegation that the appellant was using various websites to solicit clients. We find merit in appellant’s contention that various websites, some of which had the domain name capitalvia.com, were for lead generation and no business is done through them and these are only landing pages. These websites were used to track any prospective client. Hence, in our view, in the absence of any material against the appellant, the allegation is baseless. Accordingly, we answer this point in the negative.
Violation-11- Whether appellant has violated Regulation 7(2) of IA Regulations relating to Qualification of IA? - We find that no findings were recorded by the SEBI with regard to dates of joining of individual employees, in order to prove the charge. Further, appellant’s submission that the notification dated June 19, 2013 and January 27, 2014 have to be read with Regulation 3(1) and 3(2) of the SEBI (Certification of Associated Persons in the Securities Market) Regulations, 2007 is not refuted. Therefore, in our view, this allegation is not substantiated. Accordingly, we hold this point in the negative.
Violation-12 - Whether appellant has violated Regulation 13(c)? - As submitted that the compliance of the regulation post- inspection will not absolve the appellants for the violation committed during the inspection period. Our attention was drawn to the decision of Chairman, SEBI vs. Shriram Mutual Fund [2006 (5) TMI 191 - SUPREME COURT] in which it was held that penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and Regulation is established.
Appellant’s contention that the words were added after inspection do not merit any consideration in the light of settled position of law laid down in Shriram Mutual Fund (supra). Accordingly, we answer this point in the affirmative.
Violation-13 - Whether appellant has failed to make disclosure in terms of Clause 1 of COC? - We note that the appellant has admitted that it had construed all the staff as under the category of ‘Investment Advisor’. Incorrect disclosure on the website is misleading to any one and particularly the potential clients. We find no substance in appellant’s contention and accordingly hold this point in the affirmative.
Determination of quantum of the penalty - We note that there were repeated violations of multiple nature. Further, large number of complaints were received by the respondent against the appellant investment advisory firm which could have had serious impact on the integrity of the securities market and adversely affected the interest of the investors. In view of this, keeping in view the criteria indicated in Section 15-J, levy of penalty is justified.
However, since we found merit in the plea of the appellant on some of the grounds, and we have answered 4 out of 13 violations in the negative. Therefore, levying maximum amount of penalty of Rs. 1 Crore is unsustainable. In our view, ends of justice would be met by reducing the penalty to Rs. 70 lakhs.
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2025 (3) TMI 1072
Operating schemes/plans in the nature of Collective Investment Scheme (“CIS”) without obtaining prior registration from SEBI - attachment orders - existence of an alternate statutory remedy under the SEBI Act - HELD THAT:- In the opinion of the Court, all the grounds urged in the present petition can be urged before the Appellate Authority under the SEBI Act. Thus, in view of the of the fact that an alternate statutory remedy is available to Petitioner, the Court is not inclined to entertain the present writ petition under Article 226 of the Constitution.
At this juncture, it is noted that there is a limitation period to challenge the impugned orders, which has lapsed. However, considering the peculiar facts of this case, in case the Petitioner would prefer an appeal against the impugned orders within thirty days from today, the said appeal shall not be rejected on the ground of limitation.
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2025 (3) TMI 1071
Cancellation of IPO - misstatement in the prospectus regarding the procurement of software from a vendor with questionable credentials - Refund the subscription amounts to the successful investors and to cancel shares allotted to them pursuant to the Initial Public Offer (IPO) of the company - HELD THAT:- In our considered view, safeguarding the interests of the public shareholders particularly the retailers, is of paramount importance for all stakeholders of the capital market in a large country like India with significant asymmetry in capital and financial literacy. In view of this, adequacy and correctness of disclosure in Public Offers cannot be compromised. The appellant Company while going for Initial Public Offer for inviting subscription from public at large, was duty bound to obtain quotation from a genuine software provider entity for the purpose of vendor selection for an important software, which in their scheme of things, was going to be integral object of the Issue.
Despite being in the ITS sector, the company did not make desired professional efforts to evaluate whether the quotation by OCPL was genuine or not. We find that the quotation was received on May 16, 2024 and within two days on May 18, 2024, the Board of directors of the Company “noted and approved” procurement of ICCC software from the said vendor, even though in the DRHP dated May 30, 2024, in the notes to the ‘Deployment of proceeds’ segment, it has been qualified that no definitive agreement was signed with the said vendor and the Company may change vendor or quotation per se.
We also note that the decision of the Board of directors of the Company in ‘approving’ the purchase of software without due verification of credentials of the vendor and in utter disregard to its own purchase policy, which provides for taking at least three quotes for such an indent, did not the desired corporate governance norms. Surprisingly the purchase committee of the company, which ought to have examined the credentials of the vendor in details and assessed whether the vendor had deserved capability to provide ICCC software in the given time-frame, cleared the quote merely on the basis of GST returns filed for last two months, which obviously are of no technical assistance for deciding purchase of software. The committee also ignored that there was no business of OCPL during the FY 2020 and FY 2021 for which financials were available and turned blind eye on the absence of financials for the last 2 financial years i.e. FY2022 and FY 2023. We find that even the merchant banker has not done proper due diligence and has merely gone by the decision of the Board of directors for carrying out due diligence with regard to the Oasis.
If an established software player follows such a methodology to reach out to an entity with doubtful credentials, with an offer of commission of Rs. 50 lakhs for procuring quote from a Third Party, in our considered view, it cannot be treated as ‘genuine’ quotation and therefore we are not persuaded to accept the argument that the Company had made the disclaimer that such a quote was for budgetary estimate only. Therefore, we hold that the company’s claim with regard to its adequacy and correctness of disclosure in the prospectus was not bonafide and satisfactory.
In the disclaimer section of the prospectus, it is stated that the ‘Company is responsible for adequacy, correctness and accuracy of the facts disclosed’. Considering the above, we of the view that the respondent is right in holding that the said disclosure in respect of quotation from an entity such as OCPL, was a mis-statement. A listed entity has additional responsibility to its shareholders and when it comes with an Issue for public at large, it is required to ensure that the disclosures made in the prospectus are not only adequate and correct but genuine. The appellant Company has failed to meet the said requirements.
Therefore, we do not find merit in the alternative plea that the IPO may be allowed to proceed further subject to monitoring of the deployment of proceeds by an agency to be appointed by SEBI/ BSE.
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2025 (3) TMI 854
Service of the order upon the counsel of the appellant - Tribunal had refused to condone the delay of 188 days in filing the appeal for the reason that the impugned order i.e. the order passed by the learned Adjudicating Authority had been duly served upon the appellant through his counsel, on his email - whether the service upon the counsel can be said to be a valid service in the eyes of law or not?
HELD THAT:- Assuming for a moment that the present writ is maintainable, this Court is fully cognizant of the limited scope of appreciation in a writ of present nature. While entertaining any such writ, this Court cannot sit as an ‘Appellate Court’ and can evaluate the correctness of the abovesaid order.
The aspect related to condonation of delay has direct correlation with existence of sufficiency of cause. The Tribunal has refused to condone the delay and exercise of such discretionary power does not indicate any illegality or perversity either. Supervisory court, in such a situation, need not interfere where there is mere exercise of discretionary power, without there being any perversity.
Nothing to indicate or suggest violation of principles of natural justice or non-compliance of statutory requirements in any manner.
The reliance upon statutory provisions of CPC, in the present context, seems completely misplaced.
SEBI relies upon Glaxo Smith Kline Consumer Health Care Limited Case [2020 (5) TMI 149 - SUPREME COURT] and argues that High Court ought not entertain a challenge under Article 226 when the aggrieved person can avail an effective alternate remedy in the manner prescribed by law.
Undeniably, remedy of appeal is creature of statute.
Ideally, the petitioner should have filed an appeal under Section 15Z of SEBI Act, 1992, particularly, when even as per him, a question of law is, evidently, involved.
This Court has already noted above the limited scope of appreciation it possesses, while considering any such petition filed under Article 226 and Article 227 of the Constitution of India and, therefore, the irresistible conclusion is that the present petition lacks any substance or merit.
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2025 (3) TMI 340
Funds withheld by the Bombay Stock Exchange (BSE) due to an alleged fraudulent transaction involving shares - actual ownership of the Shares/amount - whether Petitioner was involved in the alleged fraud?
HELD THAT:- Petitioner had genuinely put its Shares in market for sale through Respondent No. 2. The alleged fraud has been played at the end of Respondent No. 2, by one Amit Jain from Royal International Shares Pvt. Ltd. and allegedly with some involvement of Ashish Aggarwal Jain, who is an employee of the Respondent No. 2 Company.
There may have been a fraudulent call received by Respondent No. 2 placing an Order for purchase of the Shares of M/s Ashutosh Paper Mills Ltd. and consequently the Shares got purchased, but in this entire alleged fraud, the role of the Petitioner as being a party to this fraud cannot be deciphered.
Petitioner being the owners of the Shares, had made them available for sale. Therefore, for the alleged fraud committed on the Complainant, the Petitioners whose value of shares of Rs.15.90 lakhs got sold in the market, cannot be denied to him.
It is pertinent to observe that the Shares are not in the possession of the Petitioner, but have been handed over to the concerned Agency/SEBI for being sold in the market. On a query, it has been explained that these Shares do not have any market value as on date, for which reason the Respondent No. 2 is not inclined to take responsibility of these Shares which he had admittedly purchased for and on behalf of Brij Mohan Gagrani.
There may have been some fraud committed at the level of Respondent No. 2, since allegedly, no Shares were directed to be purchased by Brij Mohan Gagrani and Respondent No. 2 may have suffered some financial loss on account of some fraud committed at its end, but that cannot be foisted on the Petitioner who in no way is a party to the alleged fraud.
There has been some argument raised that in the Statement of the Petitioner recorded during the further investigations as directed by the learned M.M, he has not been consistent about the number of Shares. Petitioner has explained that inadvertently the correct number of Shares has not been mentioned, though the entire transaction has been truthfully stated by Shri Rajneesh Kumar, Director of the Petitioner Company.
There being no denial of the Shares originally belonged to Petitioner which he had put in the market for sale and which also got sold, the Petitioner is entitled to release of Rs.15.90 lakhs realized on sale of the Shares in the market.
It is, therefore, directed that without prejudice to the merits of the case, it is hereby directed that this amount of Rs.15.90 lakhs be released to the Petitioner on Superdari subject to him furnishing a Guarantee of the same amount, before the learned M.M. It is hereby clarified that there is no finding on the actual ownership of the Shares/amount which is subject to adjudication on the merits of the case.
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2025 (3) TMI 274
Insider trading - use of Unpublished Price Sensitive Information - ‘connected persons’ - restraining the appellants from dealing in the securities market and directing to disgorge an amount and to pay penalties mentioned in the order.
Whether the noticees are ‘insiders’ in terms of Regulation 2(1)(g) of the PIT Regulations, being ‘connected persons’? - HELD THAT:- Undisputedly, the appellant No. 1 was in close association with KMP of Biocon and Mr. Arun Chandawarkar, CEO and joint MD of Biocon and CFO of Biocon Mr. Sidharth Mittal both were directly involved in the negotiations on the Biocon-Sandoz deal as also in CIMAB licensing deal. Appellant No. 1 was undoubtedly in frequent and regular communication with senior managerial persons of Biocon, who had direct knowledge of UPSI.
Keeping the twin sensitive assignment being handled by the appellant No. 1 – (a) advising on CIMAB licensing deal, which allowed him frequent access to CEO and CFO during the year long deal period while these KMPs were also negotiating the Sandoz deal; and (b) handling trading accounts of the CMD and Joint CMD of the company, we hold that the preponderance of probabilities test was correctly applied by the learned WTM.
The appellant nos. 1 is a ‘connected person’ in terms of Regulation 2(1)(g)(i) of the PIT Regulations by having access to UPSI, and the appellant No. 2 is a ‘connected person’ in terms of Regulation 2(1)(d)(i) of the PIT Regulations.
Possession of Unpublished Price Sensitive Information (UPSI) - Whether the trading behavior of the appellant’s shows that they were in possession of UPSI? - Considering the fact that there was a spike in the trading of Biocon within four days of the said UPSI period suggests that such trades were made based on the knowledge of the UPSI. No error in the finding recorded by the learned WTM that there was a strong ‘preponderance of probability’ that the trades executed by the appellants in Biocon during the UPSI period, were guided by UPSI on account of appellants being ‘insiders’.
We are also in agreement with the finding of the learned WTM of holding the appellants as ‘connected persons’ within the meaning of Regulation 2(1)(d)(i) of the PIT Regulations and not on the basis of ‘possession of UPSI’ under the Regulation 2(1)(g)(ii) of the PIT Regulation, which distinguishes ruling in case of Balram Garg [2022 (4) TMI 945 - SUPREME COURT]
In our considered view, in case of ‘insider trading’, the evidence cannot be direct but circumstantial, since evidence with respect to communication channel may not be on record. Often such sensitive information in case of ‘connected persons’ falling under 2(1)(d)(i), need not be necessarily through an email or a letter because, in the instant case, appellant was admittedly working closely with joint CMD & CEO and CFO on cross-border licensing deal and was in frequent communication with them for a long period of time, while they were simultaneously working on another cross- border deal (Sandoz-Biocon deal).
Appeal dismissed.
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2025 (3) TMI 204
Public offer date - Determination of date on which a public announcement of an open offer, in terms of clause (1) to Regulation 20, has been made - It is the case of the appellants that the date on which the public announcement was made would be 18.01.2025 - case of the private respondents that the public offer date must be taken as 03.10.2023 and, therefore, the application filed by the appellants is belated and beyond time.
HELD THAT:- Clause (9) of Regulation 20 states that, upon the public announcement of a competing offer, an acquirer who had made the preceding offer shall be entitled to revise the terms of his open offer provided the revised terms are more favourable to the shareholders of the target company.
The acquirers making the competing offers shall be entitled to make upward revisions of the offer price at any time up to one working day prior to the commencement of the tendering period.
The tendering period, we are informed, has come to an end today, that is, on 07.02.2025. During the course of arguments, it was noted that there have been several attempts to stall the public offer, but without success.
We have noted the said aspect, but at the same time, we have also taken into account the fact that the application filed by the appellants is still pending consideration by the SEBI and has not been disposed of. SEBI would be more concerned about public investors and their rights and interests.
The main question that arises and has to be decided by the SEBI relates to the date of public announcement of the open offer, as contemplated in Regulation 20(1) of the 2011 SEBI Regulations. The second question would be whether or not to grant exemption, if the situation requires it. Third issue relates to the public offer price.
It is pointed out by the private respondents that they deposited a sum of ₹330 crores way back on 26.09.2023 in an escrow account.
Keeping all the aforesaid facts in mind, we are inclined to pass the following order: -
1. The appellant, Digvijay Laxhamsinh Gaekwad (Danny Gaekwad) or their nominee/applicant before SEBI, as suggested by his counsel, shall deposit a sum of ₹600 crores in terms of the 2011 SEBI Regulations, in the form of cash and/or bank guarantee, on or before 12.02.2025. In case the amount is not deposited by the said date, the directions in the present order shall be automatically vacated without further reference to the Court.
2. The public offer, which is to close today, will be continued till 12.02.2025. In case the appellant, Digvijay Laxhamsinh Gaekwad (Danny Gaekwad) or their nominee/applicant before SEBI, deposits ₹600 crores in terms of the 2011 SEBI Regulations, the offer will continue till the end of third day post the date of the order to be passed by SEBI on the application of the appellants.
3. A party aggrieved by the order passed by SEBI would be entitled to take recourse to an appropriate remedy.
Present directions are in the nature of an interim order.
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2025 (2) TMI 750
Allegations of violations by a SEBI registered stockbroker - violations have been alleged by the SEBI against the noticees for Misuse of clients’ funds, Funding the clients beyond T+2+5 days and Not issuing the contract notes.
HELD THAT:- As recorded in the impugned order that during the inspection, it was noted that funds of credit balance clients were being utilized for settlement obligation of debit balance clients. In all 41 instances were checked and in 31 instances misutilization was observed ranging between Rs. 88,000 to Rs. 2.48 crores. Some of the instances have been tabulated and reproduced in paragraph No.21 of the impugned order. It is also recorded in paragraph No.22 that Noticee No.1 has brought in Rs. 1 crore into the system in October, 2020. Though a sum of Rs. 1 crore was infused in October, 2020 the G value was still negative for March, 2021 ranging between Rs. 66.35 Lakhs to Rs. 88,000. It is not denied by the appellant that the G value was negative as recorded in the tabular column in paragraph No.21 of the impugned order.
Second charge is providing exposure beyond T+2+5 days. This charge is also not denied but an explanation is sought to be urged that appellant was unable to detect the over exposure because of a bug in the computer system. It is also not denied that the over exposure was about Rs. 39.13 Lakhs as described in the table in paragraph No.46.
Third charge is non-issuance of contract notes. Appellant has furnished an excel sheet containing a column with regard to the status of delivery of the contract notes. As urged by the learned Advocate for the appellant that there is no specific provision to convey the proof of delivery of contract notes to the respondent. To a pointed query as to whether there exists any provision requiring the stock broker to furnish the proof of delivery of contract notes on a regular basis, on instruction it was submitted by Shri Kanade that no such provisions exists. Therefore, in our considered view, the third charge is untenable.
We may hasten to record that SEBI as a Regulator must treat all brokers with even hand. It is not disputed that in the case of Angel Broking where the misutilization of funds was to the extent of Rs. 32.97 crores, the penalty imposed is Rs. 10 Lakhs. In the instant case, as noted in paragraph No.25 of the impugned order, misutilization is in the range of Rs. 42.47 Lakhs to Rs. 2.08 crores (Rs.99 Lakhs).
Quantum of exposure beyond T+2+5 days(charge No.2) is also Rs. 39.13 Lakhs. Therefore, having regard to the undisputed facts, in our view, appellant’s case merits consideration only with regard to the doctrine of proportionality. Considering the quantum of penalty imposed in the case of Angel Broking Ltd., and also keeping in view that noticee No.1 is a ‘repeat offender’, ends of justice would be met by reducing the penalty to Rs. 15 Lakhs.
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2025 (2) TMI 524
Steps to be taken for listing the shares on the nationwide stock exchange - de-recognition of MSE - whether the Company has to be granted a reasonable extension to get itself listed with the 5th respondent? - HELD THAT:- It is trite, even in cases governed by statutes where specified periods are fixed, the courts should adopt a liberal and pragmatic approach in considering requests for extension of time or to condone the delay, rather than a hyper-technical or pedantic approach.
The underlying principle of the various circulars issued by SEBI to the ELCs, is to get listed on a nationwide stock exchange or provide an exit option to the shareholders, with the intention to protect the interests of the shareholders.
There is no material on record that shows that the Company’s shareholders have any grievance or have raised any complaint against the Company. True, there has been some delay on the part of the Company, for which they have given a reasonable explanation, which has been accepted by SEBI and NSE atleast till 30.09.2023.
After considering the facts, the materials on record, and the rival submissions made across the Bar, Company can be granted one last opportunity to get listed with the fifth respondent. In the aforesaid circumstances, notwithstanding Exts.P26 and P34 orders passed by SEBI, in the exercise of the extra-ordinary jurisdiction of this Court under Article 226 of the Constitution of India, extend the time period fixed in Ext.P22 by a further period of 90 days from the date of this judgment, to enable the Company to get itself listed with the 5th respondent. If the Company fails to adhere to the above time frame, Exts.P26 and P34 will stand confirmed.
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