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SEBI - Case Laws
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2020 (2) TMI 873
Default in price offered by the acquirers - open offer eligibility - entitlement of all shareholders for receiving interest - offer price made by the acquirers was grossly inadequate as the Target Company GTL had a plot of land worth about ₹ 2000 crore which was not reflected in the said valuation - HELD THAT:- The appellant, instead of emphasizing the relevant facts over-emphasized three valuation reports and the infrequently traded nature of GTL shares in 2018 which has no relevance and sought interest to all shareholders etc. which is untenable. The crux of the matter is simple; whether the price offered by the acquirers and the interest paid thereon to certain shareholders are in consonance with the applicable regulatory provisions and Court orders thereon.
Clearly for frequently traded shares Sub Regulation 20(4) is applicable and if an open offer has been made under Takeover Regulations 1997 that process has to be completed under the same Regulations as is explicitly stated in Sub Regulation 35(2)(c) of the new Takeover Regulations 2011. Here, it is an undisputed fact that the trigger for public announcement / open offer came on November 12, 2009 and consequently public announcement was made. Though the open offer was delayed on account of the subsequent stand (for recalling the public announcement) taken by the acquirers the original date of trigger does not change.
The valuation done as per the applicable methodology under Regulation 20(4) is not questioned; what is questioned is the valuation in 2018 which is not applicable in the matter. When the offer price of ₹ 101/- per share was made based on the price given by the acquirers in 2009 what is implemented here is the same price. Moreover, since the market price captures the intrinsic value of the GTL shares including GTL's properties, assets etc. in 2009 and since it was a frequently traded share rightly no valuation was necessary as per the applicable Regulations.
It is also an undisputed fact that interest to original shareholders who tendered their shares have been given by the acquirers @ ₹ 60.25 per share and for other shareholders @ ₹ 0.45 - we find no merit in the submissions made by the appellant regarding either the offer price or the entitlement of all shareholders for receiving interest.
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2020 (2) TMI 872
Fraudulent and Unfair Trade Practices relating to Securities Market - Dealing illiquid scrip in order to create artificial volume and market price for vested gain - HELD THAT:- Appellant did not furnish the requisite information to the investigation team. Further, no reply was filed by the appellant pursuant to the show cause notice. Inspite of service of the summons, the appellant failed to appear nor filed any reply to defend himself even though ample opportunity of personal hearing was given.
Charge levelled against the appellant remained unreburted. Further, we find that the AO considered the material evidence on record and came to a conclusion that the price payable to the stock exchange pursuant to the default committed by the appellant's client in the delivery of shares was not recovered by the appellant from its client leads to an irresistible inference that the appellant was itself dealing in the illiquid scrip in order to create artificial volume and market price for vested gain. It has come on record that during the period when the appellant's alleged client sold 120 shares the price rose from ₹ 4,351/- per share to ₹ 4,438/- per share.
AO was thus, of the opinion that creating artificial volumes and increase in the price scrip was violative of Regulations 3 and 4 of the PFUTP Regulations. The AO also found that due diligence was not carried out by the appellant in the registration of the client and that the appellant had failed to satisfy itself about the genuineness and financial soundness of its client.
We are of the opinion that the documents filed before this Tribunal were not produced by the appellant either before the investigation team or before the AO. Such documents cannot be considered by this Tribunal unless leave of the Tribunal is taken by filing an application for production of additional evidence in consonance with the principles of Order 41 Rule 27 of the Code of Civil Procedure. Such documents cannot be entertained nor can it be considered by the Tribunal.
Maximum penalty imposed - AO has considered the factors under Section 15J of the SEBI Act and has held that the material available on record is insufficient to quantify the amount of disproportionate gain or unfair advantage made by the appellant or the loss suffered by the investors as a result of the acts done by the appellant can be ascertained. Considering this aspect, we find that since the quantification could not be done, the AO on the basis of approximation has levied a penalty of ₹ 15 lacs which in our opinion is just and appropriate. In the given facts and circumstances of the case, we find that a maximum penalty under Section 15HA and 15HB is ₹ 25 crores which could be imposed. Considering the gravity of the offence, the AO has only imposed a penalty of ₹ 15 lacs instead of imposing a maximum penalty.
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2020 (2) TMI 871
Independent director liability in respect of acts of omission or commission by a company - Fraudulent issue of debentures - HELD THAT:- Decision to issue debentures and consequent allotment was made by the company during the period when the appellant had never attended the Board Meeting. The decision making process done by the company was concluded in the absence of the appellant. The appellant had no say in the decision making process made by company and its directors with regard to the issuance of debentures. Thus, the finding of the WTM in paragraph no. 18.4.2 of the impugned order that the appellant was involved in the decision making process relating to the issuance of debentures is factually incorrect and based on surmises and conjectures. The said finding in the light of the aforesaid cannot be sustained.
Admittedly, the appellant was appointed as an independent director and was not involved in the day to day affairs. Section 42(10) of the Companies Act, 2013 indicates that where the company makes an offer or accepts monies in contravention of this Section in that case the company and its promoters and directors shall be liable for penalty. The provision makes it apparently clear that the liability of director is only to the extent of penalty and not for the refund of the monies collected from the subscribers. The liability to refund the amount under Section 42(10) of the Companies Act, 2013 is fastened upon the company. Thus, the direction of the WTM directing the appellant to refund the money is wholly incorrect.
An independent director shall be held liable only in respect of such acts of omission or commission by a company which had occurred with his knowledge, consent or connivance or where the independent director had not acted diligently. In the instant case, there is no finding that the appellant had given his consent or that he had connived with the other directors in the issuance of debentures or had not acted diligently and therefore the liability to refund the amount cannot be fastened.
The impugned order in so far as it relates to the appellants cannot be sustained and is quashed. The appeal is allowed. The amount realised by the respondent pursuant to the impugned order from the accounts of the appellants shall be refunded within four weeks from today along with the interest @ 12% per annum.
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2020 (2) TMI 870
Non disclosure on transfer of shares - exemption by Regulation 10 of SAST Regulation seeked - appellants' reason that all the transfers were between the group i.e. the husband and wife i.e Appellant no.1 and 2 and their private limited Company i.e. Appellant no.3 - HELD THAT:- What is exempted under this regulation is the obligation to make an open offer. The disclosure requirement is not exempted by this Regulation.
It is to be noted that while appellant Bharat Patel holds an independent account. So far as another account is concerned appellant Minal Patel is the first holder of the same alongwith Bharat Patel. The next of the account is of appellant PAT Financial Consultants Pvt. Ltd. which is a private limited Company. As per the reply submitted to SEBI, appellant PAT Financial Consultants Ltd had various shareholders like son and daughter of appellant Bharat Patel and Minal Patel besides themselves. The term 'persons acting in concert' has nothing to do with the disclosure requirement. The same is to be applied in case of requirement of open offer to be made under the regulations. It is an admitted fact that the beneficial ownership in the shares was transferred at the various points of time which required to be disclosed by the appellant either to the Company or to the stock exchanges as per the regulations. Having failed in this, they would be liable for penalty.
The order of the Adjudicating Officer would show that a lenient view is already taken on the imposition of penalty as described supra. In the result, the following order. The appeal is hereby dismissed.
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2020 (2) TMI 869
Liability for action in case of default - RTA [Registrar to the Issue and Transfer Agent he appellant] fails to comply with any conditions subject to which registration has been granted or contravenes any of the provisions of the Act, Rules, Regulations or By laws of the Stock Exchange the said RTA shall be dealt with in the manner provided under Chapter V of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 ('Intermediaries Regulations of 2008') - HELD THAT:- The impugned order is harsh and unwarranted. We are of the opinion that there was no real urgency in passing an ex parte ad interim restraint order which virtually amounts to passing a final order especially when a detailed enquiry has been ordered.
The respondent is empowered to pass an ex-parte interim order only in extreme urgent cases and that such power should be exercised sparingly. In the instant case, we do not find that any extreme urgent situation existed which warranted the respondent to pass an ex-parte interim order. We are of the opinion that the impugned order is not sustainable in the eyes of law as it has been passed in gross violation of the principles of natural justice as embodied in Article 14 of the Constitution of India. The restraint order is in our opinion unjustified.
At this stage, we can stay the operation of the impugned order to a limited extent. We, however, find that no useful purpose would be served in keeping the appeals pending and directing the respondent to file a reply. Thus, we are deciding the appeal itself, without calling for a reply at the admission stage itself.
The impugned order insofar as it restrains the appellant from accepting fresh clients is quashed. Other directions issued by the WTM of SEBI will continue to operate against the appellant. The appeal is partly allowed. In the circumstances of the case, there shall be no orders as to costs.
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2020 (2) TMI 868
Shares acquired through off market transaction - non disclosure of such acquisition under Regulation 13(1) of the PIT Regulations, 1992 - HELD THAT:- Appellant is required to be partly allowed. The observation of the Adjudicating Officer that the appellant has violated the Regulations will have to be accepted. However, the monetary penalty would have to be set aside and the appellant deserves to be let off on warning for the reasons to follow:-
1. The appellant has filed on record at Exhibit 'G' page 98 a copy of the order dated 20th October, 2005 of the Bombay High Court in Company Application No.21 of 2005 in Company Petition No.353 of 2003. It would show that one Company namely Solid Carbide Tools Ltd. was already directed to be wound up. In the said proceedings, the appellant had filed the said application claiming to be a creditor of the Company. In the order, the High Court has noted that one Mr. Mukesh Kothari was the director and chairman of the said Company namely Solid Carbide Tools Ltd. Since the year 2001, however said Mr. Mukesh Kothari became a proclaimed offender and was facing criminal prosecution. So far as the claim of the present appellant is concerned, it was found that the appellant had pledged his personal fixed deposits to the Union Bank of India for advances made to Solid Carbide Tools Ltd. Since the loan was not repaid by this Company, the bank invoked the said deposit for adjusting outstanding claim and, thus, the appellant had become the creditor of the said Solid Carbide Tools Ltd.
These facts would show that the appellant was the creditor of Solid Carbide Tools Ltd. of which Mr. Kothari was the promoter and chairman. Mr. Kothari remained a proclaimed offender since 2001 upon proclamation by the concerned criminal court. According to the respondent SEBI, the appellant had acquired 4,84,000 shares of the present Company from said Mr. Kothari. According to the appellant, the shares were handed over to him in the year 2001 which ultimately could be transferred in his name in the year 2013 as detailed above.
The record would further show that the present Company also remained defunct from the year 2000 and even the trading in the same is suspended by the BSE. The print out of the trading data of the Company obtained from the website of BSE and placed at Annexure B to the written submission as detailed supra would show that there were no trading activity in the shares. All these facts would show that in order to recover the debt, the appellant was rather forced to accept the shares of the present Company awaiting the clearance of the loan in cash. However, as Mr. Kothari went missing and was even proclaimed as an offender by the criminal court, willy nilly he had to get those shares transferred in his name regularly.
As regard the disposal of the shares as detailed above, the appellant submitted that he was forced under duress to transfer those shares. One of the disclosures was made through Mr. Sarkhot regarding that transfer however the rest of the disclosures could not be made. Mr. Sham Gandhi in person argued before us. He submitted that he is now 75 years old. He is the victim of circumstances as detailed supra and, therefore, since the acquisition of shares or disposal of shares did not entail him of any gain or loss to any shareholder as the Company is completely defunct, slapping a monetary penalty would amount to adding insult to injury. He, therefore, submitted that the appeal be allowed.
Taking into consideration that the appellant is now 75 years old and finding that he was forced to accept the shares by Mr. Kothari as corroborated by the order of the Bombay High Court in Company Petition and that one disclosure regarding the disposal is made, in our view, though the violation of the regulations is proved, monetary penalty is not warranted in this case.
Hence appeal is partly allowed. The order of the Adjudicating Officer declaring that the appellant has violated the regulation is hereby upheld. The order of the Adjudicating Officer imposing penalty of ₹ 3 lakhs is hereby set aside. Instead the appellant is hereby warned that the appellant shall not repeat similar violation in future.
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2020 (2) TMI 609
Fraud scheme of issuance of GDRs - Pledge Agreement and the announcement that the GDRs were successfully subscribed without disclosing the Pledge Agreement to the investors resulted in misleading information to the public and thereby adversely impacting the investors - violation of Section 12A(a), (b), (c) of SEBI Act, 1992 read with Regulations 3(a), (b), (c), (d) and 4(1) of PFUTP Regulations, 2003 - HELD THAT:- Contention in the order that it is a fraudulent scheme created by the appellants along with some other entities cannot be faulted. In this context, it is relevant to note that in our order in the matter of PAN Asia Advisors Limited [2016 (12) TMI 1202 - SECURITIES APPELLATE TRIBUNAL MUMBAI] (Lead Manager) and Vintage (subscriber) whose beneficial owner was Arun Panchariya were all found to be guilty of the violations of Indian Securities Laws under the PFUTP Regulations, 2003. The same has been the modus operandi in respect of Cals Refineries Limited [2017 (10) TMI 1512 - SECURITIES AND EXCHANGE BOARD OF INDIA] though the entities connected therein were different.
The contention that Pledge Agreement was not required to be disclosed under the Listing Agreement is not correct as the Listing Agreement, which forms the very basis of a disclosure based regulatory regime, requires every material information to be disclosed to the Stock Exchange at the earliest, sometime in a matter of minutes and others in a matter of days. When the company has lent the entire proceeds of the GDR issue to the tune of US$ 38.75 million as security for a third party abroad to avail a loan on the basis of that security and thereby potentially jeopardizing the entire proceeds is not a non-event but an important material information affecting all the stakeholders. We would hold that such events have to be disclosed in bold letters so that the investors of the company as well as those who are subscribing to its GDR issue etc. should be fully aware of those highly material facts.
Arguments on delay in investigation and consequently affecting natural justice are also devoid of any merit in the matter since this Tribunal is aware of the complexity involved in the entire manipulative GDR issue.
We also do not find any deficiency in the finding in the impugned order that money has been brought in fully by the company starting from December 14, 2010 and ending January 04, 2012 and, therefore, full repayment of loan taken by Vintage was done without resorting to sale in the Indian market as irrelevant. The basic question to be answered is whether the issue was subscribed by a loan taken by Vintage on the basis of pledging the proceeds of the GDR issue as security for the said loan taken by a third party and that too a party located abroad and whether sufficient disclosures of material events associated with the issue was properly done. We are of the considered view that the method adopted by the appellants was vitiated through fraud and hence finally whether the money has come back or not is relevant in the facts and circumstances.
We are of the opinion that imposition of the restraint on the appellants herein has been done taking all the relevant factors into account as in similar matters like Cals Refineries Limited [2017 (10) TMI 1512 - SECURITIES AND EXCHANGE BOARD OF INDIA] the period of restraint imposed on the appellants was 10 years while in the instant matter restraint is only for 5 years.
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2020 (2) TMI 538
Inordinate delay in initiating the proceedings - Self trades and match trades - unfair trade practices - Regulation 3 and 4 of the PFUTP Regulations - penalty under Section 15HA of the SEBI Act - HELD THAT:- Respondent had investigated the scrips of Shree Global Tradefin Ltd. for the period March 1, 2009 to January 10, 2011 in September 2011. Pursuant thereto, a show cause notice dated April 20, 2012 was issued for the violation found during the investigated period March 1, 2009 to November 30, 2009. The respondents thereafter waited for another five years to issue a second show cause notice dated July 20, 2017 for the investigated period April 1, 2010 to January 10, 2011 which had been investigated in September 2011. We find that the respondents were aware of the alleged violation and thus there is no justification for waiting for more than five years to issue the second show cause notice dated July 20 2017. In our view there is an inordinate delay in initiating the proceedings.
Without going into the question of res judicata or estoppel raised by the appellants we are of the opinion that on account of the inordinate delay in initiating the proceedings, the impugned penalty order cannot be sustained.
Even on merits, we find that during the investigation period the observed variations in prices as well as of quantities traded are less than what was the trend during the pre-investigation period. Table at page 3 of the impugned order gives these details. Similarly, we also note that the percentage of matched trades are negligible except in respect of 2-3 appellants. Given these facts the alleged intention to manipulate becomes a weak ground for issuing a second show cause notice after considerable delay.
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2020 (2) TMI 436
Ex parte ad interim order - as directed by WTM of SEBI in the second part of direction no. (iv) the NSDL and NSE were doing their due diligence and in consultation with SEBI effected the transfer of securities to the clients who have paid in full and who were the real beneficial owners of those securities - HELD THAT:- No dispute with the interpretations of the provisions of the Depositories Act and Regulations thereunder. However, while dealing with a case of alleged fraud the implications of the same have to be factored in. The very purpose of an ex parte ad interim order is to deal with the eventualities arising from such alleged fraud or similar major violations. This ex parte ad interim order was issued on [2019 (12) TMI 477 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] . Even an oral mentioning was made by the Appellants before this Tribunal only on December 2, 2019 by which time a lot of water has flown under the bridge. Now it is on record before us that after a due diligence by NSE and NSDL securities have been transferred to the account of the clients. Therefore, further rights have been created/restored involving more than 80,000 investors.
In this context, a prayer to recall the same or to retain the same as frozen accounts of those clients becomes untenable. As ordered in the matter of Bajaj Finance Ltd. [2019 (12) TMI 1271 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] Appellants are at liberty to approach SEBI. If any representations from the Appellants are pending or filed on or before December 6, 2019 before SEBI, the WTM of SEBI, after providing an opportunity of hearing to the Appellants, shall pass an order in accordance with law latest by December 12, 2019.
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2020 (2) TMI 386
Investments made the appellants individually and collectively crossing the limit of 15% under Regulation 10 of the Takeover Regulations 1997 - obligation on the part of the appellants to make separate public announcements of open offer under Regulation 10 read with Regulation 14(1) for acquiring the shares of the Target Company within four working days from July 24, 2006 ignored - HELD THAT:- Direction of compulsorily delisting was only consequential and contingent upon the happening of certain events as stated in the order of WTM. The contention that the delisting has been ordered since the register of members of the Target Company was compromised is baseless. As held earlier, there is no evidence of tampering with the register of members. The open offer was directed because the promoters were fraudulently trying to transfer shares in their names or its entities. Thus the contention raised by the appellants has no merit and is rejected.
In the instant case, we are of the opinion that there is no bar under the SEBI Act and the Takeover Regulations 1997 in directing two different persons/entities to make an open offer at different moment of time. The promoters violated the listing regulations and were involved in fraudulent transfer of shares to itself. They were asked to make an open offer. The appellants, on the other hand, violated Regulation 10, 11 and 12 of the Takeover Regulations 1997 and were thus required to make a public announcement. We find that the direction to make an open offer was pursuant to violation of different provisions of law and violation at different point of time.
No doubt Regulation 44 of the Takeover Regulation 1997 provides consequences of the breach and gives flexibility to the WTM to enforce Regulation 11 by way of several directions and, one such direction is, to make an open offer for acquiring the shares of the Target Company. The guiding principle for issuance of a direction under Regulation 44 is the interest of the investors and securities market. Had the appellants made the open offer within a period of 4 days from the date of acquisition in accordance with the Takeover Regulations 1997 and complied with the time line specified therein, the formalities could have been complied by October 2006, i.e. from the date of making the public announcement. But alas, the same has not been done till date.
We are in agreement with the decision of the Tribunal in Nirvana'sHolding (P.) Ltd case [2011 (9) TMI 1169 - THE SECURITIES AND EXCHANGE BOARD OF INDIA] and in the peculiar facts and circumstances of the case, we do not find any reason to interfere or modify the directions given by the WTM.
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2020 (2) TMI 133
Dilution of adverse observations - HELD THAT:- Certain observations made in Paragraph No. 20 of the impugned order were not called for, such as "the computer generated disposal of a serious complaint speaks volume on the conduct of the respondents" as well as the part of the order relating to "vested interest in not deciding the matter" were not at all called for.
May be there was some remiss on the part of SEBI to act as a regulator, but casting aspersion was not warranted in the facts and circumstances of the case. As such, the adverse observations made in Paragraph No. 20 are hereby diluted.
As prayed for, time is granted to deal with the complaints positively and objectively within four months from today in accordance with law. Appeal is disposed of.
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2020 (2) TMI 105
Non-listing of an Exclusively Listed Company ("ELC" for convenience) namely Schneider Electric President Systems Ltd. ("Schneider" for convenience) and valuation of its shares - HELD THAT:- Listing is the first option and only in the event of failing to get listed an exit option should be adopted. Further, the guidelines relating to the exit option as provided under the October 10, 2016 Circular at 'Annexure A' lists a number of obligations cast upon the designated stock exchanges as well as on the management of the company to discharge. Nothing on record has been brought before us whether all these steps have been followed or monitored by the concerned stock exchange.
What is produced on record by one of the respondents (Metropolitan Stock Exchange of India Limited) is that the appellant-company had never approached them with a request for listing. Moreover, the appellants contention that the company was eligible to be listed in BSE Limited is not even disputed by any of the respondents except by the company.
Investor protection being one of the basic mandates of SEBI, we are of the considered opinion that issues relating to continued listing, exit and valuation of shares of the ELCs cannot be treated as minor individual investor complaints by SEBI. Therefore, when substantive questions on these issues are raised by minority/public shareholders SEBI shall examine those issues and pass a reasoned order. This is not done in the instant matter. We also note that SEBI has delegated lot of responsibility to the stock exchange(s) which also does not seem to have discharged any responsibility assigned to them in terms of the various Circulars issued by SEBI. What appears on record is that the company prepared a plan of exit, got a valuation done and provided an exit option. No authority seems to have discharged any of their responsibilities including monitoring.
Set aside the order/communication dated September 20, 2017 passed by SEBI and in the interest of justice we direct SEBI to pass a reasoned order in the matter. The said order shall also address the issue relating to the stand of SEBI on the need for the ELCs to make a serious effort in continued listing and the procedure and monitoring of their endeavour in listing and/or the exit process when failing to get listed.
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2020 (2) TMI 104
Valuation of the shares of 'Target Company arising out of open offer for acquisition of 25.02% - HELD THAT:- Having heard all the parties and upon appreciating the ratio of Sultania [2007 (5) TMI 334 - SUPREME COURT] and Cadbury [2014 (5) TMI 1189 - BOMBAY HIGH COURT] according to us, after remand of the matter to the respondent SEBI had rightly obtained the response of the appellant. It has also examined the submission of the intervener i.e. present appellant Chandra Prakash Tripathi. It also sought response from Haribhakti and thereafter made the observation vide the impugned direction.
The objection of the appellant that respondent SEBI has merely cut and paste the observation of Haribhakti after the hearing was concluded, though appears to be attractive, the same will have to be repelled for the reasons that Haribhakti has not given any fresh response, but had merely relied on its earlier report.
In the case of Sultania as well and in Cadbury it had been observed that the valuation being not a precise science and though all the parameters are required to be considered, the weightage to be given to each of the parameters may depend upon the facts and circumstances of each of the case, we do not find any defect in the approach of SEBI.
For the similar reason the objection of Mr. Chandra Prakash Tripathi and Bhavook Tripathi will have to be rejected.
The control of Indian Company cannot be transferred without completion of the open offer process or without deposit of 100% funds required for the open offer in an escrow account. This issue is also beyond the scope of the present appeal. Appellant Bhavook Tripathi would be at liberty to raise the same issue before the respondent SEBI. If such an application is filed before SEBI, the same will be disposed off expeditiously in accordance with law.
The acquirer had deposited 25% of the consideration under the open offer in terms of Regulation 17 of the SAST Regulations, 2011. Since the offer price has now increased to ₹ 608.46, the acquirer is required to make good the deficiency. However considering the fact that on account of dispute being raised by the acquirer and others, the consideration towards the offer price is still being enjoyed by the acquirer. Thus in the peculiar circumstances we direct the acquirer to deposit the total consideration towards the offer price in the escrow account under Regulation 17 read with 21 of the SAST Regulation within four weeks from today after adjusting the amount already deposited so as to complete the payment of consideration to shareholders who have tendered their shares in acceptance of the open offer.
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2020 (2) TMI 101
Responsibility of Legal Representatives to refund the money collected from investors by the deceased - fund mobilising activity from the public - violation of provisions of respective provisions of the SEBI Act, 1992, the Companies Act, 1956, and Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (DIP Guidelines) read with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations) and SEBI (Merchant Bankers) Regulations, 1992 ("SEBI Merchant Banker Regulations) - HELD THAT:- In exercise of the powers conferred under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11(4), 11A and 11B of the SEBI Act, hereby issue the following directions, without prejudice to the force and effect of directions issued in respect of other entities mentioned in the order -
(a) Legal Representatives of Late Sh. Y.N.Saxena, in discharge liability under section 73(2) of Companies Act,1956, jointly and severally with SICCL and other directors as per the Order dated October 31, 2018, forthwith refund the money collected by the Company through the issuance of OFCDs including the application money collected from investors, pending allotment of securities, if any, with an interest of 15% per annum, from the eighth day of collection of funds, upto the extent of the assets inherited, to the investors till the date of actual payment to the extent of assets inherited by the LRs.
(b) Legal Representatives of Late Shri Y.N.Saxena, in discharge liability under section 62 of Companies Act,1956 are, jointly and severally with SICCL and other directors as per the Order dated October 31, 2018, directed to deposit the money collected by the Company through the issuance of OFCDs along with the interest on the foresaid amount calculated with an interest of 15% per annum, from the eighth day of collection of funds, till the date of actual payment, in an Escrow Account opened with a nationalized Bank, upto the extent of the assets inherited by them. Legal Representatives of Late Shri Y.N. Saxena are directed to compensate from the said deposit, the investors in accordance with their subscription money along with interest.
(c) The repayments and interest payments to investors shall be effected only through Bank Demand Draft or Pay Order both of which should be crossed as "Non-Transferable".
(d) Legal Representatives of Late Shri Y.N.Saxena are directed to provide a full inventory of all the assets and properties including details of all the bank accounts, demat accounts and holdings of mutual funds/shares/securities, if held in physical form and demat form, inherited from Late Shri Y.N.Saxena.
(e) Legal Representatives of Late Shri Y.N.Saxena are jointly and severally with SICCL and other directors mentioned in the order dated October 31, 2018, directed to issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily with wide circulation, detailing the modalities for refund, including the details of contact persons such as names, addresses and contact details, within 15 days of this Order coming into effect.
(f) After completing the aforesaid repayments, Legal Representatives of Late Shri Y.N.Saxena, shall file a report of such completion with SEBI, within a period of three months from the date of this order, certified by two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution. For the purpose of this Order, a peer reviewed Chartered Accountant shall mean a Chartered Accountant, who has been categorized so by the Institute of Chartered Accountants of India ("ICAI") holding such certificate.
(g) In case of failure of Legal Representatives of Late Shri Y.N.Saxena to repay as per applicable law as per the aforesaid applicable directions, SEBI, on the expiry of three months period from the date of this Order may recover such amounts to the extent of assets inherited by the Legal Representatives from Sh. Y. N. Saxena in accordance with section 28A of the SEBI Act including such other provisions contained in securities laws.
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2020 (2) TMI 100
Providing Investment advisory services in the name of other name / fake name - Complain by Finvasia Securities Private Limited - Website of accused company illegally using its SEBI registration to conduct business of investment advisory services - HELD THAT:-
No activity of Fingravy of holding itself to be giving trading tips, stock specific recommendations, etc., to the investors and general public, and payment receipts of the complainant indicating the payment was made for receiving investment advice, the bank statement, prima facie, showing the credit for payment of fees, indicates that there is a preponderance of probability that Fingravy has acted as an investment advisor for consideration.
Apart from holding itself out and acting as an investment adviser, Fingravy, through its website, had earlier falsely represented itself as having a SEBI registration number, which belonged to another intermediary, as evidenced from the archive web pages, while presently it has represented that it has applied for a license from SEBI in order to deal in various fields of securities market. Therefore, it is, prima facie, held that Fingravy is claiming/asserting to the general public of facts which it knows are not true i.e., Fingravy knows that the registration number mentioned on its website did not belong to it and that presently, it has not applied for any registration with SEBI and is also actively concealing the truth that it is not authorized to deal in the securities market in any capacity on behalf of investors, so as to lure investors to deal in securities based on their advice.
M/s. Fingravy Wealth Creation Services Pvt. Ltd. and its present directors namely, Mr. Dhiraj Gupta and Mr. Sumit Kumar, are directed to:
i. Cease and desist from acting as an investment advisor including the activity of acting and representing through any media (physical or digital) as an investment advisor, directly or indirectly, and cease to solicit or undertake such activity or any other activities in the securities market, directly or indirectly, in any matter whatsoever, until further orders.
ii. Not to divert any funds raised from investors, kept in bank account(s) and/or in their custody until further orders.
iii. Not to dispose of or alienate any assets, whether movable or immovable, or any interest or investment or charge on any of such assets held in their name, including money lying in bank accounts except with the prior permission of SEBI.
iv. Immediately withdraw and remove all advertisements, representations, literatures, brochures, materials, publications, documents, websites, communications etc., in relation to their investment advisory activity or any other unregistered activity in the securities market until further orders.
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2020 (1) TMI 1694
Cornering of the shares meant for retail investors in the IPO of YES Bank - Offences punishable u/s 420, 467, 468 and 471 read with 34 of the IPC - The said F.I.R.s have been lodged by the SEBI - Seeking withdrawal of this petition with liberty to raise the question of effect and legal consequences of Order dated 07.12.2009 passed by the Securities and Exchange Board of India (SEBI), before the High Court.
HELD THAT:- Prayer is allowed. Accordingly, the special leave petition is dismissed as withdrawn with the liberty aforesaid.
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2020 (1) TMI 1667
Issue of the Non-Convertible Debentures (NCDs) without complying with the listing provisions - Liability of directors - 'officer in default' - As decided by tribunal in the absence of any document to show that any director was specified as per Clauses (a) to (c) of Section 5 of the Companies Act or any valid document to show that any person was authorized by the Board of Directors, the appellant cannot escape the liability as per Clause (g) of Section 5 of the Companies Act - HELD THAT:- We find no ground to interfere with the impugned order(s) passed by the Tribunal. These appeals are, accordingly, dismissed.
Pending application(s), if any, shall stand disposed of.
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2020 (1) TMI 1487
Unfair trade practices - Ingenuine trading of shares - Manipulation of price scrip - charge of raising price artificially - violation of Regulations 3 and 4 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 - orders restraining the appellant from accessing the securities market - miniscule shares were being sold by the appellant when there was demand for more shares and the appellant had a substantial holding in that share and thus the motive was to increase the price of the scrip - charge leveled against the appellant is, that it had contributed to the positive last traded price (LTP) as a seller and that the trades made by the appellant were not genuine which resulted in manipulation in the price of the scrip known as Jolly Plastic Industries Ltd. thereby creating misleading appearance of trading in the scrip of the Company - HELD THAT:- We are of the opinion that controversy involved in the present case is squarely covered by the decision of this Tribunal in Appeal no.97 of 2019 Nishith M. Shah HUF vs. SEBI [2020 (1) TMI 1485 - SECURITIES APPELLATE TRIBUNAL MUMBAI]
We are of the opinion that against the charge of raising price artificially one has to establish the element of collusion between the buyer and the seller which in the instant case is absent. On a query raised by us we were informed that only one buyer had been prosecuted but we had been further informed that the said buyer did not purchase it from the appellant. Thus, there is no connection between the appellant as a seller with any buyer. In the absence of element of collusion between the buyer and the seller the charge cannot be established - orders restraining the appellant from accessing the securities market cannot be sustained. - Appeal allowed.
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2020 (1) TMI 1485
Unfair trade practices - Ingenuine trading of shares - Manipulation of price scrip - charge of raising price artificially - violation of Regulations 3 and 4 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 - HELD THAT:- The investigative reports nor the WTM or the AO found any connection between the buyer and the seller. We also find that neither in the investigative report nor in the impugned order any connection has been found between the appellant with the promoters / directors of the Company. Thus, no causal connection has been established.
The investigative report finds that no adverse inference can be drawn against the buyer merely because the buyer had placed buy orders above LTP. On this basis, the buyer was exonerated from the charge of manipulation in the price of the scrip when admittedly the buyer was placing buy orders above the LTP.
Buy orders were placed at 9.15 hrs and sell orders were placed during the course of the day but not immediately after the buy orders nor the sell orders of the appellants were placed before the buy orders.There is no finding that the appellant has indulged in fraudulent or unfair trade practices in securities.
Selling miniscule amount of shares by itself is not illegal nor manipulative nor violative of Regulation 3 and 4 of the PFUTP Regulations unless collusion with others is found. Allegation that the appellant has contributed to the LTP cannot be upheld in the absence of any collusion with the buyer or promoter / director of the Company. One has to establish a connection between a buyer and with the seller in order to infer a manipulation in the price of the scrip.
See SECURITIES AND EXCHANGE BOARD OF INDIA VERSUS KISHORE R. AJMERA [2016 (2) TMI 723 - SUPREME COURT] - There must be evidence to show collusion between the buyer and the seller. In the instant case there is none. The principle of preponderance of probability cannot be exercised in the absence of any connection between the seller and the buyer.
The charge that the appellant had contributed to the LTP as a seller which resulted in the manipulation in the price of the scrips cannot be sustained in the light of the glaring fact that the same charge against the buyer had been dropped.
Charge of raising price artificially has to be established and the element of collusion between the buyer and the seller is a sine quo non. We are in the entire agreement with the aforesaid decisions and reiterate that in the absence of any finding of collusion between the buyer and the seller the charge contributing to the LTP cannot be sustained - orders restraining the appellant from accessing the securities market cannot be sustained.
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2020 (1) TMI 1365
Collective Investment Scheme - As per petitioner he have settled the amount to the investors i.e., even before the respondent filed the private complaint before Magistrate under section 200 Cr.P.C., and hence, the process of repayment commenced - HELD THAT:- XIX Additional Judge, City Civil Court, has got the jurisdiction to try the case.
Though the petitioners have stated that they settled the money, the respondent has subsequently disputed the fact that the petitioners have not produced any documentary proof to show that the amount was settled. In these circumstances, prima facie, whether the petitioners have complied with SEBI Regulations on or before the date mentioned in the Regulation and therefore, the complaint is subsequently filed and thereafter the matter has been settled or not and whether the offence is compoundable or not are the questions to be decided in the trial by putting forth evidence. Under these circumstances, this court did not find any ground to quash the proceedings. Accordingly, this Crl.O.P., is liable to be dismissed, granting liberty to the petitioners to take all their defence before the trial court.
Petitioners would further submit that the matter is already settled and the petitioners filed a memo and affidavit to compound the offence before Additional Judge XIX City Civil Court, Chennai, and so far, the learned Judge has not passed any order in the said memo.
Neither the memo was rejected nor the order passed therein. It is understood that the trial court will normally not pass any speaking order in the memo; either it would record or reject the memo. Whereas in this case, no order is passed by the learned Judge in the said memo. If memo is still pending, the petitioner is at liberty to file a petition for compounding the offence. It is further informed that now the matter is pending before Principal Judge, City Civil Court, Chennai. Therefore, in case, the petitioner file any petition for compounding the offence, learned Principal Judge, City Civil Court, is directed to receive the petition for compounding the offence and dispose of the same in accordance with law
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