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SEBI - Case Laws
Showing 301 to 320 of 555 Records
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2020 (1) TMI 1201
Insider trading in the scrips of NDTV - principal allegation in the impugned notice is that the petitioners, being promoters, and qualifying as insiders, traded in the shares of NDTV while in possession of UPSI - calling upon the petitioners before us to show cause as to why directions under section 11B of the Securities and Exchange Board of India Act, 1992 including direction for the disgorgement of illegal gains be not issued against the petitioners for the aforementioned alleged violations of the SEBI Act, 1992 and PIT Regulations - HELD THAT:- We should allow the petition to be prosecuted as its obvious purpose is to delay the adjudication of the show-cause notice. It is not as if the petitioners cannot appear before SEBI without prejudice to their rights and contentions and complaint that they were not provided full, free and unhindered inspection of the relevant records and documents. The petitioners can participate in the hearing or adjudication of the show-cause notice without prejudice to all their rights and contentions including on the above point. They can very well substantiate their primary contention that on the face of it, the show-cause notice is time barred.
We do not think that we should interfere with the showcause notice as that relief could have been claimed but advisedly not claimed earlier. It may be that the Writ Petition filed before the Hon’ble High Court of Delhi is filed by another entity and not the petitioner. Secondly, when that High Court passed the order, the present petitioners were not served with the show-cause notice. However, even that High Court expressed its reluctance to interfere with the investigations by SEBI. Pertinently, Ms.Sethna does not seek the relief of quashing of the show-cause notice. We fail to understand the reluctance of the petitioner to appear before SEBI reserving its rights and contentions.
Writ Petition before this Court with virtually the same complaint should not be entertained as that would mean that this Court can be approached challenging such a show-cause notice, when the petitioners were aware that they first approached through their promoter group, the High Court of Delhi. The grievance being more or less the same, we do not think that this Petition should be entertained only on the ground of alleged lack of inspection. We do not think that the petitioners cannot properly defend themselves. The petitioners can participate in the adjudication or the hearing and in the event any adverse order is passed, while challenging the same, the petitioners can highlight all the grievances and grounds projected in the petition before the High Court of Delhi and this High Court.
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2020 (1) TMI 716
Segregation of the funds and securities of client - Regulation Of Transactions Between Clients And Brokers - violation of SEBI circulars dated November 18, 1993 and August 27, 2003 - Penalty imposed - HELD THAT:- There is no violation of circular dated November 18, 1993. The circular itself, inter-alia, provides that withdrawal of money on client authority is permissible. In the present case, money was transferred from the client's accounts to his own account in the commodities market on client's letter of authority. This is against the guidelines provided in the circular dated November 18, 1993 itself, therefore, the order, to that extent is required to be set aside.
Transactions allegedly carried out by the appellant contrary to the directions contained in SEBI circular No. MRD/SE/Cir-33/2003/27/08 of August 27, 2003 -
The submission that the money was withdrawn from one account and credited to another account was on the strength of the letter of authority from the respective client cannot be accepted so far as the present circular is concerned. In our view, the appellant had committed breach of the directions contained in the said circular.
Considering the fact that though none of the prescribed mode of cash transfer was adopted by the appellant as provided by the circular, nonetheless, there was no cash handling in any of the transactions. Considering all these facts on the record, in our view, a penalty of ₹ 5 lacs would be fair.
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2020 (1) TMI 708
Pledging of client securities by Karvy by allegedly misutilizing the power of attorney granted by the clients - account frozen explicitly by the WTM of SEBI - appeal filed by Karvy before this Tribunal seeking flexibility in using the power of attorney - maintainability of the appeal - HELD THAT:- Preliminary objection regarding maintainability of the appeal is not sustainable since the appellant is an affected party impacted by all the impugned communications/ orders together which the appeal is also challenging. It is a fact that the appellant as a bank has lent funds to Karvy under a permitted Loan against Shares arrangement and under the Depositories Act, rights and sanctity are provided to such pledged accounts. Therefore, the appellant is an affected party is clearly undisputed. It is also a fact that the appellant was not heard either by SEBI or by the Exchanges or Depositories before passing the impugned directions. Though, the account frozen explicitly by the WTM of SEBI by order dated November 22, 2019 is not the same account as that of the appellant implicitly the order has got extended to such accounts because of the sweeping nature of the WTM’s directions to protect the interest of the investors. Hence the action by Respondent No. 3 NSDL is also a consequential one as clearly stated in their communication.
Though appellant seeks to suggest a solution stating that some of the investors in fact owe dues to Karvy and hence securities to the extent of such dues rightly belonging to Karvy at least could be used by the appellant to invoke the pledge so that at least part of the funds would be available to the appellant. We are not in a position to ascertain the veracity of the information as provided by Karvy to the appellant. Therefore, we direct the appellant to file an appropriate representation before SEBI. If such an application is filed SEBI will hear the appellant and other relevant entities and pass appropriate directions within 15 days from the date of this order. In the interim status quo shall be maintained in respect of the securities in Account No. 19502787 named “Karvy Stock Broking Limited- Client Account-NSE CM”.
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2020 (1) TMI 680
Penalty u/s 15HA of the SEBI - carrying out the scheme of collective investment scheme without obtaining registration under the SEBI Act - HELD THAT:- Collection so made by the appellants and the other entities was wholly illegal and the decision of the AO that the amount so collected under the collective investment scheme is the illegal profit earned by the appellants and other entities does not suffer from any manifest error of law. The total amount of realization made by the company and its directors amounts to illegal profits made by them.
Factors contemplated under Section 15J of the SEBI Act was duly considered. AO found that the whole amount was illegally raised under the collective investment scheme without obtaining registration from SEBI after coming into force of Regulation 4(2)(t) of the PFUTP Regulations, 2003 during the period of 06.09.2013 to 15.06.2014 the AO found that the amount so realised was a profit for the purpose of Section 15HA.
AO further found that the profit made by the appellants was at the cost of the investors. We are of the opinion that the factors contemplated under Section 15J of the SEBI Act was duly considered and we do not find any infirmative in the reasoning adopted by the AO. On the question whether the appellants have violated Regulation 4(2)(t) of the PFUTP Regulations and or on the question whether the appellants were required to get the scheme registered under SEBI Act, we are of the opinion that it is no longer open to the appellants to agitate the matter as the same has been decided by SEBI which order has been affirmed by this Tribunal.
We also find that specific findings have been given by AO that the amount mobilized during the period from 01.09.2013 to 15.06.2014 has not been refunded to the investors. No ground contrary to the aforesaid finding has been urged by the learned counsel for the appellants.
No manifest error in the order of the AO imposing penalty under Section 15HA of the SEBI Act.
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2020 (1) TMI 679
Pledging of securities of unpaid clients required taking of "explicit authorization" by the stock broker from each such client and in respect of each such pledging - HELD THAT:- PoA given by the client to the broker can be used for the purpose of pledging in favour of the stock broker, "only" for the purposes of meeting the margin requirements. The authorization claimed under said PoA by the Representor is not the "explicit authorization" of the client, as referred to under SEBI circular dated September 26, 2016 and of which record is also required to be maintained by the stock broker of all such authorisations.
Representor, in para 18 (e) of its representation dated December 19, 2019 has prayed that in respect of partly/unpaid clients, KSBL be directed to issue five days notice to the clients or the Representor be allowed to issue 5 days notice to clients to enable the clients to redeem the pledged shares by making payment of the corresponding outstanding indebtedness, failing which the Representor be permitted to invoke the pledge on shares. If the Representor is able to show proof of authorization in respect of securities having value of ₹ 13.69 crores belonging to unpaid clients, such securities can be released to the Representor after following the above procedure under supervision of NSEIL.
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2020 (1) TMI 524
Mis-utilised public issue proceeds contrary to the stated intent of investment in the company's subsidiary and augmenting the company's working capital - violating the provisions of Regulation 57 (1), Clause (XV10)(2) of Part A of Schedule VIII and regulation 60(4) of SEBI (Issuance of Capital & Disclosure Requirements) Regulations 2009 ("ICDR Regulations") read with Section 12A(a), (b) and (c) of the SEBI Act, 1992 and; regulations 3(b)(c)(d), regulations 4(1) and 4(2)(f), (k) and (r) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations 2003 ("PFUTP Regulations") - Whether IGSL made false statements in its RHP and prospectus with respect to raising bridge loans? - Whether IGSL failed to disclose acceptance of deposits under Section 58A of the Companies Act, 1956, thereby violating regulation 57(1) of the ICDR Regulations? - HELD THAT:- Referring to submissions of Mr. Modi that the Company was entitled to withdraw the earlier investment made in IFPL cannot be disputed. WTM in the impugned order at page no.25 at table no.7 had taken efforts to show that IFPL continues to reduce advancing loans against shares but increasing the same against unsecured loans, however, what would be the market constraint for the subsequent period cannot be gauged and the same are not part of the present enquiry. In the circumstances, in our view, this charge of making a wrong/false disclosure in the ICDR of funding ₹ 30 crores to IFPL for advancing loan against shares holds no water.
Undisclosed Bridge loan - In financial world, bridge loan is understood as a short term accommodation availed by an entity awaiting the permanent financial resources. In the present case, as per the Company itself short term accommodation was sought from KRSPL and the same was repaid on 3rd August, 2011 i.e. post receipt of IPO money. These facts itself clarify that the bridge loan was raised by the Company. However, in the prospectus it was positively declared that the Company has not raised any bridge loan. Thus on this count it can clearly be declared that a false/wrong declaration was made in the prospectus in violation of ICDR Regulations.
Security Deposits - WTM held that though the issue of security deposit in view of the provisions of Section 55A of the Companies Act, the jurisdiction would lie with the Central Government, for the purposes of disclosure of the deposit under ICDR Regulations the SEBI would have jurisdiction -
In our view, the finding of the WTM cannot be faulted with. During investigation the Company emphatically came with a case that all these transactions were security deposits. It is clear that ₹ 21.61 crores was repaid post IPO. Only when the show cause notice was issued the Company came with a case that it was not a security deposit but an amount kept in an account for adjustment towards the debit balance of the related accounts. It is, however, a fact that the amount was repaid after the IPO proceeds were received.
As found, the deposits were more than 25% of the IPO proceeds and was therefore material information under the ICDR Regulations. The decision of the WTM that the Company failed to disclose the deposits in the prospectus and, therefore, violated the Regulation therefore needs no interference.
To conclude, the charge that the Company has misulitised part of the fund by failing to appropriate the necessary amount towards money advanced by its subsidiaries specifically cannot be sustained. The charge of bridge loan is proved to the extent of the aspect of raising the same from KRSPL. The next charge of non disclosure of security deposit in the prospectus also stands proved.
Disclosures by independent directors - As urged that the appellants being independent director had no knowledge of the relevant non disclosures - Appellant therein were independent directors and were not involved in the day to day management and control of the Company. In the circumstances, the argument of the respondent SEBI that they had put their signatures in the prospectus were taken into consideration. It was finally concluded that disclosures could not be attributed to them as they were independent director and they were not associated in the day to day management or control over the Company. In the circumstances, the appeal was allowed.
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2020 (1) TMI 523
Ex-parte ad-interim order passed by the Whole Time Member ("WTM") of SEBI - HELD THAT:- SEBI has power to pass ex-parte ad-interim order pending investigation under Sections 11 & 11B of the SEBI Act. What has been disputed is, that considering the facts and circumstances in the instant case, there was no urgency to pass an ex-parte ad-interim order.
There is no doubt that an ex-parte ad-interim order can be passed only when there is an urgency. In Liberty Oil Mills v. Union of India [1984 (5) TMI 236 - SUPREME COURT], the Supreme Court held that the urgency must be infused by a host of circumstances and further held that the regulatory agency must move quickly in order to curb further mischief and take action immediately in order to instill and restore confidence in the capital market. There is no doubt that only under emergent circumstances and spelling out a case of urgency that an ad-interim ex-parte orders can be passed. Such exercise of regulatory measures in the form of ad-interim ex-parte orders can only be done upon the existence of circumstances warranting such a drastic measure.
Applying the aforesaid test, we find that considering the allegations spelled out in the ex-parte ad-interim order which we need not refer on merits at this stage, we find that upon the examination of the evidence, a prima facie opinion was correctly arrived at by the WTM based on objective facts indicating diversion of funds from a listed Company which was not in the interest of its shareholders. It was thus extremely necessary that an action on urgent basis was required to stop further defalcation/ diversion/ siphoning of the funds of the Company and to protect the interest of the investors and its shareholders and to instill confidence in the securities market. Such measures if not taken while the iron was hot would defeat the regulatory measures that has been provided to SEBI under the SEBI Act.
We are of the opinion that, in the instant case, there was ample evidence to show urgency and, considering the material that has been brought on record, the matter being serious, warranted an inference by the regulator. Whether such transactions indicated in the ex-parte ad-interim order was dully authorized or not by the RAC or whether such transactions were approved by a resolution of the Board of Directors is a matter to be considered on merit by the appropriate authority and it is not appropriate for this Tribunal to consider such documents at this stage as consideration of these documents may prejudice not only the investigation but also the parties.
We are of the opinion that the contention of the appellants that no case was made out for grant of an ad-interim ex-parte order is misconceived and cannot be accepted.
Appellants are entitled for supply of documents from the Company so that they may file an appropriate reply before SEBI. Denial of such documents by the Company or by SEBI would be in violation of principles of natural justice as embodied in Article 14 of the Constitution of India. Without going into the controversy as to whether requisite documents were supplied or not, we are of the opinion that, if any, document is requested by the appellants either from the Company or from SEBI the same would be supplied in accordance with law.
Order - The appellants shall file a reply before the WTM of SEBI on or before October 15, 2019. In the event the appellants want further time then appropriate application will be filed before the WTM of SEBI which will be considered and appropriate orders would be passed. In the event any document is required by the appellants either from Company or from SEBI a formal request to that effect shall be made by the appellants which document(s) shall be supplied in accordance with law within three working days.
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2020 (1) TMI 377
Non compliance of various provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 - Penalty imposed - HELD THAT:- The appellant has violated various provisions of the Listing Regulations. The limited prayer made before us was that due to unforeseen events, the stock exchange should have taken the events as a mitigating factor to waive or reduce the quantum of penalty. In this regard, we find that the exceptions carved out in the circular dated May 3, 2018 relates to certain events which in the instant case was not existing. Further, we find that there no justification or any reason has been given as to why a Company Secretary and the two independent directors could not be appointed. In the absence of any cogent reasons, we do not find any justification to reduce the quantum of penalty.
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2020 (1) TMI 368
Non-disclosure of the 'rejection' of Forest Clearance ("FC" for convenience) by the Ministry of Environment and Forests ("MoEF" for convenience) on an application for iron ore mining filed by ECL was material to an Initial Public Offer ("IPO" for convenience) made by ESL and for disclosure under Clause 36 of the Listing Agreement for ECL - HELD THAT:- In the row relating to Environmental Clearance what is indicated in the above table is that the approving authority for both in respect of coking coal mining and iron ore mining is the MoEF; approval in respect of coking coal mining has been received and approval in respect of iron ore has been received, but applicable once forest clearance is received. When this statement was published as part of the prospectus the 04.10/11.2008 rejection letter of the FAC as well as the rejection letter dated January 16, 2009 of the MoEF and the subsequent efforts made by the appellants for reconsideration were all in the knowledge of the appellants. Therefore, great effort has been made to put such facts in a compact statement like "received, but applicable once forest clearance is received"; a clear case of not only partial/inadequate disclosure but also to the effect of concealment.
Instead of disclosing a rejection everything else has been disclosed. The emphasis made by the learned counsel for the appellants also on various correspondences by different authorities seeking approval for the project from MoEF including the letter from the Prime Minister's Office ("PMO") to the MoEF also does not absolve the appellants from the required disclosures in the prospectus/under the Listing Agreement. The PMO letter is a reply to a VIP reference with a copy to MoEF clearly stating that "forwarded for its consideration and appropriate action most expeditiously". Appropriate action could be another rejection by the MoEF; approval cannot be assumed.
We do not propose to deal with the contention of the learned senior counsel for ESL that ESL has undergone a CIRP and all claims relating to penalties etc. have been permanently extinguished and so on under the approved Resolution Plan. We would just state that those issues would be addressed by the appropriate authorities under applicable laws.
In the interest of justice we tend to agree with the submissions of the appellants in Appeal No. 202 of 2016 and in 223 of 2016 that non-disclosure of the initial round rejection of the mining project proposal in the Prospectus is not in the category where maximum penalty is imposable. Here, we consider the continued efforts of these appellants (ESL and ECL) in pursuing the matter further for reconsideration etc. as well as in detailing the risk factors with possibilities of not getting the final approval etc. as disclosed in the prospectus as mitigating factors. Accordingly we would reduce the amount of penalty of ₹ 1 crore each imposed on ESL under Section 15HB of the SEBI Act to ₹ 50 lakhs. A similar penalty of ₹ 50 lakh on the three Merchant Bankers jointly is sufficient to meet the ends of justice. However, as far as the appeal of ECL is concerned, the penalty imposable under the provisions of 23A(a) and 23E of the SCRA is a maximum of ₹ 1 crore and ₹ 25 crore respectively. Therefore, the penalty of ₹ 50 lakh each imposed under the said provisions cannot be termed as excessive or harsh. Therefore, no interference is needed. The contention of the appellant ECL that sub-section 23E of SCRA, 1956 is not applicable to the appellant-company since it is applicable only to persons managing CIS or mutual funds is an incorrect reading of the sub-section.
Sub-section would make it abundantly clear that a company failing to comply with listing conditions or delisting conditions etc. shall be liable to a penalty not exceeding ₹ 25 crores. Such listing/delisting conditions are relevant to a company rather than persons managing CIS or mutual funds. Reducing the penalty amount from ₹ 1 crore each to ₹ 50 lakh each. The penalty of ₹ 50 lakhs imposed on the appellants shall be paid jointly and severally by the appellants.
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2020 (1) TMI 366
Ad-interim ex-parte order - appellants Restrained from accessing the securities market - violation of PFUTP Regulations 2003 - related party/related party transactions - Finding of manipulation of the books of account or misrepresentation of financials or diversion/siphoning off the funds of the Company - HELD THAT:- We are unable to fathom why the explanations provided by the appellant both relating to the basic facts on the proposed merger and its failure was not given sufficient consideration in the impugned order particularly because of the given business model of Tree House. Tree House is operating in the area of education both for running its own schools, through franchise system and/or by providing funds to various trusts. If that business is adversely affected due to unfavourable business environment obviously that would be a factor leading to the decline in performance as well as profitability. Therefore without passing any judgment on the veracity of the complaints between two groups/different entities the facts on record have to be analyzed in judging/evaluating business performance particularly when there are reliable evidence in the form of orders of the High Court etc. available.
Similarly, we are unable to agree with the contentions of SEBI that a trustee of a public charitable trust is a related party going by the correct reading of the definition in the Companies Act as well as in the LODR Regulations, unless there is evidence to show that those Trusts have been set up or operating for the benefit of the appellant(s). Moreover, there is nothing on record to show that Mr. Giridharilal, the trustee has personally benefited in any manner not only by virtue of being a trustee or in general by any other means. Similarly, we are also unable to appreciate fully the allegations relating to the inflated expenditure on furniture and fixtures etc. particularly in the absence of any evidence on diversion of money/resources belonging to Tree House being shown. How far SEBI can reassess or reevaluate business decisions and audited figures given in financial reports of a company unless explicit proof/evidence relating to siphoning off or manipulation of accounts is available is also a question that needs to be answered by SEBI. In the absence of such information authorities are not in a position to pass business judgments regarding what could be or what should be the cost/expenditure on a particular equipment/tool such as furniture and fixtures. These are all business decisions of the concerned entity and decisions to be taken by the authorized persons. If any malafide in terms of siphoning off of funds etc is observed in the accounts of the listed companies SEBI definitely has the power to intervene in the interest of investors and securities market.
There is yet another aspect which makes the impugned order not fully sustainable. Admittedly, based on media report an investigation was started by SEBI in December 2016. The investigation continued for more than a year and thereafter an ex-parte interim order dated March 7, 2018 was passed. By the said interim order SEBI further directed NSE to appoint an independent auditor/audit firm for conducting a detailed forensic audit of the books of account from the financial year 2011-12 onwards for verifying, inter alia, the manipulation of the books of account, misrepresentation of financials and/or business operations of the appellant Company and wrongful diversion/siphoning off the funds by the Company through related party transactions etc. As on date, nothing has been shown on record to indicate any finding through interim audit report with regard to the manipulation of books of account or siphoning off the funds of the Company. The forensic audit is still underway.
We find that the ex parte interim order was issued on the basis of presumption of certain transactions and after acknowledging the dispute between the appellant and Zee group in 2015 and the expenses incurred by the Company from the financial year 2011-12 onwards.
No case of urgency was made out in the instant case for grant of an ex parte interim order or for continuation of the said interim order to restrain the appellant from the securities market. It is settled law that an ex parte interim order is required to be passed in order to curb further mischief or to stop large scale exercise of possible mischief of tampering with the securities market. If during a preliminary enquiry, it is found prima facie, that the person is indulging in manipulation of the securities market, it would be obligatory for SEBI to pass an interim order or for that matter an ex parte interim order in order to safeguard the interests of the investors and to maintain the integrity of the market. The purpose of passing an ex parte interim order is to prevent further mischief or where the act to be prevented is imminent or where action to be taken brooks no delay.
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2020 (1) TMI 365
Delayed disclosure of material informations as required under Clause 36 of Listing Agreement read with Section 21 of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as, "SCRA'') and trading in the scrip of appellant - Washington Warning, China Announcement - HELD THAT:- It is to be noted that while having the negative information of slapping of the warning, the appellant sold shares of Jubilant Life Sciences on February 25, 2013. His explanation for the same is that he required funds for renovation of his house is not substantiated by any material on record.
As argued before us that for penalizing a person for insider trading, SEBI has to establish that the appellant has traded "on the basis of" the unpublished price sensitive information as provided by Section 15G of the SEBI Act as quoted above. On the other hand, the AO has relied on the provisions of Regulation 3 of the PIT Regulations as amended in 2002 which provided that only "having possession of" unpublished price sensitive information is sufficient to attract the provisions.
Prior to 2002, the Regulation 3 was on the line of the provisions of Section 15G of the SEBI Act, which provided that the insider trading in securities should be "on the basis of" unpublished price sensitive information.
It has been now established by the catena of cases that even if the penalty would be imposed only when the trading is done "on the basis of" any unpublished price sensitive information, the person against whom the charges are levelled will have to show that the trading was not done on the basis of the information but for other reasons, since the explanation would be especially within his own knowledge. In the present case, the appellant provided the explanation which remained uncorroborated.
Non-closure of the trading window during the period or non action by SEBI on this count is irrelevant. It is established that the present appellant being a Vice President of Jubilant Life Sciences had sold shares when adverse information reached him and purchased when positive news reached him when both remained to be published.
AO has provided the table of price fluctuation in the scrip to show that the warning letter had adverse impact while the acceptance letter on positive impact had the positive impact on the prices. Besides this, the AO has rightly noted that this factor is irrelevant. In this view of the matter, the appellant would be guilty of insider trading.
AO has imposed penalty of ₹ 10 lacs on each of the appellants Jubilant Life Sciences, Jubilant Stock Holding, Shyam Sunder Bhartia and Hari Shankar Bhartia and Amit Arora equally. The reasoning forwarded by the AO was that though the gains for the violation cannot be estimated, the violations being in the nature of detrimental to the investors, adversely impacting the equilibrium of the fair market.
The appellant in Jubilant Life Sciences would be liable for penalty only on one count i.e. for non-disclosure of the China warning immediately. The penalty accordingly is reduced to ₹ 5 lacs.
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2019 (12) TMI 1656
Violation of Regulation 11(1) of the SAST Regulations - Non issue of open offer - Huge rise of traded volumes and price of the shares on BSE - Whether agreement/decision/intention to acquire the shares and control of the Target Company by the acquirer triggers the open offer requirement under Regulations 10 and 12 of SAST Regulations, 1997 respectively? - HELD THAT:- Any person either by himself or along with the persons acting in concert who “agrees to acquire shares or voting rights” or “agrees to acquire control over the target company” would come within the definition of ‘acquirer’ irrespective of the time when actual acquisition of shares happened.
As per Regulation 2(1)(b) i.e. definition of "acquirer"; Regulation 10 relating to acquisition of 15% or more shares or voting rights; Regulation 12 relating to acquisition of control and the provisions of Regulation 14(1) and 14(3) relating to public announcement, open offer requirement under SAST Regulations, 1997 are triggered by person along with persons acting in concerts on (i) agreeing to acquire shares of the Target Company above the limits prescribed; (ii) agreeing to acquire control of a target company. Therefore, agreement/decision/intention to acquire the shares and control of the Target Company by the acquirer triggers the open offer requirement under Regulations 10 and 12 of SAST Regulations, 1997 respectively.
Whether the Noticees had the agreement/decision/intention to acquire the shares of FFSL and to take control of the management of FFSL? - Whether the MOU is only in the nature of mere understanding or has taken the character of agreement which records the rights and obligations agreed between the parties? - HELD THAT:- As no proof of communication of rescission of “MOU” was given by the Noticees. Instead, even as per their case, some tranches of physical share certificates were continued to be transferred in the name of BPJ nominees in the month of April, 2012. If the MOU has been rescinded in November 2010, there was no occasion for acceptance of physical share certificates later in April 2012 which only go to show the Noticees were acting still pursuant to the MOU. Further, BPJ vide letter dated January 30, 2019 has stated that AMPL and NVPL had backed out in the month of June 2010. However, instead of rescinding the MOU even at that stage, their shares were subsequently transferred to Mr. R Rathinmala and Mr. B Satya Prakash respectively showing further that the argument of rescission of “MOU” is only an afterthought.
It is further noted the basis of the trigger of respective provisions of the SAST Regulations, 1997 in the instant matter is on the basis of “agreement to acquire” shares and control. Therefore, the consideration of arguments which goes to establish that the actual acquisition of threshold limits of shares or actual acquisition of control did not happen as advanced by the Noticees, does not require consideration. Accordingly, those arguments are not considered.
As per the MOU dated May 27, 2010, Noticees (except) BPJHUF had an agreement / decision / intention to acquire 58.08% of the shares of FFSL for a consideration of Rs. 21,76,650 /- (by issuing cheques / post-dated cheques) and control of management of FFSL by appointing majority of directors on the Board on FFSL.
Whether the Noticees are acquirers/Persons Acting in Concert? - As upon perusal of MOU dated May 27, 2010 and letters attached thereto, I note that BPJ-HUF was neither the part of MOU dated May 27, 2010 nor issued any cheques to Mr. Natarajan or promoter of FFSL for acquisition of shares of FFSL. Hence, on May 27, 2010, BPJ-HUF did not have any agreement / decision / intention to acquire the shares of FFSL and control over FFSL. Thus, on May 27, 2010 BPJ-HUF was neither the acquirer nor person acting in concert for the acquisition of 21,76,650 equity shares (58.08%) of FFSL and control over FFSL. Hence, find merit in the said contention of BPJ-HUF.
Whether the Noticees have violated the provisions of Regulations 10 and 12 of SAST Regulations, 1997 and Section 12A(f) of SEBI Act, 1992 as alleged in the SCN? - In the instant matter, it is noted that Noticees (except BPJ-HUF) had agreed / decided that nominees of BPJ shall be appointed on the Board of FFSL leaving one promoter director. Thus, on May 27, 2010 Noticees (except BPJ-HUF) had agreed / decided to the right to appoint the majority of directors on the Board on FFSL i.e. to have control over the management of FFSL. Thus, Noitcees (except BPJ-HUF) were required to make public announcement of offer within 4 working days from the date of deciding the changes that would result in control over management of FFSL. However, it is noted that Noticees (except BPJ-HUF) did not made any public announcement of offer within 4 working days from May 27, 2010. Hence, Noticees (except BPJ-HUF) had violated the provisions of regulation 12 read with regulation 14(3) of SAST Regulations, 1997.
Thus, the allegation for the violation of the provisions of Regulations 10 and 12 of SAST Regulations, 1997 and Section 12A(f) of SEBI Act, 1992 against Noticees (except BPJHUF) stands established.
BPJ-HUF had not violated the provisions of Regulations 10 and 12 of SAST Regulations, 1997. Thus, the allegation for the violation of the provisions of Regulations 10 and 12 of SAST Regulations, 1997 and Section 12A(f) of SEBI Act, 1992 against BPJ-HUF does not stand established.
What directions should be issued against the Noticees? - As the fact that the scrip is under suspension further strengthens the case that in the interest of shareholders / investors, it is fit case to direct the Noticees (except BPJ-HUF) to make a public announcement of open offer.
ORDER:
B. P. Jhunjhunwala, Ruhi Jhunjhunwala, Mala Jhunjhunwala, Skyed Network Private Limited, Anurodh Merchandise Private Limited, Nandlal Vyapaar Private Limited, BPJ Holdings Private Limited and Radhasoami Resources Limited shall make a public announcement to acquire shares of the target company in accordance with the provisions of the SAST Regulations, 1997, within a period of 45 days from the date of service of this order;
B. P. Jhunjhunwala, Ruhi Jhunjhunwala, Mala Jhunjhunwala, Skyed Network Private Limited, Anurodh Merchandise Private Limited, Nandlal Vyapaar Private Limited, BPJ Holdings Private Limited, Radhasoami Resources Limited shall, alongwith the consideration amount, pay interest at the rate of 10% per annum on the consideration amount to the eligible shareholders as per the ratio laid down in Clariant International Limited and another vs. SEBI [2004 (8) TMI 390 - SUPREME COURT] after adjustment of dividend paid, if any.
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2019 (12) TMI 1654
Violation of Regulation 11(1) of the SAST Regulations - period of limitation - artificial price rise in the scrip during the period 2004-2008 - appellant submitted before us that the order is liable to be quashed on the sole ground of the delay - HELD THAT:- The time line of the events would show that the alleged violation had occurred between March, 2004 to June, 2004. The appellant had disclosed the transaction to the BSE at that time. The show cause notice however was issued in the present case dated 7th November, 2017. The investigation report itself would show that for non availability of the documentary evidences the investigating authority did not recommend taking drastic action to direct making of public announcement. Thus, there was inordinate delay in initiation of the proceedings.
No escape from the conclusion that the proceedings are required to be quashed. Therefore the appeal is hereby allowed.
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2019 (12) TMI 1648
Offence under SEBI Act - fraudulent scheme of issuing GDR with an ulterior motive - HELD THAT:- Heard the appeal at the stage of admission. Learned senior counsel for the respondent submitted that the orders are yet to be passed in the proceedings and all the grievances of the appellant can be made before the Whole Time Member. He also fairly submitted that the proceedings can be possibly disposed of within six months from today. In view of the said statement, the appeal is disposed of at this stage with no orders as to costs.
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2019 (12) TMI 1271
Infringement of Rights of the appellant as a bonafide lender - Depositories shall not allow transfer of securities from DP account - HELD THAT:- The impugned order notes that Karvy had raised funds pledging securities from banks and NBFCs and therefore was aware that rights of those entities would be impacted by the said order. As such, even if they could not be heard while passing the impugned order atleast on their representation they were entitled to be heard. It is on record that the appellant wrote to SEBI on November 23, 2019 (received by SEBI on November 25, 2019, 23rd and 24th being Saturday and Sunday). It is also an undisputed fact that lending against securities is a normal and permitted business activity of banks and NBFCs and SEBI is fully aware of the same. Therefore, we are of the considered view that the impugned order has prejudiced and adversely affected the rights of the appellant as a bonafide lender. Since it is the impugned order which has impacted the rights of the appellant, not arraying NSE and NSDL as parties, though their arraying might have brought in more facts on table, does not impact the maintainability of this appeal.
Accordingly, without commenting on the merit of the case, we direct the WTM of SEBI to hear the appellant on the basis of their representation dated November 23, 2019 and / or any other additional representation which they may like to make. If the appellant is desirous to make any additional representation it shall be made latest by December 4, 2019. Thereafter, the WTM of SEBI shall consider the representation(s) of the appellant and, after giving an opportunity for personal hearing, pass an order as per law latest by December 10, 2019
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2019 (12) TMI 1150
Order of the Whole Time Member ("WTM") of SEBI restraining appellants from accessing the securities market directly or indirectly for a period of 10 years - direction to refund the investors/clients money with interest at the rate of 15% per annum from the date when the repayment became due till the date of actual payment - HELD THAT:- The appellant is a promoter and therefore by virtue of holding majority stake of more than 51% she is in control of Kassa. Therefore, we find no lacuna in the impugned order in holding the appellant guilty of the various provisions specified therein and the consequent directions issued thereunder.
A common submission made by four of the appellants (excluding Manoj Kumar Agrawal) is that the impugned order does not crystallize the amount to be repaid/refunded to investors/clients and when the principal amount itself is not determined interest liability also becomes inconclusive and hence the order is unimplementable. It is also contended by them that the Demand Notice/Recovery Certificate dated December 18, 2018 has travelled beyond the impugned order. When the impugned order itself does not crystallize the amount due the Recovery Certificate for ₹ 80,97,62,785/- could not be issued by the Recovery Officer who is not an Adjudicating Authority. Further the Recovery Officer does not tell what is the amount to be adjusted in coordination with the NSE and BSE as directed in the impugned order. We find some merit in these submissions; it is not clear from the Recovery Certificate how the amount has been arrived at; what is the interest liability; whether payments made to various parties by NSE and BSE have been taken into account etc.
In the light of the above, while upholding the impugned order on merit we remit the matter to SEBI to specifically decide the following issues:
(i) The Recovery Officer shall crystallize the exact amount of liability for refund/repayment to investors/clients and issue a revised certificate.
(ii) The WTM shall reconsider the period of restraint imposed on Manoj Kumar Agrawal, (appellant in Appeal No. 346 of 2017).
(iii) The WTM shall consider the request of Manoj Kumar Agrawal for liquidation of his mutual funds units.
The appropriate authority shall pass fresh order(s) on the above issues within a period of three months from the date of the receipt of this order after giving an opportunity of hearing to the appellant(s).
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2019 (12) TMI 1144
Legality and veracity of the order passed by Forward Markets Commission which has now merged with the Securities and Exchange Board of India ('SEBI' ) - Appellant no. 1 challenged the show cause notice before the Gujarat High Court contending that no show cause notice was provided nor an opportunity of hearing was given - HELD THAT:- Admittedly the show cause notice was issued on June 21, 2011 which was received by appellant no. 2 shortly thereafter. The documents in part were only supplied on July 5, 2011. Accordingly, the appellant no. 2 cannot be faulted for the adjournment made on July 4, 2011. According to the appellant voluminous documents running into thousands of pages were provided and many documents were not provided for which further request was made which was rejected by the respondent. Request for further time to place their written submissions was granted till July 20, 2011. The request for adjournment on July 20, 2011 was rejected on the ground that the matter was being delayed. We find that only two weeks had elapsed from the date when the documents were supplied for filing a reply. Further request for adjournment was not unreasonable. Further, the period granted for filing reply was wholly inadequate considering the voluminous documents running into thousands of pages relied upon by the respondent.
In the light of the aforesaid, we are of the opinion that no reasonable opportunity was given by the respondent no. 1 to the appellant no. 2 for the purpose of filing objection/reply to the show cause notice.
The request on behalf of the appellant no. 2 to permit his advocate to place submissions on the issue of jurisdiction was not unreasonable and should not have been rejected. The finding that the appellant was avoiding to show cause on one pretext or the other is a finding based on surmises and conjectures. As per sequence of events stated aforesaid, it is clear that there has been no unreasonable request on the part of the appellant in seeking time to file their written submissions and for placing their arguments. In our opinion the rejection of the request of the appellant on July 20. 2011 for an adjournment, was violative of the principles of natural justice. Consequently, the impugned order against the appellant no. 2 cannot be sustained and is quashed.
Since the impugned order has been quashed on account of violation of principles of natural justice it is not necessary for this Tribunal to go into the question of jurisdiction, namely, whether the FMC had jurisdiction to issue a show cause notice under the FCR Act.
In the result, the appeal is allowed. The impugned order is quashed. The matter is remitted to respondent no. 1 and, if they are so advised, the respondent no. 1 can proceed afresh only after issuing the show cause notice to appellant no 1 and respondent no. 2. Since the appellant no. 2 has already been served with the show cause notice, no fresh show cause notice is thus required to be served. The respondents are further directed to grant adequate time to the appellants to file their objections/reply which will be considered by the respondent after giving an opportunity of hearing to the appellants.
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2019 (12) TMI 1143
Order of delisting - denial on the part of the delisting committee in order to enable the appellant to be represented by an Advocate - No Adequate and reasonable opportunity of being heard provided - HELD THAT:- We find that the show cause notice was issued on 1st June, 2018. The first date of hearing before the delisting committee was fixed on 26th June, 2018. The request for adjournment was only made for 26th June, 2018. The denial on the part of the delisting committee in order to enable the appellant to be represented by an Advocate is against the settled principles of natural justice. Further, we find that it was the first date of hearing and there is no allegation that undue adjournment was sought by the appellant.
Adequate and reasonable opportunity of being heard was not provided to the appellant. The impugned order is thus violative of the principles of natural justice and cannot be sustained.
Two orders of the same date has been passed by the delisting committee - From a comparison of the two orders we find that certain more facts have been inserted in the second order of 26th June, 2018 primarily to cover the lacuna that was glaring and apparent in the first order dated 26th June, 2018. We are of the opinion that once a signed order dated 26th June, 2018 was sent by the delisting committee a second order of the same date could not have been passed without recalling the earlier order and without issuing notice to the parties which apparently in the instant case has not been done. The passing of the second order dated 26th June, 2018 incorporating further facts amounts to interpolation in the order.
The impugned order of the delisting committee dated 26th June, 2018 as forwarded to the appellant by the letter dated 3rd July, 2018 and 23rd July, 2018 are quashed on payment of cost of ₹ 1 lakh. The matter is remitted to the delisting committee to decide the matter afresh after granting an opportunity of hearing to the appellant. The respondent will supply a copy of the show cause notice to the appellant and fix a date of hearing
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2019 (12) TMI 1142
Decision of the Disciplinary Action Committee ("DAC" ) of the National Stock Exchange of India Limited ("NSE") - DAC has passed several directions including consolidated monetary penalty of ₹ 37.89 lakhs, suspension of membership and review by an independent auditor appointed by the Exchange to confirm that the appellant is complying with all the regulatory guidelines as well as adequacy of the internal controls in place - HELD THAT:- Although the DAC has found some deficiencies in the claim of the appellant that his relatives had excess margin in their accounts the issue is not conclusively settled. Accordingly, appellant deserves benefit of doubt. Moreover, it is an established principle in law that when there are two provisions in law the more beneficial provision should be applied wherever appropriate. This is particularly relevant in the context of the appellant who has been indefinitely suspended also for the various violations impugned in this appeal. Therefore, we reduce the amount of penalty imposed on wrong reporting from ₹ 15 lakhs to ₹ 1 lakh on the ground of proportionality.
Regarding the penalty imposed on other violations we do not agree with the submissions of the appellant. As the documents clearly show that such violations have been committed, the appellants' hyper technical submissions do not have any merit; what is relevant is whether the appellant, based on the evidence available, has committed those violations and whether any satisfactory explanation has been provided either in mitigating the violation or in proving that the violations have not been committed. The facts and records speak volumes about the way in which the appellant has been running the business of broking and violating multiple provisions of bye laws and circulars issued by the respondent as well as by SEBI. Accordingly, we do not find any deficiency in reiterating the penalty imposed by the DAC when such violations have been noticed by the respondent.
The appellant's attempt to prove that the CA Certificate provided to the respondent Exchange was in the correct proforma, since the same was accepted by the NSCCL does not stand to merit. We note that, many of the contents of those proformae are different. The fact that NSCCL has accepted the information in a particular proforma does not absolve the appellant from providing the necessary information in the proforma specified by the Exchange, though, some of the information/part of the format may be same/common. In any case, the appellant as a broker is bound to follow the bye laws/circulars/instructions of the respondent Exchange as the Exchange is the first tier regulator of brokers. While taking membership of the Exchange the appellant has also entered into an agreement to abide by the Exchange bye laws/circulars/rules etc. Even if the submission of the appellant is accepted that they received the proforma from the Exchange belatedly the same could have been furnished by the appellant at that point of time.
The direction relating to suspension of the appellant contains a solution in itself. The said suspension of membership was only till receipt of confirmation from the appellant regarding its preparedness to run the operations as per regulatory guidelines and adequacy of the internal controls put in place and therefore providing a report from an independent auditor appointed by the Exchange to these effects. Therefore, it was open to the appellant to approach the respondent Exchange to seek such an audit after putting in place the required systems and internal controls.
Appeal is partly allowed by reducing the total amount of penalty imposed on the appellant from ₹ 37.89 lakhs to ₹ 23.89 lakhs.
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2019 (12) TMI 946
Recovery certificates/attachment notices/orders issued by the concerned authority in SEBI - SEBI held that the scheme mooted by the appellant was a CIS and directed that the contributions made to the scheme must be returned - proof of refund of money to the investors in full or refund in the form of land with full transfer of ownership and all rights - HELD THAT:- This Tribunal had given ample opportunities to the appellant to prove the veracity of their statements with documents before SEBI. The appellant is not able to prove that. Therefore, just making bold statements with part documentation by which no conclusion can be reached do not prove refund of money to the investors in full or refund in the form of land with full transfer of ownership and all rights. We also note that the impugned orders dated August 12, 2016 and September 14, 2016 deal with the documents furnished by the appellant in detail and we are not able to find fault with the same.
The appellant is not able to prove whether land has been given to the investors in accordance with the terms and conditions i.e. after development of the land etc. and what happens to the maintenance aspect. In fact, we are told by the learned counsel for the SEBI that a large number of plots are still being maintained by the appellant which is not disputed. If that be the case the contention that land parcels have been handed over to the investors as ultimate beneficiaries and as full and final transfer is not correct. Therefore, in the absence of appropriate and complete evidence relating to full refund of the investors' amount, either in the form of money or in the form of developed land and maintenance amount we are unable to interfere with the impugned directions in the various orders.
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