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SEBI - Case Laws
Showing 321 to 340 of 555 Records
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2019 (12) TMI 732
Recovery proceedings continued against the legal representative of the deceased - HELD THAT:- Proceedings would continue against the legal representative of the defaulter if the defaulter dies after the certificate was drawn up by the tax recovery officer. At the outset, Rule 85 is not applicable as we have already held that Section 28A is not applicable. In any case, in the instant case, recovery certificate was drawn on June 15, 2016 much after the death of the appellant's husband who died on November 5, 2015. The recovery certificate and the attachment proceedings was done against a dead person which was without jurisdiction. Once the person dies, recovery proceedings cannot continue and can only continue against the legal representatives if the Statute provides specifically.
SEBI Act and its Regulations does not contain any provision to continue recovery proceedings against the legal representative of the deceased. So long as there is no separate machinery to proceed against the legal representative, the cause of action comes to an end and recovery proceedings could no longer continue.
In the light of the aforesaid, the impugned recovery certificate for recovery of ₹ 12 lacs cannot be sustained and is quashed. The appeal is allowed
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2019 (12) TMI 481
Powers of Whole Time Member (‘WTM’) of Securities and Exchange Board of India (‘SEBI’) - order of debarment - restraining the appellants from accessing the securities market and further prohibiting them from buying, selling or otherwise dealing in securities, directly or indirectly, or from being associated with the securities market in any manner, whatsoever, for a period of three years from the date of the order - contentions of the appellants are that the WTM committed a manifest error in holding that the appellants were guilty in manipulating the price of the scrips pursuant to the preferential allotment - HELD THAT:- Order of debarment as per the impugned order is of three years. These three years have already been undergone by the appellant pursuant to the impugned ex parte order dated December 19, 2014 restraining them from accessing the securities market, etc. As on date four years and ten months have elapsed and the appellants are still debarred from accessing the securities market etc. We find that the WTM has not considered the period of debarment already spent from the date of the ex parte interim order till the date of passing of the order while considering the quantum of penalty. We are, thus, of the opinion that the debarment period spent by the appellants from the date of the ex parte impugned order till today is sufficient.
Thus, without going into the merits of the case and without considering the submissions of the counsel for the parties on merits, we dispose of all the appeals holding that the restraint order restraining the appellants from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever will come to an end from today.
Adjudication proceedings have been initiated by the Adjudicating Officer of SEBI and submitted that the findings given in the impugned order of the WTM would be relied upon by the AO. It was urged that the finding given in the impugned order should not be come in the way while considering the matter on merits by the Adjudicating Officer of SEBI.
We make it clear that the Adjudicating Officer of SEBI will consider the matter on merits without being influenced by the findings given by the WTM of SEBI.
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2019 (12) TMI 480
Default by company to refund the amount collected under the Collective Investment Schemes ("CIS") - officer in default - vicarious liability of a peson who was a director only for 50 days - HELD THAT:- If a company is liable to refund the monies received from the investors and if the company fails to pay the amount then the amount can be recovered jointly and severally from every Director of the Company who is an officer in default.
Therefore, when the company is the offender, the vicarious liability of the acts of the Directors cannot be computed automatically. The contention that being a Director of the Company the appellant cannot disown his responsibility for the acts of the Company is misconceived.
It is not possible to lay down any hard and fast rule as to when a Director would be vicariously responsible for the acts as a Director in charge of day-to-day affairs of the Company. However a finding has to be arrived at that the appellant was responsible for the day-to-day affairs of the Company and was involved in the collection of the monies and in the implementation of the schemes. In our view, it is not necessary that every director is required to be penalized merely because he is a director on the ground that he was deemed to responsible for the affairs of the company. If the director can explain that he had no role to play in the alleged default or that he was not responsible for the affairs of the company in which case penalty could not be fastened upon him on the mere ground that he was a director.
The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status.
In the instant case, a penalty of ₹ 1 crore has been imposed which is wholly excessive and against the provision of Section 15D of the SEBI Act.
AO by a separate order has already given a finding that the Company and its Directors were directly responsible for sponsoring the CIS without registration and were instrumental in generating the monies through this scheme in violation of the Regulations and the Act. The AO has already imposed penalties against the Company and the said Directors. The appellant in the instant case no doubt was a director only for a period of 50 days and in our opinion there is no finding that he was responsible either for sponsoring the scheme or for carrying out the scheme. We have also found that he was not instrumental in the launching/ sponsoring or carrying on the scheme. Thus, no penalty could be imposed upon the appellant.
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2019 (12) TMI 477
Pledging/misuse of client securities by the stock broker - violations of the Securities Laws - HELD THAT:- The securities lying in the aforesaid DP account actually belong to the clients which are the legitimate owners of the securities. Therefore, KSBL did not have any legal right to create any kind of pledge on these securities. Even if the client securities were pledged, it should have only been for meeting the obligation of the respective clients which was not observed in this case. Considering the issue of misuse of clients’ securities by KSBL in unauthorized manner, for its own use and purposely not disclosing the DP account no. 11458979, named KARVY STOCK BROKING LTD (BSE) to the Exchanges in their reporting create a serious doubt on the conduct and integrity of KSBL.
The acts of KSBL are prima facie in violation of Stock Broker Regulations, SEBI circular no. SMD/SED/CIR/93/23321 dated November 18, 1993, SEBI Circular No. MRD/DOP/SE/Cir – 11/2008 dated April 17, 2008, SEBI Circular No. SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016, SEBI Circular No. SEBI/HO/MRD/DP/CIR/P/2016/13 dated December 16, 2016, SEBI Circular No. CIR/MRD/DP/54/2017 dated June 13, 2017, SEBI Circular No. CIR/HO/MIRSD/MIRSD2/CIR/P/2017/64 dated June 22, 2017 and Circular No. CIR/HO/MIRSD/DOP/CIR/P/2019 dated June 20, 2019, as discussed above.
Therefore, there is need for urgent regulatory intervention to prevent further misuse of clients’ securities.
In exercise of powers conferred upon me under Sections 11(1), 11(4) and 11B read with Section 19 of the SEBI Act, 1992 and Regulation 35 of SEBI (Intermediaries) Regulations, 2008, by way of this ex parte ad interim order, pending forensic audit, hereby issue the following directions:
(i) KSBL is prohibited from taking new clients in respect of its stock broking activities;
(ii) The Depositories i.e. NSDL and CDSL, in order to prevent further misuse of clients’ securities by KSBL, are hereby directed not to act upon any instruction given by KSBL in pursuance of power of attorney given to KSBL by its clients, with immediate effect;
(iii) The Depositories shall monitor the movement of securities into and from the DP account of clients of KSBL as DP to ensure that clients’ operations are not affected;
(iv) The Depositories shall not allow transfer of securities from DP account no. 11458979, named KARVY STOCK BROKING LTD (BSE) with immediate effect. The transfer of securities from DP account no. 11458979, named KARVY STOCK BROKING LTD (BSE) shall be permitted only to the respective beneficial owner who has paid in full against these securities, under supervision of NSE; and
(v) The Depositories and Stock Exchanges shall initiate appropriate disciplinary regulatory proceedings against the Noticee for misuse of clients’ funds and securities as per their respective bye laws, rules and regulations;
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2019 (12) TMI 190
Ex-parte ad-interim order - preliminary report given by National Stock Exchange of India Limited, the Whole Time Member (“WTM”) issued an ex-parte ad interim order restraining the appellant from taking new clients in respect of its stock broking activities and also prevented the appellant from using the “power of attorney” given by its clients - HELD THAT:- Since a clarification has been sought by the appellant we deem it fit and proper that the WTM should look into this aspect and pass appropriate order after giving an opportunity of hearing to the appellant.
We accordingly dispose of this appeal at this stage with a direction to the WTM to consider the request of the appellant which has been made vide letters dated November 24, 25 and 26, 2019 and pass an appropriate order after giving an opportunity of hearing by December 02, 2019.
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2019 (12) TMI 189
Multiple trades on the same day - fraudulent and unfair trade - violation of PFUTP Regulations - Self trades or wash trades are trades without any change in beneficial ownership - HELD THAT:- On many of the days the appellant has bought and sold the shares and on some of those days the quantities bought and sold also matched. However, there were also several days on which there was only either a buy trade or a sell trade.
Generally, only when trades placed by the same party are matched within a short period of time it can be categorized as self trades. Here, it is on record that the appellant did not do multiple trades on the same day. There are a few days when both buy and sell orders of the same quantity were placed. Even on those days when perfect matching is noticed there is nothing on record to show that those trades were entered within a short time interval. In the absence of which, we are constrained to accept the submission of the appellant that being a day trader, on some days, he was placing orders in both the directions with substantive time gap.
It is also claimed by the appellant that on some of the days he actually did take delivery and therefore the beneficial ownership also got changed. The impugned order does not indicate the timing of the alleged trades nor it goes into change in beneficial ownership nor does it bring out any element relating to how it adversely affected the market.
Even though preponderance of probability is sufficient to prove PFUTP violations still fraudulent and unfair trade has to be established with some degree of confidence. Given the absence of such findings and given the undisputed fact that the appellant was a day trader we are constrained to give benefit of doubt to the appellant. However, given the facts and circumstances of the matter, we do not find any reason to award cost to the appellant though the appellant has made a high pitched demand for exemplary costs.
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2019 (11) TMI 1598
Insider trading - Use of Price sensitive information - determination of price by a market at a given day - HELD THAT:- In our view the information itself was not a price sensitive information. The record would show that GIPL had invested only ₹ 4.9 crores in the Simplex project in the said financial year. It represented only 0.05% of the GIPL's order book value at the end of August, 013 and only 0.7% of its turnover for the said financial year. Further due to the termination of the agreement a large project worth ₹ 1648 returned back to GIPL while the smaller project of ₹ 940 crore remained with Simplex. In a way it could have been a positive information to the shareholders. Adjudicating Officer however has calculated the change in the order book value without assessing whether the change was positive or negative.
Considering the minor proportion of the transaction to the turnover of GIPL, in our view the information cannot be termed as price sensitive information. The Simplex had not even disclosed the said information to the stock exchanges.
Even if it is assumed that the information was is a price sensitive information, still the appellant cannot be blamed of insider trading for the reasons that he did not trade "on the basis of the information". The appellant was able to show his dire need to infuse fund in the entity under the master restructuring agreement to implement a CDR package as detailed supra. He was even required to sell his agricultural land and flat details of which are already given hereinabove. In these circumstances he sold the shares. In the case of Rajiv B. Gandhi [2008 (5) TMI 729 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] on fact this Tribunal held that the appellants therein were able to rebut the presumption that they traded on the basis of UPSI as they had a necessity to sell the shares.
Appellant had contended that respondent SEBI had deliberately taken the closing price of September, 2013 when the price were around 30% lower than the closing price as on September 3, 2013. By adding this extra day SEBI had widened the gap between the selling price and the price found on 4 th September, 2013. In fact the share closing price rose on September 3, 2013 i.e. on the date of disclosure of the information. However, according to the appellant, respondent SEBI only inorder to show that the appellant had avoided the probable loss calculated the figures based on the last traded price of September 4, 2013.
As recorded that the information was disclosed to the BSE and NSE on September 3, 2012 at 1.05 p.m. and 2.40 p.m. respectively i.e. much before the closure of the market. There is no reason forwarded in the impugned order as to why the last traded price of September 3, 2013 is not taken into consideration by respondent SEBI. For all these reasons in our view the order cannot be sustained.
Appeal is hereby allowed. The impugned order is hereby set aside. SEBI shall take steps for refund of the amount already deposited by the appellant.
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2019 (11) TMI 1559
Unexplained use of funds raised by pledging client securities with NBFCs and Banks - monetary penalty of ₹ 15 lakhs and suspension of trading membership of the appellant from all segments of NSE for 5 days - HELD THAT:- There is sufficient evidence against the appellant to prove that certain violations have been committed by it. The magnitude of money involved is also large in terms of ₹ 19 crores worth of client securities being pledged, acceptance of deposits to the tune of ₹ 21.56 crores and non-settlement of funds belonging to 601 clients etc. However, since the appellant has complied with some of the directions issued by the DAC such as submission of CA Certificate, fulfillment of the networth criteria, we are of the considered view that the penalty imposed on the appellant is disproportionate in the given facts and circumstances.
The violations are not light enough to let off the appellants scot-free as contended by them. In the result, while upholding the monetary penalty of ₹ 15 lakh imposed on the appellant we modify the direction relating to suspension of the appellant from all segments of the exchange NSE for 5 days to that of a direction not to enroll or register any fresh clients for a period of one month. This period of one month shall commence from the seventh day of the date of this order.
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2019 (11) TMI 1555
Fraudulent tradings in the shares - Suspension of certificate of registration of the appellant as a stock broker for a period of three months for violation of the provisions of Sections 12A(a), (b) and (c) of the SEBI Act, 1992 read with regulations 3, 4(1), 4(2)(a), (e) and (g) of the SEBI - "PFUTP Regulations" and regulation 7 read with Clauses A and B(2) of Schedule II (Code of Conduct for Stock Brokers) of the SEBI - "Stock Brokers Regulations" - HELD THAT:- In the present case, there are no allegations that the appellant had indulged in proprietary trades. What is alleged is that the entity was grossly negligent and allowed fraudulent transactions to be carried out by Purshottam Khandelwal and two other violations already noted above.
Considering all these facts, in our view, the order of the WTM of SEBI directing the suspension of the license of the appellant for a period of three months needs to be set aside and in its place it is hereby directed that the appellant shall not accept any fresh clients for a period of six months from the date of this order.
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2019 (11) TMI 1554
Insider Trading for listed companies - Penalty imposed on appellant as working as Senior Vice President and Company Secretary of Financial Technologies (India) Limited who traded beyond threshold limit of 5000 shares of the Company without obtaining pre-clearance of the transactions as mandated by clause 9(b)(i) of the Code of Conduct - HELD THAT:- The penalty imposed by the Adjudicating Officer is disproportionate to the violation in the circumstances, as detailed by the appellant. The appellant had a long career of 28 years prior to the violation. He had undergone multiple angioplasties. He explained that due to a communication gap between him and the broker the violation had occurred which resulted into a meager profit of ₹ 17,467/-. Taking into consideration these factors in our opinion a penalty of ₹ 2 lakhs instead of ₹ 12 lakhs as imposed by the Adjudicating Officer would be just and sufficient.
Appeal is partly allowed. The impugned order is affirmed except the penalty which is reduced from ₹ 12 lakh to ₹ 2 lakh which shall be paid within four weeks from today by the appellant to respondent SEBI.
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2019 (11) TMI 1553
Condonation of delay - Appeal against order of delisting - delay of 316 days in filing the present appeal - HELD THAT:- Against an order of delisting, an appeal is required to be filed within 15 days under section 21A of the Securities and Exchange Board of India Act, 1992 or within 45 days under section 23L. We find from the record that the trading of the shares of the Company was suspended in August, 2016 and, therefore, it is apparently clear that that the appellant was not interested in the delisting order as it did not prefer to file an appeal within 15 days under section 21A or within 45 days under section 23L. For the appellants it was not a case of urgency.
Contention that the impugned order was never served upon the appellant is misconceived. According to the appellant they came to know of the order on 2nd June, 2018 and received the requisite documents which they applied on 4th July, 2018. The appeal could have been filed immediately thereafter but they did not do so and only filed after an inordinate delay of 316 days.
In the additional affidavit no proof has been filed to show that the officer who was in charge had gone on leave or that the Company was in correspondence with the stock exchange throughout. In the absence of any documentary proof, the ground urged in the additional affidavit is devoid of any merit and is an afterthought.
On a perusal of the affidavit we do not find any sufficient cause or plausible cause show by the appellant. The ground given by the appellant is patently vague and does not imply the presence of any legal and/or adequate reasons. No doubt the Tribunal is possessed with exercise of judicial discretion in condoning the delay after sufficient cause and/or adequate reason is given. In the instant case, we find that no bona fide reasons had been given for condoning the inordinate delay.
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2019 (11) TMI 1416
Violation of SEBI (Listing and Disclosures Requirements) Regulations, 2015 - inordinate delay the initiation of proceedings by issuance of the show cause notice which culminated into a penalty order - Directors sold the shares during investigation period proposal for change in management of the company was moved through postal ballot for approval of members on July 22, 2010 but no corporate announcement was made to the Exchange regarding the Board Meeting - HELD THAT:- No ground to interfere with the impugned order passed by the Tribunal. The appeals are, accordingly, dismissed.
Question of law is kept open.
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2019 (11) TMI 1380
Director guilty for violating Section 12A of the SEBI Act - scheme to defraud any shareholder or investor - pledging the GDR proceeds as collateral for the loan taken by Vintage for making subscription to the GDR - appellant Adi Cooper was a director and had attended the meeting of the Board of Directors on January 30, 2008 in which the GDR proceeds were authorized to be pledged as security for loan which was the starting point of the fraudulent arrangement through which the company facilitated the financing of the GDR subscription by Vintage which arrangement was not disclosed to the shareholders of the company or to the investors of the securities market through the platform of the stock exchange - HELD THAT:- Appellant Adi Cooper was neither directly or indirectly involved in any fraudulent activity nor employed any scheme to defraud any shareholder or investor. The WTM committed a manifest error in holding that the appellant Adi Cooper cannot be absolved of the consequences of the resolution of January 30, 2008 even though he was not present in the time when the issuance of GDR and execution of the loan and pledge agreements. We are of the opinion that the resolution of January 30, 2008 does not indicate any resolution or execution of the loan or the pledge agreement and, thus, holding the appellant that he was actively involved in the manipulation of the market through this fraudulent scheme is patently erroneous and farfetched. In the light of the aforesaid, we are of the opinion that the order of the WTM debarring the appellant Adi Cooper from accessing the securities market for two years cannot be sustained.
Appellant Kishore Hegde Kishore Hegde as an independent director from 2008 to 2013 was part of the scheme through which issue of GDR by the company was effected through a fraudulent arrangement of loan agreement and pledge agreement. We are also of the opinion that the conduct of the appellant Kishore Hegde was inimical to the interest of the company, to the investors, as well as to the shareholders and, the action of the appellant Kishore Hegde was in violation of Section 12A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations. The order of the WTM debarring the appellant Kishore Hegde from accessing the securities market, etc. for a period of two years does not suffer from any error of law.
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2019 (11) TMI 1120
Acquisition of 5 per cent and more shares or voting rights of a company - manipulative orders in a short time - the appellant’s strategy was to purchase bulk of the shares at a lesser market price. Thereafter, he used to place buy orders on the opening of the market at much higher price than the LTP for small number of shares some time one share only. Once that order got executed then he used to sell his stock at a higher price - Violation of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (‘SAST Regulations’) and Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (‘PIT Regulations’) - whether the transfer of shares were infact acquisition attracting the provisions of SAST Regulations and eventually PIT Regulations or the transaction was merely a pledge ? - HELD THAT:- the issue of effect of exoneration of the counter parties is immaterial. It is true that synchronized trades or self trades in itself without any motive may not be called manipulative trade practices. In the present case, however the pattern as highlighted above would go to show that the present appellant Tarun Kumar with a view to gain, indulged into trading in a fraudulent manner as detailed supra. In our view the order of the Adjudicating Officer in this regard therefore cannot be faulted.
Acquisition of shares accounted for 16.77% of the total shareholding - The case of all the appellants in this regard is that they had not “acquired” shares. - They executed agreement for pledge of the shares with these two appellants as a security towards finance to be raised. - Held that:- Regulation 7 provides for disclosures even in case of pledge to private individual, the transaction in question for public in general and market was change in the shareholding pattern.
The term pledge was nowhere put either in the transfer account of the promoters or depository account. In that view of the matter, the violations of the Regulations is clearly ruled.
As regards the quantum of penalty the learned counsel for the appellant submits that the magnitude of the ‘offence’ is required to be considered while awarding compensation in criminal cases. He further submitted that the appellant ought to have been heard on quantum of compensation. On the other hand, learned counsel for the respondent rightly submits that the present case cannot be branded as criminal case. He points to the reasoning forwarded by the Adjudicating Officer in the impugned order in this regard.
He submits that the fraudulent practices of appellant Tarun Kumar in trading the shares of Rajratan and not making disclosure as well as nondisclosure of acquisition of shares of Velan Hotels Ltd. and public announcement to acquire the shares would amount to deprivation of fair treatment of the shareholders who are affected by the change in control. In the circumstance, he submitted that the penalty of ₹ 15 lakhs imposed upon appellant Tarun Kumar for violation of PFUTP Regulations, ₹ 25 lakhs on the appellants jointly and severally for violation of Regulation 10 read with Regulation 14 of the SAST Regulation and of ₹ 6 lakhs on appellant Tarun Kumar and Jinesh for violation of Regulation 13(1) of PIT Regulations and Regulation 7(1) of the SAST Regulations was justified. He further supports the penalty imposed upon the appellant Jinesh of ₹ 4 lakhs for violation of Regulations 13(3) and 13(5) of the PIT Regulations.
Considering all the material on the record, in our view the discretion exercised by the Adjudicating Officer needs no interference in this regard also. In the circumstances, the appeals are hereby dismissed.
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2019 (11) TMI 1090
Legality and veracity of the order passed by the Whole Time Member (‘WTM’) of SEBI under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 which empowers SEBI to issue directions in the nature of remedies in the interest of the securities market and investors in securities - whether SEBI as a market regulator could be said to have jurisdiction to pass any of the directions as contained in the SCN? - HELD THAT:- Appearing on behalf of the respondents, accepts notice.
Reply to the appeal, if any, be filed within two weeks. The observations made in Paragraph 78 of the impugned Judgment and Order as to powers and jurisdiction of SEBI shall remain stayed till the next date of hearing.
List the matter in the second week of December, 2019.
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2019 (11) TMI 1016
Disposal of the complaint on the SCORES platform - appellants are aggrieved by the disposal of their complaints on the SCORES platform by the Securities and Exchange Board of India - contended that the manner in which the complaints of the appellants have been disposed of in a mechanical and summary manner - HELD THAT:- If the complainants are aggrieved by the disposal of the complaint on the SCORES platform the said complainants have a right to file an appeal under Section 15T of the SEBI Act. We are further of the opinion that the computer generated communication by the respondent on the SCORES platform, even though it may be an administrative communication is nonetheless an order since it disposes of the lis between the parties and disposes of the complaint and the issues raised by the complainants. The said communication / order as the case may be, in our opinion, is appealable.
In the instant case, we find that written complaints made to SEBI from 2013 onwards has not been disposed of as yet but complaints filed on the SCORES platform has been disposed of without deciding / settling the issue that was raised in the complaints. Thus, disposal of the complaints by the respondents on the SCORES platform is no disposal in the eyes of law. It is merely an eye wash without disposing of the complaints and without settling the controversy involved in the complaints.
SCORES is an online platform designed to help investors to lodge their complaints pertaining to the securities market. These complaints are filed online with SEBI against listed companies and SEBI registered intermediaries. All complaints received by SEBI against listed companies are dealt through SCORES
The complaint made by the appellants was a serious issue with regard to incorrect disclosures being made by three companies regarding their promoter shareholding and consequently failure of these three companies from complying with the minimum public shareholding requirement as per Rule 19A of the SCRR read with 38 of the LODR Regulations. The disposal of the complaint does not refer to the issues raised by the complainants / appellants with regard to the non-disclosure of the promoters’ shareholding or violation of the minimum public shareholding requirement under the Rules and Regulations. On the other hand, the communication intimated to the appellants has closed the complaint in a roundabout manner intimating the appellant that the information provided by the complainants would be treated as market intelligence and would also be treated as confidential. Why would the complaint of the appellants be treated as market intelligence or be treated as confidential is not known nor in our view the complaint is such which requires SEBI to treat it as market intelligence or confidential.
It is not a price sensitive matter which requires SEBI to keep such matters under wraps or confidential in nature.
We also find it strange to note that SEBI in the said order / communication states that the information submitted by the appellants would be analyzed and investigation would be made in a holistic manner but, on the other hand, in the same breath states that SEBI would neither confirm nor deny the existence of any investigation conducted by them.
We find that before the Delhi High Court SEBI informed that the matter is under investigation by them. We find it strange that while disposing of the complaint SEBI would neither confirm nor deny as to whether investigation in the complaint is going on or not.
Approach adopted by the respondents to be a strange one. Such computer generated disposal of a serious complaint speaks volume on the conduct of the respondents in treating the minority shareholders in this shabby manner. It seems that the respondents have lost sight of the mandate provided to them under Section 11 of the SEBI Act which mandates SEBI to safeguard the interest of the investors. No hesitation in stating that the SEBI as a regulator in the instant case has not performed its duties and has kept the complaint pending for more than six years which speaks volumes by itself. The Tribunal fails to fathom as to why the complaint could not have been decided unless SEBI officials had a vested interest in not deciding the matter.
We set aside the communication / order passed by the SEBI on the SCORES platform. The appeal is allowed. We direct the appellants to file a consolidated representation / complaint before SEBI annexing the earlier complaints within four weeks from today.
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2019 (11) TMI 847
Claim of fee continuity benefit - what constitutes annual turnover for the purpose of SEBI registration fee ? - HELD THAT:- On a complete perusal of all the facts and the provisions in various Circulars/ Regulations more particularly stated in Circular / Press Note dated August 28, 2003 issued under SEBI (Broker Regulations) Rules, 1992 we cannot agree with the contentions of the appellant that they are entitled for fee continuity benefit treating the initial registration granted to Pennar on August 6, 1994. The correspondences and the relevant regulations make it very clear that the appellant has been rightly treated as a fresh registration with effect from the date of granting the new registration on October 20, 2000 and thereafter cannot indefinitely continue to claim that it is case of transferring some portion of equity to Garban and the original legal entity continues.
It is a fact that original legal entity as a company continues but the question to be answered is whether for the purpose of granting registration as a broker is it the same entity. Incorporation as a company and registration as a SEBI intermediary are two different and distinct processes where there are additional rules and regulations to be adhered to. This is a case of a complete takeover of a brokerage by a new entity Garban and the new registration granted by SEBI is in the name of Garban. Both the NSE and SEBI have categorically stated to the appellant through multiple correspondences that the appellant cannot claim fee continuity benefit only on the ground that the appellant has been seeking the same through their earlier correspondences. Those claims were put to rest the day SEBI granted a fresh registration number and from that date it has to be treated as a separate broker distinct from the original Pennar as far as its business is concerned. Accordingly, the orders relied on by the appellant relating to a Company is a legal entity in perpetuity, though correct, is not relevant in the context.
The date of initial registration of the appellant is to be treated as October 20, 2000, the date of granting the fresh registration by SEBI and all fee liabilities arising from its turnover have to be recalculated with effect from this date. Since rate of interest of 15% per annum has been implemented on delayed payment by SEBI from December 16, 1998 interest, if any, on the registration fee / turnover fee @ 15% per annum also is due from the appellant on any delay in depositing/ paying the principal amount of fee.
Rate of turnover fee applicable to the appellant - we do not agree with the submissions of respondent SEBI. It is on record that the appellant did give an auditor’s certificate. The turnover proforma produced by SEBI before us consists of two parts; its upper part showing the turnover table and lower part showing fee computation table. What is argued before us is that the auditor certificate provided by the appellant consisted of only the upper portion of the relevant proforma giving the turnover table and that too for part of the period i.e. 1999-2000 to 2002-2003; not the full five years period from October 2000 – October 2005. The latter argument has no meaning since in 2003 the appellant could not have provided turnover data upto 2005.
When it is a fact that the appellant was dealing only in WDM segment and the turnover fee applicable to WDM segment was only 0.001% it was not appropriate for SEBI to impose a turnover fee at the rate of 0.01% thereby imposing such a huge burden on the appellant without any legal basis; which is highly arbitrary. If SEBI had any doubt regarding the turnover figures, being the regulator those doubts should have been removed before passing an order, particularly when the order imposes a very heavy burden on the appellant. When SEBI could calculate the fee liability based on the figures given by the appellant it was incumbent on SEBI to apply the applicable rate of fee based on the admitted position of the appellant trading only in the WDM segment. Therefore, we set aside the imposition of fee on the appellant @ 0.01% of its turnover.
In conclusion, we pass the following directions:-
(a) Appellant’s claim of fee continuity benefit is devoid of any merit and is dismissed.
(b) SEBI shall recalculate the turnover fee liability from October 20, 2000 for a period of five years at the rate of 0.001% of the turnover of the appellant.
(c) After adjusting the deposits / payments already made by the appellant, if any outstanding amount of principal is due from the appellant SEBI is at liberty to impose simple interest on such outstanding payment at the rate of 15% per annum.
(d) Appellant shall submit the turnover data in the prescribed proforma for the five year period from October 20, 2000 within one month from the date of this order and SEBI shall compute the fee liability and communicated to the appellant within a period of one month thereafter. Payment arising from the revised calculations, from either of the parties, shall be completed within one month thereafter.
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2019 (11) TMI 846
Suspension of registration of a broker with the National Stock Exchange of India Limited (‘NSE’ for short), for a period of one year by Whole Time Member (‘WTM’) of SEBI - HELD THAT:- Safekeeping all the documents and material relating to a broker’s functions is a basic responsibility. Conflicting replies relating to the role of BGSPL and Shri Puneet Agarwal as well as relating to other similar clients owned premises based branch operations therefore do not absolve the appellant fully from the violations upheld in the impugned order. It is held in the impugned order that the appellant violated various provisions of law, regulations and circulars issued thereunder.
These include SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, PFUTP Regulations, Securities Contract (Regulations) Act, 1956 and the Securities Contract (Regulations) Rules, 1957 and various circulars issued by SEBI. Some of the violations though may be technical and procedural in nature.
We also do not agree with the contentions of the appellant that client codes given in the contract notes are just reference codes in the absence of SEBI identifying those clients. When BGSPL was only one client and its unique client code was used there was no requirement for using other reference codes. Therefore, we do not find any fault in the finding in the impugned order that the appellant was using the services of unregistered sub brokers or some of its clients were actually discharging functions of sub brokers without SEBI registration. Whether BGSPL or some other such entities got the registration for sub broker-ship later is not germane to the matter because what is relevant is whether they were certified sub brokers at the relevant time.
Therefore, given these major violations we do not find any fault in penalizing the appellant with an order of suspension.
Time frame is very important while judging gravity of offences across time and in doing justice. We also agree with the submissions of the appellant that a long period of suspension of a market intermediary like a broker would make them completely defunct which, in the given context would make the punishment disproportionate. At the same time we do not agree with the submission that a warning would suffice since utilizing unauthorized sub-broker type dealing by a broker is a serious offence irrespective of the vintage of the offence. Balancing all these factors and circumstances into account we are of the view that a complete suspension of the appellant for a period of one year may not do full justice. Therefore, we modify the order of one year suspension of the appellant to that of one year restriction from taking any fresh clients.
Therefore, the appellant shall not admit or take business from any new clients for a period of one year from the date of this order.
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2019 (11) TMI 845
Collective Investment Scheme (‘CIS’) without SEBI registration - violating Section 12(1B) of the SEBI Act, 1992 and Regulation 3 of the SEBI (Collective Investment Scheme) Regulations, 1999 (‘CIS Regulations, 1999’) - Non obtaining certificate of registration for running such a scheme under SEBI Act and CIS Regulations - HELD THAT:- The appellants are in fact running a CIS. It is also an admitted fact that the appellants did not obtain a certificate of registration for running such a scheme under SEBI Act and CIS Regulations, 1999. Accordingly, the penalty imposed on the appellants cannot be faulted. The penalty imposable under Section 15(D)(a) of SEBI Act at the relevant time was ₹ 1 lakh for each day during which an entity carries on any collective investment scheme or ₹ 1 crore whichever is less.
In the instant case, the appellant Company was set up in 2010 and the money collected in the form of investment in joint venture project / scheme during 2012-13 and for periods ranging from 4 to 7 years. Therefore, the Company and the scheme came into existence many years after notification of the CIS Regulations, 1999 and the schemes were flouted despite the fact that Regulations notified in the year 1999 makes it mandatory for obtaining registration from SEBI for hoisting any such a scheme. Accordingly, we do not find any anomaly in the direction to pay a penalty of ₹ 25 lakh jointly and severally by the appellants which takes into account the mitigating factors under Section 15J of SEBI Act - Appeal is dismissed.
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2019 (10) TMI 1590
Insider trading based on the unpublished price sensitive information (“UPSI”) - Violation of provisions of the PIT Regulations, 1992 read with section 12A of the SEBI Act - As decided by SAT [2019 (10) TMI 109 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] Admittedly, the appellants have been found to be connected persons under section 2(c) of the PIT Regulations and were also found to be deemed to be connected persons under section 2(h). The appellants were also found to be insiders under section 2(e) of the PIT Regulations and were found to have traded in the shares having knowledge of the price sensitive information. Consequently, all the appellants being connected persons have been held to be equally liable to pay the amount of penalty jointly and severally. We thus do not find any error in this regard.
HELD THAT:- We find no ground to interfere with the impugned order passed by the Tribunal. The appeal is, accordingly, dismissed.
Pending application(s), if any, shall stand disposed of.
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