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SEBI - Case Laws
Showing 401 to 420 of 555 Records
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2019 (3) TMI 884
Condonation of delay - delay of 73 days - Delisting of securities - principle of a specific remedy - filing an appeal against the decision of a stock exchange - period of limitation - Appeal to Securities Appellate Tribunal - mandation of filing the appeal within the stipulated period - delay of 73 days in filing the appeal - sufficient cause - HELD THAT:- An appeal against the decision of a stock exchange shall be filed within forty five days and that the period beyond forty five days can be condoned if sufficient cause is shown to the Tribunal.
Having given our thoughtful consideration in the matter and upon perusing the provisions of Section 21A and Section 23L, we are of the opinion that the provision of Section 23L are wide enough to embrace an appeal filed against a decision of delisting. Section 23L cannot be given a narrow interpretation so as to exclude the exercise which are covered by Section 21A. The argument of the respondent that, if the matter is covered by Section 21A then Section 23L would be inapplicable by necessary implication especially when there is a specific provision cannot be accepted. There is no doubt that when there is a specific provision then it must be governed by that provision and not by the general provision (in terms of the latin maxim “generalia specialibus non derogant”) i.e. to say whenever a specific remedy is made available in law, the other remedy, more general in nature, necessarily gets excluded.
In our view, this principle of a specific remedy would exclude the general remedy would not be applicable in the instant case. This sound principle of jurisprudence, namely, that a special provision on a matter excludes the matter of a general provision on that matter cannot be applied in a situation when there are two provisions dealing with remedies in filing an appeal. When there is a plurality of remedies, the principle of specific provision excluding the general provision by necessary implication will not be applicable. In the instant case, there is no conflict between the two provisions namely Section 21A and Section 23L. Even if the two remedies happen to be inconsistent, they continue for the person concerned to choose from, until he elects one of them. In this regard, the doctrine of election will come into play and the aggrieved person has the remedy either to file an appeal under Section 21A or under Section 23L.
The contention that there has to be a harmonious construction of the two Rules would not applicable in the instant case as there is no conflict in the two provisions. The principle of harmonious construction would be applicable when there is a conflict between two provisions. The Rule of construction is well settled namely, that when there are, in an enactment, two provisions which cannot be reconciled with each other, they should be so interpreted, that if possible, effect should be given to both. This is known as harmonious construction
In the instant case, a composite order under Regulation 22 and 23 of the Regulation of 2009 has been passed by the stock exchange. Thus, an appeal determining the fair value can be challenged in an appeal filed under Section 23L of the SCRA.
In the light of the aforesaid, when two provisions deal with the remedies of filing an appeal the doctrine of election will come into play and it is open to an appellant to file an appeal either under Section 21A or under Section 23L. We consequently hold that an appeal can be filed against delisting of the securities under Section 23L. The appeal filed by the appellant is thus maintainable.
There is a delay of 73 days in filing the appeal - the reason for the delay is that the appellant company has its registered office at Ahmedabad, in Gujarat and it took them some time to find a specialized lawyer dealing in securities market. Thereafter, it took some time to collect, compile as well as collate various documents as required by the advocate.
Having heard the learned counsel for the parties, on this aspect we are of the opinion that sufficient cause has been explained by the appellant which is adequate as well as satisfactory and, therefore, we are of the opinion, that the delay of 73 days in filing the appeal should be condoned -the expression “sufficient cause” should receive a liberal construction so as to advance substantial justice when no negligence or inaction or want of bonafides is imputable to a party. Consequently, the delay in filing the appeal is condoned . See Ram Nath Sao alias Ram Nath Sahu & Ors. Vs. Gobardhan Sao & Ors [2002 (2) TMI 1280 - SUPREME COURT]
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2019 (3) TMI 828
Insider trading - Reported statement of the Chairman of a Company regarding his interest to acquire another Company is sufficient to invoke the provisions of PFUTP Regulations, 2003 - Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control - HELD THAT:- First of all the statement attributed to the appellant is as reported by a news reporter. There is no evidence as to the appellant acquiring any shares of Amrutanjan. On the other hand, what is available on record is that no effort in acquisition has been made. The appellant has clarified to the Stock Exchange immediately on receiving their communication on April 5, 2010 that it was a general statement relating to his business interest. The statement is further emphasized by the clarification provided by Amrutanjan itself which also stated that “the said news item is false and without basis and the promoters of the Company have no intention to sell out and the promoters do not foresee any reason to dilute their stake and exit from the company”.
While dealing with a serious issue of fraud the authorities need to ascertain the motive in the absence of any connecting evidence. Is nothing to prove that the quoted statement in the news report is exactly what is stated by the appellant unless the statement is derived from a written communication issued by the Chairman or by his Company which is not the case here.
There is no evidence to link to a motive. Neither the appellant nor his Company Emami had / have acquired the shares of Amrutanjan. In any case they were actually interested in acquiring; the Chairman of the acquiring company would not have talked up the prices of the shares of the acquiring company (Target Company). In the absence of any motive or a scheme or any evidence a reported news item alone is not sufficient to prove a serious charge like fraud. If at all the reported statement is correct it could an expansive mood of the person. Silence as a sign of wisdom cannot be stretched to a point of total silence in the world of securities market. Substantial movement in the prices etc. of a profitable company with sufficient liquidity cannot be attributed to such a reported statement alone.
Before parting with, the limitations of a comparative static analysis as given in the impugned order also needs to be emphasized. The comparison made in the impugned order is by taking the price / volume data of April 1, 2010 and April 5, 2010. However a look at the data for 30th and 31st March, 2010 also give a different picture.
On April 1 the volumes traded in NSE was 308538 shares and in BSE was 144644 shares which is shown to have increased to 887705 shares in NSE and 474050 in BSE on April 5, 2010. But if we take the volume on March 31, 2010 instead of April 1, 2010 the volume in NSE was 834070 and in BSE 393896. So, the volumes on March 31, 2010 and April 5, 2010 are not much different while when one compares the volume of April 5 with that of April 1 the volumes are quite different. This shows that a two day comparison can be misleading and is not sufficient to establish evidence for a serious offence like fraud.
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2019 (3) TMI 197
Penalty u/s 15HB of SEBI Act - Penalty for failure to furnish information, return, etc - determining the quantum of penalty - test of preponderance of probability - HELD THAT:- Huge volume of trading between same set/group of brokers can in a given case reasonably point to some kind of a fraudulent and manipulative exercise with prior meeting of minds. Further, there is a difference between synchronized trading involving bulk quantities and negotiated trades as a result of consensual bargaining involving synchronization of buy and sell orders resulting in matching thereof as per permissible parameters which are programmed accordingly.
Test of preponderance of probability applies for the adjudication and determination of civil liability for violation of the SEBI Act or the provisions of the Regulations framed thereunder (see RAKHI TRADING PRIVATE LTD. [2018 (2) TMI 580 - SUPREME COURT OF INDIA]). Keeping the aforesaid parameters in mind, the adjudicating authority had imposed penalty of ₹ 3,00,000/( Rupees three lakhs only) under Section 15HB of the SEBI Act, which has been upheld by the Appellate Tribunal being commensurate with the violation.
No infirmity with the concurrent findings or with the quantum of penalty imposed and the same is upheld.
Penalty for violation of Section 11C( 3) under Section 15A( a) of the SEBI Act - HELD THAT:- During the course of hearing by SEBI, most details as provided by the appellants were general in nature. In case there was no violation pertaining to mobilization of funds from the public under various schemes/arrangements, this could have been so stated in clear and categoric terms. Moreover, the contention that the offices were sealed which rendered them incapable to furnish information has been rejected for two good reasons.
First, this stand is belated and held to be an afterthought when it could have been raised at the first instance when the reply dated 5th December, 2012 was furnished, given that the records were seized by the police on 5th May, 2011. Second, assertion was contradicted by their own conduct when during the proceedings they had submitted a few documents, which were incomplete and not as desired. They did not make any distinction as to the documents within their possession and as to those with the police.
Appellate Tribunal had in these circumstances affirmed the finding that there was a lack of good faith and failure in complying with the aforesaid notices/letters/summons/emails. Adjudicating Officer had, therefore, rightly recorded that noncompliance of summons had hampered the further course of investigation. The failure was without any justification. Agreeing with the said findings, the Appellate Tribunal has observed that details were withheld with a view to delay the investigation being conducted by SEBI to the detriment of investors from whom funds were collected by the appellants in contravention of CIS Regulations.
No fault with the reasoning given. We are of the opinion that the fault squarely lied with the appellants and, thus, penalty of ₹ 1,00,00,000/( Rupees one crore only) for violation of Section 11C( 3) under Section 15A( a) of the SEBI Act does not call for any interference.
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2019 (2) TMI 1742
Fund mobilizing activities through the issuance of RPS - appellant responsible jointly and severally for making the refund alongwith interest under Section 73(2) of the Companies Act - “officer who is in default” - HELD THAT:- WTM has failed to consider the provisions of Section 5 of the Companies Act and has mechanically held that the appellant was responsible jointly and severally for making the refund alongwith interest under Section 73(2) of the Companies Act. Unless and until a finding is given that the appellant is an officer in default, the mandate provided under Section 73(2) cannot be invoked against the appellant. In the instant case, the appellant has annexed documents to indicate that the company had a managing director, namely, Mr. Indranath Daw and, therefore, as per the provisions of Section 5 the managing director would be an officer in default. We also find that there is no finding given by the WTM that the appellant was the managing director or whole time director or was a person charged by the Board with the responsibility of compliance with the provisions of the Companies Act and, consequently, could not be made responsible for refunding the amount under Section 73(2).
The Tribunal in the case of Manoj Agarwal [2017 (7) TMI 1104 - SECURITIES AND EXCHANGE BOARD OF INDIA MUMBAI] found that there was no material to show that any of the officers set out in clauses (a) to (c) of Section 5 or any specified director of the said company was entrusted to discharge the application contained in Section 73 of the Companies Act. In the instant case, there is sufficient material on record to show that there was a managing director and in the absence of any finding that the appellant was entrusted to discharge the application contained in Section 73 of the Companies Act, the direction to refund the amount alongwith interest from the appellant is wholly illegal.
Appeal is allowed. The impugned order in so far as it relates to the appellant is quashed.
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2019 (2) TMI 1685
Removal from Dissemination Board of NSE - Illegal buy back of shares - HELD THAT:- The appellant did not accept the letter of offer and chose not to sell the shares back to the Company. The buy-back offers were made in the year 2016-17 and after two years the appellant has now filed the present appeal contending that the buy-back offer made by the Company was wholly illegal in as much as the circular dated April 17, 2015 and October 10, 2016 issued by SEBI only permitted the promoters to buyback the shares and did not allow the Company to buy-back the shares.
The contention of the learned counsel for the appellant is patently misconceived as we find that SEBI issued a circular dated July 25, 2017 permitting the Company to buyback the shares so as to provide an exit to the public shareholders. In view of the said circular we do not find any illegality being made in the buy-back of the shares by the Company. In any case, we do not find any reason to disturb the arrangement made two years ago at this belated stage.
In the light of the aforesaid, we do not see any illegality in the order dated July 2, 2018 removing respondent no. 3 Company from the Dissemination Board.
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2019 (2) TMI 1044
Determination of offer price in accordance with Regulation 8 (2) (c) of SAST Regulations, 2011 - Appeal to the Securities Appellate Tribunal - Offer Price of ₹ 61.73 per share, as being offered by the LIC - Held that:- In the present case, the shares of the target company i.e. IDBI are listed on Bombay Stock Exchange Ltd. (BSE) and National Exchange of India Ltd. (NSC). Union of India is presently in the control of the target company. LIC was holding 67,36,20,000 shares in the target company, representing 14.90% of the voting rights in the target company, as a public shareholder of the target Company. The Board of Directors of the target company in their meeting held on 4.10.2018, authorized the issuance and allotment of equity shares aggregating upto 51% of the fully diluted voting share capital to LIC by way of a preferential issue. Therefore, an open offer was required to be made in terms of Regulation 3 (1) and (4) of the SAST Regulations, 2011.
The LIC has issued an announcement of an open offer on 4.10.2018 in terms of Regulations 13 (2) (g) of the SAST Regulations, 2011. As needed in terms of Regulation 16 of SAST Regulations, 2011, LIC through its Merchant Banker i.e. ICICI Securities Limited, filed a draft letter of offer with SEBI on which SEBI issued its observation letter on 7.12.2018 in terms of Regulations 16 (4) of the SAST Regulations. Thus, the price to be paid to the shareholders of the target company for acquisition of their shares in the open offer made by the LIC, has been determined in terms of Regulation 8 of the SAST Regulation, 2011.
It appears that the case of the petitioner proceed on the premise that in terms of the provisions of LIC Act, 1956 and resultant disclosure made by the LIC in clause 4.5 of the letter of offer, to the effect that LIC is wholly owned by the Central Government, therefore, the Central Government is the 'person acting in concert' with LIC within the meaning of Regulation 2 (q) of the SAST Regulations, 2011, for the purpose of present acquisition of control of the target company by the LIC. On this assumption, the petitioner is of the view that since on 25.5.2018, the Government of India acquired 1,09,73,26,649 number of shares of the target company at the price of ₹ 71.82/- per share, thus, the said price of ₹ 71.82/- per share paid by the Government of India being 'person acting in concert' of LIC will fall within Regulation 8 (2) (c). The petitioner is of the view that price of ₹ 71.82/- per share, being highest amongst all parameters laid down in Regulation 8 (2) (a) to (f) should be the price of open offer.
Examining the term “persons acting in concert” DAIICHI SANKYO CO. LTD. VERSUS JAYARAM CHIGURUPATI [2010 (7) TMI 289 - SUPREME COURT OF INDIA] has observed that the deeming provision does not provide that the mere existence of a holding-subsidiary relationship is sufficient to create this relationship. The deeming provision does not dispense with the requirement that the parties must have cooperated for the common objective or purpose of substantial acquisition of shares, and held further that this must be established as a matter of fact, on an analysis of the conduct of the parties. In addition, the Apex Court found the relationship of “persons acting in concert” must exist not at the time of the public announcement, but at the time of acquisition, for the purposes of Regulation 20(4)(b) of SAST Regulations, 2011.
On applying the aforesaid ratio to the facts of the present case, it can easily be inferred that Union of India cannot be term as 'person acting in concert' with LIC and consequently, Regulations 8 (2) (c) of the SAST Regulations, 2011 has been applied correctly in the present case and the Offer Price of ₹ 61.73 per share, as being offered by the LIC is correct as per the justification given at para 6.1.5 and 6.1.6 of the Letter of Offer, the said price has already been affirmed by a judicial verdict.
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2018 (12) TMI 1979
Non–executive director liability on omissions or commissions by a company - Noticees had failed to exercise reasonable care and had failed to act diligently - ad-interim ex-parte order could be passed by SEBI in the interests of investors or the securities market - Noticee no. 4, 6, 7 & 8 have contended that they were past non–executive directors of the company, and hence they cannot be held liable for the violations committed by the company - HELD THAT:- It is pertinent to note that the interim order in the present case was passed under the provisions of sections 11(1), 11(4) and 11B of the SEBI Act. The second proviso to section 11(4) clearly provides that “Provided further that the Board shall, either before or after passing such orders, give an opportunity of hearing to such intermediaries or persons concerned”. Further, various courts while considering the aforesaid sections of the SEBI Act have also held that principles of natural justice will not be violated if an interim order is passed and a post-decisional hearing is provided to the affected entity.
Noticees by their own admission, have stated that they became directors of the company to recover the loans (loan details recorded in paras 7 (A) (ii) and 7 (B) (xii) of this order) provided by them to Mr. Pankaj Goel. They have not adduced any evidence to show that they have taken any corrective measures as regards the violations committed by F6 Finserve. It is only in 2018, after SEBI started examining the affairs of F6 Finserve and its other directors namely, Mr. Pankaj Goel and Ms. Meenu Goel i.e. after the inspections of F6 Finserve conducted by NSE and SEBI that the Noticees have taken steps against Noticee nos. 1, 2, 3 and 5 as stated in their reply and additional submissions which are recorded in para 7 and 9 of this order.
All the directors of the company including Noticee nos. 4, 6, 7, 8, 9 and 10 who are non- executive directors had provided their personal properties as security for the loan availed by F6 Finserve and had also given personal guarantee. These properties were also used as security for the overdraft facility limit of Rs. 2 Crore to F6 Commodities. From the aforesaid, it is difficult to conclude being directors of the company, having mortgaged their personal properties and acting as guarantors for the company, the Noticees were not aware of the way the affairs of the company were being conducted and the violations committed by the company as stated in para 2 and 3 of this order.
As in exercise of the powers conferred u/s 19 of the SEBI Act, read with Sections 11(1), 11(4) and 11D thereof, hereby confirm that the directions issued vide ad interim ex parte order as against the Noticees shall continue until further orders.
In the matter of Amrapali Aadya Trading & Investment Pvt. Ltd. decided on October 31, 2018 wherein similar circumstances existed, to protect the interest of clients/ investors it was directed that a separate demat account and separate interest bearing bank account shall be opened wherein the securities and funds belonging to the Noticee therein would be transferred. In the extant matter, the interim order dated May 29, 2018 directed the depositories, Registrar and Transfer Agents and banks that no debits/ transfer is made from the accounts of the Noticees. I, therefore, direct as under:
a. Since the claim value is higher at NSE, NSE Defaulters Committee shall, as expeditiously as possible, open and operate a dedicated demat account where all the securities lying in the demat accounts of F6 Finserve shall be transferred.
b. The NSE Defaulters Committee shall open and operate a dedicated interest bearing bank account with a Nationalized Bank where all the funds lying in various bank accounts held in the name of F6 Finserve, Mr. Pankaj Goel and Ms. Meenu Goel, shall be transferred.
c. Since the claim value is higher at MCX, the MCX’s Defaulters Committee shall, as expeditiously as possible, open and operate a dedicated demat account where all the securities lying in the demat accounts of F6 Commodities shall be transferred.
d. The MCX’s Defaulters Committee shall open and operate a dedicated interest bearing bank account with a Nationalized Bank where all the funds lying in various bank accounts held in the name of F6 Commodities shall be transferred.
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2018 (12) TMI 1685
Exit option to stock exchanges that had been de-recognized or had become non-operational - petitioners claim that in terms of a Circular dated 10.10.2016 BNL could either raise capital for listing on a Nation-wide Stock Exchange or provide an exit to the investors as specified in Annexure-A to the said Circular. Therefore, removal of BNL from BSE Dissemination Board is contrary to the Circular dated 10.10.2016 -
DSE was derecognised on 19.11.2014 and on 13.07.2015, DSE sent BNL on the Dissemination Board of BSE. In the meanwhile, on 19.02.2015, BNL was listed on the Calcutta Stock Exchange (CSE). It is stated that BNL sent several communications stating that it was not required to be placed on the Dissemination Board of BSE as it was listed on a recognized exchange, namely, CSE
HELD THAT:- According to BNL, it had secured the listing on CSE and therefore was not required to be shifted to the Dissemination Board of BSE. Prima facie, this contention is unmerited for two reasons. First, that such companies, which were exclusively listed on a derecognised stock exchange were required to be listed on the Nation-wide Stock Exchange on or before the exit of the derecognised stock exchange. And, second, the provisions of sub-paragraph (v) of paragraph 3 of the Circular dated 22.05.2014 has to be read in conjunction with sub-paragraph (i) of paragraph 3 of that Circular; which means that the listing must be on a Nation-wide Stock Exchange. Admittedly, CSE is not one such Stock Exchange. However, it is not necessary to examine this issue any further, in view of the events that have transpired subsequent to the filing of the present petitions.
On 20.03.2018, the learned ASG appeared for SEBI and made a statement that BNL was one of the 63 companies, which was listed on CSE which has now been re-transferred to the Dissemination Board of BSE/NSE and therefore, the petitioners’ grievance would not survive.
BNL had not opted for any of the two options as mentioned in the letter dated 10.08.2018 and, therefore, is required to be transferred to the Dissemination Board. In view of the above, the principal grievance of the petitioners does not survive. This is so because the petitioners’ challenge to SEBI’s clarification dated 06.04.2017 was premised on the basis that it had permitted companies listed on the CSE to be removed from the Dissemination Board contrary to its earlier circular dated 22.05.2014 and 10.10.2016.
This Court does not consider it necessary to examine the question whether the removal of BNL’s name from the Dissemination Board of BSE was otherwise illegal as BNL is now required to be replaced on the Dissemination Board.
The petitioners have also raised certain other issues with regard to the manner in which the shares of the existing shareholders are to be valued. Controversy in this regard is premature and further not a subject matter of the petitions as originally filed. It is, thus not necessary to examine that issue. The aforesaid questions are, accordingly, left open and all contentions of the parties are reserved.
In addition, the petitioner has also raised certain grievances regarding the identity of the promoters of BNL. This court is of the view that the said issues are required to be examined by SEBI in the first instance. It would thus be open for the petitioners to make a complaint to SEBI. Needless to state that if such complaint is made, SEBI shall examine the same in accordance with law.
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2018 (11) TMI 1635
Petitioner seeking adjournment - HELD THAT:- As petitioner seeks an adjournment on the ground that the main counsel has undergone Angioplasty surgery recently.
In the meanwhile, respondents shall file their counter affidavits within four weeks from today. Rejoinder thereto, if any, be also filed before the next date of hearing.
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2018 (11) TMI 1633
Stay of show cause - appropriatness for the petitioner to give reply to the show cause notices - HELD THAT:- We are not inclined to interfere with the order impugned in the special leave petition. The same is, accordingly, dismissed. However, the petitioner will be at liberty to avail of such remedy as may be open, in the event adjudication in the show cause notice is adverse to it.
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2018 (11) TMI 1586
Determination of offer price of shares - price per share as computed on 18.07.2018/8.08.2018, which according to the petitioner are dates on which the respondent no.2 Life Insurance Corporation of India Bar and Bench (LIC) had agreed to acquire further shares in IDBI Bank Ltd. - petitioner’s contention is that LIC and IDBI Bank Ltd. have violated the provisions of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 thereby benefiting LIC - HELD THAT:- Admittedly, the petitioner has an alternate remedy of filing a complaint before the Securities and Exchange Board of India (SEBI).
Learned counsel for SEBI states that the complaint, if any, made by the petitioner would be examined and the necessary decision would be taken. In view of this statement, no further orders are required to be passed in this petition except to direct that SEBI treat the present petition as a complaint and take an appropriate decision within a period of two weeks from today. It is so directed.
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2018 (10) TMI 1684
Stay of show cause - appropriatness for the petitioner to give reply to the show cause notices - HELD THAT:- The petitioner is required to reply to the show cause notice to enable the respondent No.1 pass a final order against which the petitioner has a remedy of appeal before the SAT. We have been informed one of the noticee has already approached the SAT.
That insofar as the subsequent notices are concerned, we agree with the submission of Mr. Mehta, appropriate for the petitioner is to give reply to the said notices. In any case, if any order is passed to the prejudice of the petitioner, remedy is for the petitioner to approach the SAT. The Court is not inclined to entertain this application, the same is dismissed.
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2018 (8) TMI 2115
Freezing of Bank account of petitioner - Seeking withdrawal of amount held in Bank Account - imposition of condition of furnishing bank guarantee of any nationalized bank of an amount equal to the amount lying on such account on the date of withdrawal - HELD THAT:- Before the Supreme Court, the petitioner sought permission to sell further shares - the Supreme Court permitted the petitioner to sell its remaining shares and securities through recognized stock exchanges and registered stock brokers and credit the sale proceeds in the bank account maintained by the petitioner with ICICI Bank. It is a matter of record that the sale proceeds of the remaining shares brought a sum of Rs.42.51 crores which was deposited in the petitioner's said bank account.
One may recall, the initial order restraining the petitioner from dealing in Indian Stock Market was passed by SEBI. However, when these proceedings were on going, the CBI restraint order dated 26.10.2006 also came to be passed. The Appellate Tribunal had permitted the petitioner-Company to sell some of the shares and to deposit sale proceeds in the bank account. Along with existing balance added by the sale proceeds, the total came to approximately Rs.38 crores. The Supreme Court further permitted the petitioner to sell shares proceeds of which came to Rs.42.51 crores - All along, the Supreme Court had made a clear distinction between the two amounts. Insofar as, sum of Rs.42.51 crores is concerned, the Supreme Court had concluded that the same was not covered under CBI's restraint order. The petitioner was allowed to withdraw the same unconditionally. However, with respect to rest of the amount, the Supreme Court granted no relief except allowing the petitioner to challenge such restraint order passed by CBI. Thus, the first contention of the counsel for the petitioner that there was no distinction between the two amounts is not well founded. Had the case been so simple, surely the Supreme Court itself would have released both the amounts.
Quite apart from the various aspects emerging from the affidavit, it is neither possible nor correct on my part to interfere at this interim stage in the present proceedings and hold that all the above assertions made by CBI are incorrect and there is no trail of tainted money having been routed through foreign destinations back into the said account in ICICI Bank.
Discharge of Dharmesh Doshi, accused No.8 - HELD THAT:- Learned Magistrate noted that he has already been discharged. It is primarily on this basis that he permitted the petitioner to withdrawal of the amount. He, however, imposed condition for providing bank guarantee of a matching sum. If the discharge of accused No.8 had attained finality perhaps the petitioner was justified in contending that petitioner should have been allowed withdrawal of the amount unconditionally. However, discharge of Dharmesh Doshi accused No.8 is not yet final. Revision Petition filed by CBI against the order of the Magistrate is pending before the Sessions Court. To safeguard the interest of the respondents, it would be absolutely necessary to maintain the condition imposed by the learned Magistrate.
Petition dismissed.
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2018 (7) TMI 2334
Determination of jurisdiction of High Court for SEBI violations - Jurisdiction of Mumbai HC or Andhra Pradesh HC - listing of the stocks and shares of that fifth respondent with the appellant appears to have been made the subject matter of the writ petition by levying challenge to the decision of the appellant to de-list the fifth respondent's shares and stocks - HELD THAT:- As decision to de-list the shares was taken by the appellant at Mumbai and the trading of the shares is also at Mumbai and suspension of that has also been in compliance with the prescriptions made and imposed on the appellant. Predominantly, the territorial jurisdiction therefore falls exclusively within the jurisdiction of Mumbai Courts may, including the High Court of Judicature at Mumbai.
When notice is issued to the public at large informing a particular fact situation, without any adverse decision as against any particular person, particularly, the noticee, it would not be appropriate for the writ Court to deal with the matter as if the authority which issued such public notice has to face litigations in various High Courts of India, rather than confining such litigation to the territorial jurisdiction of the High Court within whose territorial limits, that authority is; and, from where that notice was issued. On a plain consideration of the situation in hand, we do not see that this Court has territorial jurisdiction over the matter in hand. We hold so.
In view of the finding recorded above that this Court does not have the territorial jurisdiction to entertain the writ petition from which this appeal arises, the jurisdiction exercised by the learned Single Judge in granting the impugned interlocutory order is also unsustainable. In the result, this Writ Appeal is allowed vacating the impugned order, leaving open all issues inter se the appellant and respondent Nos. 1 and 5.
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2018 (6) TMI 1837
Violation of SAST Regulations - takeover exercise couched as a loan agreement - secured loan advanced by VCPL to RRPR - scope of conversion option and the purchase option (outlined in the loan agreement) and call option - No public announcement to acquire shares of the target company made - whether execution of the set of agreements (i.e the Loan Agreement between VCPL and RRPR along with the Call Option agreements through VCPL’s affiliates binding the Promoters of NDTV) partakes of the structure of a loan transaction or an arrangement entered into by the parties to acquire “control” over NDTV under Regulation 12 read with regulation 14(3) of SEBI (SAST) Regulations, 1997? -
HELD THAT:- All the concerns attached to the manner in which the loan agreements and call option agreements were entered into and the subsequent conduct of the noticee do not substantiate its argument that the transaction was only in the nature of a loan. Instead, it appears that the loan agreement and call option agreements were used to shroud the true nature of the transaction which was acquisition of beneficial interest in NDTV Ltd. The elaborate mechanism adopted by the noticee and its associates appear to be solely to deflect attention from this acquisition and thus covetously overcome the obligations imposed by the Takeover Regulations.
In effect, the transaction is not to secure the loan but to acquire control over all the affairs of the Target Company leaving only the right to control the “editorial policies of NDTV” to the Promoters and Borrowers, right from the day of execution of the loan agreement.
Thus in our view, the takeover exercise has been conveniently couched as a loan agreement with the predominant intention of the Noticee being to acquire control over NDTV without contemplating any repayment of the loan, whatsoever, from the Promoters or Borrowers. The transaction documents admittedly confer Conversion Option, Purchase Option and the Call option, and if the voting rights is to give full effect to the Transaction Documents, it would straightaway mean that the 52% of the voting rights of NDTV have to be exercised by the Promoters as per the dictates of the Lender and the same may traverse the specified Veto rights under Schedule 3. What is certain is the idea of the Noticee to start exercising control through the Promoters by keeping a tight hold on 52% of the shares of NDTV, through the threefold 'Options' conveyed by the Promoters, by helping them to meet the loan repayment that was pending to ICICI Bank.
The related issue as to whether veto rights confer any rights of control in favour of the noticee is not relevant for consideration in the instant case as the veto rights in Schedule 3 are eclipsed by the operative provision in Clause 20 of the Loan Agreement and are not significant enough for an independent consideration from the 'control' angle.
A close look at the structure of the transaction revolving around the conversion option and the purchase option (outlined in the loan agreement) on the one hand and a call option on the other clearly reveals that the transaction structure is unusual and peculiar to say the least.
The absence of an explicit clause in the Loan Agreement rendering the conversion option void on repayment of loan is strikingly abnormal and it clearly lays out an unfettered path for the noticee to stake its access to NDTV, albeit through the medium of RRPR. The call option construct is also strangely devoid of any time limitations and it endows the noticee (and its affiliates) the right to acquire 26% of NDTV shares from RRPR, at any time with no linkage to the loan. The strike price of the call option has been set so high (at a premium of 51% to the then average market price by noticee's own admission in its reply dated May 21, 2018) that it renders the whole exercise of collateralization of the loan a non-starter. Given the price history of NDTV shares, the argument of the noticee about the call option serving as a collateral seems very hollow.
Thus the noticee i.e. VCPL did indirectly acquire control in NDTV Ltd., by entering into the Loan agreement and the Call Option agreements on 21st July, 2009, thereby obligating it to make a public announcement of an open offer under Regulation 12 read with regulation 14(3) of SEBI (SAST) Regulations, 1997, as alleged in the SCN.
Order:
a) The noticee 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 this order;
b) The noticee shall along with the offer price, pay interest at the rate of 10% per annum from the date when they incurred the liability to make the public announcement till the date of payment of consideration, to the share-holders who were holding shares in the target company on the date of violation and whose shares are accepted in the open offer, after adjustment of dividend paid, if any.
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2018 (6) TMI 1737
Violation of SEBI Act and the PFUTP Regulations - trading in the shares of Out of company - scrip of the company was an illiquid scrip and out of purchase and sale of 157 shares, some of the trades of the appellant were self trades and some trades had influenced the price of the scrip of the company by contributing the market net LTP (Last Traded Price) and some trades had also contributed to the NHP (New High Price) - Penalty imposed - HELD THAT:- The trades executed by the appellant had the effect of net positive LTP of ₹ 85.35. Very fact that the appellant had indulged in self trades/ LTP/ NHP without giving any justifiable reason, clearly justifies the inference drawn by the AO that the trades executed by the appellant were manipulative trades.
As held by the Apex Court in the case of SEBI V/s Kishore R. Ajmera [2016 (2) TMI 723 - SUPREME COURT] in the absence of direct evidence, by taking into account immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded it is open to an AO to arrive at a reasonable conclusion that the trades executed were manipulated trades.
In the facts of the present case, in our opinion, no fault can be found with the decision of the AO that the trades executed by the appellant were manipulative trades and hence, the appellant was guilty of violating the SEBI Act and the PFUTP Regulations.
Argument advanced by the Representative of the appellant that the penalty imposed is excessively harsh is without any merit. Penalty imposable under Section 15HA of SEBI Act for violating the PFUTP Regulations is up to ₹ 25 crore. However, after taking into consideration all mitigating factors the AO has imposed penalty of ₹ 7 lac which cannot be said to be unreasonable or excessive.
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2018 (5) TMI 2151
Violation under SEBI Act - Ex parte - ad- interim order - not settling the accounts of inactive clients - Mis-utilization of client securities - inspection carried out by SEBI revealed that there is Non-settlement of funds of inactive clients, Improper use/Mis-utilisation of client funds - funds of the clients, having credit balance with the Broker, were utilized for allowing exposure to the clients having debit balance or were used by F6 for its own purposes - difference between the credit balance in the clients’ ledger as submitted by F6 and the sum of balances lying in the Client Bank accounts and the cash collateral lying with exchanges as on the sample dates - HELD THAT:- As there were unreasonably huge fund transfers between F6 and FCPL during the inspection period.
A person acting as a securities market intermediary is expected to protect the interest of investors in the securities market in which he operates. Such a person is required to maintain high standards of integrity, promptitude and fairness in the conduct of his business dealings, and not be motivated purely by prospects of financial gain.
As a regulator of the capital markets, SEBI has the duty to safeguard the interest of investors and protect the integrity of the securities market. Since the conduct of F6, FCPL and their directors is not in the interest of investors in the securities market, necessary action has to be taken against them immediately, else it may lead to loss of investors’ trust in the securities market. We are convinced that this is a case where effective and expeditious action is required to be taken to prevent any further harm to investors.
Pending detailed inquiry, in view of the liabilities of F6 and FCPL and transfer of clients’ funds / securities between F6 and FCPL it is essential to take urgent steps to prevent F6, FCPL and its present / past directors not to alienate any assets, whether movable or immovable, or any interest or investment or charge in any of such assets, so that the final remedies, if any, do not become infructuous.
Further, in order to maintain the status quo, pending detailed inquiry, it is appropriate that the holdings of the bank accounts of F6 and FCPL are also required to be frozen.
For non-compliances, movement of funds, misconduct and failure to repay the investors, pending detailed inquiry, it is also appropriate that the holdings of the bank accounts of Mr. Pankaj Goel and Ms. Meenu Goel are also frozen in order to maintain the status quo.
Thus F6 Finserve Private Limited, F6 Commodities Private Limited, Mr. Pankaj Goel, Mr. Parveen Sharma, Mr. Meenu Goel, Mr. Sanjay Anand, Ms. Kavita Anand, Ms. Asha Sharma, Mr. Deepak Goel and Ms. Ruchika Goel are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, either directly or indirectly, or being associated with the securities market in any manner whatsoever, till further directions.
The aforesaid entities and persons shall cease and desist from undertaking any activity in the securities market, directly or indirectly, in any manner whatsoever till further directions and are directed to provide a full inventory of all their assets, whether movable or immovable, or any interest or investment or charge in any of such assets, including details of all their bank accounts, demat accounts and mutual fund investments immediately but not later than 5 working days from the date of receipt of these directions. Also directed not to dispose of or alienate any assets, whether movable or immovable, or any interest or investment or charge in any of such assets excluding money lying in bank accounts except with the prior permission of SEBI.
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2018 (5) TMI 1953
Claims of the appellants against their broker rejected by the DC - NSE liability to compensate the appellants - whether all claims of the investors / clients against their defaulter broker can be paid out of the Investor Protection Fund ('IPF' for short) of the stock exchange - HELD THAT:- The relationship between the appellants and Kassa was in the nature of a client - broker one rather than an investor - broker one. Very fact that the clients did not do a single trade for a long period after opening their trading accounts and they had entered into agreements which specified the percentage of fixed returns to the appellants make it very clear that the appellants were supporting the illegal para banking activity of their broker. The submissions made by some of the appellants that they were uninformed investors cannot be accepted since the claims of all the appellants (except one) are in millions of rupees (in the range of ₹ 2 million to ₹ 8 million). It is also a fact that SEBI and exchanges have widely publicized the specific manner in which clients accounts should be maintained by the brokers and how such accounts should be settled in every quarter etc. as evidenced through the Bye-laws and circulars.
From the Bye-laws and the relevant circulars, we note that the process of refunding investors when a broker is declared as defaulter is as follows :
a) On inviting claims against the defaulter broker by the exchange investors would submit their claims.
b) These claims are scrutinized by the IGRP of the exchange who validates the admissible claims against the said broker.
c) The exchange would refund the claims using the funds of the defaulter broker available with the exchange in the form of deposits, margin money etc.
d) In case of shortage of funds in the defaulter broker's account with the exchange, the unpaid claims / remaining claims would be placed before the DC of the exchange which will verify such claims as to whether they can be paid out of the IPF.
e) Claims found to be payable from the IPF as per the Bye-laws will be entertained and others would be rejected.
f) Finally, whatever claims are pending i.e. after pay out from the broker's own fund with the exchange and as admissible under IPF, all the remaining claims have to be settled by the broker itself.
Given these procedures and the reasons cited in para no. 9 above, we find no fault with the DC's decision that the appellants' claims cannot be entertained from the IPF. Appellants are at liberty to approach the appropriate forum to settle their claims against Kassa in case Kassa is not honoring their claims.
We do not find any merit in the argument of the appellants that NSE is liable to compensate the appellants for having failed in their duty as a regulator of brokers.
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2018 (4) TMI 1798
Violation of open offer obligations contained in the Takeover Regulations, 1997 - Failure on part of the appellants to make an open offer on acquisition of 43,600 shares - Penalty imposed - HELD THAT:- Fact that the appellants by failing to make open offer within the stipulated time have violated regulation 11(2) read with regulation 14(1) of the Takeover Regulations, 1997 is not in dispute.
Obligation cast on the appellants to make open offer was not dependent on SEBI acquiring knowledge about the violation or dependent on SEBI initiating action against the appellants for non- compliance of the open offer obligations. In other words, delay on part of SEBI in initiating action did not absolve appellants from their obligation to make open offer. Therefore, the appellants who are guilty of violating the open offer obligations contained in the Takeover Regulations, 1997 cannot escape penal liability by alleging that there is delay on part of SEBI in initiating action against the appellants for non- compliance of their open offer obligations.
Argument of the appellants that the penalty imposed is exorbitant or excessive is also without any merit. Penalty imposable under Section 15H(ii) of SEBI Act for violating the open offer obligations contained in Takeover Regulations, 1997 is up to ₹ 25 crore, however, the AO after taking into consideration all mitigating factors has imposed penalty of ₹ 7 lac and directed that the said penalty be paid by the appellants and other two PACs jointly and severally, which cannot be said to be unreasonable or excessive.
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2018 (4) TMI 1715
Fraudulent scheme of trading in the scrip of M/s. S. J. Corporation Ltd. (‘SJC’) - violation of SEBI Act and PFUTP Regulations - Market manipulation where the scheme employed by the appellants involved hiking the price of the shares in which the promoters had to make open offer - defunct company is taken over - increase the price of the scrip which they have to buy in an open offer at a higher price - HELD THAT:- There is no ambiguity in our mind that a scheme of fraud has been conceived and implemented by the appellants herein, except appellant no. 5.
We also hold that this is a unique case of manipulation. A defunct company is taken over by a few parties; peculiar interest is shown by a few others in buying the shares of that company placing orders mostly at 5% above the LTP thereby gradually raising its price to abnormal levels and creating artificial liquidity in the scrip and thereafter most of the parties trying to off-load their holdings at a substantially inflated price. If individual case is seen independently there is nothing abnormal about it but when the picture is looked at in totality what is unfolding is a fraud perpetuated on the market / investors.
It is not that the trade logs are disputed or the financial transactions are in dispute. What is disputed is only the motive behind such trade and the financial transactions. Even the argument of the promoters of SJC that they did not trade is only legally correct since another companyw herein they were promoters at the relevant time placed a buy order on 28.01.2009 (in Phase-II) for 100 shares at price 5% above the LTP, though only 10 shares got delivered.
Similarly, appellant placed one buy order for just 5 shares at the rate of ₹ 1185/- per share on 26.09.2009. This was the highest reported price ever and it is equivalent to a pre-split price of ₹ 11850/-. Since the counter party did not meet the obligation the difference was credited to the appellant’s account. This appellant was already holding 400 shares of SJC (pre-split) and her husband (appellant in appeal no. 536 of 2015) had offloaded part of his holdings in Phase-III. Therefore, each small buy or small role played by each appellant needs to be juxtaposed with the motive of the appellant. Further, residing in a location or telephone calls between people also in itself do not make one party to a fraudulent scheme; but all associated factors together do make them parties. Therefore, given the factual matrix perused by us we find no merit in the submissions of the appellants.
We find no fault in imposing such a joint and several penalty as it is now abundantly clear that the appellants were acting together and together they inflated the notional value of their shares to more than ₹ 132 crore. If they could be party to such a fraudulent scheme whether they are a homogeneous group or otherwise they should find a way to fulfill the consequences / obligation of paying the penalty jointly and severally imposed upon them.
In view of the above reasons we find no merit in the appeals except that of Ms. Reshma Patel, Appellant No. 5 as she succeeds in her appeal. Since in the impugned order penalty of ₹ 2.5 crore has been imposed under Section 15HA of SEBI Act on 19 appellants jointly and severally and one of them succeeds in the appeal the penalty amount also needs to be reduced. Accordingly, we reduce the joint and several penalty from ₹ 2.5 crore to ₹ 2.3 crore to be paid by 18 of the appellants.
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