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SEBI - Case Laws
Showing 441 to 460 of 555 Records
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2016 (11) TMI 1643
Trigger date of Unpublished Price Sensitive Information (‘UPSI’) - whether the company failed to keep the trading window of its scrip closed during the period when UPSI was in force? - whether this enabled some of the Promoter-Directors and some other entities to share the UPSI with other entities and/or trade in the shares of Shelter Infra Projects Ltd. thereby violating relevant provisions of securities laws? - HELD THAT:- Draft SPA did not specify the price at which the shares were to be sold, cannot be a ground to hold that there was no UPSI on June 19, 2009, because, in the present case, the price fixed was a negotiated price and in the facts of present case, it is reasonable to hold that it is only after arriving at the negotiated price, the draft SPA was forwarded on June 20, 2009, however, the negotiated price was not disclosed in the draft SPA. Admittedly, the promoter-directors and their relatives and other connected entities started dealing in the shares from June 22, 2009. In these circumstances, even if it is held that the UPSI came into existence on 19th June, 2009 and not with effect from 21st May, 2009 as held by the AO, in the facts of present case, no fault can be found with the decision of AO, because, it is only from 22nd June, 2009 the directors, their relatives and connected entities sought to deal in the shares of the target company on the basis of UPSI which came into existence on 19th June, 2009.
Since the existence of UPSI from 19th June, 2009 cannot be doubted, it was the duty of the company (Shelter Infra) to keep the trading window closed till the date of announcement of public offer on 7th August, 2009. Since this has not been done, the Company is in violation of the relevant provisions of Listing Agreement and the PIT Regulations.
Accordingly, the penalty of ₹ 50 lakh imposed on the company for not closing the trading window cannot be faulted. It was contended by the Counsel for the company that the delay in disclosing the board decision to the Stock Exchange, is attributable to the Compliance Officer and the directors of the company. It is submitted that since the promoter-directors of the company have been exonerated vide order of the AO of SEBI dated 28th June, 2013,in the present case, the company cannot be made liable. We see no merit in the above contention.
Overall responsibility of the company and the board of directors to ensure that the Code of Conduct is followed in letter and spirit. In our opinion, the AO was not justified in holding the Compliance Officer alone was responsible for closing the trading window and disclosing the Board resolution to the Stock Exchange. Therefore, fact that the AO has erroneously held that the directors are not liable cannot be a ground to hold that the company must also escape penal liability for failing to close the trading window during the existence of UPSI and failing to make disclosures to the Stock Exchange within the stipulated time.
Argument of the Counsel for the company that penalty of ₹ 50 lakh imposed under Section 23A(a) of SCRA is unreasonably excessive deserves acceptance. According to the Counsel for the appellant, there was only delay of 7 days i.e. from 30th July, 2009 to 7th August, 2009 when public announcement relating to the public offer was made. Though, respondent has stated that the public announcement cannot be treated as disclosure, in the peculiar facts of present case, where the company already has suffered penalty of ₹ 50 lakh on account of failure of Compliance Officer/directors to close the trading window and since the directors have been exonerated, it would be just and proper to restrict the penalty till the public announcement was made. Penalty under Section 23A(a) of SCRA for 7 days delay at the rate of ₹ 1 lakh per day would be ₹ 7 lakh. Accordingly, while sustaining the penalty of ₹ 50 lakh imposed under Section 15HB of the SEBI Act for not closing the trading window, we reduce the penalty of ₹ 50 lakh imposed under Section 23A(a) of the SCRA to ₹ 7 lakh for not disclosing the Board resolution to the Stock Exchange.
Whether appellant was an insider? - Admittedly, trades were executed by the appellant on 3rd July, 2009 i.e. during the subsistence of UPSI. The argument made by the Counsel for the appellant that she did not sell the shares bought on 3rd July, 2009 and as such did not benefit from the UPSI even assuming that if she was privy to the UPSI is also without any merit. Under the relevant regulations trading in the shares of the company (whether buy or sell) by an insider is prohibited. On the ground taken by the appellant that the penalty of ₹ 1 crore imposed is too harsh, we note that in other penalty orders in Appeal Nos.120 and 143 of 2014, penalty imposed on each person comes in the range of ₹ 20-30 lakh. Further, given that the appellant is an old lady who depended on her husband and the then Compliance Officer Mr. Surana and the fact that both have expired, we deem it proper to reduce the penalty from ₹ 1 crore imposed in the impugned order to ₹ 30 lakh.
Very fact that the director of Shelter Infra was a business partner of the Parekh Group and that the Parekh Group traded in the shares of Shelter Infra for the first time after the UPSI came into existence, is sufficient to hold that UPSI was the reason for the appellants to trade in the shares of Shelter Infra. Accordingly, there is no reason to interfere with the AO’s order in both these appeals.
The argument that the appellants were not privy to the UPSI and had authorized the Chairman of Shelter Infra to negotiate in respect of their shares without being privy to the UPSI cannot be sustained since it is conclusively proved that UPSI was in existence from 19th June, 2009. Further, argument that the appellant no.1 did not sell shares which he bought during July, 2009 in the open offer or that the appellant no.2 did not sell the shares even during the open offer period do not absolve the appellants from being penalized for violating the PIT Regulations. Hence, the penalty of ₹ 30 lakh imposed on the appellant no.1 for two violations (code of conduct and PIT regulations) and ₹ 20 lakh imposed on appellant no.2 for one violation (PIT regulations) in the impugned order cannot be said to be unreasonable or excessively harsh.
In these appeals before us, it is established beyond doubt that UPSI came into existence at least on 19th June, 2009. All the directors and their relatives are covered under the definition of “insider”. The Parekh Group having business dealings and partners in business concern with an insider are covered under connected people. Passing on the information needs to be judged from the context and in the instant context it is not disputed that the Parekh Group started trading from 22nd June, 2009 after the UPSI came into existence. Thus, the company, its directors and their relatives and connected entities are guilty of violating the provisions of the securities laws, they are liable for action under the SEBI Act and/or SCRA.
Appellants in all these appeals are directed to pay the penalty amount within a period of 45 days from today to SEBI. If the amount of penalty is not paid within a period of 45 days from today, SEBI is at liberty to recover the penalty with interest at 12% per annum from the date of the orders impugned in the respective appeals till payment.
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2016 (11) TMI 1622
Cancellation/Annulment of trade – guilty of gross negligence by not installing requisite checks and balances as there was punching of erroneous selling order – Whether mistake of punching erroneous sell order constituted ‘material mistake in trade’ and was annullable under Bye law 5(a) framed by NSE - HELD THAT:- In view of the decision of this Tribunal in the case of M/s. Emkay Global Financial Services Limited vs. National Stock Exchange of India Limited & Ors. [2015 (8) TMI 335 - SECURITIES APPELLATE TRIBUNAL MUMBAI] which is subsequent to the impugned decision, the Committee of NSE would rehear all the parties and pass fresh order on merits.
Accordingly, the impugned order is allowed to be withdrawn with liberty to the Committee of NSE to pass fresh order on merits. NSE is directed to give all the relevant trade and order logs to all the parties before passing the fresh order.
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2016 (10) TMI 1327
Fraudulent Preferential allottees and pre-IPO transferees - Restriction Accessing the securities market and further prohibited them from buying, selling or dealing in securities in any manner whatsoever, till further directions - noticees forming part of Trading Group acted as buyers to the pre IPO transferees/ preferential allottees thereby creating artificial demand for the supply of shares from preferential allottees/ pre IPO transferees - Trading Group are connected among themselves and provided hugely profitable exit to the pre IPO transferees/ preferential allottees in such scrips that hardly had any credential in the market - HELD THAT:- Noticees were acting in concert with other entities named in the interim order towards a common objective that has been brought out in the interim order. The investment made by the preferential allotees (including the noticees) cannot be termed as a rational investment behaviour and such investment, as in this case, could be possible only if the preferential allotees (including the noticees) had nexus with the companies, their promoter /directors and the issue of such shares was under a prior arrangement between them for an objective other than for providing equity capital to the company. The trading data also reveals that most of the shares sold by the preferential allotees and pre IPO transferees were bought by the entities of the Trading Group - this cannot be termed as a coincidence especially when sellers have nexus with the company, as mentioned in the interim order. As brought out in the interim order, ultimate beneficiaries of the whole scheme in question are the preferential allottees and Pre IPO Transferees. It is beyond reason to hold that the company, its promoters/directors, Trading group and Funding group would devise the impugned plan/scheme for the benefit of the entities who are neither party to the plan/scheme nor have any complicity in the plan with others. As, the noticees, who are the preferential allottees, are the ultimate beneficiaries, they cannot pretend to be oblivious to the scheme/plan.
The facts and circumstances of this case, strongly indicate that the issue of these shares was under a prior arrangement between them for the ulterior motive or the end objective of the scheme that has been brought out explicitly in the interim order.
Accordingly, find that the preferential allottees, pre IPO transferees acting in concert with Funding Group and Trading Group have used the stock exchange system to artificially increase volume and price of the scrip for making illegal gains and to convert ill-gotten gains into genuine one. The whole scheme could not have been possible without the involvement/ connivance of companies and their promoters and directors.
5 noticees (covered under this order), have failed to give any plausible reasoning/explanation, at this stage, for their acts and omissions as described in the interim order and have not been able to make out a prima facie case for revocation of the interim order. I, therefore, in this case, reject the prayers of noticees for setting aside the interim order or for complete removal of restraint imposed by it. I, therefore, do not have any reasons to change or revoke the ad interim findings as against them in the interim order.
Activities on account of ban and consequent freezing of their demat accounts - These entities have pleaded for removal of the restraint imposed vide the interim order or at least allow them partial relief of permitting trading in securities other than those involved in this case and also allow them to deal in cash and F&O segment. It is worth mentioning that the case in hand is peculiar as large number of entities have been restrained and the ongoing investigation in the matter may take time in completion. I have been conscious that the restraint order should not cause disproportionate hardship or avoidable loss to the portfolio of the noticees. That is why several relaxations, such as allowing investment in mutual fund units, permission to liquidate existing portfolio and keep the proceeds in escrow account and even utilize 25% of the proceeds for meeting exigencies, etc. have been made in the past. Now at this stage, considering the facts and circumstances of this case and submissions/oral arguments made before me, I deem it appropriate to make further relaxations so as to address the issues of the personal and business exigencies or other liquidity problems.
In exercise of the powers conferred upon me under section 19 of the SEBI Act, read with sections 11(1), 11(4) and 11B thereof, hereby confirm the directions issued vide the ad interim ex parte order dated June 29, 2015 read with Corrigendum Order dated January 04, 2016 as against the noticees except that they can:-
(a) enter into delivery based transactions in cash segment in the securities covered in NSE Nifty 500 Index scrips and/ or S&P BSE 500 scrips;
(b) subscribe to units of the mutual funds including through SIP and redeem the units of the mutual funds so subscribed;
(c) deal in Debt/Government Securities;
(d) invest in ETF
(e) avail the benefits of corporate actions like rights issue, bonus issue, stock split, dividend, etc.;
(f) tender the shares lying in their demat account in any open offer/delisting offer under the relevant regulations of SEBI.
Considering business and personal exigencies and liquidity problems submitted by the noticees I allow further relaxations/reliefs to the noticees as under:-
(a) They are permitted to sell the securities lying in their demat accounts as on the date of the interim order, other than the shares of the companies which are suspended from trading by the concerned stock exchange and the shares of the four scrips in the SME segment covered under this order, in orderly manner under the supervision of the stock exchanges so as not to disturb the market equilibrium and deposit the sale proceeds in an interest bearing escrow account with a Scheduled Commercial bank.
(b) They may deal with or utilize the sale proceeds lying in the aforesaid escrow account under the supervision of the concerned stock exchange as provided under:-
i. the sale proceeds may be utilised for investments permitted in para 38;
ii. upto 25% of the value of the portfolio as on the date of the interim order or the amount* in excess of the profit made /loss incurred or value of shares purchased to give exit, whichever is higher, may be utilized for business purposes and/or for meeting any other exigencies or address liquidity problems.
* The amount will include the value of portfolio in the demat account
Explanation: For the purposes of determining the portfolio value of the entities, the value of portfolio of securities lying in the demat account/s (individual and joint both) on the date of the interim order after excluding the value of shares that have been suspended from trading as on the date of the communication shall be considered.
(c) The aforesaid reliefs shall be subject to the supervision of exchanges and depositories. The stock exchanges may use the existing mechanism available for implementing the similar interim relief earlier granted to some of the entities.
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2016 (10) TMI 1308
Fraudulent and Unfair Trade Practices relating to Securities Market - synchronized order placement and circular trading - Violation of the PFUTP Regulations - Difference between buy order time and sell order time was less than 60 seconds and there was no difference between buy order rate and sell order rate as well as there was no difference between buy order quantity and sell order quantity - HELD THAT:- Finding recorded by the Adjudicating Officer that the pattern of synchronized order placement and circular trading clearly establish that the transactions were carried out with the intension that the orders of participating entities should match and that there was prior arrangement with respect to those of transactions cannot be faulted. The Adjudicating Officer is justified in holding that the very fact that the Vishvas group entities were trading continuously among themselves by placing orders in such pattern thereby contributing significantly to the total volume in the market cannot be faulted.
Argument advanced by the counsel for the appellant that having common address and having shares of Vishvas Securities Ltd. could not be a ground to infer that the appellant was connected with the Vishvas Group is without any merit. In the present case, the Adjudicating Officer has not only established the connection of the appellant with the Vishvas Group but also demonstrated that the trading pattern among themselves resulted in synchronized trades and circular trades which were in violation of the PFUTP Regulations.
Appellant had incurred loss by executing the trades in question cannot be a ground to infer that the said trades were not in violation of the PFUTP Regulations. Having violated the PFUTP Regulations, the appellant cannot escape the penal liabilities merely because the appellant chose to incur losses on account of the trades in question.
Violations committed by the appellant fall under Section 15HA of SEBI Act and the penalty imposable thereunder was ₹ 25 crore, the Adjudicating Officer has imposed a penalty of ₹ 25 lac against the appellant which cannot be said to be exorbitant or excessively high. It is a matter of record that SEBI has proceeded against various entities of the Vishvas group entities for violating the PFTUP Regulations and has imposed varying penalties up to the extent of ₹ 1crore. In these circumstances, no fault can be found with the decision of the Adjudicating Officer in imposing penalty of ₹ 25 lac as against the appellant on ₹ 25 crore imposable under section 15ha of the SEBI act for violating the PFUTP Regulations.
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2016 (10) TMI 1305
Acquisition of shares without making the required public announcement - new acquisition went beyond the creeping acquisition limit of 5% - violation of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (“SAST Regulations”) - HELD THAT:- It is an undisputed fact that in the year 2000-2001, the Appellants cumulatively acquired 5.0346% of the shareholding of APIL. This fact has indeed been admitted by the Appellants as far back as the personal hearing conducted before the Ld. Adjudicating Officer. At the personal hearing, the Appellants admitted that inadvertently they had not made a public announcement when their newly acquired shareholding went beyond the limit of 5% as prescribed in Regulation 11(1).
Categorical admission by the Appellants it is evident that the Appellants understand the import and underlying philosophy of Regulation 11(1). Participants in the securities market are allowed to actively indulge in trading and other related activities because SEBI as the market regulator is given assurances by these market players that they understand the law and regulations as laid down by the Legislature and SEBI respectively. If the Legislature and SEBI, acting on such assurances, give companies and other market participants the right to execute their business decisions in the manner these entities deem fit, it goes without saying that there is a corresponding duty placed on the market participants to ensure that such mistakes as acquiring more than the creeping acquisition limit of 5% without making the necessary public announcement are not made.
There is no provision in the SEBI Act, which may have the effect of prohibiting SEBI from taking action beyond a particular period of time in a given case. However, it goes without saying that the regulator should always make an endeavor to take prompt action against the defaulting companies to render speedy and timely justice. In the present case, however, action was taken immediately after SEBI came to know about the violations. Therefore, delay, in itself, cannot defeat the ends of justice in the facts and circumstances of the case in hand. Moreover, there is nothing on record to suggest that the admission made by the appellants before the A.O. that the acquisition made by them exceeded the prescribed limit was erroneous. In these circumstances, no fault can be found with decision of the A.O. in holding that the appellants are guilty of violating the Takeover Regulations and, accordingly, imposing penalty on the appellants.
As rightly brought to our notice by the Appellants that at the time the misconduct was committed and the shares acquired by the Appellants, the maximum penalty for the default of acquiring more than the prescribed limit of shareholding without making the required public announcement was ₹ 5 lac. The penalty of ₹ 15 lac was introduced later when the Act was amended. SEBI cannot be allowed to retrospectively apply the law in this situation.
In our considered opinion the penalty of ₹ 15 lac imposed by SEBI in one of the orders is more than what was applicable in 2000-2001 and is therefore reduced to ₹ 5 lac.
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2016 (7) TMI 1690
Mandation of WTM of SEBI to pass order - Order passed by the WTM of SEBI or not? - validity letter issued by the Chief General Manager when no order passed by WTM of SEBI - HELD THAT:- WTM had instructed that a note be prepared and accordingly, a note was prepared and put up for approval of WTM on June 23, 2016. It is further stated in the said affidavit that alongwith the said note, draft letters to be sent out to the appellant were also placed before the WTM of SEBI. The said note as also draft letters were approved by the WTM on June 27, 2016 and, accordingly, letter dated July 8, 2016 was issued to the appellant, thereby communicating the decision of the WTM of SEBI disposing off the representation of the appellant.
When questioned as to whether there is any order passed by the WTM of SEBI, counsel for SEBI fairly stated that there is no order passed by the WTM of SEBI.
Thus, it is evident that the WTM of SEBI permitted the Chief General Manager to issue a letter to the appellant that the representation made by the appellant has already been disposed off by the WTM of SEBI, when in fact no order was passed by the WTM of SEBI.
In these circumstances, it is apparent that the WTM of SEBI sought to represent that he has already passed an order, when in fact there was no order passed by the WTM of SEBI.
As per the order passed by this Tribunal [2016 (5) TMI 1610 - SECURITIES APPELLATE TRIBUNAL MUMBAI] WTM of SEBI was required to pass an order by June 24, 2016. Accordingly, having heard the appellant on June 21, 2016, the WTM of SEBI was duty bound to pass an order by June 24, 2016. If for any administrative constraints it was not possible to pass an order within the stipulated time, then the WTM of SEBI ought to have sought extension of time, which the WTM of SEBI has failed to do.
Instead, the WTM of SEBI resorted to a totally impermissible mode of representing that an order has been passed when in fact no order was passed by him. In such a case, informing the party that an order disposing of the representation is already passed, without actually passing an order, is nothing but an attempt to mislead in the matter. We strongly condemn the irresponsible approach adopted in the matter.
Since the WTM of SEBI has not passed any order, we would have directed the WTM of SEBI who had heard the appellant on June 21, 2016 to pass an order immediately. However, we are informed that the said WTM of SEBI is travelling.
In these circumstances, we quash the letter issued by the Chief General Manager on July 8, 2016 and direct SEBI to assign the matter to any other responsible WTM of SEBI who shall pass an order on the representation of the appellant within two weeks from today after giving an opportunity of hearing to the appellant. It would be open for such WTM of SEBI to hear the representation of the appellant as also the representation made by the Respondent No. 2 together and pass appropriate order thereon.
Since we are distressed with the manner in which the WTM of SEBI has discharged his quasi judicial duties which is highly detrimental to the interests of the securities market, we direct the registry to forward a copy of this order to the Hon’ble Finance Minister and also to the Chairman of SEBI for information-we disposed of the appeal in the aforesaid terms subject to payment of costs quantified at ₹ 1 lac to be paid by SEBI to the appellant within one week from today.
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2016 (7) TMI 1678
Invalid CIS scheme - non seeking registration with SEBI - violation of CIS Regulations - collection of subscription amount after the ex-parte interim order - refund to investors - HC upholding the decision of SEBI that the Appellants have floated and operated CIS without registering with SEBI and hence in violation of CIS Regulations, since the schemes are closed by the Appellants voluntarily and substantial amount is refunded to the investors, we grant extension of two years time from the date of this order to the Appellants to enable them to pay the balance amount refundable to the investors.
HELD THAT:- No substance in these appeals, therefore, the civil appeals are dismissed.
Pending application, if any, stands disposed of.
As clarified that the respondent shall not collect further amount from the investors until it is registered as CIS and shall also give details to the SEBI with regard to the amount disbursed by it, at the end of every quarter. The first such statement shall be given in the first week of October about the payments made up to 30th September, 2016.
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2016 (7) TMI 1660
Insider trading - Insider trading - trade in script on the basis of unpublished price sensitive information (“UPSI”) - Abhijit Rajan sold approximately 144 Lakh shares held by him in GIPL (representing 70.56% of his shareholding in that company - Shri Abhijit Rajan was restrained from buying, selling or dealing in securities and accessing the securities markets, either directly or indirectly, in any manner whatsoever, till further directions vide the Interim Order - HELD THAT:- In the instant proceedings, CICPL and its Directors, have been able to substantiate their contention with adequate evidence that the sale of GIPL shares were executed to clear the margin shortfall. As stated earlier, the letter (addressed to CICPL by IIFL Finance), clearly stated that the net margin shortfall was approximately ₹2.55 Crores and accordingly, CICPL was required to arrange for the aforesaid funds by August 7, 2013. Hence the action of selling the shares appear to be pursuant to the demand made by IIFL Finance.
The property transactions entered into between CICPL and Shri Abhijit Rajan were registered within the permissible statutory limit permitted by law. While it is possible that discussions in respect of the property transactions entered into between CICPL and Shri Abhijit Rajan may have been happening a few months prior to the impugned trades, no material evidence has been placed before me in the instant proceedings in support of such negotiations actually taking place prior to the execution of said trades. In the aforementioned context, the allegations against CICPL and its Directors as contained in the SCN, are not supported by any material evidence. On the other hand, CICPL and its Directors have substantiated their contention regarding the need for urgent sale of GIPL shares with the support of documentary evidence.
No alternative but to find that the charges against CICPL and its Directors i.e. Shri Kiran Indru Hingorani and Shri Indru B. Hingorani, as alleged in the SCN, have not been made out on the basis of the material available on record. For the aforementioned reasons, we are constrained to give the benefit of doubt to CICPL and its Directors i.e. Shri Kiran Indru Hingorani and Shri Indru B. Hingorani.
Quantification of unlawful gains or avoidance of loss by Shri Abhijit Rajan - Shri Abhijit Rajan has already undergone a restraint from July 17, 2014 till date i.e. a period of almost 2 years. It is noted that SEBI has already initiated Adjudication Proceedings inter alia against Shri Abhijit Rajan in respect of the same violations alleged in the instant proceedings. This being the factual position, I am of the view that no further restraint is required to be imposed on Shri Abhijit Rajan on account of the reasons detailed in the preceding paragraphs. However, it is made clear that the Adjudicating Officer shall independently verify the facts and arrive at findings including quantum of penalty, if any, without being influenced by the observations recorded in this Order.
ORDER
i. The SCN dated March 29, 2016, issued against Shri Abhijit Rajan, is disposed of without any further directions. On and from the date of operation of this Order, the directions issued vide the Interim Order dated July 17, 2014 read with the Confirmatory Order dated March 23, 2015, will not continue further against Shri Abhijit Rajan.
ii. In view of the findings against Shri Abhijit Rajan in the instant proceedings in respect of the violations alleged in the SCN, he becomes liable for disgorging the amount of unlawful gains. Accordingly, Allahabad Bank, wherein the amount of ₹1.09 Crores was deposited by Shri Abhijit Rajan in an account ‘SEBI Escrow A/c Abhijit Rajan (A/c No. 50330382173)’, shall transfer the said amount within a period of 10 days to SEBI.
iii. The SCN dated March 29, 2016, issued against CICPL and its Directors i.e. Shri Kiran Indru Hingorani and Shri Indru B. Hingorani, is disposed of without any directions.
iv. Allahabad Bank shall release the amount of ₹35.24 Lakhs, which was deposited by CICPL and its Directors i.e. Shri Kiran Indru Hingorani and Shri Indru B. Hingorani, in an account ‘SEBI Escrow A/c Consolidated Infrastructure Co. Pvt. Ltd. (A/c No. 50330378961)’, in view of the findings against the said entities in the instant proceedings.
This Order shall come into force with immediate effect.
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2016 (5) TMI 1610
SEBI states that the representation made by the Appellant would be considered and appropriate orders would be passed within a period of seven weeks from today. Statement made by Counsel for SEBI is accepted.
Appellants in both the Appeals, do not press the Appeals. Both the Appeals are disposed of in the above terms with no order as to costs.
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2016 (5) TMI 1596
Issue of IPO - Role of Book Running Lead Manager - Appellant had not employed reasonable skill and care while conducting its due diligence exercise in respect of the IPO of Issuer Company in its capacity as Book Running Lead Manager ("BRLM") - non-disclosure as a related party transaction - Appellant had failed to exercise due diligence with respect to the Issuer Company's IPO which had resulted in certain incorrect and inadequate disclosures in the RHP - Appellant was thus prohibited from taking up any new assignment in the securities market in any manner for a period of six months from the date of the order for allegedly violating provisions of Regulation 64(1) of the SEBI (Issue of Capital and Disclosure) Regulations, 2009 - HELD THAT:- As in accordance with the provisions of the ICDR, the disclosure on Related Party Transactions is to be submitted as a part of the overall financial information to be certified by the auditors. Once the information is so certified, and this certified financial information is reproduced in the offer document, the ICDR's requirements of Due Diligence are considered to be met. As noted above, disclosures on related party transactions need to be made as per para (B)(12) of section IX of the ICDR Regulations which, in turn, states that they must be made in accordance with AS 18. It, therefore, falls to us to consider and decide whether Gadeo or Richa Mittal qualify as related parties in accordance with AS 18.
It is evident from a plain reading of the definition of 'relative' as provided under para 10.9 of AS 18 that the relatives covered under the definition are, quite categorically put, the spouse, son, daughter, brother, sister, father and mother who may be expected to influence the key management personnel of the reporting enterprise, in this case, the Issuer Company. This definition is exhaustive in nature. It does not leave scope for the inclusion of relatives by extending the list of relatives to other people. The intention of the law maker in this regard is crystal clear viz., only those relatives particularly mentioned in para 10.9 will be relevant for determining related party transactions. Mrs. Richa Mittal being the sister-in-law of Mr. Sanjeev Mittal is not covered under AS 18. In keeping with AS 18, as per the records, even the peer review auditors have not treated the transaction with Gadeo as a related party transaction. As all documents were duly analysed by the Appellants and there was no information in any of these indicating that the transaction with Gadeo was a related party transaction.
It appears that the factum of Mrs. Richa being the sister-in-law of Mr. Sanjeev Mittal was not properly conveyed to the appellant. This is evidenced from the fact that on receiving SEBI's query regarding Richa Mittal's stature with respect to the Issuer Company, the Appellant pointedly asked the Issuer Company whether Mrs. Richa Mittal was connected with the Issuer Company in any manner, and the Issuer Company replied in the negative vide letter dated February 7, 2011 -despite the presence of certain pointers in the information that the Appellants possessed with themselves, it is a matter of fact that nothing was contained in the partnership deed that explicitly pointed towards a relationship between Mr. Sanjeev Mittal and Mrs. Richa Mittal or indicated that she was married to Mr. Sanjeev Mittal's brother. This combined with the fact that AS 18 does not mention a sister-in-law as a relative and that Mrs. Richa Mittal did after all own 97.5% of Gadeo, dwarfing the 2.5% owned by Mr. R.K. Mittal, must be construed as a mitigating factor.
Non-disclosure of the taking of ICDs by the Issuer Company - As after analyzing the concept of due diligence in detail in Appeal No. 275 of 2014, we have already held that an MB should also examine bank statement of the issuer company though mandatorily not required. Relying upon the same reasoning we note that had the Appellant looked at the bank statements of the relevant period, the ICDs would have come to light and the Appellant would have been able to reflect the same in the RHP and the Prospectus.
Albeit, it is not necessary for a BRLM to look into the bank statements it would have been prudent for the Appellant to peruse the bank statements instead of merely relying on the Statutory Auditor's Report and the statement of the Issuer Company. Although, there is some merit in the charges leveled against the Appellants, as far as non-perusal of Bank statements of the Issuer Company and disclosure of related party transactions is concerned, in view of the fact that the punishment already undergone is far in excess of the punishment which the Appellants deserved against the charges in question, we quash the remnant punishment imposed vide the Impugned Order and partly allow the Appeal.
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2016 (5) TMI 1505
Application for renewal of registration as Merchant Banker ("MB") denied - Order passed by the Respondent - SEBI, declaring that Almondz Global Securities Limited ("Appellant") is not a "Fit and Proper Person" as defined under Schedule II of the SEBI (Intermediaries) Regulations, 2008 ("Intermediaries Regulation") - HELD THAT:- SEBI's aim in imposing punishments upon companies should be to make companies law-compliant so as to ensure that the interests of the securities market are secured. SEBI should not view punishments from a perspective of thinning the herd, rather it should help in fostering a healthy environment where intermediaries act cautiously and responsibly under the overall supervision of the market regulator. The punishment should not only be reasonable but must fit the violation or breach of law for which the entity is sought to be penalized. It is true that neither can a straitjacket formula be prescribed nor can a general pattern of reasonableness be laid down to be invariably applied in all cases.
No consistency in the orders passed by SEBI in terms of the punishment imposed upon Merchant Bankers for their misconduct. The punishments range from just a warning or token punishment for a day to the imposition of a fine of ₹ 1 crore. Further, in cases where there are repeated offences, registration has been denied. However, in the facts of the present case, since the fault of the Appellant is limited in as much as the Appellant has relied upon the Statutory Auditor's reports and the statements issued by the two Issuer Companies, instead of looking into the banks statement, by no stretch of the imagination can it be said that the Appellant is not a fit and proper person for carrying on business as a Merchant Banker.
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2016 (3) TMI 1376
Violation of Takeover Regulations, 1997 - acquiring additional shares upto 5%, without making a public announcement - HELD THAT:- Admittedly, the additional shares have not been acquired through open market in normal segment on the stock exchange, but the said shares have been acquired by the appellants through off market. Thus, the acquisition of additional shares by the appellants cannot be said to be in compliance with the provisions contained in the second proviso to Regulation 11(2) of the Takeover Regulations, 1997.
Argument of the appellants that since the trading in the shares of the company were suspended during the relevant period, the appellants bonafide believed that the shares could be purchased through off market is without any merit, because, under the second proviso to Regulation 11(2) exemption from making open offer is available only if the acquisition is made through open market purchase in normal segment on the stock exchange and not by any other method. Therefore, if the trading in the shares of the company were suspended during the relevant period it could not be presumed that the appellants could acquire shares through off market. The language of the second proviso to Regulation 11(2) being clear and unambiguous, the appellants are not justified in contending that in the absence of trading in the shares of the company on the stock exchange, the appellants could acquire shares in the off market.
In the instant case, SEBI by misconstruing the provisions contained in Section 15H(ii) of SEBI Act, has erroneously imposed penalty of ₹ 25 lac by treating the above factors as mitigating factors.
In view of the decision of the Apex Court in case of SEBI vs. Roofit Industries Ltd.[2015 (11) TMI 1387 - SUPREME COURT] which holds that mitigating factors set out in Section 15J are not applicable to violations covered under Section 15H(ii) as it stood prior to September 8, 2014, we were inclined to remand the matter to enable SEBI to take corrective measures. However, counsel for SEBI was not in favour of remand and sought dismissal of the appeal. Thus, in the facts of present case, where penalty of ₹ 25 lac is imposed as against the imposable penalty of ₹ 25 crore, the appellants are not justified in contending that the penalty imposed is disproportionate to the violations committed.
On account of certain arguments advanced by the counsel for appellants which were inconsistent with the pleadings on record, we, on conclusion of arguments had declared that we are dismissing the appeal with costs quantified at ₹ 15,000/-.
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2016 (2) TMI 1272
Ex-parte interim order - prima facie view of SEBI that the business carried on by the appellants constituted CIS - whether SEBI by its confirmatory order dated August 24, 2015 is justified in continuing the directions contained in the ex-parte interim order dated June 3, 2015 until further orders? - whether SEBI is justified in turning down a request made by the Appellant by way of a Miscellaneous Application before this Tribunal seeking registration as CIS under the CIS Regulations, without prejudice to its right to contend that the schemes operated by it are not covered under CIS? - HELD THAT:- Appellants pending further investigation have agreed to be regulated by SEBI without prejudice to their rights and contentions that the schemes in question are not covered under CIS, we direct the appellants to make a without prejudice application seeking registration in respect of the refundable schemes in question preferably within one week from today and further direct SEBI to grant provisional registration to the Appellants as per the procedure prescribed under the CIS Regulations so that interest of investors/customers do not suffer, especially when it is found by SEBI that the business carried on by the appellants prima facie to be in accordance with law except that the said business is carried on without seeking registration from SEBI. Depending on the investigation report, SEBI may consider grant of final registration to the Appellants in accordance with law in due course of time. Needless to say that SEBI shall make an endeavor to complete the pending investigation expeditiously against the appellants so that the prima facie view of SEBI regarding the business activities of the appellants attains finality before hand in one way or the other.
For all the aforesaid reasons, while upholding the prima facie view of SEBI that the business carried on by the appellants constituted CIS, we set aside the directions given by SEBI in the impugned orders dated June 3, 2015 and August 24, 2015 and direct the Appellants to make an application for registration with SEBI in respect of the refundable schemes covered by the CIS Regulations, and further direct SEBI to grant provisional certificate of registration as provided under the CIS Regulations forthwith, and eventually on receipt of final investigation report, if found appropriate, grant final registration as per law, so that the schemes being operated by the Appellants are henceforth regulated so that the investors' interests are effectively and properly protected by SEBI.
Till the date of granting provisional registration, the Appellants may continue to receive subscription amount from the investors under the existing schemes. Accounts/records of the amounts collected thereunder, shall be maintained in a separate account and appellants shall not launch any new scheme except in accordance with law. The appellants shall also not alienate or create any encumbrance or third party rights on any of their properties except for repayment to the customers/investors
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2016 (1) TMI 1510
Manipulative, fraudulent and unfair trade practices - Trading in certain scrips GIL pursuant to the detection of a huge rise in the traded volumes and/or price of the shares of these companies - certain entities had indulged in creating artificial volume by trading among themselves, in a synchronized manner and also carrying out off-market transfers among themselves for the purpose of meeting settlement obligations of another, thus contributing also to the price rise in these scrips - SEBI passed an interim order restraining 39 persons/entities from accessing the securities market and further prohibited them from buying, selling or dealing in securities in any manner whatsoever, till further directions.
HELD THAT:- Large scale trading amongst the PP group entities, which included the Noticees, all of which were synchronized and did not result in change in ownership created an artificial demand in the scrip of GIL and led to a price rise which was misleading and disadvantageous to the genuine investors in the securities market.
We find that the Noticees in the present proceedings were related / connected to each other and connived amongst themselves for execution of synchronized and self trades, creation of artificial volume and price manipulation which not only distorted market equilibrium but were also found to be fraudulent in nature. The Noticees have therefore violated the provisions of regulations 3 (a),(b),(c),(d), 4(1), 4(2) (a),(b) (e) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.
Noticees have submitted that based on the same set of facts and transactions as in the instant case monetary penalties were imposed against the Noticees by the adjudicating officer vide his separate order(s) and the Noticees have challenged the said order(s) before SAT. However, we are satisfied that the contraventions as found in this case are grave and have the potential to disturb the market integrity and disturb the fair, equitable and efficient functioning of the securities market.
In the instant case, the proceedings u/s 11 and 11B of the SEBI Act have been initiated against the Noticees in addition to the adjudication proceedings against them as the charges against the entities are grave and have larger implications on the safety and integrity of the securities market. For the serious contraventions as found in the instant case, monetary penalty alone would not be sufficient to safeguard the market integrity.
Considering the repetitive nature of the default by the Noticees, I, in order to protect the interest of investors and the integrity of the securities market, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11 and 11B thereof and regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 hereby restrain the 17 mentioned entities from accessing the securities market and further prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever.
The period of prohibition already undergone by the Noticees who were debarred/restrained pursuant to the interim order dated February 02, 2011, shall be taken into account for the purpose of computing the period of prohibition imposed in this order. Further, it is clarified that the restraint/prohibition imposed on the Noticees hereinabove shall run concurrently with the restraint/prohibition imposed by SEBI vide order dated May 13, 2015, June 29, 2015 and January 4, 2016 in the matters of dealings in the shares of Goldstone Technologies Limited, LGS Global Limited and Well Pack Papers and Containers Limited respectively.
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2015 (10) TMI 2847
Fund mobilising activity from the public - offer and issuing Redeemable Preference Shares (RPS) - Company and its directors are restrained from carrying on with their fund mobilizing activity - violation of the provisions of sections 56, 60 read with section 2(36), 73 of the Companies Act, 1956 r.w.s. 465 of the Companies Act, 2013 and the SEBI (DIP Guidelines – since rescinded) read with SEBI (ICDR Regulations) - HELD THAT:- Company has made multiple allotments on a monthly basis during the financial years 2009-2010, 2010-2011 and 2011-2012. It can be seen that on every allotment (excluding the solitary allotment made on 30.04.2009), the number of persons to whom RPS were allotted always exceeded 49. The Company is not an NBFC or a Public Financial Institution within the meaning of Section 4A of the Companies Act, 1956 to be covered under the second proviso to section 67(3) of the Companies Act, 1956. Therefore, considering the number of persons from whom monies were mobilized by the Company by issuing RPSs, which is definitely more than 49 persons, it can be concluded that the Company had made a public issue of RPS in terms of the first proviso to section 67(3) of the Companies Act, 1956. Further, the manner of making such offer and issuance of RPS adopted by the Company (i.e., series of allotments made consistently every month) can be definitely held to be a ploy employed by the Company to circumvent the provisions of the first proviso to section 67(3) of the Companies Act, 1956.
In view of the above observations, by virtue of section 55A(a) and (b), the SEBI has jurisdiction and would govern the issue of RPS as the same was made to more than 49 persons. As alleged in the SEBI Order, the Company was mandated to comply with the provisions of sections 56, 60 and 73 of the Companies Act, 1956 read with Companies Act, 2013 and the DIP Guidelines read with the ICDR Regulations, in respect of its offer and issue of RPS.
As Company did not comply with the public issue norms mandated under sections 56, 60 and 73 of the Companies Act, 1956 read with the Companies Act, 2013 and the DIP Guidelines read with the ICDR Regulations in respect of its offer and issue of RPS made during the financial years 2009-2010, 2010-2011 and 2011-2012. The Company is therefore liable for appropriate regulatory action.
6 persons (present and past directors) are liable for the violations committed by the Company as found in this Order and also liable for making refunds under section 73(2) of the Companies Act, 1956 read with section 27 of the SEBI Act and the DIP Guidelines. Thus it becomes necessary to issue directions for refund against the Company and its directors and other directions in the interest of investors and the securities market.
Order:- Company jointly and severally, shall forthwith refund the money collected by the Company through the issuance of Redeemable Preference Shares (which have been found to be issued in contravention of the public issue norms stipulated under the Companies Act, 1956 and the DIP Guidelines), to the investors including the money collected from investors, till date, pending allotment of securities, if any, with an interest of 15% per annum compounded at half yearly intervals, from the date when the repayments became due (in terms of Section 73(2) of the Companies Act, 1956) to the investors till the date of actual payment.
The repayments to investors shall be effected only in cash through Bank Demand Draft or Pay Order.The Company/its present directors are permitted to sell the assets of the Company only for the sole purpose of making the refunds as directed above and deposit the proceeds in an Escrow Account opened with a nationalised Bank.
The Company and its promoters and directors shall issue public notice, in all editions of two National Dailies (one English and one Hindi) and in one local daily (in Bengali) with wide circulation, detailing the modalities for refund, including details of contact persons including names, addresses and contact details, within fifteen days of this Order coming into effect. After completing the aforesaid repayments, the Company shall file a certificate of such completion with SEBI, within a period of three months from the date of this Order, from two independent peer reviewed Chartered Accountants who are in the panel of any public authority or public institution.
The Company, its directors and former directors are also directed to provide a full inventory of all their assets and properties and details of all their bank accounts, demat accounts and holdings of shares/securities, if held in physical form.The Company is directed not to, directly or indirectly, access the capital market by issuing prospectus, offer document or advertisement soliciting money from the public and are further restrained and prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner, from the date of this Order till the expiry of 4 years from the date of completion of refunds to investors as directed above.) The directors including former directors restrained from accessing the securities market and further prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner, with immediate effect.
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2015 (8) TMI 1502
Appropriate final orders after considering the reply given already - HELD THAT:- A perusal of the order impugned would show that it is prima facie in nature. The enquiry is almost completed except filing written submissions. In a matter of this nature, touching upon Revenue and technical aspects involving economy, this Court is expected to adopt a dignified reluctance to leave the issues open to be decided by the statutory authority.
Thus without going into the merits of the Case, this Court directs the first respondent to pass appropriate final orders after considering the reply given already and to be given in the form of written submission within a period of four weeks from the date of receipt of a copy of this order. The petitioner is at liberty to give the written submissions to the first respondent within a period of one week from the date of receipt of a copy of this Order.
Writ petition stands disposed of by directing the first respondent to pass final order on merits after considering the relevant materials.
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2015 (8) TMI 1499
Prima facie view contained in the ex-parte ad interim order sustained after hearing the appellants - exercise of the powers conferred upon under sections 11(1), 11(4) and 11B of the SEBI Act - HELD THAT:- The documents and details available on record, the prima facie view taken in the interim order is correct. Further, the directions of not collecting any funds from the investors under the existing schemes/existing company within the group and not to launch any new schemes or plans, is in the interest of lay investors who may fall in the trap of the alleged schemes of the Company. In so far as existing investors as concerned, SEBI has directed that the Company shall not dispose of or alienate any of the properties/assets obtained directly or indirectly through money raised by Citrus and not to divert the funds raised from public.
It was necessary for SEBI that such unauthorized collection of money be stopped immediately in order to prevent further damage to the general public by unregistered CIS activities. As the activities of the Company and its directors are prima facie found to be illegal and in violation of the SEBI directions, revoking the directions issued vide the interim order, at this stage will not be in the interest of the investors. Further, as also discussed above, in terms of the SEBI order dated August 21, 2015 in the matter of Royal Twinkle Star Club Limited, the directors of the Citrus namely Mr. Omprakash Basantlal Goenka, Mr. Prakash Ganpat Utekar, Mr. Venkatraman Natrajan and Mr. Narayan Shivram Kotnis cannot be permitted to carry out any fund mobilization activity. In view of the same, in my considered opinion revoking/modifying the directions issued vide the interim order in any form is not appropriate.
As also noted earlier the documents/details submitted by the Company have to be examined in detail, in the light of submissions made and the discussion in the interim order. In view of the same, I am convinced that the directions in the interim order in respect of the entities need to be continued, till further directions. These directions have been imposed in the interest of investors and to ensure that the noticees do not continue with the money mobilization activities through its plans/schemes. SEBI is directed to conduct an investigation into the operations of the Company, in order to form a final view as to whether the activity of the Company is in the nature of CIS as prima facie observed in the interim order. SEBI is advised to expeditiously conclude the investigation and proceed in accordance with law.
In exercise of the powers conferred upon me under sections 11(1), 11(4) and 11B of the SEBI Act, 1992 read with Regulation 65 of SEBI (Collective Investment Schemes) Regulations, 1996, hereby confirm the directions issued vide the SEBI interim order dated June 03, 2015 against Citrus Check Inns Limited, Mr. Omprakash Basantlal Goenka, Mr. Prakash Ganpat Utekar, Mr. Venkatraman Natrajan and Mr. Narayan Shivram Kotnis.
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2015 (6) TMI 1256
Mis-selling of schemes to the public - "Ponzi Scheme" - company refused to refund the money invested by the complainant in June 2012, when the complainant approached the company for refund of the money as she wanted to discontinue with the plan - preliminary inquiry into whether or not Citrus is carrying on activities of 'collective investment scheme' in terms of Section 11AA of the SEBI Act - HELD THAT:- Promoters/Directors/persons in charge of the business of Citrus. Incidentally, the same Directors are also the promoter/directors of Royal Twinkle against whom directions were passed by SEBI on March 07, 2014. Furthermore, SEBI has received several investor complaints against Citrus alleging that Directors of Royal Twinkle are now running their collective investment schemes through Citrus.
It is obvious that the schemes launched by Royal Twinkle and Citrus are identical in nature and the same management is running the schemes of both the companies i.e. Royal Twinkle and Citrus. This fact is in direct contravention of the assertion made in the company's letter wherein they stated that they have not offered similar holiday plans through its associates, group etc.
This indicates that Citrus is deliberately making false/misleading statements. At this juncture, SEBI cannot be a mere spectator ignoring the investor complaints- specially in the light of the fact that the quantum of funds mobilized from public is a pretty sizeable ₹ 777.04 Crores as on March 31, 2013. As detailed before, Citrus has steadfastly refused to give the latest and relevant information to SEBI despite being given several opportunities to do so. The trail of all these events as well as the conduct of Citrus lead me to draw a prima facie inference that the refusal to give information is nothing but an attempt to conceal the real nature of its fund mobilizing activities.
Protecting the interests of investors is the first and foremost mandate for SEBI. Therefore, steps have to be taken in the instant matter to ensure that only legitimate investment activities are carried on by Citrus and no investors are defrauded. Further, in order to safeguard the assets/property acquired by Citrus and its promoters/directors using the funds collected from the investing public until full facts and materials are brought and final decision is taken in the matter, it is incumbent on SEBI to take preventive action by way of an immediate measure.
Thus no other alternative but to take recourse to an interim order against Citrus and its Directors for preventing them from further carrying on with its existing fund mobilizing activity by launching 'collective investment scheme', without obtaining registration from SEBI in accordance with law.
This order shall be treated as a show cause notice and Citrus and its Directors may show cause as to why the plans/schemes identified in this order should not be held as a 'collective investment scheme' in terms of the Section 11AA of the SEBI Act and the CIS Regulations and why appropriate directions under the SEBI Act and CIS Regulations, including directions in terms of Regulations 65 and 73 of the CIS Regulations should not be issued against them.
Citrus and its abovementioned Directors may, within 21 days from the date of receipt of this Order, file their reply.
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2015 (6) TMI 1216
Fraudulent IPO - Screen based trading with manipulative or fraudulent intent - Restraint orders - preferential allotment of the shares of Eco, Esteem, CNE and HPC, and, thereafter getting those shares listed on the stock exchange so as to avail exemption on LTCG tax gains - HELD THAT:- The transactions in the said scrips were with a premeditated understanding, plan, device or artifice. In the present matter, once the shares of these companies got listed in SME segment of BSE, the Trading Group entities manipulated the price/volume of the scrips and then provided profitable exit to preferential allottees and Pre IPO transferees. Moreover, in any market, a sudden supply if not matched by similar demand leads to price fall. Considering the same, any rational investor would not have dumped a large number of shares without facing the risk of a significant price fall until and unless he was sure of the demand side absorbing the supply. In this case, the entities of Trading Group created the demand against the supply from the preferential allottees/pre IPO transferees. In the whole process, the principle of price discovery was kept aside and the market lost its purpose. It is evident from the above analysis that the Trading Group entities provided a hugely profitable exit to the preferential allottees and pre IPO transferees.
Preferential allottees, pre IPO transferees acting in concert with Funding Group and Trading Group have used the stock exchange system to artificially increase volume and price of the scrip for making illegal gains and to convert ill-gotten gains into genuine one. However, the whole scheme could not have been possible without the involvement/ connivance of companies and their promoters and directors.
The acts and omissions were prima facie for generating fictitious LTCG so as to convert unaccounted income of preferential allottees and pre-IPO transferees into accounted one with no payment of taxes as LTCG is tax exempt under section 10(38) of Income Tax Act, 1961. I prima facie find that the above modus operandi helped the concerned entities to not pay income tax on account of LTCG and helped them to show the source of this income to be from legitimate source i.e. stock market.
The manipulation in the traded volume and price of the scrip by a group of connected entities in this case, has not only resulted in enabling illegal benefit to a group of entities but also has the potential to induce gullible and genuine investors to trade in the scrip and harm them. As such the acts and omissions of companies, Funding Group, Trading Group entities, preferential allottees and pre-IPO transferees are “fraudulent’ as defined under regulation 2(1)(c) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (“PFUTP Regulations‟) and are in contravention of the provisions of Regulations 3(a), (b), (c) and (d) and 4(1), 4(2)(a), (b), (c), (d), (e) and (g) thereof and section 12A(a), (b) and (c) of the Securities and Exchange Board of India Act, 1992.
Certain market manipulations are taking place in the scrips of Eco, Esteem, CNE and HPC. I note that currently major portion of the shareholding (around 35.43% in Eco, 41.10% in Esteem, 41.01% in CNE and 56.22% in HPC) is lying with the preferential allottees, pre IPO transferees, Funding Group, Trading Group and the promoters/directors of these companies. It is also pertinent to mention that Eco and Esteem have already obtained approval of shareholders for migrating from SME platform to Main Board of BSE. If these companies are allowed to shift to Main Board of BSE, the minimum Bid Size of ₹ 1 Lakh, which is currently present in SME segment of the exchange, will not be applicable in the Main Board. Consequently, it will increase the liquidity in the scrips as well as very small investors, who are kept away from SME segment through Minimum Bid Size, may also be induced to invest in these companies.
Unless prevented they may use the stock exchange mechanism in the same manner as discussed hereinabove for the purposes of their dubious plans as prima facie found in this case. In my view, the stock exchange system cannot be permitted to be used to achieve unlawful benefits whether tax related or otherwise. Considering these facts and the indulgence of a listed company in such a fraudulent scheme, plan, device and artifice as prima facie found in this case, I am convinced that this is a fit case where, pending investigation, effective and expeditious preventive and remedial action is required to be taken by way of ad interim ex -parte in order to protect the interests of investors and preserve the safety and integrity of the market.
In order to protect the interest of the investors and the integrity of the securities market in exercise of the powers conferred upon in terms of section 19 read with section 11(1), section 11 (4) and section 11B of SEBI Act, 1992, pending inquiry/investigation and passing of final order in the matter, hereby restrain the concerned persons/entities from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner. The stock exchanges and the Depositories are directed to ensure that all the above directions are strictly enforced.
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2015 (4) TMI 1326
Seeking Interim order of stay of further proceedings - FIR against the applicants herein for the offence punishable under Section 23(1) of the Securities Contracts (Regulation) Act, 1956 and Section 15H(A) of the Securities and Exchange Board of India Act, 1992 - HELD THAT:- The law in this regard is well-settled. Although the police has the power to investigate the offence alleged against the applicant and chargesheet has been filed, the Court will not be able to take cognizance in view of the specific bar. The investigation carried out by the police can be used for the purpose of filing a complaint in writing before the appropriate court. To be precise, whatever materials have been collected by the Investigating Officer could be used by the authority for the purpose of filing a complaint before the competent court.
Applicants have been able to make out a strong prima facie case to have an interim order of stay of further proceedings of Sessions Case pending
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