2023 (1) TMI 1258 - AT - SEBI

Fraudulent activities under SEBI - issue of 80, 800 false share certificates forging signatures of genuine investors on the transfer documents and verifying fake share certificate and forging signatures and approving fraudulent transfer etc . - WTM passed ex-parte ad-interim order - appellants were Directors and Promoters in company in the business of non-banking finance and also a stock broker on NSE and BSE - contention of the appellant is that the impugned order was passed ex-parte without giving an opportunity of hearing - HELD THAT - We find that the impugned order is an ex-parte ad-interim order which has been passed in terms of Section 11 in the interest of the investors. We find that admittedly the order directing the appellant to make an open offer as per the order dated 27th July 2010 has not been complied with for more than ten years and therefore direction was given to the appellants to complete the process of the open offer within 60 days. Such direction so issued does not suffer from any error of law nor does the order amounts to penalising the appellant again for the same cause of action. WTM has calculated the value of the open offer and the amount which is to be paid to the shareholders/investors in terms of Regulation 15(2) of the Delisting Regulations. This amount was directed to be deposited as a safeguard which could eventually be utilised accordingly as and when the appellants makes the open offer. The amount so calculated is a tentative figure and if objected by the appellant can be rectified and revised on the basis of evidence that would be furnished by the appellant while passing a final order. It is for the aforesaid purpose that the appellant was given an opportunity to show cause as to why appropriate directions should not be issued under Section 11 and 11B. Thus WTM was justified in passing an ex-parte ad-interim order which can be modified provided an application is filed by the appellant objecting to the calculation. No manifest error in the order passed by the WTM.

Summary

Issues:
- Legality and validity of the order dated 13th December, 2021 passed by the Whole Time Member (WTM)
- Compliance with SEBI's order dated 27th July, 2010 regarding securities market activities
- Calculation and payment of the value of open offer to shareholders/investors
- Justification of the ex-parte ad-interim order passed by WTM
- Opportunity for the appellant to object to the calculation and revise the amount
- Dismissal of the appeal and miscellaneous application

Analysis:
1. Legality and Validity of the Order: The appellants challenged the legality and validity of the order dated 13th December, 2021, passed by the Whole Time Member (WTM). The Tribunal found that the impugned order was an ex-parte ad-interim order passed in the interest of investors. Despite the appellants not complying with the order to make an open offer for more than ten years, the Tribunal directed them to complete the process within 60 days. The Tribunal concluded that the order was justified and did not amount to penalizing the appellants again for the same cause of action.

2. Compliance with SEBI's Order: The Securities and Exchange Board of India (SEBI) had issued an order on 27th July, 2010, restraining the appellants from accessing the securities market and directing them to make a public offer to acquire shares from public shareholders. The appellants failed to comply with this order, leading to subsequent legal proceedings and the impugned order of 13th December, 2021, requiring them to take steps to complete the public offer and deposit a specified sum along with interest.

3. Calculation and Payment of Open Offer Value: The Whole Time Member (WTM) calculated the value of the open offer and the amount to be paid to shareholders/investors as per the Delisting Regulations. The calculated amount was directed to be deposited as a safeguard pending completion of the open offer. The Tribunal clarified that this amount was tentative and subject to revision based on evidence provided by the appellants. The appellants were given an opportunity to object to the calculation and present their case.

4. Justification of Ex-parte Ad-interim Order: The Tribunal justified the ex-parte ad-interim order passed by the WTM, stating that it could be modified upon application by the appellants objecting to the calculation. The Tribunal found no manifest error in the WTM's order and emphasized the importance of complying with regulatory directives in the interest of investors and market integrity.

5. Dismissal of the Appeal: After considering the arguments presented by both parties, the Tribunal dismissed the appeal, stating that the WTM's order was valid and not erroneous. The Tribunal also disposed of a miscellaneous application related to the case. The order was to be digitally signed and made available for all concerned parties to act upon.

This detailed analysis covers the key issues raised in the legal judgment and provides a comprehensive understanding of the Tribunal's decision and reasoning.