9911796707
TMI Blog2002 (1) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 49 of the Foreign Exchange Management Act, 1999 ('the FEMA'). 2. Prosecution allegations in brief are that after noticing abnormal outflow of foreign exchange from the stock market, the Enforcement Directorate, Mumbai Zonal Office made enquiries from the Securities and Exchange Board of India Act, 1992 ('the SEBI') vide their letter dated 7-3-2001. On receipt of information, the department took up investigation and sought information from First Global Stock Broking (P.) Ltd. ('FGSBPL') of which the petitioner is the director. On 3-10-2001, reference was received from the Income-tax Department regarding sale of shares of Himachal Futuristic Communication Ltd. ('HFCL') by FGSBPL, to Foreign Institutional Investors ('FIIs') and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized. However, residential premises of the petitioner at Mumbai could not be searched as none was available and same had to be sealed. On 27-11-2001, the petitioner sent a communication through the lawyers stating that they are sending keys of their house at Mumbai through their employees Hitesh Kavelkar and Pankaj Walia, who shall represent them at the time of search. However, they also did not turn up. 3. Enquiries were also made from the RBI on the issue of sale of shares of HFCL acquired on private placement basis by group of companies of the petitioner to FIIs. The RBI in their letter dated 11-12-2001 confirmed that the sale of said shares by the group of companies of the petitioner and the purchase by the FIIs under sub-accounts was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotted; (iv) Out of these, companies of the petitioner sold 5,92,950 shares to the 16 FIIs/their sub-accounts through their custodians in India, outside the stock exchange without the permission of the RBI at a price ranging from Rs. 1060.50 to Rs. 1,075 per share when the prevailing market rate was between Rs. 1,951 to Rs. 2,211 per share; and (v) The Deutsche Bank, Mumbai one of the custodians of the FIIs to whom shares were sold by the FGSBPL on 25-3-2000 wrote to the SEBI, inter alia, the following : "u The trades have been executed by the broker on a DVP Spot basis. uThe price at which the contract is executed is much less than the market price of Himachal Futuristic on 22/03. The purchase contract is executed at a price of Rs. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian company which operates on the London Stock Exchange and is a member of NASDAQ USA; that they are one of the highest tax-payers in the country and that the petitioner is being victimised because of his association with Buffalo Network (P.) Ltd. (Tehelka.com), which was instrumental in exposing corruption relating to the defence deals on 13-3-2001. He argued that the petitioner's company as a part of its multifarious investments holds only 14.5 per cent shares of their company but he did not hold any managerial or editorial position in the same. He further argued that there was never any case of regulatory infraction or tax dispute. The harassment of the petitioner and his wife started only after 13-3-2001. The learned solicitor General c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I of any FII transaction. The FII (foreign entity) and the Custodian Banks were responsible for approval and reporting to the RBI and SEBI. Every transaction done by an FII in India is reported with full details of the contract to both the RBI and the SEBI by the custodian banks by the end of the same day. Reliance was placed on 10B.4 of the RBI Exchange Control Manual & SEBI Regulations for FIIs. It is, thus, argued that violation of the provisions of the FERA, if any, would be either by FII or their Custodian Banks and not by the petitioner; (ii) the petitioner's company as the lead arranger/book runner for the reputed FIIs had sought to acquire the shares in HFCL in terms of the notification and the guidelines of the RBI. Their bids were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the sale of HFCL shares to various FIIs/sub-Accounts or from the concerned FIIs/Sub-Accounts for purchase of such shares." In view of the above, I am unable to accept the contention that even if the allegations are assumed to be true, no offence against the petitioner is made out. As the investigations are still in progress, any detailed discussion on merits is not called for. 11. The learned senior counsel for the petitioner lastly argued that grant of bail is the rule and refusal is the exception. The petitioner is a professional person having deep roots in the society and there is no likelihood of his absconding or tempering with the evidence, therefore, he is entitled to be released on bail. Reliance was placed on the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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