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TMI Blog2013 (6) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... arang. All the shares allotted were pledged with the Ahmedabad Peoples' Bank against loans taken by PCL Comp and its group companies, including Hirak and Sarang. The address of another allottee, Rudra Securities, prior to 11/11/2008 was the residential address of the 1st Appellant. No cogent explanation has been provided by the Appellants with regard to the receipt of funds, the application and the allotment of shares, except to say that they raised debt to apply. It is the admitted position before the adjudicating officer that 'no documents were available' in support of this contention. Thus a minute perusal of the impugned order thus makes it abundantly clear that the 7 allottees in question acted with a common purpose and design in the matter of allotment of 2.90 crore preferential shares in question. It is established by the learned adjudicating officer beyond doubt that all the 7 persons functioned as a one entity for all practical purposes and intents. All the three companies in the appeals, who acted through individual directors only, are equally responsible for the wrongful acts in question and hence liable to pay the penalty imposed upon them by the impugned order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Section 15H(ii) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'the SEBI Act') on them. Two persons namely, Shri Ashok H. Shah and Ms. Neha R. Shethwala have, however, been exonerated as no violation could be established against them before the adjudicating officer. 3. Brief facts leading to the passing of the above said impugned order are that the Securities and Exchange Board of India (for short SEBI) conducted investigations relating to the preferential allotment of 2,90,00,000 shares @ Rs.1 each at a premium of Rs.0.25 per share by the Platinum Corporation limited (hereinafter referred to as 'PCL Comp). These preferential shares were allotted to the following 7 persons on 13th January, 2009:- 1. Dhrumal Vaidya - 25,00,000 shares 2. Anindo Achinto Banerji - 25,00,000 shares 3. Pratik R. Shah - 50,00,000 shares 4. Nikita B. Dave - 50,00,000 shares 5. Vashi Constructions Pvt. Ltd. - 50,00,000 shares 6. Dhanlaxmi Lease Finance Ltd. - 40,00,000 shares 7. Rudra Securities and Capital Ltd. - 50,00,000 shares 4. The case of SEBI is that all the above 7 allottees acted in concert with each other for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany in accordance with the regulations." 6. Shri P.K. Bindlish, was appointed as the adjudicating officer by the competent authority vide its order dated 4th July, 2011 to enquire into and adjudicate under section 15H(ii) of the SEBI Act for the above said allegations. The learned adjudicating officer issued show-cause notices to all the above 19 incumbents as per the requirement of Rule 4(1) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995. From the pleadings, it is noted that Pratik R. Shah, Dhrumal Vaidya, Anindo A. Banerjee, and Nikita B. Dave duly received notices issued by the learned adjudicating officer on several occasions but did not respond to him in any manner. However, the following persons appeared in person and filed their replies:- 1. Vashi Constructions Pvt. Ltd., 2. Rajesh C. Shah. 3. Bhavana R. Shah, 4. Ashok H. Shah, 5. Rudra Securities and Capital Ltd., 6. Nileshkumar T. Kava, 7. Ketan D. Sorathiya 8. Vipul S. Trivedi, 9. Dhanlaxmi Lease Finance Ltd., 10. Bipin R. Shah, 11. Bharat R. Shah 12. Girish G. Doshi, 13. Neha R. Shethwala 7. The replies s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting in any role at all. * She, thus, prayed for keeping herself away from the transaction and dropping the allegations against her. 10. In these circumstances and after giving reasonable opportunity of personal hearing to the noticees, the learned adjudicating officer considered the replies of the appellants and other material/documents brought on record by the parties and came to the conclusion that the 11 appellants and 4 more noticees were guilty of violating the provisions of Regulation 10 of the SAST Regulations, 1997 and hence imposed a penalty of Rs. 20 lacs on behalf of them, jointly and severally. However, Mr. Ashok H. Shah and Ms. Neha Shethwala were exonerated by the adjudicating officer after analyzing the facts and evidence in respect of their alleged role in the whole matter. 11. The appellants before this Tribunal have mainly submitted that all transactions are bona fide purchases and they have nothing to do with the act of PCL Comp in giving money to some other party. The appellants have further contended that the conclusion of the learned adjudicating officer regarding rotation of money is based on assumptions and that the appellants, being bona fide i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise harsh and violative of Articles 14 and 21 of the Constitution of India. 14. On the other hand, Shri Shiraz Rustomjee, the learned senior counsel with Mr. Mihir Mody, Advocate for the respondent, have submitted that the preferential allotment of shares to the tune of 2,90,00,000 on 13th January, 2009 was made to 7 persons, out of which 4 are directors, and other three are the companies. All of them are appellants in the three appeals. They opened their accounts either immediately preceding the date of allotment of preferential shares to them or their accounts with the concerned Bank had negligible amounts. All the shares were pledged with the banks in order to raise the loan. Thus money comes to the company and goes back to the persons from whom it came and that too, in cash. It is submitted by the learned counsel for the respondent that this has been explained with great clarity in Annexures II, III, IV to the show-cause notice dated 20th April, 2011 and Annexure-I to the impugned order dated 19th January, 2012. 15. After hearing both the learned counsel for the parties, at length, and after perusing the pleadings and documents produced by the parties, it is evident that; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant and reproduced hereinbelow:- "32. TRANSACTIONS ON JANUARY 12, 2009 - It is observed that the Company had shown to have received allotment money of Rs.62,50,000 from Rudra Securities and Capital Ltd. and Rs.50,00,000 of Dhanlaxmi Lease Finance Ltd. The Company had immediately transferred the amount of Rs.1,00,00,000/- to Sarang Chemicals Ltd. and transferred Rs.12,50,000 to Hirak Biotech Ltd. on January 13, 2009. It is observed that thereafter, there were 20 cash withdrawal transactions in the account the Sarang Chemicals Ltd. In regard to source of funds to Rudra Securities and Capital Ltd. and Dhanlaxmi Lease Finance Ltd., it is observed that they had received the amount of Rs.1.125 Crore from Hirak Biotech Ltd. Hirak Biotech Ltd. in turn received 10 cash deposits amounting to Rs.1 Crore and also received Rs.12.50 Lakhs through a transfer entry. It is observed that the cash of Rs.1 Crore shown to have withdrawn from account of Sarang Chemicals Ltd. was once again shown to have credited in the account of Hirak Biotech Ltd., thereby completing circular rotation of transactions to the tune of Rs.1 Crore and in the process, the Company had created entries of receipt of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The moment such a huge number of shares is acquired, voting rights accrue and when the same becomes in excess of the then stipulated percentage of 15, the SAST Regulations, 1997 (Takeover Regulations) would hold the field. PCL Comp being a listed company, therefore, was obliged to make a public announcement in this regard. By not doing so and due to its failure, the general public/investors at large were put to prejudice. Further, the manner in which the transaction in question has been completed leaves no doubt to hold that the same was not bona fide. The money was deposited through cheques but was withdrawn in cash by the persons concerned at the end of the day. In the process, the shares in question were pledged to take loan. These acts of the appellants are undoubtedly prejudicial to the healthy growth of the market and, therefore, SEBI rightly exercised its jurisdiction in holding the proceedings against the appellants and in passing the impugned order in question that too, after due application of mind. 18. All the three companies before us in the appeals, who acted through individual directors only, are equally responsible for the wrongful acts in question and hence liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fair gesture shown by the learned adjudicating officer in respect of these two persons and his findings qua Neha Shethwala and Ashok H. Shah are hereby upheld. Therefore, in the facts and circumstances of the case, there is no violation of Articles 14 and 21 of the Constitution of India. There are two important limbs of Article 14, i.e., "equality before law" and "equal protection of law". Equality, as contemplated by Art. 14, is a dynamic concept and mainly prohibits arbitrariness and discriminatory state action. It also takes in its sheep the doctrine of Natural Justice which is termed as a synonym of fairness in the context of delivery of justice. Similarly, the equal protection clause simply means a right to equal treatment in similar circumstances. 21. In the case in hand, we do not find any arbitrary or unreasonable approach adopted by the learned adjudicating officer towards any of the appellants or noticees. The exoneration of the two noticees is not discriminatory in as much as there is rationale/justification to be found in paras 44 and 45 of the impugned order. The argument of the appellants, regarding infringement of Art.14, therefore, stands rejected. 22. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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