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TMI Blog2009 (9) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 15T of the Securities and Exchange Board of India Act, 1992 against the order dated October 31, 2008 passed by the whole time member of the Board restraining him from buying, selling or dealing in securities for a period of two years from the date of the order. Since the whole time member found that the appellant had unduly enriched himself by his unlawful conduct and made huge profits after cornering shares reserved for the retail investors, he directed him to disgorge a sum of ₹ 72 lacs which, according to the impugned order, represents the unlawful gains made by the appellant He has also been directed to pay interest at the rate of 10 per cent from the date of listing of the shares. 2. The appellant claims to be a financie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt on allotment of shares was required to transfer the shares back to the appellant who in turn was to transfer the shares to the finance company. Again, there is no dispute between the parties that in the case of Suzlon IPO, all the applicants (3870) applied for 96 shares each and deposited a sum of ₹ 48,960/- as application money with each application and in the case of 1217 applicants, 100% finance had been provided by the appellant where as in the case of the remaining applicants, the appellant provided 50% finance and the remaining portion of the amount was financed by the Centurian Bank. 719 applications in the case of IDFC IPO were totally financed by the appellant and each applicant had been allotted 266 shares though each app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on the dictates of the appellant and the finance company who were in concert with each other for cornering shares reserved for the retail investors. On a query made by us from the learned Counsel for the appellant as to whether the appellant was registered as a money lender and whether the finance company was registered as a non banking finance company with the Reserve Bank of India, his answer was in the negative. This apart, there are several other factors from which an inference could be drawn that the applications for allotment of shares were in fact on behalf of the appellant and the finance company. An amount of ₹ 16 crores was advanced to the appellant without any documentation or security and he, too advanced the same to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant claims that interest was charged and paid to the finance company for the amount borrowed. No record has been produced to substantiate this plea. Another factor which makes us raise our eye-brows is that most of the applicants were the friends and relatives of friends of the appellant, most of whom were residing in the same building and each one of them applied for identical number of shares and took loan for an identical amount. Each applicant made sure that the amount for which he applied for the shares was less than ₹ 50,000/- so that he did not have to disclose the details of his Permanent Account Number. It is not disputed that the refund issued by the issuer company for the excess number of shares applied was recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and IDFC. In the absence of any material as to how the illegal gains were distributed between the appellant and the finance company, the whole time member, in our view rightly proceeded on the basis that they shared the amount equally. It is on this basis that the appellant was required to disgorge a sum of ₹ 72 lacs. Disgorgement is a monetary equitable remedy to prevent a wrong doer from unjustly enriching himself as a result of his illegal conduct. Disgorgement of illegal gains are ordered against those who violate the securities laws and make unlawful gains. The amount should not exceed the total profits realized as a result of the unlawful activity and the amount ordered to be disgorged should approximately be equal to the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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