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TMI Blog2021 (7) TMI 1433X X X X Extracts X X X X X X X X Extracts X X X X ..... to manipulate the price or the market or that a fraud would be played upon the shareholders and the investors. We are further of the opinion that finding of the WTM that the resolution of the Board of Directors provides execution of a pledge or execution of a charge agreement is wholly erroneous, perverse and based on no evidence. The resolution also does not stipulate that the proceeds could be utilized by the bank as security in connection with a loan taken by another entity. In the light of the aforesaid, we are of the view that the appellant cannot be debarred only on the basis of being present in the resolution of the Board of Directors. The impugned order of the AO as well as the WTM in so far as it relates to the appellants cannot be sustained and is quashed. The appeals are allowed. - JUSTICE TARUN AGARWALA, PRESIDING OFFICER AND JUSTICE M.T. JOSHI, JUDICIAL MEMBER For the Appellant : Mr. Gaurav Joshi, Senior Advocate with Mr. Piyush Raheja, Mr. Sahil Gandhi, Mr. Feroze Patel, Mr. Jigar Shah and Ms. Dimple Vora, Advocates i/b. Markand Gandhi Co. For the Respondent : Mr. Sumit Rai, Advocate with Mr. Abhiraj Arora, Ms. Rashi Dalmia and Mr. Karthik Nar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed to the stock exchange. 4. The only charge against the appellants was that they were Independent Non-Executive Directors and were part of the resolution dated 29th October, 2009 by which the first resolution was passed by the Board of Directors for issuance of the GDR and for opening an account with EURAM bank. 5. Before the WTM and the AO, the appellants contended that they were appointed as Non-Executive Directors and were not involved in day to day affairs of the Company nor were part of the decision making process relating to the GDR issue. The appellants contended that they have not signed any agreement involved in the alleged fraud and that their role as Independent Non-Executive Director was very limited and restricted. The appellants contended that they have no specific role in the GDR issue other than attending the board meeting in which the resolution dated 29th October, 2009 was passed for the issuance of the GDR. The WTM and the AO in their orders have come to the conclusion that the issuance of GDR was a fraud played upon investors and the scheme was wrongly utilized in the securities market which was violative of Section 12A of the Securities and Exchange B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curity in connection with a loan taken by another entity. The resolution could also mean that the proceeds would be utilized by the bank as security in connection with a loan taken by the company itself. Thus, from the resolution dated January 30, 2008 one cannot arrive at a conclusion that this was the first step or the starting point of a fraudulent arrangement through which the company could facilitate the financing of the GDR subscription by Vintage. It may be noted here that when the resolution of January 30, 2008 was passed Vintage was nowhere in the picture. The pledging of the shares on May 5, 2009 in favour of Vintage and the loan taken by Vintage in order to subscribe to the GDR issues was done at a time when the appellant admittedly was not involved in the affairs of the company as he had ceased to be a director prior to that date. There isno evidence to establish that the appellant Adi Cooper remained associated with the company or with other directors even after he resigned on October 10, 2008. 9. We further find that the resolution of January 30, 2008 authorizing the bank to utilize the proceeds as security in connection with a loan cannot be inferred as loan given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely : (a) (b) . (f) publishing or causing to publish or reporting or causing to report by a person dealing in securities any information which is not true or which he does not believe to be true prior to or in the course of dealing in securities; (k) an advertisement that is misleading or that contains information in a distorted manner and which may influence the decision of the investors; (r) planting false or misleading news which may induce sale or purchase of securities 10. Similarly in Adesh Jain vs Securities and Exchange Board of India (Appeal No. 217 of 2020 decided on November 19, 2020) this Tribunal held:- 12. Having heard the learned counsel for the parties and having given our thoughtful consideration in the matter, we are of the opinion, that the controversy involved in the present appeal is squarely covered by a decision of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous, perverse and based on no evidence. The resolution also does not stipulate that the proceeds could be utilized by the bank as security in connection with a loan taken by another entity. 13. In the light of the aforesaid, we are of the view that the appellant cannot be debarred only on the basis of being present in the resolution of the Board of Directors dated July 27, 2006. In the absence of any evidence that the appellant had a role to play in the issuance of the GDR, the mere presence of the appellant in the resolution of the Board of Directors dated July 27, 2006 does not make him liable for the alleged fraud that had been committed by the Company. 8. In so far as the appellants are concerned no finding has been given either by the WTM or by the AO that the appellants had any role to play in the issuance of the GDR. The only finding given is that by signing the resolution of the Board of Directors dated 29th October, 2009 the appellants were party to the fraudulent scheme and had not acted diligently which finding cannot be accepted in the light of the decision cited aforesaid. 9. In view of the aforesaid, the impugned order of the AO as well as the WTM in so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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