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TMI Blog2022 (10) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 1. The Appeal no. 496 of 2020 is filed being aggrieved by the order of learned Adjudicating Officer ('AO‟) of the respondent no. 1, Securities and Exchange Board of India ('SEBI‟) bearing reference no. Order/VV/JR/2019-20/6885- 6886 dated February 20, 2020 imposing a penalty of Rs. 15 lakh on the appellants, jointly and severally, for violation of provisions of Section 12A (a), (b) and (c) of the SEBI Act, 1992 and Regulations 3 (a), (b), (c), (d), 4(1), 4(2)(f), (k) and (r) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ('PFUTP Regulations‟). 2. The facts of the case are that the appellants (Appellant no. 1 is a partnership firm and Appellant no. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... needed to be authorized from the Members. In view of this, we are unable to comment upon the appropriateness of variation in utilization of money". Contrary to the qualified opinion in the annual report, the appellants issued an unqualified utilization certificate dated May 30, 2015. Further, the actual utilization of IPO proceeds was significantly different from the certificate issued by the appellants and the unqualified utilization certificate issued by the Statutory Auditor was not true, was misleading and contained information in a distorted manner which may influence the decision of the investors. 4. The appellants filed their replies and written submissions dated December 22, 2017, January 4, 2018 and June 21, 2019 wherein they den ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n certificate containing distorted information which they did not believe to be true but certified knowing that the same when published could be relied upon by the investors to be true and fair. Thus, the appellants aided and abetted the Company in disseminating false information as presented in utilization certificate to wrongfully influence the decision of the investors and thus their acts and omissions amount to aiding and abetting in fraudulent, unfair and manipulation acts of the Company and were covered within the definition of "fraud" and "fraudulent" under Regulation 2(1)(c) of the PFUTP Regulations. 6. We have heard Shri Neville Lashkari, the learned counsel with Shri Prakash Shah, the learned counsel for the appellant and Shri Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. This Tribunal vide its order dated May 2, 2022 in Appeal no. 179 of 2019 has held that the Company (Tarini International Ltd.) and its directors have mis-utilized the IPO proceeds. The issue before us is, thus, whether the appellants can be penalized under Section 12A(a),(b) & (c) of SEBI Act, 1992 and Regulation 3(a),(b),(c),(d) and 4(2)(f), (k) and (r) of the PFUTP Regulations. 10. In Writ Petition no. 5249/2010 Price Waterhouse Co. Vs SEBI decided by the Bombay High Court on 13.08.2010, the question raised was whether SEBI has power to issue a show cause notice to the Charted Accountants in connection with the work which they have undertaken for a listed company in a matter of maintaining accounts and balance sheets. It was urged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books of account and balance sheet of the company. If it finds that the C.A. had no intention and knowledge to fabricate and fudge the books of account and there was only some omission without any mens rea or connivance with anyone then on such evidence SEBI cannot give any further directions. 13. In Price Waterhouse Co. Vs. SEBI in appeal no. 6 of 2018 decided on 09.09.2019, this Tribunal while considering the role of the appellant as a firm of the C.A.s and after considering the judgment of the Bombay High Court (supra) found that the scope of the enquiry was only restricted to the charge of conspiracy and involvement in the fraud and not to any charge of professional negligence since the C.A. / C.A. firm were not dealing directly in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO on collusion with the Company in the absence of which the charge of aiding and abetting the Company cannot be sustained. It is an admitted fact that the appellants had qualified the annual accounts on the matter of utilization of funds of the IPO and such a qualification is mentioned in the Annual Report which is in the public domain. In absence of a finding that there was deceit or inducement, the appellants can only be held guilty for professional lapse or negligence for which the appropriate authority to take action is ICAI. SEBI has already made a complaint to the ICAI in the instant case and ICAI is holding an inquiry against the appellants. 16. Section 12(A)(a) & (b) of SEBI Act is not applicable to the appellants as they are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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