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TMI Blog2024 (11) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant and proves the allegation substantially. It is, however, only to the extent of determination of unlawful gains pursuant to the provision of Securities and Exchange Board of India Act, 1992(SEBI Act, 1992). The SEBI has determined the amount of unlawful gain by taking the difference of the amount out of sale of shares. Their area of determination was only to find out illegal gain out of the allotment. The provisions of the Act of 2002 are quite different and distinct to the provisions of the SEBI Act, 1992. The FIR followed by ECIR was recorded finding commissioning of scheduled offence and the proceeds of crime in the hands of the appellant. It is taking into consideration the amount involved and used for illegal purpose to cheat the public and, therefore, the entire amount therein was considered to be the proceeds of crime . The satisfaction of the amount determined by the SEBI would not absolve the appellant from commission of the scheduled offence, otherwise the appellant would have challenged the FIR or ECIR but no such challenge has been made. Thus, there are no substance even in the second argument. Discrepancies and contradictions in the orders qua the amount - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and as ECIR/01/AZO/2008 on 02.05.2008 in the matter of YBL IPO. It was found that the applications to seek allotment of shares were made through the Bank and Demat Account opened in fictitious/benami names. The financiers played a great role, rather got involved in making applications for allotment of shares pursuant to the IPOs and for that accounts were opened in the name of the fictitious persons in Demat Account so that multiple applications can be made for better chances of allotment of shares. The complaint has explained the modus operandi in the following terms: Consequent to the preliminary scrutiny, SEBI found that certain entities had cornered IPO shares reserved for retail applicants by making application in the retail category through the medium of thousands of fictitious/benami IPO applicants with each of the application being for small value so as to be eligible for allotment under the retail category. Subsequent to the receipt of IPO allotment these fictitious/benamiallottees had transferred shares to their principals who in turn transferred the shares to the financiers that had originally made available the funds for executing the game-plan. The financiers in turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l purposes so as to attach the Bank and Demat Accounts, thus attachment of the Bank Account is not sustainable in the eyes of law. 6. The learned counsel for the appellants has given the brief facts pertaining to the loan provided by the Yes Bank Ltd. in June, 2005 to Mr. Purshottam Budhwani (alleged Key Operator). The loan amount could not have been considered to be a tainted money yet amount was attached against the loan of Rs. 5,67,00,000/- taken from the Yes Bank. The allegation was made that the loan amount was allegedly used by Key Operator for purchasing shares in the IPO of Yes Bank. Mr. Budhwani received 1,27,950 shares of Yes Bank at the price of Rs. 45 per share amounting to Rs. 57,57,750/-. The loan amount was computed and pursuant to the unsuccessful applications, amount was returned which has erroneously been considered to be the proceeds of crime . It is ignoring that Mr. Budhwani (Key Operator) transferred 63975 shares of Yes Bank in the Demat Account in July, 2005 for a total value of Rs. 28,78,875/- at the price raised to Rs. 45 per share. 7. The argument was made even in reference to the IPO of IDFC. The facts and figures of it were given. The loan of Rs. 16,49,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount aforesaid was satisfied by the appellant. 11. The SEBI has taken note of unlawful gain out of sale of shares which can be termed to be the proceeds of crime . It is for the reason that the allegation against the appellant was for opening the fictitious Bank and Demat Accounts to seek more allotment of shares, then the proceeds of crime could have been the difference of amount i.e. the sale proceeds of the shares allotted to the appellant minus the original amount injected for seeking allotment. The SEBI has taken note of the aforesaid but the respondent herein failed to consider that the `proceeds of crime could have been the difference of amount referred to above and not the amount used for making applications for allotment of shares in pursuance to IPO. In light of the facts given above also now there remains no reason to continue the provisional attachment. Issue No.3 12. The learned counsel for the appellants further submitted that there are discrepancies and contradictions in the impugned order, OC and also in the order of provisional attachment. The amount referred in the three documents varies and it can happen only when the matter is not taken up meticulously by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order was passed by this Tribunal confirming the provisional attachment order (Original Complaint No. 17/2008) of 18975 equity shares of Yes Bank Ltd after considering all the issues raised by the appellant in this appeal other than few issues which were not raised by the appellant in this case also before the Adjudicating Authority. The new issues have been raised without amending the appeal. The new issues are in reference to the order passed by the SEBI subsequent to the provisional order of attachment and also alleged discriminatory treatment on return of amount pursuant to the unsuccessful applications. It is alleged that in many cases, it was not considered to be the `proceeds of crime . The reference of relevant paras of the earlier order of this Tribunal has been given by the learned counsel and would be referred while recording our finding. 17. We have considered the rival submissions and perused the record carefully. 18. The brief facts pertaining to the case have been given which are arising out of the famous Shares Scam case of year 2005. The complaint was made against the appellant apart from many others for commission of malpractices and manipulation to seek allotmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were going up and whoever remain successful in getting the shares, remain gainer and, therefore, to gain excess amount out of allotment of shares, the fraud was committed by the Financier through the Key Operator and as a result of which, the respondents have rightly taken entire amount to be the `proceeds of crime . 21. In the light of the discussion made above, we do not find any substance in the argument and it is more so when the issue was earlier decided by the Tribunal against the appellant in their own Appeal No. 24/2008 on 23.08.2011. The relevant paras of the order are quoted hereunder for ready reference: 6. SEBI conducted detailed investigation of the matter and it was found that there were various individuals/entities who were involved in opening fictitious/benami bank and demat accounts, filing applications in retail category for subscription of shares in an IPO, receiving allotted shares in fictitious/benamidemat accounts, pooling these shares in one demat account by off market transfers before the listing of shares and transferring these shares to financiers in off market transaction. These individuals/entities including Sh. Parag Priyakant Jhaveri, Sh. Dipak Jashvan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttam Budhwani and got shares in the names of different family members and H.U.F. out of the shares of YBL and other IPOs cornered by him. 64. He further submitted that by date of closure of IPO means last date by which application along with cheque/draft etc, can be deposited for subscribing IPO. The cheque deposited with application takes time in clearing from the bank. Therefore, the date of clearing of funds from Appellant's bank account to PurushottamBudhwani's bank account is not relevant. He relied upon the statement of Mr. Purushottam Budhwanidt. 17.6.2008 answer to question no. 1 and 2, wherein he has admitted that these funds were received for making 1200 applications in the IPO of Yes Bank and copy of ledger account of PurushottamBudhwani for FY 2005-06 maintained by the Appellant wherein against the debit entry of Rs. 5,67,00,000/- dt. 27.6.2005, it is mentioned in the narration as Ch.No. PB. Yes Bank. xxxx 68. We are of the opinion that statements of Sh. PurushottamBudhwani and Appellant clearly shows that there was tacit understanding between them and the Appellant provided funds to finance the applications for subscribing shares in the IPOs reserved for RII ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant also failed to explain as to why he received/accepted share allotted in IPOs towards part settlement/repayment of purported loans in the names of different persons. Appellant failed to explain the basis of cost taken for transfer of shares as the shares were not listed in stock exchange and they were transferred in off market transactions. xxxx 73. From the copy of ledger account of Sh. Purshottam Budhwani in the books of D.N. Dalal HUF for the FY 2005-06, it was noted that the Appellant provided funds to the tune of Rs. 85.22 crores for subscribing 11 IPOs and the amount financed was returned by way of issue of cheque and by adjusting Rs. 5.12 crores on account of transfer of shares received in 11 IPOs, as per detail given below. The funds were provided to PurushottamBudhwani around the closure date of IPOs, the funds provided matched the amount payable on a set of applications under RII, the shares were transferred in off market transactions around the date of listing, shares were transferred at the IPO allotment price whereas PurushottamBudhwani had option to sell them at a substantial price in market. It was also noted from answer to Q.no. 24 in statement of PurushottamBud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly shows that the two key operators made large number of applications for the allotment of shares in different IPOs and the refunds received by them from the issuer companies were being returned to the appellants. If the money had been lent on a principal-to-principal basis as is the case of the appellants, then the refunds should not have been returned to the appellants and only the principal amount needed to be returned along with interest. It is interesting to note that the entire amount which came by way of refund was not returned to the appellants and only a part thereof was returned and a major portion was retained by the key operators as roll over money which was used for making applications for the next IPO that was to follow shortly. To illustrate, in the case of IPO of ILFS, the key operators received a refund of 5,22,31,250 because the number of shares allotted were less than those applied for. Instead of returning this entire amount, the key operators returned to the appellants only a sum of 46,31,250 and retained 4.76 crores with them which was the exact amount required by them for making applications in the next IPO of IDFC that was coming out within a few days. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or cornering shares in different IPOs in the retail category and that they were the beneficial owners of those shares. We are satisfied that the two key operators were none other than the front entities for the appellants. The role that the appellants have played in the scam is by providing finance to the key operators and that they were acting in concert with each other for cornering shares. In this view of the matter, we answer the question formulated in the opening part of this order in the affirmative and hold that the appellants dealt in securities in a fraudulent manner and indulged in unfair trade practices in securities and thereby violated Section 12 A of the Act and Regulations 3 and 4(1) of the Regulations. The findings recorded by the whole-time member in this regard are affirmed. The civil appeal filed against the above order of Securities Appellate Tribunal; Mumbai before the Supreme Court was also dismissed. 22. In the light of the earlier judgment and finding recorded by this Tribunal, we do not find any substance in the first argument. 23. An argument has been raised on continuance of attachment of the Bank and Demat Accounts even after the order of SEBI determinin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue has been made which would cover the fourth issue. It was not narrated while referring the argument being repetition of the issue. 27. The fifth issue is alleged discrimination in the action of the respondent. It is alleged that the refund amount was not considered to be the proceeds of crime in many cases while it was taken to be the proceeds of crime in the case of the appellant. The counsel for the appellant vehemently argued the issue aforesaid and for which the matter was deferred to find out the substance in the argument. The counsel for the respondent categorically stated that no discrimination in the similarly placed has been made. The counsel for the appellant was called upon to refer to the documents to prove allegation of discrimination in the treatment between the similarly placed. A reference of the Income Tax Return was given but then the counsel fairly admitted that it cannot substantiate the argument of discrimination. It could have been by producing an order of provisional attachment against others which has not been produced. Thus, even the last argument alleging discrimination of treatment is not made out. 28. In light of the discussion made above, we do not f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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