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2013 (6) TMI 90 - Board - Companies LawPenalty u/s 15H(ii) of SEBI Act, 1992 - case of SEBI that all the 7 allottees acted in concert with each other for the purpose of acquiring a huge number of shares of PCL Comp through preferential allotment but failed to come out with a public announcement to acquire the said shares as per Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 - penalty of ₹ 20 lacs on 11 appellants and 4 more noticees guilty of violating the provisions of Regulation 10 of the SAST Regulations, 1997 jointly and severally - Held that:- As it is evident that all seven allottees had bank accounts with Vinayak Sahakari Bank & all the bank accounts had negligible balance in them before the date of the allotment. Few of them even opened their bank accounts just before the date of allotment of the shares. There was a common pattern of circular fund flow, involving Hirak Biotech Ltd. and Sarang Chemicals Ltd, both of which are group concerns of PCL Comp. All the seven allottees were funded by Hirak and one was funded by Sarang. 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. Violation of the principles of natural justice - Held that:- As it is noted that all the relied upon documents, which were asked for by the appellants, were supplied to them by the adjudicating officer. Adjournments on personal grounds to the appellants for personal hearing were also liberally granted by the adjudicating officer in consonance with the principles of natural justice. Therefore, the plea regarding violation of principles of natural justice being raised at this stage is an afterthought and hence liable to be rejected. Breach of Article 14 read with Article 21 of the Constitution of India - Held that:- The adjudicating officer has given convincing reasoning regarding exoneration of Shri Ashok H. Shah and Ms. Neha Shethwala appreciated by Tribunal Therefore there is no violation of Articles 14 and 21 of the Constitution of India. No arbitrary or unreasonable approach adopted by the adjudicating officer towards any of the appellants or noticees. The argument of the appellants, regarding infringement of Art.14, therefore, stands rejected. In the facts of the present case, even if the expression "personal liberty" is interpreted to include in its ambit the "right to livelihood", as pressed by appellants, the same cannot be extended to allow the appellants to carry on trade or business in shares against the statutory and regulatory norms prescribed lawfully by the SEBI. It would, otherwise, be injurious to public interest and may also have insidious effect on the capital market. Therefore, the plea advanced by the appellants based on Art. 21 also fails. Appeal dismissed.
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