Home Case Index All Cases SEBI SEBI + AT SEBI - 2022 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (6) TMI 1441 - AT - SEBIFraudulent GDR issue - fraudulent scheme was devised by the Company and its Directors - Vintage was the only entity which subscribed the entire 1.17 million GDRs of the Company by obtaining a loan from EURAM Bank - Penalty and restraint orders against company and directors - HELD THAT:- In the instant case, the copies of the loan agreement, pledge agreement was obtained from an authenticated source and, therefore the existence of the original document cannot be disputed and, in any case, the appellants especially the Company and Managing Director had copies of these documents if not the original and, therefore, it does not lie in their mouth to contend that the copies annexed to the show cause notice cannot be relied upon. In any case, we are of the opinion that if copies of the documents and/or its contents thereof are relied by SEBI and the same is disputed by the appellants regarding its existence or its contents then the onus is upon the appellants who disputes it to prove that the document is forged or its contents are manipulated and its signatures are not of their Directors. The onus is upon the appellants and not upon SEBI. Appellants contended that they were not aware of the pledge agreement and, therefore, the question of disclosing it to the stock exchange did not arise - Since we have already held that the appellants were aware of the pledge agreement non-disclosure of the pledge agreement invited penalty which the AO has rightly penalised the appellants. Company furnished wrong information to SEBI regarding the subscribers to the issue. The list provided by the Company indicated that a number of subscribers had subscribed to the GDR issue which upon investigation was found to be false and that only one entity had subscribed to the GDR issue. The contention that the Company had only forwarded the letter that was given by the Merchant Banker cannot be accepted. The responsibility at the end of the day is of the Company and, in our opinion, filing false information was solely the responsibility of the Company and cannot be diverted to the Merchant Banker. A feeble attempt was made contending that there were two dates on the loan agreement, namely, 16th August, 2010 and 26th August, 2010 and, therefore, doubted the authenticity of the said document. In the first blush the argument appeared to be attractive but upon a closer scrutiny of the document we find that the loan agreement was sent by EURAM Bank to Vintage on 16th August, 2010. This offer of a loan agreement was accepted by Vintage when they placed their signature on 26th August, 2010. Thus, we do not find any discrepancy doubting the authenticity of the loan agreement. Penalty - As excessive penalty imposed upon the Company does not make any sense. In the instant case, there are 70,000 public shareholde Rs. Penalising the Company with such heavy penalty is infact penalising the shareholders which is not justifiable especially for a running company. Money raised through GDRs has been received by the Company and has not been misappropriated. The same has been utilitised for the purpose for which the GDR was issued, namely, for the Company’s subsidiary which fact has not been disputed. Thus, it is not a case of defalcation of the funds. Even though the appellants had misled the investors into believing that the GDR was successful whereas there was only one subscriber. Further, the loan agreement, pledge agreement was not disclosed to the shareholders and to the stock exchange. Such scheme was totally fraudulent. If the Company had not given security for the loan taken by Vintage then Vintage could not have subscribed to the GDRs and, consequently, the GDR issue would have failed. Thus, by entering into the pledge agreement for facilitating subscription of its GDRs, we are of the view that the appellant had played a fraud on the securities market and misled the investors by creating a false impression and, thus, violated Section 12A of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations. Directions so issued under Section 11 and 11B of the SEBI Act and the penalty so imposed under Section 15HA are disproportionate and does not commensurate with the violation in view of the directions given in similar matters by the respondent. A penalty of Rs. 10,00,000/- has been imposed on the Directors only on the strength that they were signatories to the board resolution. In Mr. Gurmeet Singh vs. SEBI [2021 (9) TMI 1519 - SECURITIES APPELLATE TRIBUNAL MUMBAI] and other connected appeals this Tribunal has held that merely being a signatory to a resolution does not mean that these Directors were part of the fraudulent scheme that the respondent was required to show some other evidence to show that these Directors were also part of the fraudulent scheme. Thus the imposition of penalty is excessive. Consequently, while affirming the order of the WTM and AO of the aforesaid violations committed by the appellants we reduce the debarment period of the Company and the Managing Director from five years to three years. The other Directors have already undergone the debarment period and, therefore, no further order is required to be passed. In so far as the penalty imposed by the AO is concerned, the penalty against the Company is reduced to Rs. 25 lakhs. The penalty against the Managing Director is affirmed. The penalty imposed against the remaining Directors is reduced from Rs. 10,00,000/- to Rs. 2,00,000/-. The appeals are partly allowed. In the circumstances of the case, parties shall bear their own costs.
|