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SEBI - Case Laws
Showing 281 to 300 of 510 Records
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2019 (12) TMI 1656
Violation of Regulation 11(1) of the SAST Regulations - Non issue of open offer - Huge rise of traded volumes and price of the shares on BSE - Whether agreement/decision/intention to acquire the shares and control of the Target Company by the acquirer triggers the open offer requirement under Regulations 10 and 12 of SAST Regulations, 1997 respectively? - HELD THAT:- Any person either by himself or along with the persons acting in concert who “agrees to acquire shares or voting rights” or “agrees to acquire control over the target company” would come within the definition of ‘acquirer’ irrespective of the time when actual acquisition of shares happened.
As per Regulation 2(1)(b) i.e. definition of "acquirer"; Regulation 10 relating to acquisition of 15% or more shares or voting rights; Regulation 12 relating to acquisition of control and the provisions of Regulation 14(1) and 14(3) relating to public announcement, open offer requirement under SAST Regulations, 1997 are triggered by person along with persons acting in concerts on (i) agreeing to acquire shares of the Target Company above the limits prescribed; (ii) agreeing to acquire control of a target company. Therefore, agreement/decision/intention to acquire the shares and control of the Target Company by the acquirer triggers the open offer requirement under Regulations 10 and 12 of SAST Regulations, 1997 respectively.
Whether the Noticees had the agreement/decision/intention to acquire the shares of FFSL and to take control of the management of FFSL? - Whether the MOU is only in the nature of mere understanding or has taken the character of agreement which records the rights and obligations agreed between the parties? - HELD THAT:- As no proof of communication of rescission of “MOU” was given by the Noticees. Instead, even as per their case, some tranches of physical share certificates were continued to be transferred in the name of BPJ nominees in the month of April, 2012. If the MOU has been rescinded in November 2010, there was no occasion for acceptance of physical share certificates later in April 2012 which only go to show the Noticees were acting still pursuant to the MOU. Further, BPJ vide letter dated January 30, 2019 has stated that AMPL and NVPL had backed out in the month of June 2010. However, instead of rescinding the MOU even at that stage, their shares were subsequently transferred to Mr. R Rathinmala and Mr. B Satya Prakash respectively showing further that the argument of rescission of “MOU” is only an afterthought.
It is further noted the basis of the trigger of respective provisions of the SAST Regulations, 1997 in the instant matter is on the basis of “agreement to acquire” shares and control. Therefore, the consideration of arguments which goes to establish that the actual acquisition of threshold limits of shares or actual acquisition of control did not happen as advanced by the Noticees, does not require consideration. Accordingly, those arguments are not considered.
As per the MOU dated May 27, 2010, Noticees (except) BPJHUF had an agreement / decision / intention to acquire 58.08% of the shares of FFSL for a consideration of Rs. 21,76,650 /- (by issuing cheques / post-dated cheques) and control of management of FFSL by appointing majority of directors on the Board on FFSL.
Whether the Noticees are acquirers/Persons Acting in Concert? - As upon perusal of MOU dated May 27, 2010 and letters attached thereto, I note that BPJ-HUF was neither the part of MOU dated May 27, 2010 nor issued any cheques to Mr. Natarajan or promoter of FFSL for acquisition of shares of FFSL. Hence, on May 27, 2010, BPJ-HUF did not have any agreement / decision / intention to acquire the shares of FFSL and control over FFSL. Thus, on May 27, 2010 BPJ-HUF was neither the acquirer nor person acting in concert for the acquisition of 21,76,650 equity shares (58.08%) of FFSL and control over FFSL. Hence, find merit in the said contention of BPJ-HUF.
Whether the Noticees have violated the provisions of Regulations 10 and 12 of SAST Regulations, 1997 and Section 12A(f) of SEBI Act, 1992 as alleged in the SCN? - In the instant matter, it is noted that Noticees (except BPJ-HUF) had agreed / decided that nominees of BPJ shall be appointed on the Board of FFSL leaving one promoter director. Thus, on May 27, 2010 Noticees (except BPJ-HUF) had agreed / decided to the right to appoint the majority of directors on the Board on FFSL i.e. to have control over the management of FFSL. Thus, Noitcees (except BPJ-HUF) were required to make public announcement of offer within 4 working days from the date of deciding the changes that would result in control over management of FFSL. However, it is noted that Noticees (except BPJ-HUF) did not made any public announcement of offer within 4 working days from May 27, 2010. Hence, Noticees (except BPJ-HUF) had violated the provisions of regulation 12 read with regulation 14(3) of SAST Regulations, 1997.
Thus, the allegation for the violation of the provisions of Regulations 10 and 12 of SAST Regulations, 1997 and Section 12A(f) of SEBI Act, 1992 against Noticees (except BPJHUF) stands established.
BPJ-HUF had not violated the provisions of Regulations 10 and 12 of SAST Regulations, 1997. Thus, the allegation for the violation of the provisions of Regulations 10 and 12 of SAST Regulations, 1997 and Section 12A(f) of SEBI Act, 1992 against BPJ-HUF does not stand established.
What directions should be issued against the Noticees? - As the fact that the scrip is under suspension further strengthens the case that in the interest of shareholders / investors, it is fit case to direct the Noticees (except BPJ-HUF) to make a public announcement of open offer.
ORDER:
B. P. Jhunjhunwala, Ruhi Jhunjhunwala, Mala Jhunjhunwala, Skyed Network Private Limited, Anurodh Merchandise Private Limited, Nandlal Vyapaar Private Limited, BPJ Holdings Private Limited and Radhasoami Resources Limited shall make a public announcement to acquire shares of the target company in accordance with the provisions of the SAST Regulations, 1997, within a period of 45 days from the date of service of this order;
B. P. Jhunjhunwala, Ruhi Jhunjhunwala, Mala Jhunjhunwala, Skyed Network Private Limited, Anurodh Merchandise Private Limited, Nandlal Vyapaar Private Limited, BPJ Holdings Private Limited, Radhasoami Resources Limited shall, alongwith the consideration amount, pay interest at the rate of 10% per annum on the consideration amount to the eligible shareholders as per the ratio laid down in Clariant International Limited and another vs. SEBI [2004 (8) TMI 390 - SUPREME COURT] after adjustment of dividend paid, if any.
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2019 (12) TMI 1654
Violation of Regulation 11(1) of the SAST Regulations - period of limitation - artificial price rise in the scrip during the period 2004-2008 - appellant submitted before us that the order is liable to be quashed on the sole ground of the delay - HELD THAT:- The time line of the events would show that the alleged violation had occurred between March, 2004 to June, 2004. The appellant had disclosed the transaction to the BSE at that time. The show cause notice however was issued in the present case dated 7th November, 2017. The investigation report itself would show that for non availability of the documentary evidences the investigating authority did not recommend taking drastic action to direct making of public announcement. Thus, there was inordinate delay in initiation of the proceedings.
No escape from the conclusion that the proceedings are required to be quashed. Therefore the appeal is hereby allowed.
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2019 (12) TMI 1648
Offence under SEBI Act - fraudulent scheme of issuing GDR with an ulterior motive - HELD THAT:- Heard the appeal at the stage of admission. Learned senior counsel for the respondent submitted that the orders are yet to be passed in the proceedings and all the grievances of the appellant can be made before the Whole Time Member. He also fairly submitted that the proceedings can be possibly disposed of within six months from today. In view of the said statement, the appeal is disposed of at this stage with no orders as to costs.
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2019 (12) TMI 1271
Infringement of Rights of the appellant as a bonafide lender - Depositories shall not allow transfer of securities from DP account - HELD THAT:- The impugned order notes that Karvy had raised funds pledging securities from banks and NBFCs and therefore was aware that rights of those entities would be impacted by the said order. As such, even if they could not be heard while passing the impugned order atleast on their representation they were entitled to be heard. It is on record that the appellant wrote to SEBI on November 23, 2019 (received by SEBI on November 25, 2019, 23rd and 24th being Saturday and Sunday). It is also an undisputed fact that lending against securities is a normal and permitted business activity of banks and NBFCs and SEBI is fully aware of the same. Therefore, we are of the considered view that the impugned order has prejudiced and adversely affected the rights of the appellant as a bonafide lender. Since it is the impugned order which has impacted the rights of the appellant, not arraying NSE and NSDL as parties, though their arraying might have brought in more facts on table, does not impact the maintainability of this appeal.
Accordingly, without commenting on the merit of the case, we direct the WTM of SEBI to hear the appellant on the basis of their representation dated November 23, 2019 and / or any other additional representation which they may like to make. If the appellant is desirous to make any additional representation it shall be made latest by December 4, 2019. Thereafter, the WTM of SEBI shall consider the representation(s) of the appellant and, after giving an opportunity for personal hearing, pass an order as per law latest by December 10, 2019
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2019 (12) TMI 1150
Order of the Whole Time Member ("WTM") of SEBI restraining appellants from accessing the securities market directly or indirectly for a period of 10 years - direction to refund the investors/clients money with interest at the rate of 15% per annum from the date when the repayment became due till the date of actual payment - HELD THAT:- The appellant is a promoter and therefore by virtue of holding majority stake of more than 51% she is in control of Kassa. Therefore, we find no lacuna in the impugned order in holding the appellant guilty of the various provisions specified therein and the consequent directions issued thereunder.
A common submission made by four of the appellants (excluding Manoj Kumar Agrawal) is that the impugned order does not crystallize the amount to be repaid/refunded to investors/clients and when the principal amount itself is not determined interest liability also becomes inconclusive and hence the order is unimplementable. It is also contended by them that the Demand Notice/Recovery Certificate dated December 18, 2018 has travelled beyond the impugned order. When the impugned order itself does not crystallize the amount due the Recovery Certificate for ₹ 80,97,62,785/- could not be issued by the Recovery Officer who is not an Adjudicating Authority. Further the Recovery Officer does not tell what is the amount to be adjusted in coordination with the NSE and BSE as directed in the impugned order. We find some merit in these submissions; it is not clear from the Recovery Certificate how the amount has been arrived at; what is the interest liability; whether payments made to various parties by NSE and BSE have been taken into account etc.
In the light of the above, while upholding the impugned order on merit we remit the matter to SEBI to specifically decide the following issues:
(i) The Recovery Officer shall crystallize the exact amount of liability for refund/repayment to investors/clients and issue a revised certificate.
(ii) The WTM shall reconsider the period of restraint imposed on Manoj Kumar Agrawal, (appellant in Appeal No. 346 of 2017).
(iii) The WTM shall consider the request of Manoj Kumar Agrawal for liquidation of his mutual funds units.
The appropriate authority shall pass fresh order(s) on the above issues within a period of three months from the date of the receipt of this order after giving an opportunity of hearing to the appellant(s).
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2019 (12) TMI 1144
Legality and veracity of the order passed by Forward Markets Commission which has now merged with the Securities and Exchange Board of India ('SEBI' ) - Appellant no. 1 challenged the show cause notice before the Gujarat High Court contending that no show cause notice was provided nor an opportunity of hearing was given - HELD THAT:- Admittedly the show cause notice was issued on June 21, 2011 which was received by appellant no. 2 shortly thereafter. The documents in part were only supplied on July 5, 2011. Accordingly, the appellant no. 2 cannot be faulted for the adjournment made on July 4, 2011. According to the appellant voluminous documents running into thousands of pages were provided and many documents were not provided for which further request was made which was rejected by the respondent. Request for further time to place their written submissions was granted till July 20, 2011. The request for adjournment on July 20, 2011 was rejected on the ground that the matter was being delayed. We find that only two weeks had elapsed from the date when the documents were supplied for filing a reply. Further request for adjournment was not unreasonable. Further, the period granted for filing reply was wholly inadequate considering the voluminous documents running into thousands of pages relied upon by the respondent.
In the light of the aforesaid, we are of the opinion that no reasonable opportunity was given by the respondent no. 1 to the appellant no. 2 for the purpose of filing objection/reply to the show cause notice.
The request on behalf of the appellant no. 2 to permit his advocate to place submissions on the issue of jurisdiction was not unreasonable and should not have been rejected. The finding that the appellant was avoiding to show cause on one pretext or the other is a finding based on surmises and conjectures. As per sequence of events stated aforesaid, it is clear that there has been no unreasonable request on the part of the appellant in seeking time to file their written submissions and for placing their arguments. In our opinion the rejection of the request of the appellant on July 20. 2011 for an adjournment, was violative of the principles of natural justice. Consequently, the impugned order against the appellant no. 2 cannot be sustained and is quashed.
Since the impugned order has been quashed on account of violation of principles of natural justice it is not necessary for this Tribunal to go into the question of jurisdiction, namely, whether the FMC had jurisdiction to issue a show cause notice under the FCR Act.
In the result, the appeal is allowed. The impugned order is quashed. The matter is remitted to respondent no. 1 and, if they are so advised, the respondent no. 1 can proceed afresh only after issuing the show cause notice to appellant no 1 and respondent no. 2. Since the appellant no. 2 has already been served with the show cause notice, no fresh show cause notice is thus required to be served. The respondents are further directed to grant adequate time to the appellants to file their objections/reply which will be considered by the respondent after giving an opportunity of hearing to the appellants.
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2019 (12) TMI 1143
Order of delisting - denial on the part of the delisting committee in order to enable the appellant to be represented by an Advocate - No Adequate and reasonable opportunity of being heard provided - HELD THAT:- We find that the show cause notice was issued on 1st June, 2018. The first date of hearing before the delisting committee was fixed on 26th June, 2018. The request for adjournment was only made for 26th June, 2018. The denial on the part of the delisting committee in order to enable the appellant to be represented by an Advocate is against the settled principles of natural justice. Further, we find that it was the first date of hearing and there is no allegation that undue adjournment was sought by the appellant.
Adequate and reasonable opportunity of being heard was not provided to the appellant. The impugned order is thus violative of the principles of natural justice and cannot be sustained.
Two orders of the same date has been passed by the delisting committee - From a comparison of the two orders we find that certain more facts have been inserted in the second order of 26th June, 2018 primarily to cover the lacuna that was glaring and apparent in the first order dated 26th June, 2018. We are of the opinion that once a signed order dated 26th June, 2018 was sent by the delisting committee a second order of the same date could not have been passed without recalling the earlier order and without issuing notice to the parties which apparently in the instant case has not been done. The passing of the second order dated 26th June, 2018 incorporating further facts amounts to interpolation in the order.
The impugned order of the delisting committee dated 26th June, 2018 as forwarded to the appellant by the letter dated 3rd July, 2018 and 23rd July, 2018 are quashed on payment of cost of ₹ 1 lakh. The matter is remitted to the delisting committee to decide the matter afresh after granting an opportunity of hearing to the appellant. The respondent will supply a copy of the show cause notice to the appellant and fix a date of hearing
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2019 (12) TMI 1142
Decision of the Disciplinary Action Committee ("DAC" ) of the National Stock Exchange of India Limited ("NSE") - DAC has passed several directions including consolidated monetary penalty of ₹ 37.89 lakhs, suspension of membership and review by an independent auditor appointed by the Exchange to confirm that the appellant is complying with all the regulatory guidelines as well as adequacy of the internal controls in place - HELD THAT:- Although the DAC has found some deficiencies in the claim of the appellant that his relatives had excess margin in their accounts the issue is not conclusively settled. Accordingly, appellant deserves benefit of doubt. Moreover, it is an established principle in law that when there are two provisions in law the more beneficial provision should be applied wherever appropriate. This is particularly relevant in the context of the appellant who has been indefinitely suspended also for the various violations impugned in this appeal. Therefore, we reduce the amount of penalty imposed on wrong reporting from ₹ 15 lakhs to ₹ 1 lakh on the ground of proportionality.
Regarding the penalty imposed on other violations we do not agree with the submissions of the appellant. As the documents clearly show that such violations have been committed, the appellants' hyper technical submissions do not have any merit; what is relevant is whether the appellant, based on the evidence available, has committed those violations and whether any satisfactory explanation has been provided either in mitigating the violation or in proving that the violations have not been committed. The facts and records speak volumes about the way in which the appellant has been running the business of broking and violating multiple provisions of bye laws and circulars issued by the respondent as well as by SEBI. Accordingly, we do not find any deficiency in reiterating the penalty imposed by the DAC when such violations have been noticed by the respondent.
The appellant's attempt to prove that the CA Certificate provided to the respondent Exchange was in the correct proforma, since the same was accepted by the NSCCL does not stand to merit. We note that, many of the contents of those proformae are different. The fact that NSCCL has accepted the information in a particular proforma does not absolve the appellant from providing the necessary information in the proforma specified by the Exchange, though, some of the information/part of the format may be same/common. In any case, the appellant as a broker is bound to follow the bye laws/circulars/instructions of the respondent Exchange as the Exchange is the first tier regulator of brokers. While taking membership of the Exchange the appellant has also entered into an agreement to abide by the Exchange bye laws/circulars/rules etc. Even if the submission of the appellant is accepted that they received the proforma from the Exchange belatedly the same could have been furnished by the appellant at that point of time.
The direction relating to suspension of the appellant contains a solution in itself. The said suspension of membership was only till receipt of confirmation from the appellant regarding its preparedness to run the operations as per regulatory guidelines and adequacy of the internal controls put in place and therefore providing a report from an independent auditor appointed by the Exchange to these effects. Therefore, it was open to the appellant to approach the respondent Exchange to seek such an audit after putting in place the required systems and internal controls.
Appeal is partly allowed by reducing the total amount of penalty imposed on the appellant from ₹ 37.89 lakhs to ₹ 23.89 lakhs.
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2019 (12) TMI 946
Recovery certificates/attachment notices/orders issued by the concerned authority in SEBI - SEBI held that the scheme mooted by the appellant was a CIS and directed that the contributions made to the scheme must be returned - proof of refund of money to the investors in full or refund in the form of land with full transfer of ownership and all rights - HELD THAT:- This Tribunal had given ample opportunities to the appellant to prove the veracity of their statements with documents before SEBI. The appellant is not able to prove that. Therefore, just making bold statements with part documentation by which no conclusion can be reached do not prove refund of money to the investors in full or refund in the form of land with full transfer of ownership and all rights. We also note that the impugned orders dated August 12, 2016 and September 14, 2016 deal with the documents furnished by the appellant in detail and we are not able to find fault with the same.
The appellant is not able to prove whether land has been given to the investors in accordance with the terms and conditions i.e. after development of the land etc. and what happens to the maintenance aspect. In fact, we are told by the learned counsel for the SEBI that a large number of plots are still being maintained by the appellant which is not disputed. If that be the case the contention that land parcels have been handed over to the investors as ultimate beneficiaries and as full and final transfer is not correct. Therefore, in the absence of appropriate and complete evidence relating to full refund of the investors' amount, either in the form of money or in the form of developed land and maintenance amount we are unable to interfere with the impugned directions in the various orders.
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2019 (12) TMI 732
Recovery proceedings continued against the legal representative of the deceased - HELD THAT:- Proceedings would continue against the legal representative of the defaulter if the defaulter dies after the certificate was drawn up by the tax recovery officer. At the outset, Rule 85 is not applicable as we have already held that Section 28A is not applicable. In any case, in the instant case, recovery certificate was drawn on June 15, 2016 much after the death of the appellant's husband who died on November 5, 2015. The recovery certificate and the attachment proceedings was done against a dead person which was without jurisdiction. Once the person dies, recovery proceedings cannot continue and can only continue against the legal representatives if the Statute provides specifically.
SEBI Act and its Regulations does not contain any provision to continue recovery proceedings against the legal representative of the deceased. So long as there is no separate machinery to proceed against the legal representative, the cause of action comes to an end and recovery proceedings could no longer continue.
In the light of the aforesaid, the impugned recovery certificate for recovery of ₹ 12 lacs cannot be sustained and is quashed. The appeal is allowed
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2019 (12) TMI 481
Powers of Whole Time Member (‘WTM’) of Securities and Exchange Board of India (‘SEBI’) - order of debarment - restraining the appellants from accessing the securities market and further prohibiting them from buying, selling or otherwise dealing in securities, directly or indirectly, or from being associated with the securities market in any manner, whatsoever, for a period of three years from the date of the order - contentions of the appellants are that the WTM committed a manifest error in holding that the appellants were guilty in manipulating the price of the scrips pursuant to the preferential allotment - HELD THAT:- Order of debarment as per the impugned order is of three years. These three years have already been undergone by the appellant pursuant to the impugned ex parte order dated December 19, 2014 restraining them from accessing the securities market, etc. As on date four years and ten months have elapsed and the appellants are still debarred from accessing the securities market etc. We find that the WTM has not considered the period of debarment already spent from the date of the ex parte interim order till the date of passing of the order while considering the quantum of penalty. We are, thus, of the opinion that the debarment period spent by the appellants from the date of the ex parte impugned order till today is sufficient.
Thus, without going into the merits of the case and without considering the submissions of the counsel for the parties on merits, we dispose of all the appeals holding that the restraint order restraining the appellants from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever will come to an end from today.
Adjudication proceedings have been initiated by the Adjudicating Officer of SEBI and submitted that the findings given in the impugned order of the WTM would be relied upon by the AO. It was urged that the finding given in the impugned order should not be come in the way while considering the matter on merits by the Adjudicating Officer of SEBI.
We make it clear that the Adjudicating Officer of SEBI will consider the matter on merits without being influenced by the findings given by the WTM of SEBI.
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2019 (12) TMI 480
Default by company to refund the amount collected under the Collective Investment Schemes ("CIS") - officer in default - vicarious liability of a peson who was a director only for 50 days - HELD THAT:- If a company is liable to refund the monies received from the investors and if the company fails to pay the amount then the amount can be recovered jointly and severally from every Director of the Company who is an officer in default.
Therefore, when the company is the offender, the vicarious liability of the acts of the Directors cannot be computed automatically. The contention that being a Director of the Company the appellant cannot disown his responsibility for the acts of the Company is misconceived.
It is not possible to lay down any hard and fast rule as to when a Director would be vicariously responsible for the acts as a Director in charge of day-to-day affairs of the Company. However a finding has to be arrived at that the appellant was responsible for the day-to-day affairs of the Company and was involved in the collection of the monies and in the implementation of the schemes. In our view, it is not necessary that every director is required to be penalized merely because he is a director on the ground that he was deemed to responsible for the affairs of the company. If the director can explain that he had no role to play in the alleged default or that he was not responsible for the affairs of the company in which case penalty could not be fastened upon him on the mere ground that he was a director.
The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status.
In the instant case, a penalty of ₹ 1 crore has been imposed which is wholly excessive and against the provision of Section 15D of the SEBI Act.
AO by a separate order has already given a finding that the Company and its Directors were directly responsible for sponsoring the CIS without registration and were instrumental in generating the monies through this scheme in violation of the Regulations and the Act. The AO has already imposed penalties against the Company and the said Directors. The appellant in the instant case no doubt was a director only for a period of 50 days and in our opinion there is no finding that he was responsible either for sponsoring the scheme or for carrying out the scheme. We have also found that he was not instrumental in the launching/ sponsoring or carrying on the scheme. Thus, no penalty could be imposed upon the appellant.
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2019 (12) TMI 477
Pledging/misuse of client securities by the stock broker - violations of the Securities Laws - HELD THAT:- The securities lying in the aforesaid DP account actually belong to the clients which are the legitimate owners of the securities. Therefore, KSBL did not have any legal right to create any kind of pledge on these securities. Even if the client securities were pledged, it should have only been for meeting the obligation of the respective clients which was not observed in this case. Considering the issue of misuse of clients’ securities by KSBL in unauthorized manner, for its own use and purposely not disclosing the DP account no. 11458979, named KARVY STOCK BROKING LTD (BSE) to the Exchanges in their reporting create a serious doubt on the conduct and integrity of KSBL.
The acts of KSBL are prima facie in violation of Stock Broker Regulations, SEBI circular no. SMD/SED/CIR/93/23321 dated November 18, 1993, SEBI Circular No. MRD/DOP/SE/Cir – 11/2008 dated April 17, 2008, SEBI Circular No. SEBI/HO/MIRSD/MIRSD2/CIR/P/2016/95 dated September 26, 2016, SEBI Circular No. SEBI/HO/MRD/DP/CIR/P/2016/13 dated December 16, 2016, SEBI Circular No. CIR/MRD/DP/54/2017 dated June 13, 2017, SEBI Circular No. CIR/HO/MIRSD/MIRSD2/CIR/P/2017/64 dated June 22, 2017 and Circular No. CIR/HO/MIRSD/DOP/CIR/P/2019 dated June 20, 2019, as discussed above.
Therefore, there is need for urgent regulatory intervention to prevent further misuse of clients’ securities.
In exercise of powers conferred upon me under Sections 11(1), 11(4) and 11B read with Section 19 of the SEBI Act, 1992 and Regulation 35 of SEBI (Intermediaries) Regulations, 2008, by way of this ex parte ad interim order, pending forensic audit, hereby issue the following directions:
(i) KSBL is prohibited from taking new clients in respect of its stock broking activities;
(ii) The Depositories i.e. NSDL and CDSL, in order to prevent further misuse of clients’ securities by KSBL, are hereby directed not to act upon any instruction given by KSBL in pursuance of power of attorney given to KSBL by its clients, with immediate effect;
(iii) The Depositories shall monitor the movement of securities into and from the DP account of clients of KSBL as DP to ensure that clients’ operations are not affected;
(iv) The Depositories shall not allow transfer of securities from DP account no. 11458979, named KARVY STOCK BROKING LTD (BSE) with immediate effect. The transfer of securities from DP account no. 11458979, named KARVY STOCK BROKING LTD (BSE) shall be permitted only to the respective beneficial owner who has paid in full against these securities, under supervision of NSE; and
(v) The Depositories and Stock Exchanges shall initiate appropriate disciplinary regulatory proceedings against the Noticee for misuse of clients’ funds and securities as per their respective bye laws, rules and regulations;
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2019 (12) TMI 190
Ex-parte ad-interim order - preliminary report given by National Stock Exchange of India Limited, the Whole Time Member (“WTM”) issued an ex-parte ad interim order restraining the appellant from taking new clients in respect of its stock broking activities and also prevented the appellant from using the “power of attorney” given by its clients - HELD THAT:- Since a clarification has been sought by the appellant we deem it fit and proper that the WTM should look into this aspect and pass appropriate order after giving an opportunity of hearing to the appellant.
We accordingly dispose of this appeal at this stage with a direction to the WTM to consider the request of the appellant which has been made vide letters dated November 24, 25 and 26, 2019 and pass an appropriate order after giving an opportunity of hearing by December 02, 2019.
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2019 (12) TMI 189
Multiple trades on the same day - fraudulent and unfair trade - violation of PFUTP Regulations - Self trades or wash trades are trades without any change in beneficial ownership - HELD THAT:- On many of the days the appellant has bought and sold the shares and on some of those days the quantities bought and sold also matched. However, there were also several days on which there was only either a buy trade or a sell trade.
Generally, only when trades placed by the same party are matched within a short period of time it can be categorized as self trades. Here, it is on record that the appellant did not do multiple trades on the same day. There are a few days when both buy and sell orders of the same quantity were placed. Even on those days when perfect matching is noticed there is nothing on record to show that those trades were entered within a short time interval. In the absence of which, we are constrained to accept the submission of the appellant that being a day trader, on some days, he was placing orders in both the directions with substantive time gap.
It is also claimed by the appellant that on some of the days he actually did take delivery and therefore the beneficial ownership also got changed. The impugned order does not indicate the timing of the alleged trades nor it goes into change in beneficial ownership nor does it bring out any element relating to how it adversely affected the market.
Even though preponderance of probability is sufficient to prove PFUTP violations still fraudulent and unfair trade has to be established with some degree of confidence. Given the absence of such findings and given the undisputed fact that the appellant was a day trader we are constrained to give benefit of doubt to the appellant. However, given the facts and circumstances of the matter, we do not find any reason to award cost to the appellant though the appellant has made a high pitched demand for exemplary costs.
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2019 (11) TMI 1598
Insider trading - Use of Price sensitive information - determination of price by a market at a given day - HELD THAT:- In our view the information itself was not a price sensitive information. The record would show that GIPL had invested only ₹ 4.9 crores in the Simplex project in the said financial year. It represented only 0.05% of the GIPL's order book value at the end of August, 013 and only 0.7% of its turnover for the said financial year. Further due to the termination of the agreement a large project worth ₹ 1648 returned back to GIPL while the smaller project of ₹ 940 crore remained with Simplex. In a way it could have been a positive information to the shareholders. Adjudicating Officer however has calculated the change in the order book value without assessing whether the change was positive or negative.
Considering the minor proportion of the transaction to the turnover of GIPL, in our view the information cannot be termed as price sensitive information. The Simplex had not even disclosed the said information to the stock exchanges.
Even if it is assumed that the information was is a price sensitive information, still the appellant cannot be blamed of insider trading for the reasons that he did not trade "on the basis of the information". The appellant was able to show his dire need to infuse fund in the entity under the master restructuring agreement to implement a CDR package as detailed supra. He was even required to sell his agricultural land and flat details of which are already given hereinabove. In these circumstances he sold the shares. In the case of Rajiv B. Gandhi [2008 (5) TMI 729 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] on fact this Tribunal held that the appellants therein were able to rebut the presumption that they traded on the basis of UPSI as they had a necessity to sell the shares.
Appellant had contended that respondent SEBI had deliberately taken the closing price of September, 2013 when the price were around 30% lower than the closing price as on September 3, 2013. By adding this extra day SEBI had widened the gap between the selling price and the price found on 4 th September, 2013. In fact the share closing price rose on September 3, 2013 i.e. on the date of disclosure of the information. However, according to the appellant, respondent SEBI only inorder to show that the appellant had avoided the probable loss calculated the figures based on the last traded price of September 4, 2013.
As recorded that the information was disclosed to the BSE and NSE on September 3, 2012 at 1.05 p.m. and 2.40 p.m. respectively i.e. much before the closure of the market. There is no reason forwarded in the impugned order as to why the last traded price of September 3, 2013 is not taken into consideration by respondent SEBI. For all these reasons in our view the order cannot be sustained.
Appeal is hereby allowed. The impugned order is hereby set aside. SEBI shall take steps for refund of the amount already deposited by the appellant.
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2019 (11) TMI 1559
Unexplained use of funds raised by pledging client securities with NBFCs and Banks - monetary penalty of ₹ 15 lakhs and suspension of trading membership of the appellant from all segments of NSE for 5 days - HELD THAT:- There is sufficient evidence against the appellant to prove that certain violations have been committed by it. The magnitude of money involved is also large in terms of ₹ 19 crores worth of client securities being pledged, acceptance of deposits to the tune of ₹ 21.56 crores and non-settlement of funds belonging to 601 clients etc. However, since the appellant has complied with some of the directions issued by the DAC such as submission of CA Certificate, fulfillment of the networth criteria, we are of the considered view that the penalty imposed on the appellant is disproportionate in the given facts and circumstances.
The violations are not light enough to let off the appellants scot-free as contended by them. In the result, while upholding the monetary penalty of ₹ 15 lakh imposed on the appellant we modify the direction relating to suspension of the appellant from all segments of the exchange NSE for 5 days to that of a direction not to enroll or register any fresh clients for a period of one month. This period of one month shall commence from the seventh day of the date of this order.
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2019 (11) TMI 1555
Fraudulent tradings in the shares - Suspension of certificate of registration of the appellant as a stock broker for a period of three months for violation of the provisions of Sections 12A(a), (b) and (c) of the SEBI Act, 1992 read with regulations 3, 4(1), 4(2)(a), (e) and (g) of the SEBI - "PFUTP Regulations" and regulation 7 read with Clauses A and B(2) of Schedule II (Code of Conduct for Stock Brokers) of the SEBI - "Stock Brokers Regulations" - HELD THAT:- In the present case, there are no allegations that the appellant had indulged in proprietary trades. What is alleged is that the entity was grossly negligent and allowed fraudulent transactions to be carried out by Purshottam Khandelwal and two other violations already noted above.
Considering all these facts, in our view, the order of the WTM of SEBI directing the suspension of the license of the appellant for a period of three months needs to be set aside and in its place it is hereby directed that the appellant shall not accept any fresh clients for a period of six months from the date of this order.
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2019 (11) TMI 1554
Insider Trading for listed companies - Penalty imposed on appellant as working as Senior Vice President and Company Secretary of Financial Technologies (India) Limited who traded beyond threshold limit of 5000 shares of the Company without obtaining pre-clearance of the transactions as mandated by clause 9(b)(i) of the Code of Conduct - HELD THAT:- The penalty imposed by the Adjudicating Officer is disproportionate to the violation in the circumstances, as detailed by the appellant. The appellant had a long career of 28 years prior to the violation. He had undergone multiple angioplasties. He explained that due to a communication gap between him and the broker the violation had occurred which resulted into a meager profit of ₹ 17,467/-. Taking into consideration these factors in our opinion a penalty of ₹ 2 lakhs instead of ₹ 12 lakhs as imposed by the Adjudicating Officer would be just and sufficient.
Appeal is partly allowed. The impugned order is affirmed except the penalty which is reduced from ₹ 12 lakh to ₹ 2 lakh which shall be paid within four weeks from today by the appellant to respondent SEBI.
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2019 (11) TMI 1553
Condonation of delay - Appeal against order of delisting - delay of 316 days in filing the present appeal - HELD THAT:- Against an order of delisting, an appeal is required to be filed within 15 days under section 21A of the Securities and Exchange Board of India Act, 1992 or within 45 days under section 23L. We find from the record that the trading of the shares of the Company was suspended in August, 2016 and, therefore, it is apparently clear that that the appellant was not interested in the delisting order as it did not prefer to file an appeal within 15 days under section 21A or within 45 days under section 23L. For the appellants it was not a case of urgency.
Contention that the impugned order was never served upon the appellant is misconceived. According to the appellant they came to know of the order on 2nd June, 2018 and received the requisite documents which they applied on 4th July, 2018. The appeal could have been filed immediately thereafter but they did not do so and only filed after an inordinate delay of 316 days.
In the additional affidavit no proof has been filed to show that the officer who was in charge had gone on leave or that the Company was in correspondence with the stock exchange throughout. In the absence of any documentary proof, the ground urged in the additional affidavit is devoid of any merit and is an afterthought.
On a perusal of the affidavit we do not find any sufficient cause or plausible cause show by the appellant. The ground given by the appellant is patently vague and does not imply the presence of any legal and/or adequate reasons. No doubt the Tribunal is possessed with exercise of judicial discretion in condoning the delay after sufficient cause and/or adequate reason is given. In the instant case, we find that no bona fide reasons had been given for condoning the inordinate delay.
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