9911796707
TMI Blog2018 (8) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants herein, have been held to have violated certain provisions of SEBI Act, 1992, Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 and / or Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Accordingly, various directions such as restraint from dealing in the securities market directly or indirectly / disgorgement of the unlawful gains made / direction to make an open offer as detailed therein have been issued. 2. Facts relevant to the appeals are as follows:- 3. Appellants are charged with aiding and abetting a fraudulent scheme launched by a company by the name Platinum Corporation Ltd. ('PCL' for short) and its directors / promoters. Impugned order has been passed against several entities based on an investigation conducted by SEBI relating to buying, selling and dealing in the scrip of PCL. PCL was incorporated on July 17, 1992 in the name of Kanugo Lease and Investment Ltd. Its shares were listed on BSE on January 9, 1997. Between July 20, 2005 and September 15, 2006 PCL made a number of misleading corporate announcements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director (also listed as a promoter of PCL as per the last shareholding pattern reported to BSE) 4 Mr. Anindo Achinto Banerjee Director (also listed as a promoter of PCL as per the last shareholding pattern reported to BSE) 5 Mr. Jignesh D. Shah Director of PCL 6 Mr. Jayesh D. Shah Director of PCL 7 Ms. Nikita B. Dave Director of PCL 8 Vashi Constructions Pvt. Ltd. Ashok Shah (Noticee no. 9), Hiralal Shah (Noticee no. 28), Bhavana Shah (Noticee no. 10), and Rajesh Shah (Noticee no. 11) are directors. 9 Mr. Ashok H. Shah Signed the tripartite agreement on behalf of PCL (as its director) with NSDL. He is also a director of Vashi Constructions (Noticee no. 8), Induram Developers (Noticee no. 29) and Corporate Allianz (Noticee no. 27). In addition, he managed Exdon Trading Company Ltd. (Noticee no. 26) as its Director 10 Ms. Bhavana Rajesh Shah Director, Vashi Constructions and Sister of Ashok Shah (Noticee no. 9) 11 Mr. Rajesh C. Shah Director, Vashi Constructions (Noticee no. 8) and husband of Bhavana Shah (Noticee no. 10) 12 Ms. Neha Ravindrakumar Shethwala Authorized signatory for Vashi Constructions (Noticee no. 8), Rudra Securities (Noticee no. 13) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wife of Bipin Shah (Noticee no. 19), Director of Parvati Minerals (Noticee no. 32 and Pratik Minerals (Noticee No. 33) 32 Parvati Minerals Pvt. Ltd. Managed by Bharat Shah (Noticee no. 18), Bipin Shah (Noticee no. 19) and Meeta Shah (Noticee no. 31) 33 Pratik Minerals Pvt. Ltd. Managed by Bharat Shah (Noticee no. 18), Bipin Shah (Noticee no. 19) and Meeta Shah (Noticee no. 31) 34 Robinson Worldwide Trade Ltd. (presently known as Sun and Shine Worldwide Ltd.) Managed by Ramanlal Trivedi (Noticee no. 39) and promoter of PCL (Noticee no. 1) 35 Ms. Sarlaben Hiralal Shah Mother of Ashok Shah (Noticee no. 9, who signed tripartite agreement on behalf of PCL (Noticee no. 1) 36 Shalibhadra Steel Pvt. Ltd. Anand Trivedi (Noticee no. 25 and son of Ramanlal Trivedi (Noticee no. 39)-promoter of PCLs (Noticee no. 1) is a director. 37 Shankeshwar Metals Pvt. Ltd. Anand Trivedi (Noticee no. 25) (son of Ramanlal Trivedi -promoter of PCL) (Noticee no. 1) is a director. 38 Siddhivinayak Tradelink Pvt. Ltd. Anand Trivedi (Noticee no. 25) (son of Ramanlal Trivedi - (Noticee no. 39 and promoter of PCL is a director. 39 Mr. Ramanlal N. Trivedi Promoter of PCL (Noticee no. 1), Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market and disgorgement of unlawful gains have been ordered for PFUTP violations. In case of appellants where both 3 years and 5 years restraint have been imposed that period would run concurrently. 12. The specific facts relating to each appellant are as follows:- (i) Appeal No. 303 of 2016:- (a) The basic charge against the appellant is that they have connived and conspired with PCL and its promotes / directors in hoisting the scheme of making the scrip liquid and thereafter selling them in the market and thereby made unlawful gains. The connection of the appellant to PCL is established through crossconnection between different entities. The appellant is managed by Bharat Shah, Bipin Shah and Meeta Shah. Bharat Shah and Bipin Shah are brothers and are directors of Dhanlaxmi Lease Finance (Appellant in Appeal No. 376 of 2017) and Meeta Shah is the wife of Bipin Shah. The Mobile No. 09824019596 given in the KYC details of Bharat Shah with the depository participant was that of Ashok Shah, one of the past promoter / director of PCL. This same mobile number is mentioned in the KYC details of Bipin Shah also. Ashok Shah was a director of PCL who is also director of Vashi Constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day-to-day affairs. Appellant No. 5 was the director of Rudra Securities & Capital Ltd. during the period of off loading all shares in the market i.e. between November 30, 2006 and February 14, 2007 and was responsible for its day-to-day affairs. (b) Except Appellant No. 5 all others were beneficiaries of the preferential allotment made by PCL. The Appellant No. 1 off loaded 25 lakh shares it received from Jayesh Shah and made a profit to the tune of Rs. 21,59,971/-. Appellant No. 1 was allotted 50 lakh shares of PCL as preferential allotment at the rate of Rs. 1.25 per share. These shares were pledged with banks as collateral securities for loan taken by PCL and its group entities. Accordingly, the Appellant No. 1 have been debarred for 3 years for conniving and conspiring with PCL and concurrent debarment of another 5 years for its role in the fraudulent preferential allotment; disgorgement for the unlawful profit made of Rs. 21,59,971/- with 12% interest till payment and a combined public announcement, along with PACs to acquire the shares of PCL under Regulation 10 of SAST Regulations. Appellant Nos. 2, 3 and 4 have been debarred from the market for 5 years for their role in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven in their KYC details for DP account. Ashok Shah, in turn, was a former director of PCL and director of Vashi Construction Pvt. Ltd., Induram Developers and Corporate Strategic Allianz Ltd. and manages Exdon Trading Company Ltd., all related entities in the impugned order. Bharat Shah (Appellant No. 2) received 20 lakh shares from Sbhuadraben Ramalal Patel and 15.40 lakh shares from Anand Trivedi (son of Ramanlal Trivedi who was the former director of PCL and also a director of Robinson Worldwide and CMD of Cartesian Computers). Bharat Shah also received 20 lakh shares from Tushar Shah (promoter of PCL) and 8 lakh shares from Bipin Shah. Appellant No. 4 Girish Joshi received 20 lakh shares from Jayesh Shah (promoter of PCL) and 4 lakh shares from Bipin Shah. Dhanlaxmi Lease Finance Ltd. is one of the beneficiaries of the preferential allotment. Bharat Shah off loaded 75,72,338 shares in the market and made a gain of Rs. 86,92,786/-. Bipin Shah off loaded 23,15,476 shares and made a gain of Rs. 31,88,802/-. Girish Joshi off loaded 11,41,516 and made a profit fo R.s 4,71,897/-. Dhanlaxmi Lease Finance Ltd. received 40 lakh shares of PCL as part of the preferential allotment and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (b), (c) of SEBI Act and Regulation 3(b), (c), (d) of PFUTP Regulations) have been used in amplifying the violations; those who have transferred shares in off-market have been subjected to only monetary penalty through adjudication orders while those who have sold shares in the market have been subjected to Section 11/11B proceedings, debarment and disgorgement thereby the impugned order suffers from inequitable and unfair approach in imposition of penalties; undue delay (more than 9 years) in the proceedings has caused irreparable damage to the appellants; the role and involvement of the appellants in the alleged conspiracy has not been proved; the appellants have no role in the corporate announcements made by the company and moreover, announcements have only a short shelf life and, therefore, sales beyond a few days of the corporate announcements are not affected by the corporate announcements; sales on several dates had no connection with announcements, treatment of unlawful gains is vitiated since off-market sales/purchases are not illegal, market prices were not taken into consideration in deciding profits and appellants connection/role vis-à-vis the alleged manipulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Appellate Tribunal in the matter of M/s. Opee Stock Link Ltd. & Anr. vs. SEBI (Appeal no. 20 of 2009) dated December 30, 2009 and in the matter of Libord Finance Ltd. vs. SEBI (Appeal no. 37 of 2008) dated March 31, 2008 he emphasized that the impugned order is vitiated because of undue delay and by using Sections 11/11B of the SEBI Act as a punishment which is held in the cited orders as illegal and unsustainable. 17. Shri J. P. Sen Learned Senior Counsel for the appellants in appeal no. 306 of 2016 submitted that appellant no. 1 in this appeal namely; Hiralal Popatlal Shah expired on October 8, 2012. Appellant no. 1 had no connection with PCL except that his son Ashok Shah was a past Director of PCL. Even Ashok Shah left PCL as a Director in the year 2002. The appellant Nos. 1, 2 and 3 received 1, 45,000, 1,50,000 and 1,50,000 shares each from one Shri Mahendra Daulatrai Ganatra as consideration/refund for the shares of Renco Gears Ltd. which the appellants had given to Shri Ganatra in September 1993. Instead of paying in money/cash, the above stated quantities of shares of PCL were given to these three appellants in 1999. This is stated in the appeal memo as well as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate announcements. There has been inordinate delay in issuing this order; disgorgement is done arbitrarily since all the shares sold during the investigation period is not treated as illegal and the effect of corporate announcement is for a few days only and illegal gain should have been calculated only for trades done during those few days; shares bought between corporate announcements should not have been included for calculating illegal gains; while categorizing some sales as not illegal the correct position relating to appellants sales dates was not taken; the inability to produce purchase price etc. was due to passage of time since documents need to be preserved only for 8 years under Companies Act; and as such average market price should have been taken as purchase price instead of arbitrarily taking Rs. 1 per share; connection of Ramalal Trivedi (director of the appellant) to PCL because of his past association during March 2001 - September 2003 cannot be a ground for establishing association with PCL during 2005-2007. He also added that in respect of appeal no. 62 of 2018 that the finding that the appellants received 5 lakh shares from Jayesh Dinesh Shah is incorrect, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees, including the appellants herein very clearly and a chart showing the connection is also part of the impugned order. It was Ashok Shah as director of PCL who signed a tripartite agreement with NSDL etc. in March 30, 2000. Ashok Shah was a director of Vashi Construction, Corporate Strategic Allianz Limited, Induram Developers and Exdon Trading. Registered address of Rudra Securities was the same as that of Ashok Shah's residence. Registered address of Robinson Worldwide is the same address of Induram Developers which is managed by Ashok Shah, as a Director. The mobile number being used by Ashok Shah is given in the KYC details for depository account with Stock Holding Corporation by several appellants herein. Girish Doshi, is director of Dhanlaxmi Finance, alongwith Bharat Shah and Bipin Shah who were directly connected with Ashok Shah. Learned senior counsel further submitted that this connection plays out in multiple ways i.e. by means of transfer of shares off-market, transfer of money between some of them, cross directorship in companies some of which are on appeal, common telephone no. and office address, and through preferential allotment. Therefore, the arguments of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not impossible to operationalize an announcement for an open offer even after delisting a company. In the instant matter PCL has been delisted on November 29, 2017 by BSE. Only difference between a normal open offer and in matters like the one under consideration is that the PAC buying the shares consequent to the open offer cannot sell it in the market. So in short, the direction to make an open offer can be implemented without any difficulties even though the company has been delisted. 25. We have perused the documents placed before us and heard the detailed submissions made by learned counsel appearing on behalf of the various appellants; Shri J. J. Bhat in Appeal nos. 303 of 2016 and 374, 375 and 376 of 2017, Shri J. P. Sen, in appeal no. 306 of 2016 and Shri Prakash Shah in Appeal nos. 62 and 79 of 2018. We also heard Shri Pradeep Sancheti, learned senior counsel appearing on behalf of SEBI in all these appeals. We also note the following position in law for ready reference: SEBI Act, 1992 Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control. "12A. No person shall directly or indirectly- (a) u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under." "4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:- (a) to (d) ............................................................; (e) any act or omission amounting to manipulation of the price of a security; (f) to (j) ....................................................................; (k) an advertisement that is misleading or that contains information in a distorted manner and which may influence the decision of the investors; (l) to (q) ...........................................................; (r) planti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but their emphatic argument is that he is not a promoter or director of PCL. Since Jayesh Shah is not in appeal herein, we perused the records relating to his Appeal No. 94 of 2014 against an adjudication order of SEBI dated October 1, 2012 which was set aside by this Appellate Tribunal on the ground that SCNs were not received by the appellants and it was remanded for fresh orders. SEBI subsequently issued the order dated November 30, 2015 which is also challenged before this Appellate Tribunal but by only three of the original appellants except Jayesh Shah. While perusing the documents we note that Jayesh Shah, appellant therein, has never given his middle name or his father's name in any of the documents and gave only a care of address. Moreover, the DP account number stated by the appellants herein and given against Jayesh D. Shah in the impugned order are the same. On a specific query by SEBI to Central Depository Services (India) Ltd. (CDSL) SEBI was told that CDSL could not find any account relating to Jayesh Sumesh Shah in PCL share accounts. Appellants also take shelter under the findings in the impugned order that the shareholding pattern declared by PCL during 2005-07 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities in the group such as Vashi Construction, Induram Developers (where both were directors); Corporate Strategic Allianz Limited and Exdon Trading. We have also upheld the impugned order against Corporate Strategic Allianz vide our order dated February 1, 2018. 30. The affidavits submitted by Shri Ganatra (supra) belatedly before this Appellate Tribunal (not before WTM of SEBI) cannot be fully relied upon in the absence of supplementary evidences. What is stated in his affidavits is that in order to compensate for the shares of Renco Gears given by appellants in September 1993, shares of PCL was given to the appellants in December 1999 vis-à-vis the promise of paying cash within a few months of the original transactions in 1993. The total value of 4,45,000 shares of PCL transferred to the appellants at the rate of Rs. 40/- would be to Rs. 1.78 crore. In the absence of any details relating to the price of the shares of Renco Gears, we have to assume that value of the Renco Gears shares also would be more or less equal to Rs. 1.78 crore. In the years 1993, Rs. 1.78 crore was a substantial amount of money which is given off-hand without any agreement or any documentary evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotment and they need to make the public offer as per SAST Regulations, 1997. 32. Given the above facts and finding in the impugned order that appellants in all appeals, except Appellant nos. 2 and 3 in Appeal no. 306 of 2016, have violated Regulation 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(e), (k) and (r) of the PFUTP Regulations, 2003 cannot be faulted. Similarly, finding in the impugned order that the beneficiaries of the preferential allotment have violated Regulation 8(3) and Regulation 10 of SAST Regulations, 1997 also cannot be faulted. The appellants in Appeal No. 374, 375 and 376 of 2017 are therefore liable for the violations of SAST Regulations, 1997 in addition to the violation of the PFUTP Regulations, 2003, common to all appellants, except Appellant nos. 2 and 3 in Appeal no. 306 of 2016. 33. We do not agree with the arguments of the appellants that a public announcement for open offer is now impossible in view of the fact that PCL has been compulsorily delisted by the BSE on November 29, 2017. We note that while issuing the order on compulsory delisting by BSE on November 29, 2017, inter-alia-, the following directions were given: "Promoters of these delisted companie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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