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TMI Blog2019 (6) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... ). SEBI conducted a preliminary examination in the scrips of STML for the period July 1, 2016 to March 31, 2017 in relation to bulk Short Messages Services (SMSs) which recommended trading in the scrips of the Company. 2. On the basis of the investigation and material available with SEBI, the WTM found it fit to pass an ex-parte interim order dated November 1, 2017 in order to safeguard the interest of the investors and to protect the integrity of the securities market. The ex-parte adinterim order against the appellant was as under :- "(a) Prohibited from buying, selling or dealing in securities, directly or indirectly, in any manner whatsoever, till further directions; (b) Directed to cease and desist from disseminating messages or news in any form related to the securities market, directly or indirectly, by any means whatsoever." 3. The prima-facie basis for passing the ex-parte ad-interim order by the WTM was that prior to sending of SMSs, there was a fund transfer of Rs. 50 lacs from the joint account of the STML to Mr. Lahoti. Mr. Lahoti in collusion with Mr. Mohsin channelized the funds to RouteSMS on behalf of Future Fintrade. It was observed that Future Fintrade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso contended that due to differences the appellant disinherited his son Gautam Gupta (the director of STML and a noticee) and re-wrote his WILL dated February 9, 2016. It was also contended that Gautam Gupta, his son, filed a police compliant against the appellant on May 13, 2016 and that STML also filed a defamation Suit against him on March 22, 2016. It was also contended that the appellant had filed a petition before NCLT Chandigarh against STML and its directors Ajay Gupta (Brother) and Gautam Gupta (Son) for mismanagement of STML under the Companies Act, 2013. It was also stated by the appellant that he was never a joint account holder with STML in the bank account maintained with UCO Bank. It was contended that as per the banking practice there cannot be a joint account with the Company and that the appellant was only an authorized signatory to the bank account of STML as a director but after his resignation in 2013 his authorization to use the account came to an end. It was categorically stated that he never operated the account of STML after he resigned as a director. In this regard, the appellant produced certificates from the UCO Bank indicating that the bank account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing allegedly a joint holder in the STML's bank account. This is based on a bank statement obtained by the respondent from UCO Bank for the period from January 1, 2016 to June 1, 2016. The WTM on the basis of this bank statement had issued an ex-parte interim order. No finding has been given by the WTM on the letter dated January 2, 2018 issued by the UCO Bank stating that the account of STML was not a joint account and that the appellant had resigned as a director in 2013 and since then had not issued any cheque on behalf of STML. The WTM for reason best known has not considered the certificate issued by the bank and chose to ignore this vital piece of evidence. 10. Under the Banking Regulation Act, 1949, for opening an account of a Company, amongst other documents, a resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on behalf of the Company is required to be filed. A Company is a legal entity and can only act through its Board of Directors or through one or more juridical persons. In the instant case, no such steps have been taken by the WTM to find out who are the authorized signatories who can transact on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect and atleast give a prima-facie finding on the basis of an in depth analysis of the evidence that there was a causal linkage of the appellant with the manipulative increase in the price of the shares of the company through bulk SMSs. The WTM has conveniently overlooked these evidences which on the face of it is glaring and could not be overlooked in a casual manner. 14. The fact that the appellant sold a substantial portion of his holdings during the increase of the price of the scrip cannot by itself lead to a conclusion of the appellant indulged in any manipulative or fraudulent practice which would come under PFUTP Regulations unless there was further evidence to show that the appellant was acting in concert as a homogenous group with other entities. No such observation or prima-facie evidence has been given by the WTM. 15. We are, consequently, of the opinion that the impugned order in so far as it relates to the appellant cannot be sustained. 16. SEBI has power to pass interim orders and such interim orders can also be passed ex-parte. Interim orders are passed in order to prevent further possible mischief of tampering with the securities market. If during investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant filed its reply as early as on November 3, 2017. However, the ex-parte interim order continued till the confirmatory order was passed on October 30, 2018. In our opinion, apart from the delay in disposal of the matter, the ex-parte order was confirmed mechanically without any application of mind and without considering the relevant documents. In our opinion, there was no shred of evidence to come to a prima-facie conclusion that the appellant was indulging in unfair trade practices with a manipulative intent to manipulate the price. 20. The appellant has stated on affidavit before SEBI on December 23, 2017 that he has no other source of income except trading in shares and that as a result of the ex-pate order, his broker prematurely closed his trading positions which the appellant had taken in F&O segment resulting in a loss of Rs. 50 lacs. This aspect has not been considered by the WTM. We are further of the opinion that whenever an ex-parte order is granted, an endevour should also be made to dispose of the matter as expeditiously as possible no sooner when the party appears. In the instant case, the ex-parte order was passed on November 1, 2017 and the appellant filed hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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