TMI Blog2021 (5) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... n the procedure adopted by the appellant in the issuance of the GDR. The only charge that remains was nondisclosure of the Account Charge Agreement before the stock exchange. We find that nothing has been brought on record to indicate as to how this non-disclosure was violative of the Listing Agreement. We also find that no misleading statement was made by the appellant with regard to the subscription of the GDR issue. Considering the fact that there has also been an inordinate delay in the issuance of the GDR the order passed by the WTM debarring the appellant from accessing the securities market for a period of one year cannot be sustained in the peculiar facts and circumstances of the present case and is therefore quashed. The appeal is allowed - Misc. Application No. 12 of 2021 And Misc. Application No. 66 of 2020 And Appeal No. 62 of 2020 - - - Dated:- 15-4-2021 - JUSTICE TARUN AGARWALA, PRESIDING OFFICER JUSTICE M.T. JOSHI, JUDICIAL MEMBER Mr. P.R. Ramesh, Advocate i/b Ms. Noelle Ann Park, Advocate for the Appellant. Mr. Shyam Mehta, Senior Advocate with Mr. Mihir Mody, Mr. Sushant Yadav and Mr. Karan Dhawan, Advocates i/b K Ashar Co. for the Respondent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork was appointed as a depository bank for the GDRs to be issued; (iii) Fairmays Solicitors were appointed to act as English legal advisors to the Company for the offering of GDR issue; (iv) Kauputhing Bank was appointed as the lead managers to the issue; (v) ICICI bank was appointed by Bank of New York as the custodian for the GDRs. The share certificate were handed over to ICICI Bank which was issued for the underlying shares of the said GDR issue; and (vi) National Stock Exchange granted approval for the listing of 50 million equity shares of rupees two (2) each issued at a price of ₹ 14.50 per share (USD 3.05 per GDR) underlying 5 million GDRs of the Company. 5. The sequence of events pertaining to the GDR issue of the appellant are as follows:- (i) On March 8, 2003, the board approved infusion of fresh equity shares through GDR route to the tune of maximum of US$ 25 million. Accordingly, on March 8, 2003, intimations were sent to NSE and BSE relating to issuance of ₹ 5 crore equity shares through GDR mechanism. In furtherance of the same, the board also approved the opening of an Escrow account with Banco Efisa, S.A / Banco Portugue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by company to transfer Amount received by company Date Amount (US#) Date Amount (Rs.) 18/07/2003 5,000,000 23/07/2003 23,07,25,000 12/08/2003 1,600,000 17/08/2003 7,33,12,000 25/08/2003 1,250,000 27/08/2003 5,72,50,000 US# 7,850,000 ₹ 36,12,87,000 (x) On July 19, 2004, an amount of US# 7.13 million was debited in Morepen account with Banco (as per SCN dated June 21, 2017). The amount was subsequently used for repaying debts. (xi) The appellant in its investigation report had specifically observed that there was no adverse inference or link between the subscribers and the entities that converted the GDR and sold the shares in the Indian markets. 6. The appellant approved and authorized the signing of documents related to 5 million GDR issue and accordingly the inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of US$ 7.13 million should not be issued against it them under Section 11, 11B and 11(4) of the Act. What specific directions are being considered by SEBI has not been spelt out in the SCN but the supplementary show cause notice (as issued by SEBI later and set out hereinafter) suggests that the appellant may be directed to bring back funds. 10. The aforesaid procedure taken by the appellant was duly replied to the show cause notice. The appellant contended that the procedure for issuance of GDR was followed in accordance with law and that there has been no manipulation, no disruption nor any investor grievance has been received. It was also contended that there has been unduly delay in the issuance of show cause notice and therefore on the short ground the proceedings should be withdrawn. The appellant also contended that on account of delay a lot of prejudice has been caused to them, in as much as, they don t have relevant documents to put an efficacious reply. It was contended that on May 16, 2014 there was a fire in the corporate office of the appellant in New Delhi, as a result of which, the property and the records were damaged. It was alleged that the documents relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 and 4 of the PFUTP Regulations cannot be invoked. This charge was accordingly dropped. 17. However, the WTM found that misleading statement was made by the appellant which was violative of Regulation 5 of the PFUTP Regulations, 1995. In this regard we may consider what was the misleading statement that is alleged. The show cause notice contended that the pledging to the GDR proceeds through an Account Charge Agreement was done in a clandestine manner and was not disclosed to the stock exchange about the Account Charge Account. Further, a misleading statement was made to the stock exchange that the GDR issue was successfully subscribed. In our opinion, both these findings are based on surmises and conjectures and cannot be accepted. In the first instance, only an allegation was made that the Account Charge Agreement was not intimated to the stock exchange. We find that there is no finding whatsoever as to why or where was this requirement to disclose the Account Charge Agreement to the stock exchange. There is no discussion on this aspect whatsoever. Presumably, the respondent are alleging violation of the Listing Agreement, namely, that Account Charge Agreement was required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re misled is not known since there is no material to show that the investors were induced to invest in the scrip of the company. The question of inducement in the instant case does not arise as the WTM has already given a finding that fraud was not established under PFUTP Regulations, 1995 or 2003. Since fraud was not established the question of inducement does not arise. Thus, the finding given by the WTM is patently erroneous and cannot be sustained. 20. Admittedly, the GDR was issued in 2003 and the show cause notice was issued after 14 years on June 21, 2017 and after 15 years a supplementary show cause notice was issued on June 12, 2018 and after 16 years a second supplementary show cause notice was issued on January 1, 2019. The WTM acknowledges the fact that the show cause notice is required to be issued within a reasonable time but contended that since there is no limitation prescribed under the SEBI Act, there is no bar in issuing delayed show cause notices. While rejecting the submissions of the appellant on the issue of delay in the issuance of show cause notice the WTM has relied upon the decision in the Ravi Mohan Ors. vs SEBI and other connected appeals decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent are not helpful. In Vaman Madhav Apte (supra), Kunal Pradeep Savla Ors. (supra), Sudarshan Walia Ors. (supra), Ravi Mohan Ors. (supra), this Tribunal held that in the absence of any specific provision in the SEBI Act or in the Takeover Regulations after issuing a show cause notice, the fact that there was a delay on the part of SEBI in initiating proceedings for the violation committed cannot be a ground to quash the penalty imposed for such violation. The Tribunal, however, in the aforesaid decisions further went on to hold that in the absence of a time limit prescribed for issuing a show cause notice or for completing the adjudicating proceedings, SEBI cannot arbitrarily delay the procedure and must take all reasonable steps to initiate and complete the proceedings in accordance with law as expeditiously as possible. The Tribunal also held that the Regulator should always make an endeavor to take prompt action against the defaulting Companies in order to render speedy and timely justice. 23. It is no doubt true that no period of limitation is prescribed in the Act or the Regulations for issuance of a show cause notice or for completion of the adjudication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e change in the shareholding. The non-compliance of Regulation 13 if any becomes technical in nature. 25. We also find that in the case of Ashok Shivlal Rupani (supra) the period of investigation was January 4, 2010 to January 10, 2011 in the scrip of M/s. Oregon Commercial Ltd. and the show cause notice issued on November 20, 2017 which this Tribunal held that there was an inordinate delay. In the instant case, there is a delay of more than 14 years in issuing the show cause notice. To this extent, the facts are common. Further, Civil Appeal No. 8444 8445 of 2019 Securities and Exchange Board of India vs. Ashok Shivlal Rupani Anr, etc was dismissed by the Supreme Court on November 15, 2019 thus affirming the decision of this Tribunal. 26. In ICICI Bank Limited vs Securities and Exchange Board of India (Appeal No. 583 of 2019 decided on July 8, 2020) the Tribunal held:- 30. However, we agree with the contentions of the learned Senior Counsel for the appellant on the inordinate delay in issuing the show cause notice and in passing the impugned order by respondent SEBI. The disclosure violations had been noticed by SEBI soon thereafter and a preliminary in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27. In the light of the aforesaid, we are of the opinion that there has been an inordinate delay in the issuance of the show cause notice. Even though there is no period of limitation prescribed in the Act and Regulations in the issuance of a show cause notice or for completion of the adjudication proceedings, the authority is required to exercise its powers within a reasonable period as held recently in Adjudicating Officer, Securities and Exchange Board of India vs. Bhavesh Pabari (2019) SCC OnLine SC 294. In the instant case, we are of the opinion that the power to adjudicate has not been exercised within a reasonable period and therefore no direction could be imposed. 28. We are also of the opinion that in the instant case there was no diversion of funds in the issuance of the GDR. We also find that no finding has been given with regard to any violation in the procedure adopted by the appellant in the issuance of the GDR. The only charge that remains was nondisclosure of the Account Charge Agreement before the stock exchange. We find that nothing has been brought on record to indicate as to how this non-disclosure was violative of the Listing Agreement. We also find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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