TMI Blog2021 (5) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... utilized by the company for the purpose for which the GDR were issued. The appellant was also the Chairman of the audit committee of the company. The WTM found that being the Chairman of the audit committee, he did not place any objection as to why the GDR proceeds did not reach the company and how the proceeds were utilized. We are thus, of the opinion that in the light of the findings given by the WTM, the appellant Kishore Hegde was part of the scheme through which issue of GDR by the company was effected through a fraudulent arrangement of loan agreement and pledge agreement. We are also of the opinion that the conduct of the appellant Kishore Hegde was inimical to the interest of the company, to the investors, as well as to the shareholders and, the action of the appellant Kishore Hegde was in violation of Section 12A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations. - the orders of the WTM and the AO does not suffer from any error of law. Managing director / directors are concerned we find from the perusal of the comparative chart that some directors/ managing directors have been penalized a sum of Rs. 25 lakhs and in some cases Rs. 1 crore - Upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing of the Resolution dated August 13, 2010 is based on surmises and conjectures. The order of the AO imposing a penalty of Rs. 3 lakhs is also unwarranted in the facts of the present case. The orders of the WTM and the AO in this regard cannot be sustained. - APPEAL NO. 393 OF 2020, 394 OF 2020 WITH MISC. APPLICATION NO. 67 OF 2020 AND APPEAL NO. 64 OF 2020, 487 OF 2020, 488 OF 2020, MISC. APPLICATION NO. 428 OF 2021 (DELAY APPLICATION) AND APPEAL NO. 203 OF 2021, 184 OF 2020 - - - Dated:- 12-5-2021 - JUSTICE TARUN AGARWALA PRESIDING OFFICER AND JUSTICE M. T. JOSHI JUDICIAL MEMBER For the Appellant : Mr. Manish Chhangani, Advocate i/b Ms. Aishwarya Shubhangi, Advocate For the Respondent : Mr. Shyam Mehta, Senior Advocate with Mr. Mihir Mody and Mr. Arnav Misra, Advocates i/b. K. Ashar Co. ORDER Per: Justice Tarun Agarwala, Presiding Officer 1. For the reasons stated in the misc. applications, the delay in the filing of the appeals are condoned. The Misc. Application Nos. 67 of 2020 and 428 of 2021 are allowed. 2. Seven appeals have been filed against different orders. However, the issue is common and accordingly all the seven appeals are bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with regulations 3 and 4 of the PFUTP Regulations. Another sum of Rs. 20 lakhs was imposed upon the company under Section 21 of the Securities Contracts (Regulation) Act, 1956 ( SCRA for convenience) read with Clauses 36 and 50 of the Listing Agreement. A sum of Rs. 5 crore was imposed upon the director Vinod Kumar Kaushik under Section 12 of the SEBI Act read with regulations 3 and 4 of the PFUTP Regulations. In so far as Ajay Sethi is concerned, a penalty of Rs. 20 lakhs was imposed. 5. In so far as another director Vipin Sharma is concerned the WTM had passed an order dated September 30, 2019 restraining him from accessing the securities market for a period of 1 year. This order was challenged by the appellant in Appeal No. 58 of 2020 which was allowed by this Tribunal by an order dated February 06, 2020 and the order of the WTM in so far as it related to Vipin Sharma was set aside with a direction to the WTM to pass a fresh order after giving an opportunity of hearing. This Tribunal while allowing the appeal had found that an ex-parte order was passed against him without serving a show cause notice. Pursuant to the order of the Tribunal, the WTM passed a fresh order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Listing Agreement. Such fraudulent act committed by the company and its directors and giving misleading disclosure was a fraudulent act. On these findings, the impugned orders were passed the WTM restraining the appellants from accessing the securities market and the AO imposed the penalties. 7. We have heard Shri Manish Changani, the learned counsel for the appellants and Shri Shyam Mehta, the learned senior counsel for the respondent in Appeal Nos. 393, 394 and 64 of 2020 and Mr. Shourya Tanay, the learned counsel for the appellant and Mr. Suraj Choudhary, the learned counsel for the respondent in Appeal Nos. 203 of 2021 and 184 of 2020. 8. At the outset, the learned counsel submitted that the appellants except the appellant in Appeal No, 184 of 2020 are only confining their arguments on the quantum of penalty imposed by the AO. 9. In view of the statement made by Shri Manish Changani, the learned counsel appearing for Chromatic India Limited the company and its directors Vinod Kumar Kaushik the findings given by the WTM in its order dated September 30, 2019 and findings given by the AO in its order dated March 31, 2020 is hereby confirmed. 10. The learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the company for any of the stated purposes of GDR issued and accordingly imposed a penalty of Rs. 20 lakhs. 14. Having heard the learned counsel for the parties, we are of the opinion that the Resolution dated August 13, 2010 by itself does not create any suspicion nor creates any fraudulent act. Being a signatory to the said Resolution by itself does not violate any provision of the SEBI Act or the PFUTP Regulations. However, being part of the Audit Committee he had access to the financial status of the company. It is deemed to be in his knowledge that the GDR proceeds of the company were lying in an account in European American Investment Bank ( Euram Bank ) and the same was not being utilized for the business purposes of the company rather it was being utilized as collateral for the loan given to Vintage. Being part of the Audit Committee he should have raised a red flag by observing that the funds were not being utilized by the company for the purpose for which the GDR were issued. In this regard, this Tribunal in Mr. Kishore Hegde vs SEBI (Appeal No. 300 of 2019 decided on November 05, 2019) held:- The contention of this appellant that he was not involved in the day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in other matters and no similarity having been pointed out by the appellant we are of the opinion, that the penalty imposed by the AO under Section 12 of the SEBI Act read with 3 and 4 of the PFUTP Regulations and under Section 21 of the SCRA read with Clauses 36 and 50 of the Listing Agreement needs no modification. We are further of the opinion, that when the findings given by the WTM and the AO has not been pressed before us in such circumstances, the discretionary relief is not available to the appellants namely the company and its whole time director Vinod Kumar Kaushik. The appeals of the company and Vinod Kumar Kaushik cannot be sustained. 17. In so far as the appeal of Vipin Sharma is concerned, we find that the WTM in its order dated September 25, 2020 found that he was appointed as an additional director on 07.09.2009 and had resigned on 29.09.2010. The WTM held that he was part of the Resolution dated August 13, 2010 which was the genesis of the ultimate fraud that was played by the company and its directors. The WTM took into consideration that even though the appellant may have resigned soon thereafter on September 29, 2010 nonetheless, he was aware of the objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd conjectures. The order of the AO imposing a penalty of Rs. 3 lakhs is also unwarranted in the facts of the present case. The orders of the WTM and the AO in this regard cannot be sustained.19 21. For the reasons stated aforesaid, Appeal Nos. 393 of 2020 Chromatic India Limited vs. SEBI, Appeal No. 394 of 2020 Vinod Kumar Kaushik vs. SEBI, Appeal No, 184 of 2020 Ajay Sethi vs SEBI, Appeal No. 64 of 2020 Chromatic India Limited Anr. vs. SEBI and Appeal No. 203 of 2021 Ajay Sethi vs SEBI are dismissed. The impugned orders in Appeal No. 487 of 2020 and 488 of 2020 Vipin Sharma vs. SEBI are quashed. The said appeals are allowed In the circumstances of the case, parties shall bear their own costs. 22. The present matters were heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor a certified copy of this order could be issued by the Registry. In these circumstances, this order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Parties will act on production of a digitally signed copy sent by fax and/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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