TMI Blog2011 (1) TMI 1585X X X X Extracts X X X X X X X X Extracts X X X X ..... mited company and its shares are listed, among others, on the Bombay Stock Exchange Ltd., Mumbai (BSE). Zafar Yunus Sareshwala and Uves Yunus Sareshwala are its managing director and joint managing director respectively. It carries on the business of non-banking finance company and is also a stock broker on the National Stock Exchange Ltd. and BSE. Parsoli is also a depository participant affiliated to the Central Depository Services (India) Ltd. and is providing depository services to its clients. Every listed company is required to have a share transfer facility either in house or through a share transfer agent registered with the Securities and Exchange Board of India (for short the Board). Parsoli appointed Pinnacle Shares Registry Pvt. Limited as its share transfer agent for handling the share transfer work and it shall be referred to hereinafter as RTA. 3. The Board carried out investigations, inter-alia, in the matter of fraudulent transfer and demat of shares of Parsoli on the basis of forged documents. Investigations revealed that very large number of shares which were held by the shareholders in physical form had been transferred in the names of persons who belonged to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us from accessing the securities market directly or indirectly for a period of seven years from the date of the order. The managing director and the joint managing director of Parsoli have also been restrained from holding the position of a Director in any listed company for a period of seven years. These two directors are also required to make a public offer through a merchant banker to acquire shares of Parsoli from the public shareholders after paying them the value as determined under the Delisting Regulations. BSE has also been directed to delist Parsoli in case its public shareholding after the public offer falls below the minimum required to be maintained. It is this order which is under challenge in Appeal No. 146 of 2010. Parsoli had also been directed to remove the RTA and appoint another one and it failed to comply with this direction. For this failure, Parsoli has, by order dated July 22, 2010, been restrained from accessing the securities market for a period of six months. Appeal No. 150 of 2010 is directed against this order. Parsoli had also failed to furnish to BSE the shareholding of persons belonging to the category of promoter and promoter group . This i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensated to avoid lengthy and expensive litigation and that no shareholder has made any complaint in this regard. She contended that the Appellants did not have any motive to transfer the shares fraudulently. The learned Counsel for the Appellants further argued that the alleged fraudulent transfers as referred to in the impugned order do not pertain to the activities of Parsoli as a broker or as a depository participant and, therefore, the whole time member was not justified in restraining Parsoli from carrying on such activities. The learned senior counsel appearing for the Respondent Board, on the other hand, referred to the record and strenuously contended that the findings recorded in the impugned orders were correct and supported by the record collected during the course of the investigations and the enquiry and could not be challenged. He took us through some of the transfer documents on the basis of which the shares were transferred by the directors of Parsoli to their own names/accounts which were based on forged signatures. He also pointed out that despite several deficiencies in the transfer documents, the shares were transferred by the directors to their own account an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bhai S. Shah as will be seen hereafter. Then which were the share certificates accompanying the share transfer forms on the basis of which Parsoli transferred the shares. They cannot but be duplicate/forged share certificates. Here also Parsoli and its directors owe an explanation but there is none. It is interesting to note that the form dated July 29, 2005 does not record the date of approval nor does it record the transfer number as entered in the register of members/transfers. We are satisfied that Parsoli and its directors transferred the shares not only on the basis of forged signatures of the transferor but also on the basis of forged/duplicate share certificates. The findings recorded by the whole time member in this regard are affirmed. After the shares were transferred in the name of Mohammed A. Kothawala on the basis of the share transfer form dated July 29, 2005, these were dematerialized on September 21, 2005 in his name. 6. Now comes the compensation to the genuine shareholder which will bring the cat out of the bag. Dipakbhai S. Shah who was holding the original share certificate(s) in the physical form applied on September 22, 2005 to Parosli for the dematerialis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similarly situated shareholders was, thus, purchased by compensating them. In this view of the matter, the argument of the learned Counsel for the Appellant that no shareholder made any complaint to the Board holds no water. We are in agreement with the whole time member that this was a carefully crafted strategy by the Appellants in transferring the shares of genuine shareholders fraudulently to their own accounts. The case of transfer from Dipakbhai S. Shah to Mohammed A. Kothawala is not a solitary instance. There are large number of such instances and we have perused some of those documents. In an identical manner, shares were transferred from the name of one M.M. Chaus who was a genuine shareholder of Parsoli to the account of Mohammed A. Kothawala, a front entity of Parsoli. Similar is the case of transfer of shares from Arbab A. Bharuchi to Talha Sareshwala. Arbab A. Bharuchi was a genuine shareholder whose shares were fraudulently transferred in the name of one of the directors of Parsoli. Interestingly, we have some other instances as well where shares were fraudulently transferred in the accounts of the directors of Parsoli on the basis of share transfer forms which do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, in paragraph 6.85 of the memorandum of appeal, the Appellants also state that the specimen signature cards were not handed over to the share transfer agent for better operational and administrative control . Both these reasons cannot go together. Be that as it may, if the specimen signature cards were in torn condition, we wonder how the signatures of the transferors were being verified by the transfer committee and, if it could verify the same on the basis of the torn cards, the same could well have been done by the RTA also which was meant to carry out that work. As already observed, once the RTA was appointed, retention of specimen signature cards for better operational and administrative control or for any other reason was in violation of the statutory provisions. The more we look into the conduct of the Appellants, the more we are satisfied that they acted fraudulently right from the word go. In the result, we find no infirmity in the order of July 27, 2010. 8. Since Parsoli and the RTA had connived to defraud the shareholders, the Board by its order dated February 20, 2009 directed Parsoli to remove the RTA and appoint another one within six months from the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid provisions, the adjudicating officer has imposed monetary penalties on Parsoli and its directors and their front entities as under: (i) a consolidated penalty of Rs. 25 lakhs on Parsoli Corporation Limited, Mr. Zafar Sareshwala, Managing Director and Mr. Uves Sareshwala, promoter / Director under Section 15A(a) of the SEBI Act, 1992 for the violation of Section 11C(2) and (3) of SEBI Act. (ii) a consolidated penalty of Rs. 3 crores on the promoters' family of Sareshwalas comprising of (a) Mr. Zafar Sareshwala, Managing Director (b) Mr. Uves Sareshwala, (c) Mr. Talha Yunus Sareshwala and (d) Mr. Saleha Mohammed Yunus Sareshwala under Section 15HA of SEBI Act, 1992 for the violation of Regulations 3(a) to (d), 4 (1) and (2)(h) of the SEBI (FUTP) Regulations, 2003 and under Section 19G of the Depositories Act, 1996 for the violation of Regulation 53A of the SEBI (DP) Regulations. (iii) a consolidated penalty of Rs. 70 lakhs on the Kothawalas family comprising of (a) Mohammed Alibhai Kothawala (b) Amena Maksud Kothawala (c) Fatema Mukhtar Kothawala (d) Maksud Yusufbhai Kothawala (e) Mariam Yusuf Kothawala (f) Mukhtar Yusufbhai Kothawala (g) Yusufbhai Uma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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