TMI Blog2022 (6) TMI 1441X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that if copies of the documents and/or its contents thereof are relied by SEBI and the same is disputed by the appellants regarding its existence or its contents then the onus is upon the appellants who disputes it to prove that the document is forged or its contents are manipulated and its signatures are not of their Directors. The onus is upon the appellants and not upon SEBI. Appellants contended that they were not aware of the pledge agreement and, therefore, the question of disclosing it to the stock exchange did not arise - Since we have already held that the appellants were aware of the pledge agreement non-disclosure of the pledge agreement invited penalty which the AO has rightly penalised the appellants. Company furnished wrong information to SEBI regarding the subscribers to the issue. The list provided by the Company indicated that a number of subscribers had subscribed to the GDR issue which upon investigation was found to be false and that only one entity had subscribed to the GDR issue. The contention that the Company had only forwarded the letter that was given by the Merchant Banker cannot be accepted. The responsibility at the end of the day is of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs only on the strength that they were signatories to the board resolution. In Mr. Gurmeet Singh vs. SEBI [ 2021 (9) TMI 1519 - SECURITIES APPELLATE TRIBUNAL MUMBAI] and other connected appeals this Tribunal has held that merely being a signatory to a resolution does not mean that these Directors were part of the fraudulent scheme that the respondent was required to show some other evidence to show that these Directors were also part of the fraudulent scheme. Thus the imposition of penalty is excessive. Consequently, while affirming the order of the WTM and AO of the aforesaid violations committed by the appellants we reduce the debarment period of the Company and the Managing Director from five years to three years. The other Directors have already undergone the debarment period and, therefore, no further order is required to be passed. In so far as the penalty imposed by the AO is concerned, the penalty against the Company is reduced to Rs. 25 lakhs. The penalty against the Managing Director is affirmed. The penalty imposed against the remaining Directors is reduced from Rs. 10,00,000/- to Rs. 2,00,000/-. The appeals are partly allowed. In the circumstances of the case, parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EURAM Bank. Further, a loan agreement dated 16th August, 2010 was entered into between EURAM Bank and Vintage FZE (hereinafter referred to as Vintage ) for subscribing to 1.17 million GDRs of the Company. On the same date i.e. 16th August, 2010 a pledge agreement was also executed between EURAM Bank and the appellant Company inter alia pledging the proceeds from the GDR issue as a collateral for the loan taken by Vintage. 4. Based on the aforesaid agreements, Vintage was the only entity which subscribed the entire 1.17 million GDRs of the Company by obtaining a loan from EURAM Bank. Pursuant to the loan agreement dated 16th August, 2010 the loan amount was secured by the pledge agreement dated 16th August, 2010 executed by the Company. 5. On 1st September, 2010, 11,65,750 GDRs representing 5,82,87,500 equity shares of Rs. 5 each at USD 21.45 per GDR was allotted to Vintage. Vintage purportedly repaid the loan amount in several tranches to EURAM Bank between the period from 29th October, 2010 to 17th March, 2011. Pursuant to the repayment of the loan EURAM Bank issued a letter dated 21st March, 2011 to Vintage confirming the repayment of the loan taken by Vintage. A copy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital market and, therefore, the scheme of issuance of GDR was fraudulent violating Section 12A(a), (b), (c) of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations. 8. The appellants submitted their replies contending that the documents annexed to the show cause notice were mere photocopies and were not duly authenticated as being photocopies of the original and, therefore, such documents cannot be considered as evidence until and unless these documents are authenticated. Further, the originals of the loan agreement, escrow agreement and pledge agreement were not provided for inspection and, therefore, it was violative of the principles of natural justice. Further, the show cause notice did not disclose the precise action that was proposed to be taken against the Company and other noticees. It was further submitted that the Company did not give any false information regarding subscribers to the GDR issue and contended that the list of subscribers that was received from the Company by the Lead Manager was provided to SEBI during investigation and that there was no reason to suspect that the list of subscribers provided by the Lead Manager was incorrect. The Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted by Mr. Sumit Garg and Mr. Kamal Budhiraja, Advocates for the appellants in appeal no.536 of 2019 and 439 of 2020 and Mr. Shyam Mehta, Senior Advocate with Mr. Mihir Mody, Mr. Arnav Misra and Mr. Mayur Jaisingh, Advocates for the respondent. 11. Before us, the following contentions was raised by the appellants, namely, i. Pledge agreement was never executed by the Company or by the Managing Director Dr. Kailash S. Choudhari. ii. Burden was upon SEBI to produce the original and prove the documents. iii. Show cause notice relies upon photocopies of loan agreement, pledge agreement etc., which are inadmissible in evidence since the same has not been authenticated nor proved especially when originals are available. iv. Secondary evidence under Section 65 and 66 of the Evidence Act was not followed. v. Loan agreement has two dates, namely, 16th August, 2010 and 26th August, 2010 which casts doubt on the authenticity of the documents and, therefore, it was essential for SEBI to produce the original. vi. The Company did not mislead the investors as no false statement was made with regard to the subscription of the GDR nor any false information was given to SEBI wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were aware of a loan taken by Vintage. Pursuant to the loan agreement and the pledge agreement, the proceeds of the GDR was used as a loan which Vintage has repaid over a period of time the details of which has been given in the impugned order. This letter amply proves that the appellants were aware of the execution of the loan and pledge agreement. 14. In addition to the aforesaid, the WTM as well as AO have compared the signature of the Managing Director, Dr. Kailash Choudhari which were appended in the pledge agreement and in the escrow agreement as well as in the authorisation letter authorising M/s. Joby Mathew and Associates to appear before SEBI. The WTM has given a categorical finding that the signature of the Managing Director on all these documents appear to be the same and no distinction can be made out. This finding has not been questioned before us. Thus, the contention that the Company and its Managing Directors did not execute the pledge agreement, being a bald denial cannot be accepted. 15. A perusal of the pledge agreement and loan agreement clearly indicates that the appellants were aware and had copies of the agreements. Thus, it is no longer open to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument is produced to establish some fact, then the writer must be produced or his affidavit must be filed in accordance with the principles of natural justice under Order 19 of Civil Procedure Code as well as the Evidence Act. It is in this light that the Supreme Court held that the Tribunal cannot rely upon copies of the documents when the original are in existence and are not produced or proved by one of the methods either by affidavit or by witness who have executed them. Thus, reliance by the appellants on this decision of the Supreme Court Bareilly Electricity Supply Co. Ltd. (supra) is totally misplaced and is not applicable in the given circumstances. 18. Similarly, the decision of the Bombay High Court in Pradyuman Kumar Sharma vs. Jaysagar M. Sacheti and Others 2013 (5) Mh. L. J. 86 is not applicable nor helpful to the appellant s case. In this decision, the arbitrator did not refer the dispute to an expert witness to examine the disputed signature. The Bombay High Court held that the arbitrator rightly did not refer the document to an expert witness as the same was disputed and not proved. It is in this scenario, the Bombay High Court held that a disputed document that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n our opinion, filing false information was solely the responsibility of the Company and cannot be diverted to the Merchant Banker. 22. It was urged that original copies should have been produced and EURAM Bank could have been directed to produce it which in the instant case was not done. The WTM in this regard held that since EURAM Bank was not subject to the process of the court such direction could not be issued to produce the documents. In this regard, we are of the opinion that the respondent under Section 11(1)(ib) of the SEBI Act but also under Section 15I(2) has powers to enforce the attendance of any person to give evidence or produce any document. In any case, we take judicial notice of the fact that a large number of appeals have been filed by EURAM Bank before this Tribunal against directions/penalties imposed by SEBI upon them and, therefore, it does not lie in the mouth of SEBI to say that EURAM Bank is outside their process. However, production of the original documents was not required in view of what we have held earlier in the preceding paragraphs. 23. A feeble attempt was made contending that there were two dates on the loan agreement, namely, 16th August, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titutionally protected right which can be traced to Article 14 as well as Article 21 of the Constitution. The doctrine of proportionality is aimed at bringing out proportional result or proportionality stricto sensu‟. It is a result oriented test as it examines the result of the law in fact the proportionality achieves balancing between two competing interests: harm caused to the society by the infringer which gives justification for penalising the infringer on the one hand and the right of the infringer in not suffering the punishment which may be disproportionate to the seriousness of the Act. 27. Similar view was expressed by the Delhi High court in Rajkumar Dyeing and Printing Works Pvt. Ltd. In Rajendra Yadav, the Supreme Court held that the doctrine of equality applies to all those who are found guilty. The Supreme Court held: 9. The doctrine of equality applies to all who are equally placed; even among persons who are found guilty. The persons who have been found guilty can also claim equality of treatment, if they can establish discrimination while imposing punishment when all of them are involved in the same incident. Parity among co-delinquents has also to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by an authority which is contrary to law or which is improper or where the action taken is unreasonable then the Court of law is duty bound to interfere with such action and one such mode of exercising power is to exercise the doctrine of proportionality. Where the punitive measure is harsh or disproportionate to the offence which shocks the conscience it is within the discretion of the Court to exercise the doctrine of proportionality and reduce the quantum of punishment to ensure that some rationality is brought to make unequals equal. 30. In this regard, the appellants have produced various orders passed by SEBI against various companies and its Directors wherein different period of debarment have been given for similar/identical offence. For facility, a comparative table is given below: Debarment Order Sr. No. Name of the GDR issuer company Period of GDR issue Total Amount raised by GDR issue (USD) million Subscriber Period of Debarment Date of Order 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 50,00,000/- (Rupees Fifty Lakhs) 23rd April, 2018 2. Syncom Healthcare Ltd. September 2010 20.74 Vintage Rs. 25,00,000/- (Rupees Twenty Five Lakhs) 30th August, 2019 3. Visu International Ltd. April 2006 9.66 Seazun Rs. 1,25,00,000/- (Rupees 1 Crore Twenty-Five Lakhs) 18th March, 2021 4. GV Films Ltd. April 2007 40 Whiteview Rs. 25,00,000/- (Rupees Twenty-Five Lakhs) 29th January, 2020 5. Aksh Opti-Fibre Ltd. Sept 2010 25 Vintage Rs. 10,15,00,000/- (Rupees Rupees Ten Crore Fifteen Lakhs) 28th February, 2020 33. A perusal of the aforesaid table indicates that G.V. Films Ltd. had raised 40 million USD and the Company was only awarded a penalty of Rs. 25,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udulent scheme that the respondent was required to show some other evidence to show that these Directors were also part of the fraudulent scheme. Thus the imposition of penalty is excessive. 38. Consequently, while affirming the order of the WTM and AO of the aforesaid violations committed by the appellants we reduce the debarment period of the Company and the Managing Director from five years to three years. The other Directors have already undergone the debarment period and, therefore, no further order is required to be passed. In so far as the penalty imposed by the AO is concerned, the penalty against the Company is reduced to Rs. 25 lakhs. The penalty against the Managing Director is affirmed. The penalty imposed against the remaining Directors is reduced from Rs. 10,00,000/- to Rs. 2,00,000/-. The appeals are partly allowed. In the circumstances of the case, parties shall bear their own costs. 39. 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. Certified copy of this order is also available from the Registry on payment of usual charges. - - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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