TMI Blog2021 (8) TMI 1397X X X X Extracts X X X X X X X X Extracts X X X X ..... was taken. Ultimately, it was held that the submissions that retransfer of the shares by the Bank to the appellant therein would not amount to acquisition of the shares cannot be accepted. It was held that such arguments would mean circumventing Takeover Code and Regulation 58 of the Depository Regulations, which cannot be permitted. It was further found that when the law prescribes course for creation of a pledge of shares, the parties cannot agree to create a pledge contrary to the SAST Regulations. Considering all these facts the contention of the appellants was negativated and the appeal against the order of the respondent SEBI was dismissed. Taking into consideration all these factors and the law as crystallized, in our view, the submissions of the appellants cannot be accepted. It is an admitted fact that the shares were transferred to the concerned noticees. Thereafter the shares were again transferred in the demat accounts of the appellants in the similar fashion. Appellants have thus violated the provisions of the regulations detailed above. The order of the AO, therefore cannot be faulted. As regards the issue of delay in launching the proceedings, we find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore they were required to make an announcement of open offer in accordance with the Regulation 3(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as SAST Regulations 2011). However, it was found by SEBI that these noticees have failed to do so. During the proceedings, as detailed above, it was found that Mr. R. Sahadevan was not the promoter of the Company and therefore discharged from the present proceedings. 3. Respondent SEBI found that the Appellant no. 1 had transferred shares through off market transactions from / to noticee no. 4 Mr. Piyush Kothari, noticee no. 5 Mr. Mohammed Azhar Khan, noticee no. 6 Mr. Mehul Modi during the investigation period. Appellant no. 2 had received shares through off market transactions from notice no. 7- Mr. Nelesh Devendra Vora. It was further found that in all these off market transactions the present appellants as well as the above noticees were required to pay consideration at the same time, against the off market transactions in terms of Section 2(i) of the SCRA. However, these noticees failed to pay consideration. Further, violations of disclosure requirements in terms of SAST Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. The said noticee (Mr. Modi) informed that that he had transferred some of the shares off market to several persons. 25 lakhs shares were transferred by him to noticee no. 7 Mr. Nilesh Devendra Vora. After persuasion the said noticee transferred those 25 lakhs shares to the Beneficiary Account of Appellant no. 2 on November 22, 2013. Rest of the shares however could not be recovered and therefore appellants had filed a complaint with the Economic Offences Wing of the Mumbai Police. (iii) Thereafter the appellants received show cause notice from the respondent SEBI on April 23, 2019. Thus, the initial transfer of shares to the two noticees was only by way of securities for financial assistance as detailed above. In the circumstances, the transactions were not in the nature of sell or purchase of the shares and there was no violation of any of the provisions as narrated above. (iv) The learned AO however did not agree with the submissions and passed the impugned order. 5. We have heard Shri Joby Mathew, the learned counsel for the appellant and Shri Suraj Chaudhary, the learned counsel for the respondent. 6. The learned counsel for the appellants submitted before us th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and Exchange Board of India (Depositories and Participants) Regulations 1996 (hereinafter referred to as Depository Regulation ). The shares were undisputedly transferred in favour of defendant no. 1 and the shares were held with the depository herein was shown as the beneficial owner of the shares. The Bombay High Court therefore held that the plaintiff had conveyed their property in the shares to defendant no. 1. and the transaction had the effect of transfer. 10. In the case of Liquid Holdings Private Limited (supra) this Tribunal had held on the similar lines. In that case the appellant had created a pledge of the shares for a loan of Rs. 10 crore from Lakshmi Vilas Bank Limited. Upon non-payment of the loan the pledge was invoked. Consequently, the shares were transferred to beneficial ownership account of the Bank in the record of the depository. The bank however agreed that upon settlement of the loan account, the shares would be transferred back to the appellants. The letter to that effect was also sent by the Bank. In the circumstances, appellant submitted that the transfer of the shares to the appellant later on would not amount to purchase of shares. This tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dis apply in such cases of hypothecation: Provided that the depository before registering the hypothecatee as a beneficial owner shall obtain the prior concurrence of the hypothecator. (11) No transfer of security in respect of which a notice or entry of pledge or hypothecation is in force shall be effected by a participant without the concurrence of the pledgee or the hypothecatee as the case may be. 11. It was also noted that as per Section 10 of the Depositories Act, 1996 a person in whose name the shares are recorded with the depository is deemed to be the registered owner for the purposes of effecting transfer of ownership of security on behalf of a beneficial owner. Further, this Tribunal considered the provisions of Section 150 of the Companies Act which requires every company to keep a register of its members and enter therein their particulars of shares held by them, as referred to in the section. Further survey of various relevant provisions was taken. Ultimately, it was held that the submissions that retransfer of the shares by the Bank to the appellant therein would not amount to acquisition of the shares cannot be accepted. It was held that such arguments wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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