TMI Blog2022 (1) TMI 1413X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. In the absence of any inducement, the question of fraud committed by the appellants does not arise. This Tribunal in Price Waterhouse [ 2019 (9) TMI 592 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] has categorically held that a C.A. can be proceeded against them if they are instrumental in preparing false and fabricated accounts otherwise SEBI has no power to proceed against them. 29G Section 12A(a) (b) of the SEBI Act is obviously not applicable to the appellant as they are not dealing in the securities. Similarly, Section 12(c) cannot be made applicable because no fraud has been carried out by the appellant. Further, in the absence of connivane, deceit, or manipulation Regulation 3 4 of the PFUTP Regulations cannot be made applicable. The appeal is hereby allowed with no order as to costs. - Justice Tarun Agarwala, Presiding Officer And Justice M.T. Joshi, Judicial Member Mr. Ravichandra Hegde, Advocate with Mr. Robin Shah, Advocate i/b Parinam Law Associates for the Appellant. Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms. Deepti Mohan and Ms. Binjal Samani, Advocates i/b Vidhii Partners for the Respondent. ORDER Per : Justice M.T. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , however, did not agree with the submissions and the impugned order was passed. 6. The Learned AO has enumerated in detail the lapses which had been committed by the present appellants. Bulk of the allegations was that though the Company has made payment to the various vendors in crore of rupees without having any invoices, bills from the vendor came later on. The appellants did not raise a red flag against it. In one instance no invoice / bill was forthcoming. In some cases the alleged work was allegedly obtained through the vendors which names were not listed in the prospectus, on the basis of which the Initial Public Offerings was made to the general investors. There are other lapses like making an excess payment which was later on returned, the deposit made to the BSE Limited ( BSE for short) which could not have been spent out of the IPO proceeds etc. 7. The appellants do not dispute the fact that the payment was made and thereafter the invoices were received by the Company and that some of the vendors were not listed in the prospectus. Their case, however, is that since payment was evidenced by the bank statements, no fault can be found and the invoices were received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bill that was found on record of the entity was blank as regards the date. The name of the said entity also did not find place in the prospectus. The appellant submitted that there were valid reasons to believe that the payment was made and the amount was utilized for the object. 13. As regards the payment made to one Madhuvan Enterprises concerning electrical installation while the payment was made on May 7, 2011 of Rs. 1,31,34,189/- and the bill was raised on May 16, 2011. The name of this entity also is absent in the prospectus. Same explanation was given by the appellants as like other cases. 14. As regards the payments made to Forever Sales Corporation, for electrical installation work, while the payment was made on May 7, 2011 the bill was raised on May 15, 2011. This entity was also not named in the prospectus. 15. As regards the payment made to Reality Sales, an amount of Rs. 17,28,000/- was made by the Company to the said entity. However, no proof of payment was submitted. Further, no invoice document was provided. The name of this entity was also not listed in the prospectus. The Learned AO therefore observed that it was a serious lapse on the part of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted before us that while the audit was conducted way back in the year 2012 and the show cause notice was issued on December 19, 2019, the delay itself had caused prejudice. In support of the same the learned counsel for the appellants relied on the following decisions which are as follows:- (a) Ashlesh Gunvantbhai Shah vs Securities and Exchange Board of India (Judgment of Securities Appellate Tribunal dated January 31, 2020; (b) Securities and Exchange Board of India, Through Chairman vs Rajeev Bhanot Ors. etc.etc. (Order passed by the Supreme Court of India dated November 8, 2021); (c) Mr. Rajeev Bhanot Ors. vs Securities and Exchange Board of India (Judgment passed by Securities Appellate Tribunal dated July 9, 2021; 22. The appellant has submitted no fraud is involved in the entire episode and therefore the appellants cannot be booked under the provisions of the PFUTP Regulations. To buttress the argument the appellants relied on following six decisions:- (a) Securities and Exchange Board of India vs Kishore R. Ajmera (Judgment passed by Supreme Court of India dated February 23, 2016); (b) Securities and Exchange Board of India vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing in securities which are listed or proposedto be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder 3. Prohibition of certain dealings in securities No person shall directly or indirectly (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made thereunder; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made thereunder. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled to take measures as prescribed in the said section. Further, appropriate directions can be given under section 11-B. 29(C). The Bombay High Court further held that if on conclusion of enquiry if no evidence is available regarding fabrication and falsification of accounts, then SEBI cannot give any direction in any manner. The Bombay High Court held that SEBI has jurisdiction to inquire into and investigate the matter in connection with manipulating and fabricating the books of account and balance sheet of the company. If it finds that the C.A. had no intention and knowledge to fabricate and fudge the books of account and there was only some omission without any mens rea or connivance with anyone then on such evidence SEBI cannot give any further directions. 29(D). In Price Waterhouse Co. Vs. SEBI in appeal no. 6 of 2018 decided on 09.09.2019, this Tribunal while considering the role of the appellant as a firm of the C.A.s and after considering the judgment of the Bombay High Court (supra) found that the scope of the enquiry was only restricted to the charge of conspiracy and involvement in the fraud and not to any charge of professional negligence since the C.A. / C.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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