BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI

Transcription

1 BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Appeal No. 98 of Yashraj Containeurs Limited 757/758, Jawala Estate, Soni Wadia, Borivali (West), Mumbai Mr. Jayesh Valia B- 1701, Pushp Vinod 1, S. V. Road, Borivali (West), Mumbai Ms. Sangeeta J. Valia B- 1701, Pushp Vinod 1, S. V. Road, Borivali (West), Mumbai Order Reserved On: Date of Decision : Vasparr Shelter Limited 401, Court Chamber, S. V, Road, Borivali (West), Mumbai Appellants Versus Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai Respondent Mr. Somasekhar Sundaresan, Advocate with Mr. Dhaval Kothari, Mr. Abishek Venkatraman, Mr. Paras Parekh and Mr. Akash Joshi, Advocates i/b J. Sagar Associates for Appellants. Mr. Vikram Nankani, Senior Advocate with Mr. Tomu Francis, Advocate for the Respondent. CORAM: Justice J.P. Devadhar, Presiding Officer Dr. C.K.G. Nair, Member Per: Justice J.P. Devadhar

2 2 1. This appeal is filed to challenge the order passed by the Whole Time Member ( WTM for short) of the Securities and Exchange Board of India ( SEBI for short) on January 13, By the said order appellants are restrained from accessing the securities market and prohibited from buying, selling or otherwise dealing in securities directly or indirectly or being associated with the securities market in any manner, whatsoever for a period of 5 years for violating the securities laws during the year Prior to the impugned order dated January 13, 2016, for the same violations the Adjudicating Officer of SEBI had passed an order on November 13, 2009, wherein penalty of ` 30 lac was imposed on the appellants under Section 15HA and Section 15G of the Securities and Exchange Board of India Act, 1992 ( SEBI Act for short) for violating the provisions contained in the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ( PFUTP Regulations for short) and SEBI (Prohibition of Insider Trading) Regulations, 1992 ( PIT Regulations for short). 3. Challenging the aforesaid order passed by the AO, Appellant No. 1 had filed Appeal No. 70 of While disposing of the said appeal on December 02, 2010 this Tribunal had observed thus:- After arguing these appeals for sometime, the learned counsel appearing for the appellants pray that they may be allowed to withdraw the appeals.

3 3 While granting this prayer, we cannot resist observing that in view of the serious allegations made against the appellants which stand established during the course of the adjudication proceedings, the Securities and Exchange Board of India (for short the Board) should not have been content with initiating only adjudication proceedings against the appellants in which only a monetary penalty could be levied. This is a fit case where the Board should have considered initiating proceedings under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 for issuing appropriate directions against the appellants to protect the integrity of the market and the interests of the investors. We have seen this being done in other cases. This is a fit case where the Board could have also prosecuted the company and its promoters. We say so because, apart from the other serious charges established against the company and its promoters, it has been found that the company fudged its accounts and showed profits when it was actually making losses. It projected a rosy picture about its performance before the securities market and the investors with a view to lure them to invest as a result whereof the price of the scrip of the company rose from ` to ` in a short span

4 4 of 44 days and, interestingly, when the price went up, the promoters and their front entities off-loaded more than 9 lac shares in the market. This is, indeed, a very serious market illegality/irregularity and, in our view, imposing a monetary penalty alone on the company and its promoters will not meet the ends of justice. We are constrained to make these observations because the lenient view taken by the Board does not, in our opinion, protect the integrity of the market and not even the interest of the investors which is its primary duty. This kind of lenient view will not be a deterrent for others and would send a wrong signal that the delinquents could continue with their nefarious activities by paying a monetary penalty. Having said this, we leave the matter at that since the appeals are being withdrawn. 4. Although the order of this Tribunal is dated December 02, 2010 SEBI issued a show cause notice to the appellants only on February 27, 2013, thereby calling upon the appellants to show cause as to why action should not be taken against the appellants for violating the regulations framed by SEBI. Admittedly, an opportunity of hearing was granted to the appellants and thereafter by the impugned order dated January 13, 2016 appellants are restrained from accessing the securities market for a period of 5 years. Challenging the aforesaid order the present appeal is filed.

5 5 5. Mr. Sundaresan learned counsel appearing on behalf of appellants fairly stated that since penalty imposed on the Appellant No. 1 company by the AO has been accepted and the said penalty has already been paid, he is not pressing the argument that the appellants have not violated the regulations framed by SEBI. However, counsel for the appellants submitted that in the facts of present case, restraining the appellants from entering the securities market for a period of 5 years is wholly unjustified for the following reasons:- a) In the present case, after considering all option available under the SEBI Act, SEBI had deemed it fit to impose monetary penalty on the company and had deemed it fit not to take any drastic action of restraining the appellants from entering the securities market. Merely because this Tribunal while permitting the Appellant No. 1 to withdraw the appeal filed to challenge the penalty order, had observed that SEBI may consider initiating proceedings under Section 11 and 11B of the SEBI Act, the WTM of SEBI was not justified in restraining the appellants from entering the securities market for a period of 5 years. b) Admittedly, on December 02, 2010 this Tribunal had directed SEBI to consider taking action against the appellants for the violations committed during the

6 6 year Admittedly, SEBI did not deem it proper to initiate action against the appellants for more than two years and it is only on February 27, 2013, SEBI sought to issue show cause notice to the appellants and thereafter, by the impugned order dated January 13, 2016 sought to restrain the appellants from accessing the securities market for a period of 5 years. Thus, it is apparent that SEBI has passed the restraint order belatedly inspite of the fact that there was no case for restraining the appellants from accessing the securities market for a period of 5 years. c) Alternatively, it is submitted that assuming there was violation committed in the year , restraining the appellants from accessing the securities market for a period of 5 years at this belated stage is unwarranted and excessively harsh. Accordingly, it is submitted that the debarment be restricted to the period undergone by the appellants from January 13, 2016 till date. 6. Mr. Nankani, learned Senior Advocate appearing on behalf of SEBI, relying on the observations made in the order of this Tribunal dated December 02, 2010, submitted that no fault can be found with the order impugned in the appeal and hence the impugned order need not be interfered with.

7 7 7. We have carefully considered the arguments advanced by counsel on both sides. 8. In the order of this Tribunal dated December 02, 2010 it is recorded that in the year the appellants had fudged the accounts of the company and showed profits when it was actually making losses. It is further recorded in the said order that the appellants sought to project a rosy picture about the performance of the company to the investors in the securities market with a view to lure them to invest in the company and in fact as a result of above action, the price of the scrip of the company rose from ` to ` in a short span of 44 days. Moreover, it is also recorded in the said order that when the price of the scrip went up, the promoters and their front entities off-loaded more than 9 lac shares in the market. All these factors clearly show that in the year the appellants had indulged in serious violation of the securities laws and therefore SEBI is justified in taking stern action against the appellants. 9. Question, however, to be considered is, whether restraint order passed against the appellants for a period of 5 years is justified in the facts of present case. Admittedly, for the violations committed during the year SEBI had initiated penal action against the company in the year 2008 and accordingly penalty of ` 30 lac was imposed on the appellants. However, no action was initiated under Section 11/11B of SEBI Act and even after this Tribunal on December 02, 2010 directed SEBI to take action against appellants, SEBI did not initiate action for

8 8 more than two years. Although there is failure on part of SEBI to take prompt action, appellants are not justified in contending that the impugned order be quashed and set aside on account of delay on part of SEBI in initiating action against the appellants. However, in the present case, the violations relate to the period and inspite of initiating penalty proceedings in the year 2008 Section 11/11B proceedings have been initiated against the appellants in the year There is nothing on record to suggest that in all these years the appellants have violated any of the securities laws. In these circumstances, in our opinion, it would be just and proper to restrict the restraint order for a period of two years. 10. Accordingly, for the reasons stated above, the impugned order dated January 13, 2016 is modified by restricting the restraint order passed against the appellants from 5 years to 2 years. 11. Appeal is disposed of in the aforesaid terms with no order as to costs. Sd/- Justice J.P. Devadhar Presiding Officer Prepared & Compared By: PK Sd/- Dr. C.K.G. Nair Member