Securities Appellate Tribunal
Rikhav Brokers Pvt. Ltd.(Now Known As 4G ... vs Sebi on 10 August, 2016
Author: J.P. Devadhar
Bench: J.P. Devadhar
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of decision: 10/08/2016
Appeal No.240 of 2014
Rikhav Brokers Pvt. Ltd.
(Now known as 4G IT Solutions (India) Pvt. Ltd.,
36, Matru Chhaya,
S.N. Road, Mulund (West),
Mumbai - 400 080. ... Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No.C4-A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mr. P.N. Modi, Senior Advocate a/w Mr. Prakash Shah and Ms. Kalpana
Desai, Advocates for Appellants.
Mr. Kumar Desai a/w Mr. Saurabh Bachhawat and Mr. Harekrishna Ashar,
Advocates i/b K. Ashar & Co. for the Respondent.
WITH
Appeal No.241 of 2014
AHL Investment Consultants Pvt. Ltd.
307/208, Parshwanath Apt.,
Sarvodaya Nagar,
Mulund (West),
Mumbai - 400 080. ... Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No.C4-A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mr. Prakash Shah, Advocate for Appellants.
Mr. Kumar Desai a/w Mr. Saurabh Bachhawat and Mr. Harekrishna Ashar,
Advocates i/b K. Ashar & Co. for the Respondent.
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CORAM : Justice J.P. Devadhar, Presiding Officer
Dr. C.K.G. Nair, Member
Per : Justice J.P. Devadhar(Oral)
1.In these two appeals, the appellants are aggrieved by the common order passed by the Adjudicating Officer ("AO" for short) of the Securities and Exchange Board of India (for short "SEBI") on 25th April 2014. Since common order is challenged in these two appeals, both these appeals are heard together and disposed of by this common decision.
2. By the impugned order, the AO of SEBI has imposed penalty of Rs.75 lacs and penalty of Rs.25 lacs on the respective appellant under Section 15 HA of the SEBI Act, 1992 for contravening Section 12A(a),(b) & (c) of the SEBI Act, Regulation 3(b) &(d), 4(1) and 4(2)(a)&(b) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (for short "PFUTP Regulations").
3. Facts relevant for these two appeals are that each appellant had participated in the bid for subscribing to the shares in the IPO of Vaswani Industries Limited ("VIL" for short), however, the appellants withdrew the bid on 5th May, 2011 by informing its bankers to stop payment of the cheque issued for subscribing to the shares of VIL.
4. As large number of bidders had withdrawn from the bid, SEBI investigated the matter and issued show-cause notice to various entities including the appellants herein, calling upon them to show cause as to why action should not be taken against them, inter alia, on the ground that the bidding for shares in the IPO of VIL by the appellants were not bona fide in -3- nature and the bidding were done with a motive to artificially inflate the bid book and to create misleading appearance of bidding.
5. During the course of hearing the appellants had contended that they had sufficient funds to subscribe to the shares of VIL. As there was no documentary evidence to substantive that claim, AO of SEBI called upon the appellants to furnish requisite proof in that behalf within a period of one week.
6. Admittedly, the appellants failed to furnish the requisite information and accordingly failed to establish that the appellants had sufficient funds to subscribe to the shares of VIL. In the absence of any proof to establish that the appellants had sufficient funds available with them during the bidding process, AO inferred that making bids without having sufficient funds was with a view to artificially inflate the bid book at the highest price and to create misleading interest for other investors/public to subscribe to the issue. Accordingly, it is held that the appellants have violated the provisions contained in the SEBI Act and the PFUTP Regulations and by the impugned order penalty of Rs.75 lacs and Rs.25 lacs is imposed on each appellant.
7. Relying on a bank statement annexed to the memo of appeal and a bank certificate annexed to the affidavit in rejoinder, Counsel for the appellants submitted that due to bona fide reasons, the above documents could not be furnished to the AO and therefore, on the basis of above documents it must be held that the appellants had sufficient funds to subscribe to the shares of VIL and the inference drawn by the AO is erroneous.
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8. Admittedly, the AO of SEBI had no occasion to consider the aforesaid documents which are sought to be furnished for the first time before this Tribunal. Apart from the above, in para 18 of the impugned order, the AO has recorded the plea of the appellants in relation to the adjudication order passed in case of Bajaj Group (consisting of 10 entities and Bachawat Group (consisting of 7 entities). Admittedly, those two groups were the major applicants who had participated in the bid and had withdrawn their application like the appellants. It is the case of the appellants that as those group entities are exonerated, the appellants also ought to have been exonerated, because the case of the appellants is similar to the case of the above two group entities. On perusal of the impugned order, it is seen that the AO has not recorded any finding as to how the case of the appellant is different from those two group entities.
9. In these circumstances, we set aside the impugned order qua the appellants herein and restore the matter to the file of AO of SEBI to pass fresh order on merits and in accordance with law. Appellants are at liberty to file additional documents before the AO within two weeks from today. The AO would then consider those documents and pass appropriate order after giving an opportunity of hearing to the appellants.
10. Both the appeals are disposed of in the aforesaid terms with no order as to costs.
Sd/-
Justice J.P. Devadhar Presiding Officer Sd/-
Dr. C.K.G. Nair Member 10/08/2016 Prepared & compared by-ddg