Securities Appellate Tribunal
Babulal M. Dugar & Ors. vs Sebi on 4 May, 2022
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Hearing : 18.02.2022
Date of Decision : 04.05.2022
Appeal No. 169 of 2020
1. Babulal M. Dugar, since deceased
represented by Legal Heirs
1a. Mrs. Armav Dugar
1b. Bharati Jain
1c. Vinod Kumar Dugar
1d. Manoj Kumar Dugar
2. Vinod Kumar Dugar
3. Manoj Kumar Dugar
705, Sahajanand Complex,
Opposite to Rajasthan High
School, Shahi Baug Road,
Ahmedabad - 380004. ..... Appellants
Versus
Securities & Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ...... Respondent
Mr. Joby Mathew, Advocate with Mr. Anshuman Sugla, Advocate
i/b. Joby Mathew and Associates for the Appellants.
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Mr. Suraj Chaudhary, Advocate with Mr. Chirag Shah, Mr. Veer
Ashar, Mr. Akash Jain, Ms. Daksha Kasekar, Advocates i/b.
Mansukhlal Hiralal & Co. for the Respondent.
CORAM : Justice Tarun Agarwala, Presiding Officer
Justice M. T. Joshi, Judicial Member
Per : Justice M. T. Joshi, Judicial Member
1. Aggrieved by the order of the learned Whole Time Member
(hereinafter referred to as 'WTM') of Securities and Exchange Board
of India (hereinafter referred to as 'SEBI') dated December 20, 2019
whereunder the appellants were directed to disgorge an amount of
Rs. 3,07,607.30 with the interest at the rate of 12% p. a. from the
year 2004 onwards till repayment, the present appeal is preferred.
2. During the pendency of the appeal, appellant no. 1 Babulal
Dugar had died, therefore, his legal representatives filed misc.
application no. 718 of 2021 and accordingly the legal representatives
are brought on record.
3. The impugned order was passed by the learned WTM for
violation of the provisions of Section 12A(a), (b) and (c) of the
Securities and Exchange Board of India Act, 1992 (hereinafter
referred to as 'SEBI Act') and Regulations 3(a), (b), (c), (d) and 4(1)
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of the Securities and Exchange Board of India (Prohibition of
Fraudulent and Unfair Trade Practices relating to Securities Market)
Regulations, 2003 (hereinafter referred to as 'PFUTP Regulations').
4. It appears that SEBI received a reference that the present
three appellants i.e. deceased Babulal and his two sons Manoj Kumar
Dugar (hereinafter referred to as 'Manoj') and Vinod Kumar Dugar
(hereinafter referred to as 'Vinod') were having multiple Permanent
Account Number (hereinafter referred to as 'PAN') out of which one
was in their own name and others in some other names with their
photographs affixed and had opened multiple demat accounts to
corner the allotment of shares in Initial Public Offers (IPO) of
various companies and were successful in getting allotment in 27
IPOs. The allotment obtained with fake identities were transferred to
these three appellants by way of off-market transactions and had
thus, made unlawful gain of the amount disgorged. After conclusion
of the investigation, show cause notice was issued to the present
appellants. They denied the allegations and submitted that no fake
identities were created by them and the off-market transactions were
entered into in normal course of business. The learned WTM did not
agree with the submissions, therefore, the impugned order was came
to be passed.
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5. We have heard Mr. Joby Mathew, the learned counsel with
Mr. Anshuman Sugla, the learned counsel for the appellants and
Mr. Suraj Chaudhary, the learned counsel with Mr. Chirag Shah,
Mr. Veer Ashar, Mr. Akash Jain, Ms. Daksha Kasekar, the learned
counsel for the respondent.
6. While the appellant Late Babulal and his two sons Manoj and
Vinod had their own pancards alongwith demat accounts, trading
accounts, etc. investigation of the respondent SEBI showed that Late
Babulal had also opened accounts in the name of one Sampatlal
Bucha and Subhakaran Jain. Appellant Manoj besides him had
opened accounts in the name of Karan Sethia. Appellant Vinod in
the similar fashion had opened account in the name Sitaram Sharma.
Besides this, multiple demat accounts were allegedly opened by the
appellants in the name of suspected entities as detailed in the
paragraph no. 5 of the impugned order. These Subhakaran Jain,
Sampatlal Bucha and Karan Sethia are allegedly the non-existent
personalities created by the appellants. The details of the allotment
in 27 IPOs are given in the paragraph no. 6 of the impugned order.
7. The impugned order would show that during investigation,
respondent SEBI had received the photo copies of pancards, account
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opening forms, KYC documents from the depositories. The learned
WTM had examined all those documents and concluded that there
was complete identity of the faces in the photographs including the
pattern of the dress worn by the respective entities and only
difference was the angles from which the photographs were clicked.
It was further highlighted by the learned WTM that the off-market
transactions with these entities by the appellant were not denied
under which the shares allotted in IPO by these fictitious entities
were transferred to them.
8. The learned counsel for the appellants submitted that they are
the businessmen operating from Ahmedabad and Jaipur. Respondent
SEBI relied on the colour copy of the documents. No forensic
examination of the same was carried out and merely the learned
WTM observed that the photographs are of the same personalities as
without any expert's opinion. Off-market transfer of the shares were
made in the normal course of the business. It was further submitted
that the entity, namely, Sampatlal Bucha had obtained on rent the
premises of the appellant Vinod at Jaipur from the year 2005 and,
therefore, they were knowing each other. It was explained that
therefore the address of the Vinod can be found in the address of the
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said appellant and in KYC documents, PAN, etc. In fact however the
address of all these nonexistent entities is same.
9. While the appellant relied on the ratio of DharamDeo Yadav
vs. State of Uttar Pradesh [(2014) 5 SCC 509] and Nandlal
Wasudeo Badwaik vs. Lata Nandlal Badwaik & Anr. [(2014) 2 SCC
576] to buttress their submission that the forensic examination is
required, the respondent relied on the ratio of Indian Overseas Bank
& Ors. vs. Om Prakash Lal Srivastava [(2022) SCC Online SC 62]
and SEBI vs. Opee Stock-link Ltd. [(2016) 14 SCC 134].
10. Upon hearing both the sides, in our view, there is no merit in
the appeal and the same is liable to be dismissed for the following
reasons.
11. It cannot be gainsaid that the addresses of the alleged fictitious
entities is the same that of the appellants. Though the appellants
contend that one of those alleged fictitious entities Mr. Sampatlal
Bucha had obtained on rent their premises, nothing is explained
regarding other entities Karan Sethia as well as Sitaram Sharma who
shared the same address as that of the appellant Vinod. The
respondent filed the color photo copies of all the concerned alleged
documents like KYC, PAN along with affidavit in reply. The
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learned WTM has examined those documents and observed same
identity between photographs including even the pattern of the dress
worn by those entities. The learned counsel for the appellants
submitted that those documents were never served upon the
appellants. The respondent however pointed out that inspection of
the documents was given to the appellants.
12. As regards the issue as to whether the appellants could have
been nailed on the basis of the similarity found by the learned WTM
without any expert evidence, we find that the present case has to be
decided on preponderance of probability. While there is no
explanation from the side of the appellants as to why the alleged
fictitious entities address is the same that of the appellant, the
appellants even failed to produce those entities either before the
learned AO or before this Tribunal when their case is that some of
them had obtained on rent their premises and were known to them as
there were numerous off-market transactions of transferring the
shares received by those entities in IPO to the appellants.
13. In the case of SEBI vs. Opee Stock-link Ltd. relied by the
respondent cited (supra), in the similar case of cornering of the
allotment of shares in IPO by opening numerous fake accounts, the
learned WTM therein had examined the documents and similarity in
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the signatures noted by him. Besides this, same address was
attributed to the benami entities. The Hon'ble Supreme Court of
India had accepted the finding of the learned WTM in that case who
has examined the documents and found similar signatures
everywhere though somewhat slightly different. Thus, while
deciding the case on preponderance of probability, the learned WTM
like a trial court has examined the documents including the
photographs. This exercise without any expert evidence was
approved by the Supreme Court. We therefore see no merit in the
arguments of the appellants that the expert evidence is must in the
case,
14. The ratio of the cases of DharamDeo Yadav and Nandlal
Wasudeo Badwaik cited (supra) relied on by the appellants would
not be applicable, as those would show that the cases were related to
the criminal offences wherein the case is required to be proved
beyond reasonable doubt.
15. As regards the issue of non-supply of the documents, Exhibit
D annexed to the appeal memo itself shows that on April 16, 2018
inspection of all the documents was given to the appellants.
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16. Considering all the material on record, we find that the appeal
is devoid of any merit. Hence the following order :
ORDER
17. The appeal is hereby dismissed without any order as to costs.
18. 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.
Justice Tarun Agarwala Presiding Officer Justice M. T. Joshi Digitally signed RAJALA byRAJALAKSHMI Judicial Member 04.05.2022 KSHMI HDate:
NAIR H NAIR 2022.05.06 PTM 10:31:21 +05'30'