Delhi District Court
Sebi vs . Jvg Finance & Others on 30 July, 2012
SEBI Vs. JVG Finance & Others
IN THE COURT OF SH. PAWAN KUMAR JAIN,
ADDL. SESSIONS JUDGE-01(CENTRAL):DELHI
Complaint Case No. 38 of 2010
ID No: 02401R5870212004
SECURITIES AND EXCHANGE BOARD OF INDIA, a statutory body
established under the provisions of Securities and Exchange Board of
Indian Act, 1992, having its Head office at Mittal Court, B-Wing, 224
Nariman Point, Mumbai 400210 represented by its Asst. General
Manager, Ms. Jyoti Sharma.
VERSUS
1. JVG Finance Ltd., a company incorporated
Under the Companies Act, 1956
thorugh its directors, having its Regd.
Office at B-22, Ansal Chambers-I,
Bhikaji Cama Place, New Delhi-110066
........Accused No. 1
2. Sh. V.K. Sharma, Chairman & Managing Director
JVG Finance Ltd., r/o C-8/8013,
Vasant Kunj, New Delhi.
(Since PO vide order dated 17/03/2006) ........Accused No.2
3. Col. Tripat Singh Bhan (Retd.), Director
JVG Finance Ltd., r/o 551, Sector-37
Noida (UP)
(Since PO vide order dated 28/01/2010)
........Accused No.3
4. Shri Biresh Prasad Singh, Director,
JVG Finance Ltd. Address: B-22,
Ansal Chamber-I, Bhikaji Cama Place,
New Delhi-110006
(Since PO vide order dated 25/05/2006)
........Accused No.4
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SEBI Vs. JVG Finance & Others
5. Dr. Bharati Sharma
r/o 22, Jamuna Apartments, Boring Street
Patna-800001 and also at 201,
Ashiana Chambers, Exhibition Road,
Patna, Bihar.
(Since PO vide order dated 13/02/2009)
..........Accused No. 5
6. M/s Hoffland Finance Ltd., a Company
Incorporated under the Companies Act
Registered office at; 1207, Hemkunt,
Rejendra Place, New Delhi
(Since PO vide order dated 23/11/2006)
..........Accused No. 6
7. Sh. B.B. Sharma, Chairman, Hoffland
Finance Ltd. R/o B-2/54, Safdarjung Enclave,
New Delhi.
(Since PO vide order dated 23/11/2006)
..........Acccused No. 7
8. Sh. A Subba Roa, Director of Hoffland
Finance Ltd. R/o CS-91/398, West Azad
Nagar, Krishana Nagar, Delhi
(Since PO vide order dated 17/03/2006)
.........Accused No. 8
9. Sh. M.N. Badam, Director of Hoffland
Finance Ltd. R/o E--15/B, DDA Flats,
Munirka, New Delhi.
(Since PO vide order dated 04/08/2006)
..........Accused No.9
10. Lt. Gen, Jagdish Narain (Retd.) Director
of Hoffland Finance Ltd. R/o 437-D,
Sector- 29, Arun Vihar, Noida, (UP).
(Since discharged vide order dated 13/02/2009)
.........Accused No. 10
11. Maj, Gen. Pramod Kapur (Retd.), Director
of Hoffland Finance Ltd. R/o Sector-29,
Arun Vihar, Noida (UP)
(Since discharged vide order dated 13/02/2009)
......Accused No.11
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SEBI Vs. JVG Finance & Others
12. Shri Suraj Pal Sharma, Director of
Hoffland Finance Ltd. R/o B-5/100,
Safdarjung Enclave, New Delhi
(Since PO vide order dated 23/11/2006)
.......Accused No.12
13. Sh. Brij Kishore Kapur, Director of
Hoffland Finance Ltd. O/a; 1207,
Hemkunt, Rajendra Place, New Delhi.
(Since PO vide order dated 23/11/2006)
......Accused No.13
14. Sh. Navin Chandra Pandey, Company
Secretary, Hoffland Finace Ltd.
R/o RZ-134, Lane 2, Kailashpuri, Palam
Colony, New Delhi.
(Since discharged vide order dated 28/01/2008)
......Accused No.14
15. M/s Marisia Financial Services Ltd.
Registered office at; 431, Ansal
Chambers-II, Bhikaji Cama Place,
New Delhi. Through its Director
Accused No.9.
(Since PO vide order dated 20/04/2007)
.............Accused No. 15
16. Sh. Rakesh Mishra, Chief Manager HFL,
Resident of 4451, Pocket B, 5 & 6, Vasant
Kunj, New Delhi and also at; A-40, Village
Mohammadpur, Near Bhikaji Cama Place,
New Delhi.
(Since PO vide order dated 25/05/2006)
.......Accused No. 16
17. Sh. Hari Kumar
R/o 519, Ansal Chamber-II,
Bhikhaji Cama Place, New Delhi
also at F-40, Katwaria Sarai,
New Delhi.
(Since PO vide order dated 04/08/2006)
.........Accused No. 17
18. Sh. Rana Das
R/o 421, Ansal Chamber-II
Bhikhaji Cama Place, New Delhi
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SEBI Vs. JVG Finance & Others
(Since PO vide order dated 25/05/2006)
.............Accused No. 18
19. Sh. S.K. Gupta
R/o 15-70, Kanoon Goyan
Aligarh (UP)
(Since PO vide order dated 28/01/2010)
.......Accused No. 19
20 M/s Evergrow Financial Services P. Ltd.
A Company Registered under the Companies
Act, having its registered office at 709,
Pocket D, Dilshad Garden, Delhi-110095
(represented by accused No.22)
......Accused No. 20
21. Sh. Ashok Kumar Kohli, Director of
M/s Evergrow Financial Services P. Ltd.
R/o 709, Pocket D, Dilshad Garden, Delhi-95
(Since abated vide order dated 17.05.2000)
......Accused No. 21
22. Sh. Pardeep Sharma, Director of
M/s Evergrow Financial Services P. Ltd.
R/o 887, Janta Flat, Nandnagri,
Delhi
.........Accused No.22
23. Sh. Gopal Gupta
Resident of E-21-A, Om Vihar,
Uttam Nagar, Delhi
(Since abated vide order dated 23/06/2011)
..........Accused No. 23
24 M/s V.M. Investment having its office
at Shop No. 125, 110, Apna Bazar,
Gurgaon (Haryana) represented through
its proprieter Mr. Virmani.
(Since PO vide order dated 23/11/2006)
.........Accused No. 24
Date of Institution : 30.10.2004
Date of Committal to Sessions Court : 19.03.2005
Date of judgment reserved on : 25.07.2012
Date of pronouncement of judgment : 30.07.2012
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SEBI Vs. JVG Finance & Others
Present: Sh. Sanjay Mann, Advocate, counsel for SEBI.
Sh. Vinod Pant, Advocate, counsel for accused A-20
and A-22.
J U D G M E N T(Oral):
1. This criminal complainant was preferred by the Securities & Exchange Board of India (hereinafter referred to as "SEBI" or "the complainant" on October 30, 2004 in the Court of Additional Chief Metropolitan Magistrate (ACMM) alleging violation of Regulations 4(a) to 4 (d) of SEBI Regulations (Prohibition of Fraudulent and Unfair Trade Practices) (hereinafter referred to "Regulations" or the said Regulations) was constituting for the offence punishable under Section 24(1) read with Section 27 of the SEBI Act.
2. Twenty four persons were arrayed as accused in the criminal complaint preferred under Section 200 Cr. P.C., they being JVG Finance Limited (hereinafter , "A1"), accused No. 2 Sh. V.K. Sharma ("A2"), accused No. 3 Col. Tripat Singh Bhan (Retd) ("A3"), accused No. 4 Sh. Biresh Prasad Singh ("A4"), accused No. 5 Dr. Bharati Sharma ("A5"), accused No. 6 M/s Hoffland Finance Limited ("A6"), accused No. 7 Sh. B.B. Sharma ("A7"), accused No. 8 Sh. A. Subba Rao ("A8"), accused No. 9 Sh. M.N. Badam ("A9"), accused No. 10 Lt. Gen. Jagdish Narain (Retd.) ("A10"), accused No. 11 Maj. Gen. Pramod Kapur (Retd.) ("A11"), accused No. 12 Sh. Suraj Pal Sharma ("A12"), accused No. 13 Sh. Brij Kishor Kapur ("A13"), accused No. 14. Navin Chandra Pandey ("A14"), accused No. 15 M/s Marisia Financial Services Limited ("A15"), accused No. 16 Sh. Rakesh Mishra ("A16"), accused No. 17 Shi Hari Kumar ("A"17), accused No. 18. Sh. Rana Das ("A18"), accused No. 19 Sh. S.K. Gupta ("A19"), accused No. 20 M/s Evergrow Financial Services Private Limited ("A20"), accused No. 21 Sh. Ashok Kumar Kohli ("A21"), 22 Sh.
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Pardeep Sharma ("A22"), 23 Sh. Gopal Gupta ("A23"), 24 M/s V.M. Investment("A24").
3. It was alleged that A-1 M/s JVG Finance Limited was incorporated on September 6, 1989 and said company had come out with its public issue of 20.00 lac equity shares of ` 10/- at par in terms of its prospectus dated May 5, 1995. The share of A-1 was listed in Delhi Stock Exchange (DSE) and Magadh Stock Exchange (MGSE). It was alleged that in January 1997 A-1 had come out another public issue of 50 lac shares the premium of ` 80/- each. It was alleged that SEBI had received complaints from investors of A-1 alleging price rigging in the scrip. In the said complaint it was alleged that company was involved in the rigging of scrip price in collusion with MGSE. It was further alleged that delivery of shares received from DSE were returned as bad deliveries by MGSE on the ground that these shares were belonged to promoters quota shares under lock-in, forcing the investors to cover their position under auction. Another complaint dated April 03,1997 was received to the SEBI pointing out irregularities in the public issue of A-1 and manipulation in scrip price of the company. On the basis of the complaints, an enquiry was initiated and it was revealed that the share price of A-1 was ` 48/- on April 03, 1995 and same had risen up to ` 75/- on October 30, 1995, thus, the price had risen up to 55% approximately without any commensurate price in the sensitivity index.
4. Qua A-20 and A-22, it was alleged that SEBI had sought information from A-20, accordingly, A-20 had furnished the requisite information vide letter dated November 3, 1997, intimating SEBI that A-20 had purchased 18,000 shares for 21 persons. During enquiry SEBI official visited the premises No. 709, Pocket-D, Dilshad Garden, Delhi on May 18 , 1998 and found that it was the residence of Ashok Kumar Kohli who was working with Hoffland Finance Limited (A-6). As per the CC No.38/10 Page no. 6 of 12 SEBI Vs. JVG Finance & Others statement of wife of Ashok Kumar Kohli said firm was started by her husband but no work was done by the said firm and further stated that her husband was working in HFL till 5-6 months back. It was alleged that A-20 was only a front of A-6 HFL to rigging the price of the scrip of A-1. It was further alleged that A-21 and A-22 were directors of the A-20, thus, being directors, they were in charge of, and responsible to conduct the business of A-20, thus, responsible for the said violations. During trial A-21 had expired and consequently, proceeding qua him was abated vide order dated May 17, 2012.
5. Since, the rest of the accused have already been declared proclaimed offender, thus, the allegations qua them, levelled in the complaint are not narrated herein.
6. Vide order dated March 19, 2010 a notice for the offence punishable under Section 24 (1) read with 27 of SEBI was served upon A-20, A-21 and A-22 to which they pleaded not guilty and claimed trial.
7. In order to prove the guilt of accused persons, SEBI has examined one witness i.e. Ms. Jyoti Sharma as CW1. Thereafter, A-21 and A-22 were examined under Section 313 Cr.P.C. A-22 denied all the evidence adduced by SEBI and submitted that he was working with A-6 for limited period and had nothing to do with A-20. It was submitted that he was not an active director of company, thus, not involved in any transaction of selling and buying shares. In order to prove his defence, he had examined Sh. Anil Kumar and Sh. G.L. Katiyal as DW1 and DW2 respectively.
8. Learned counsel appearing for SEBI submits that A-20 M/s Evergrow Finance Service Private Limited was a front company of A-6 and A-22 was one of the Directors of A-20. It was submitted that A-20 CC No.38/10 Page no. 7 of 12 SEBI Vs. JVG Finance & Others had purchased 18000 equity shares of M/s JVG Finance Service Company Limited (A-1) in order to create false demand in the market with an intention to inflate the price of equity shares of A-1 so that A-1 could get higher premium in the forthcoming public issue. It was submitted that since A-22 was the Director of A-20, being Director he was vicariously liable for the said violations.
9. Per contra learned counsel appearing for A-20 and A-22 submitted that there is no iota of evidence on record to prove the guilt of accused persons. It was submitted that A-20 was the sub-broker of M/s Puri Finance Service and being the sub-broker, A-20 had purchased 18000 equity shares of A-1 JVG Finance Limited for its clients and had also taken the delivery of said shares. It was submitted that as per SEBI, A-20 had made the payment of said shares. It was submitted that there is no iota of evidence to establish that A-20 was involved in rigging up the price of A-1. It was further submitted that there is no iota of evidence to establish that A-22 was in charge of and responsible to for the conduct of business of A-20.
10. I have heard rival submissions advanced by counsel for both the parties, perused the record carefully and gave my thoughtful consideration to their contentions.
11. The present complaint has been filed for the violation of Regulations 4 (a), 4 (b), 4 (c) and 4(d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) and same is reproduced as under: -
" Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities.
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(2) Dealing in securities shall be deemed to be
fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:-
(a) indulging in an act which creates false or misleading appearance of trading in the securities market;
(b) dealing in a security not intended to effect transfer of beneficial ownership but intended to operate only as a device to inflate, depress or cause fluctuations in the price of such security for wrongful gain or avoidance of loss;
(c) advancing or agreeing to advance any money to any person thereby inducing any other person to offer to buy any security in any issue only with the intention of securing the minimum subscription to such issue;
(d) paying, offering or agreeing to pay or offer, directly or indirectly, to any person any money or money's worth for inducing such persons for dealing in any security with the object of inflating, depressing, maintaining or causing fluctuat in the price of such security;
12. SEBI case is that in order to create a false demand of the equity shares of A-1 JVG Finance Limited, A-20 had purchased the shares of A-1 with an intention to create a false demand in the market so that the share price of A-1 may go up and A-1 could get higher premium CC No.38/10 Page no. 9 of 12 SEBI Vs. JVG Finance & Others in the forthcoming public issue. In order to prove these allegations, SEBI has relied upon the statement of Mr. Sanjiv Puri, which is exhibited as Ex.CW1/30. Perusal of his statement reveals that A-20 was one of the clients of M/s Puri Finance Service since October 1996. In his statement, he categorically stated that all the payments from M/s Evergrow Finance Limited Services (A-20) were received through Accounts Payee Cheques and the deliveries were made against the payment. He further stated that M/s Puri Finance Service Limited had issued contract notes/sale purchase invoices at the time of said transactions. From his statement, it appears that there is nothing unusual in the transactions made by A-20 through M/s Puri Finance Service Limited as M/s Puri Finance Service Limited had issued contract notes/bills/invoices at the time of purchase of 18000 equity shares. Moreover, the delivery of these shares was only made after making payment through Accounts Payee Cheques. Thus, the statement is not helpful to the SEBI to establish that A-20 was involved in any fraudulent unfair practices.
13. In order to prove the guilt of accused persons under Regulations 4 of the said Regulations. SEBI was bound to prove that either the act of A-20 and A-22 was involved in creating false or misleading appearance of trading in the securities market or the said transactions were not intended to transfer of beneficial of ownership but intended to operate only as a device to inflate, depress the price of securities. As already discussed, since A-20 had not only made the payment of shares but had also taken the delivery of the said shares against valid contract notes/bills/ vouchers, thus, there is no evidence to establish that either the said transactions were to create false demand or misleading the securities market or the said transactions were with intention to inflate of the price of securities. Thus, SEBI has failed to produce any evidence on record to establish the guilt of accused for the violations of Regulations 4 (a) to 4 (d) of said Regulations.
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14. Since, SEBI has failed to prove the guilt of A-20, question of vicarious liability in terms of Section 27 of the SEBI does not arise. Moreover, during trial SEBI has failed to produce any document on record to establish that A-22 was in charge of and was responsible to for the conduct of business of A-20. SEBI has relied upon the statement of wife of A-22 and same is exhibited as Ex.CW1/26.
15. I have heard perused the said statement. Smt. Neelam Kohli wife of A-22 deposed that her husband was working with M/s Hoffland Finance Limited but he had resigned from the said company. She further deposed that A-20 was started by her husband. She further deposed that her husband was not present and he was expected by Sunday as at that time A-22 was out of station. But thereafter, SEBI has not examined A-22 without any reasonable explanation. Thus, the testimony of Smt. Neelam Kohli is not helpful to SEBI to establish beyond the shadow of reasonable doubts that A-22 was in charge of and responsible to the company accused for the conduct of its business.
16. The allegation qua A-20 and A-22 are two folded; one pertains to the period prior to 1996 and second pertains to the year 1996 onwards. It is admitted case of SEBI that A-20 was incorporated in the year 1996, thus, A-20 and A-22 could not be involved in the price rigging of A-1 for the period up to 1996 i.e. prior to its incorporation. So far the allegation of price rigging since 1996 is concerned, same has already been discussed. During trial SEBI has failed to produce sufficient evidence on record to bring home the guilt of accused beyond the shadow of all reasonable doubts.
17. Pondering over the on going discussion, I am of the considered opinion that SEBI has failed to bring home the guilt of accused A-20 and A-22 beyond the shadow of all reasonable doubts.
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Thus, I hereby, acquit A-20 and A-22 for the offence punishable under Section 24(1) read with Section 27 of the SEBI Act.
18. Since, remaining accused are proclaimed offenders. File be consigned to record room with direction the same be revived as and when they are arrested.
Announced in the open Court On this 30 th day of July 2012 (Pawan Kumar Jain) Additional Sessions Judge-01, Central, THC/Delhi CC No.38/10 Page no. 12 of 12