Supreme Court - Daily Orders
Pan Asia Advisors Ltd (Now Known As ... vs Securities And Exchange Board Of India on 21 September, 2021
Bench: A.M. Khanwilkar, Dinesh Maheshwari, C.T. Ravikumar
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.380 OF 2020
SECURITIES AND EXCHANGE
BOARD OF INDIA ...APPELLANT(S)
VERSUS
ADI COOPER ...RESPONDENT(S)
O R D E R
Heard learned counsel for the parties. This appeal takes exception to the judgment and order dated 05.11.2019 passed by the Securities Appellate Tribunal, Mumbai in Appeal No. 124/2019, whereby the decision of the Securities and Exchange Board of India (SEBI) dated 28.02.2019 came to be set aside.
The appeal was filed by the respondent questioning the direction issued by the SEBI restraining the respondent from accessing the securities market and further prohibiting him from buying, selling or otherwise dealing in securities, directly or indirectly for a period of two years from the date of the order.
The SEBI in its order, while dealing with issue Signature Not Verified Digitally signed by No. 2, noted about the role played by the respondent NEETU KHAJURIA Date: 2021.09.27 17:50:18 IST as a whole time Director of Commex Technology Limited Reason:
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in passing a sweeping Board Resolution dated 30.01.2008 giving authorization to EURAM Bank to use the GDR proceeds as security in connection with loan as well as to enter into any Escrow Agreement or similar arrangement, if and when so required. Such resolution enabled fraudulent arrangement, whereby the Company could facilitate financing of GDR subscriptions by other entity, namely, Vintage. The SEBI also found as a fact that neither such an arrangement nor the resolution passed by the Board was disclosed to the shareholders of the Company or the investors of the securities market through BSE, which was obligatory. In substance, SEBI opined that the fact that respondent ceased to be a whole-time Director of the Company with effect from 10.10.2008, was of no avail. It thus concluded that taking advantage of such inappropriate resolution, transactions were entered with Vintage, a third entity, to exploit the GDR subscription. The respondent was equally and vicariously responsible along with other Directors for such a situation.
We may usefully advert to the relevant extract of the decision of SEBI, which reads thus: -
“36. Considering that Mr. Adi Cooper was the Whole Time Director of the Company and has admittedly participated in the Board meeting dated January 30, 2008, prior to passing the said resolution it was his duty to ask the 2 3 management a pertinent question as to why GDR proceeds should be kept as security for any loan when the same was being raised to meet the stated objectives of the Company and if it is to be kept as security, how would the GDR proceeds be used to meet the stated objectives of the issue. His subsequent resignation does not absolve him completely from his acts discharged during his tenure as a director of the Company, which cast a responsibility to act diligently, in the interest of Company and the shareholders. Needless to point out here that the phrase ‘acting diligently’ embodies in itself the duty not be careless and casual in approach while taking decisions. The Hon’ble Supreme court in Official Liquidator v. P.A. Tendolkar (1973) 1 SCC 602 has observed that “A Director may be shown to be so placed and to have been sol closely and so long associated personally with the management of the Company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of the business of a Company even though no specific act of dishonesty is proved against him personally. He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the Company even superficially.”
37. In view of the above, I find that Mr. Adi Cooper (Noticee no. 2) has to be held liable for the violation charged under the SCN.” This view taken by the SEBI, however, stood reversed on account of the impugned order dated 05.11.2019 in Appeal No. 124/2019 passed by the Securities Appellate Tribunal, Mumbai.
The Securities Appellate Tribunal was impressed by the fact that although the respondent was party to the resolution, being a whole-time director and member of the Board of Directors of the Company, had only 3 4 resolved that Company may open an account with the EURAM Bank for the purpose of deposit of GDR proceeds. The resolution does not stipulate that the proceeds would be used as security in connection with the loan taken by another entity. The latter part of this submission is not in consonance with the purport of the resolution passed by the Board on January 30, 2008. Whereas, the SEBI had rightly noted that such resolution facilitated the transaction with Vintage and was a fraudulent transaction considering the fact that neither the arrangement nor the resolution was ever disclosed to the shareholders of the Company or the investors of the securities market through BSE. This aspect has not been reckoned by the Appellate Tribunal. This is a manifest error committed by the Appellate Tribunal.
In light of the above, we have no hesitation in taking the view that the Appellate Tribunal was unduly impressed by only one fact; but ought to have construed the resolution in the manner done by the SEBI and in particular, the inaction of the Board of not disclosing the arrangement to the shareholders or the investors of the securities market through BSE.
As a result, we set aside the impugned judgment and order and instead uphold the view taken by the SEBI vide its decision dated 28.02.2019. 4 5
However, as regards the debarment period specified in the said order, we accept the submission canvassed by the counsel for the respondent that the respondent having already undergone substantial part of the prohibition imposed by the SEBI vide order dated 28.02.2019, that period be treated as sufficient compliance of the final order passed by the SEBI.
Counsel for the appellant has left it to the Court to pass appropriate order on this submission.
Accordingly, we accept the submission made by the respondent and order that the prohibition imposed by the SEBI in terms of the order dated 28.02.2019 be treated as substantially complied by the respondent and nothing more needs to be done in that regard hereafter.
We are informed by the counsel for the respondent that there are other proceedings pending against the respondent, in which the respondent may be permitted to raise all permissible issues and contentions and those proceedings be decided in accordance with law. We have no difficulty in acceding to this submission. We order accordingly.
The civil appeal is disposed of in the above terms. No order as to costs.
5 6 All applications are also disposed of.
....................,J.
(A.M. KHANWILKAR) ....................,J.
(DINESH MAHESHWARI) ....................,J.
(C.T. RAVIKUMAR) NEW DELHI SEPTEMBER 21, 2021 6 7 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.180 OF 2021 SECURITIES AND EXCHANGE BOARD OF INDIA ...APPELLANT(S) VERSUS ADESH JAIN ...RESPONDENT(S) O R D E R Heard learned counsel for the parties. This appeal takes exception to the judgment and order dated 19.11.2020 passed by the Securities Appellate Tribunal in Appeal No. 217/2020. The Appellate Tribunal was impressed by the view taken by it in another case decided around the same time viz., in the case of ‘Adi Cooper v. Securities and Exchange Board of India’ (Appeal No.124 of 2019 decided on November 5, 2019).
Placing reliance on the said decision, the Securities Appellate Tribunal allowed the appeal preferred by the respondent.
Be it noted, the decision of the Securities Appellate Tribunal in the case of ‘Adi Cooper v. Securities and Exchange Board of India’ has been 7 8 reversed by this Court in Civil Appeal No. 380 of 2020. As a result, it is not open to place reliance on the said decision.
Further, we have noticed that the SEBI in its order dated 06.03.2020, which has been set aside by the Securities Appellate Tribunal, had adverted to the specific role of the respondent as noticee No. 6. It is noticed that besides being party to the loosely worded resolution, which paved way to the company for resorting to fraudulent transaction, he had complete knowledge about the same.
These aspects have not been squarely dealt with by the Securities Appellate Tribunal in the impugned judgment.
Taking any view of the matter, therefore, this appeal ought to succeed. The impugned judgment and order passed by the Appellate Tribunal is set aside. Instead, the parties are relegated before the Securities Appellate Tribunal for reconsideration of the appeal afresh.
All contentions available to the parties are left open.
Civil Appeal is disposed of in the above terms. No order as to costs.
All applications are also disposed of. 8 9
....................,J.
(A.M. KHANWILKAR) ....................,J.
(DINESH MAHESHWARI) ....................,J.
(C.T. RAVIKUMAR)
NEW DELHI
SEPTEMBER 21, 2021
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ITEM NO.9+16 Court 3 (Video Conferencing) SECTION XVII
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 9516-9517/2017 PAN ASIA ADVISORS LTD (NOW KNOWN AS GLOBAL FINANCE AND CAPITAL LTD.) & ANR. Appellant(s) VERSUS SECURITIES AND EXCHANGE BOARD OF INDIA Respondent(s) ( IA No. 1/2017 - CONDONATION OF DELAY IN FILING APPEAL and IA No. 69664/2017 - EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT and IA No. 69672/2017 - STAY APPLICATION) WITH C.A. No. 380/2020 (XVII) (FOR FOR STAY APPLICATION ON IA 10634/2020) C.A. No. 180/2021 (XVII) (FOR EX-PARTE STAY ON IA 10772/2021) C.A. No. 4977-4978/2021 (XVII) ( IA No.105448/2021-EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT and IA No.105444/2021-EX-PARTE STAY) Civil Appeal No(s). 4787-4794/2021 (IA No.99701/2021-EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT and IA No.99699/2021-EX-PARTE STAY and IA No.116669/2021- PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES) Date : 21-09-2021 These matters were called on for hearing today. CORAM : HON'BLE MR. JUSTICE A.M. KHANWILKAR HON'BLE MR. JUSTICE DINESH MAHESHWARI HON'BLE MR. JUSTICE C.T. RAVIKUMAR For Parties Mr. Mahfooz Ahsan Nazki, AOR Mr. Ashish Prasad, Adv.
Mr. Rohit Sharma, Adv.
Mr. Pruthvi Dhinoja, Adv.
Mr. Sandeep Wadhawan, Adv.
Mr. Sumeer Sodhi, Adv.
Mr. T. Mahipal, AOR Mr. Pratap Venugopal, Adv.
Ms. Surekha Raman, Adv.
10 11 Mr. Dileep Poolakkot, Adv.
Mr. Akhil Abraham Roy, Adv.
Mr. Vijay Valsan, Adv.
For M/s. K.J.JOHN & CO.
Mr. Diyansh Jain, Adv.
Mr. Ritaj Kacker, Adv.
Mr. Karan Dalal, Adv.
Mr. Deepkaran Dalal, AOR Mr. Vikram Nankani, Sr. Adv.
Mr. Kishore Kunal, AOR Mr. Parth, Adv.
UPON hearing the counsel the Court made the following O R D E R Civil Appeal No(s). 9516-9517/2017 Learned counsel for the appellants submits that the appellants have already undergone debarment period of 10 years.
Our attention is invited to the observation made by the full-time member of Securities and Exchange Board of India (SEBI) in its order dated June 20, 2013 mentioning the fact that the appellants had already suffered the debarment period of approximately 1 year and 8 months.
Assuming that the debarment was kept in abeyance during the pendency of the appeal filed by the appellants between July, 2013 to September, 2013 and by virtue of allowing the appeal, the same was not in force and stood revived only in terms of an interim order passed by this Court on 13th December, 2013, it 11 12 must follow that the appellants must have already suffered almost 10 years debarment period by now.
Learned counsel for the SEBI, however, prays for time to take instructions and place the correct position on affidavit to counter this claim of the appellants. That be filed within two weeks from today.
List the matter on 26th October, 2021.
C.A. Nos. 380/2020 and 180/2021 These appeals are disposed of in terms of the signed order.
Pending applications shall stand disposed of. C.A. Nos.4977-4978/2021 List these matters along with Civil Appeal Nos. 9516-9517 of 2017 on 26th October, 2021.
C.A. Nos.4787-4794/2021 De-linked.
List these matters on 27th September, 2021 before appropriate Bench wherein one of us, (A.M. Khanwilkar, J.), is not a Member.
(NEETU KHAJURIA) (VIDYA NEGI)
COURT MASTER COURT MASTER
(Signed orders in CA Nos.380/2020 & 180/2021 are placed on the file.) 12 13 13