Bombay High Court
Jyoti Mehta And Ors vs Kishore Janani And Ors on 3 October, 2018
OSK
IN THE SPECIAL COURT AT BOMBAY
( Constituted under the Special Court [Trial of Offences Relating to
Transactions in Securities] Act, 1992 )
Date : 3rd October, 2018.
SPECIAL CASE NO. 01 OF 2017
Resumed on S.A.
Cross-Examination of Defendant No.1 Kishor Janani
by Advocate Ms.Mamta Sadh on behalf of the Plaintiff
below Affidavit of Evidence Exhibit-41
1.At present I am not practicing as a Chartered Accountant. I practiced as a Chartered Accountant for almost for two and half years. It was an independent practice. During my Membership of the Stock Exchange, I was not practicing in Chartered Accountancy. In the year 1988-89, I was a Sub-Broker to M/s.Kanti V. Dand. I was filing my Income Tax Returns when I was practicing as Chartered Accountant. Even after I became the Member of Stock Exchange, I continued to file Income Tax Return(s). Till the time, I became the Member of the Bombay Stock Exchange, I was filing Income Tax Return(s) in my personal name and thereafter, I started filling the Income Tax Return(s) in the name of Defendant No.1. After Defendant No.1 was declared defaulter in Bombay Stock Exchange, the Income Tax Return(s) were not filed. Therefore, from 1 DW-01 Kishor Janani.doc ::: Uploaded on - 04/10/2018 ::: Downloaded on - 05/10/2018 01:57:18 ::: the year 1990-91 to 1998 Defendant No.1 must have filed the Income Tax Return(s). I state that Defendant No.1 was filing the Income Tax Returns in the year 1992-93 to 1995-96. Mr.Harshad Mehta was not my only client when I acquired my membership in the year 1990. Besides Mr.Harshad Mehta, I had number of other clients.
2. The term "Vyaj Badla Transaction" is a Indian Terminology. There used to be a mechanism of that nature in the Bombay Stock Exchange, where Buyer of the shares, by paying margin money, not having the full amount of investment in his pocket, will rely on Vyaj Badla Mechanism of the Bombay Stock Exchange, where those who had excess funds and wanted to invest for the time being on behalf of the Buyer of the share, will get benefit of the interest. The term "Badla" means, "in place of the funds", which they had invested. In such transaction Buyer and Financier used to be different persons. It would be correct to say that Mr.Harshad Mehta was a Financier in such Vyaj Badla Transactions.
3. In my office there were 35 staff members plus 7 sub-brokers working in the Business of Brokerage only. We were having Clientele Business, Arbitrage Business and Jobbing Business. All the 35 persons from my Office were engaged in any of these three activities. There was 2 DW-01 Kishor Janani.doc ::: Uploaded on - 04/10/2018 ::: Downloaded on - 05/10/2018 01:57:18 ::: no separate Accounting Department in my Office. Multiple persons in the office were doing the multiple tasks, including accounting, under my supervision.
4. In the year 1992-93 and 1994-95 mainly I was maintaining and looking after the accounts of Defendant No.1. Mr.Sudhir Chothani, Mr.Ramesh Darji, Mr.Dinesh Shah and one more person by name Dinesh were also looking after the accounts under my supervision during that period. None of them is working with Defendant No.1 at present.
5. The Clientele Business means, I used to receive the orders for Buying and Selling of the shares from the clients. We used to enter into transaction on their behalf and deliver, purchase, or sell the shares for them. The Clientele business would also, either be speculative trading or spot delivery. The speculative trading means, client will either buy or sell the shares (take the position) in the respective shares which have been ordered by him, without taking delivery, by paying margin. Such transaction will never get converted into delivery position. It only transfers money. The payment of margin money is fully commanded by the Rules and Regulations of the Bombay Stock Exchange. For every settlement, the Bombay Stock Exchange will declare the margin money. I cannot even state, by estimation, as to how much percent, the margin money 3 DW-01 Kishor Janani.doc ::: Uploaded on - 04/10/2018 ::: Downloaded on - 05/10/2018 01:57:18 ::: used to be.
6. I used to collect margin money from the client, as prescribed by the Bombay Stock Exchange, when I received the order or after execution of the order. It being a speculative transaction, there was no question of client paying the remaining amount until the transaction was squared off, unless client decides to take delivery. In that case, he will have to pay the full amount. It is true that even in the speculative transaction the contract note was required to be issued and used to be issued. Contract Notes were required to be issued for the transactions of all the nature. Sometimes, merely looking at the contract notes also, I can say whether it was a speculative transaction or the transaction of spot delivery. It was totally the discretion of the client, as to how long he wants to continue the speculative transaction. Only on his instruction, that he no more wants to continue with the speculative transaction, squaring off used to take place.
7. Defendant No.1 would be raising the Bills for such speculative transactions. In speculative transaction, I would raise the Bill for the difference in the price and also on the margin money. I would collect the margin money from the client, as per my discretion or I would not collect such money, depending upon the relationship between me and the client 4 DW-01 Kishor Janani.doc ::: Uploaded on - 04/10/2018 ::: Downloaded on - 05/10/2018 01:57:18 ::: and my need of money. I used to collect margin money from Mr.Harshad Mehta; sometimes late, sometimes in advance and sometimes not at all. When I say that I was collecting margin money in advance from the client, I mean to say that, sometimes the credit money of the client was lying with me and on his instructions, if he was entering into the speculative transaction, then from that credit money, the margin money was recovered. Once the order was given by the client, as the money is lying with me, I would take in advance the margin money. It would be correct to say that money would became payable only after the trade happened.
8. The Jobbing Business means, giving two way quotes of ask and bid to the people who are asking quotation from my jobbers for respective trades. Jobbing is a mechanism by which the liquidity in the market is facilitated. It was necessary that during those years Brokers would be required to go to the trading hall for undertaking the transactions. I used to sit in my office. I had my sub-brokers in the trading hall to execute the transactions. I would also go to the trading hall, whenever it was required. During the relevant period, I had 7 sub-brokers working with me. I used to visit the trading hall regularly. If the transaction was done on the floor of the exchange, the Broker was required to file the said transaction with the Stock Exchange on the same day. Defendant No.1 was also following the said practice.
5DW-01 Kishor Janani.doc ::: Uploaded on - 04/10/2018 ::: Downloaded on - 05/10/2018 01:57:18 :::
9. My books of account were audited in the Financial Year 1991- 92 to 1993-94. Today I do not have the copy of those audited books of accounts. I do not remember whether those audited books of accounts are in my office or not. I did not thought it fit to find out the audited books of accounts, when I filed this Affidavit of Evidence and the copies of those account books of extracts in this Court. I do not remember whether any Income Tax Proceeding(s) or Wealth Proceeding(s) are pending against Defendant No.1 of the financial year 1991-92. However, I remember that my all the assessments are done. I have filed the audited books of account with Income Tax Authorities, whenever required. I do not remember whether I had filed these audited books of account before any of the three Chartered Accountancy Firms, appointed by this Court. To the best of my memory, CBI has not recorded my statement in respect of the suit transaction. I had entered into correspondence with Income Tax Department in respect of the suit transaction. I have not produced any of the said correspondence in this case.
10. Now I am shown the letter dated 20th September 2001 marked Exhibit- "O" and which I had produced along with my Affidavit. This letter is written by me to M/s.Kapadia and Damania and Co., one of the Chartered Accountancy Firm appointed by this Court. It is signed by 6 DW-01 Kishor Janani.doc ::: Uploaded on - 04/10/2018 ::: Downloaded on - 05/10/2018 01:57:18 ::: me. It is marked as Exhibit D-61.
11. When the reports appeared about the involvement of Mr.Harshad Mehta in the Security related scam in April 1992, my faith in him was not shaken. After reading those reports in 3rd Week of April 1992 till 7th May, 1992, my confidence in Mr.Harshad Mehta was not shaken. But intermittently upto the last part of this period, my confidence was shaken. Even after reading paragraph No.20 of my Affidavit, I state that, by 7th May, 1992, my confidence in Mr.Harshad Mehta was not shaken, however due to the conditions in the Market and money which was recoverable from Mr.Harshad Mehta, I became panic.
12. I was not aware about the set-up and functioning of M/s.Harshad Mehta Group Company. (Witness volunteers that he was directly dealing with Mr.Harshad Mehta.) I was aware about his only one office at Nariman Point from where Mr.Harshad Mehta was functioning. That Office was situated in Makers Chamber-V. I do not remember the number of the floor on which his office was situated. I am not aware that Mr.Harshad Mehta was having at-least 10 offices in Makers Chamber-V.
13. In paragraph No.4 of my Affidavit, I have used the word 'dealing room'. This 'dealing room' refers to the dealing room in my office. 7 DW-01 Kishor Janani.doc ::: Uploaded on - 04/10/2018 ::: Downloaded on - 05/10/2018 01:57:18 ::: I used to receive the orders personally from Mr.Harshad Mehta and also from his staff on telephone. I am not aware as to what was the volume of the business carried by Mr.Harshad Mehta in Money Market Transaction during the year 1991-92. (Witness volunteers that he had deals with Mr.Harshad Mehta only in equity market.) I had never dealt with Mr.Ashwin Mehta in respect of the any of the suit transaction. He has never dealt with me in equity business.
14. When I have used the word "large quantum" in paragraph No.4 of my Affidavit, I meant it that the dealing was in the quantity of 1,000's. Relatively, the small quantity means the quantity of 100's or 10's. Today I cannot specifically say in which transaction Mr.Harshad Mehta has personally placed the order, but I can say that in all the transactions in which the quantum was large, he has placed the orders personally. In respect of those transactions also, the contract notes were issued in regular course of business.
15. In my Office, the communication with the client used to be made either by telephone or by issuing Contract Notes or by issuing Bills. I do not know whether the Rules prescribed that acknowledgement was to be obtained about the receipt of the Contract Notes. However, such acknowledgements were obtained in my office. Sometimes we also used 8 DW-01 Kishor Janani.doc ::: Uploaded on - 04/10/2018 ::: Downloaded on - 05/10/2018 01:57:18 ::: to send the Contract Notes to the clients. In case the acknowledgement of the receipt of Contract Note is not obtained from the client and the dispute arose then, according to me, such position did not arise as we used to retain the Contract Notes till the Bill was paid. Till the Bill was not settled, the Contract Notes used to be maintained in our office. (Witness volunteers that in case of M/s.Harshad Mehta Group all the Contract Notes were either collected by them or they were dispatched by us in the transactions of large quantity.)
16. The Contract Notes were on contract rack in my office. Those Contract Notes were collected either by the clients or by the sub-brokers, sometimes with acknowledgement, sometimes without acknowledgement. The criteria for delivery of the Contract Notes by my office staff to the offices of the clients was if the offices of those clients were situated in the area of Mumbai and depending upon the quantum of the shares.
17. Sometimes the acknowledgement of the Bills were obtained, sometimes not. None of the Bills produced by me in this suit bear the acknowledgement of Mr.Harshad Mehta or his office.
18. Now I am shown the letter Exhibit-37 dated 23 rd September, 1998. It seems I have not replied this letter. It will not be correct to say 9 DW-01 Kishor Janani.doc ::: Uploaded on - 04/10/2018 ::: Downloaded on - 05/10/2018 01:57:18 ::: that as I have not replied this letter, it means I have not given the details in particulars about the mode of payment, cheque no., date and bank name etc as required in the letter. (Witness volunteers that he had personally gone to the office of Mr.Harshad Mehta and furnished him all the details called for in the letter and explained to him. . On the request of learned counsel for the learned counsel for the Plaintiffs, the cross examination is deferred to 10th October, 2018, at 11.00 am.
[DR. SHALINI PHANSALKAR-JOSHI, J.] 10 DW-01 Kishor Janani.doc ::: Uploaded on - 04/10/2018 ::: Downloaded on - 05/10/2018 01:57:18 :::