Securities Appellate Tribunal
Sakshi Saxena vs Sebi on 8 December, 2022
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Hearing : 05.12.2022
Date of Decision : 08.12.2022
Misc. Application No. 647 of 2022
And
Appeal No. 190 of 2022
Sakshi Saxena
B-18, Ashoka Niketan,
Second Floor, Delhi - 110092. ..... Appellant
Versus
Securities & Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Ms. Sakshi Saxena, Appellant in person.
Mr. Akash Rebello, Advocate with Mr. Ravishekhar Pandey, Mr.
Nishit Dhruva, Ms. Shefali Shankar, Advocates i/b. MDP & Partners
for the Respondent.
CORAM : Justice Tarun Agarwala, Presiding Officer
Ms. Meera Swarup, Technical Member
Per : Justice Tarun Agarwala, Presiding Officer
2
1.The present appeal has been filed against the order dated February 25, 2022 passed by the Adjudicating Officer (hereinafter referred to as 'AO') of Securities and Exchange Board of India (hereinafter referred to as 'SEBI') imposing a penalty of Rs. 6 lac for violating Regulations 3 and 4 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') and Regulation 57(1) of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (hereinafter referred to as 'ICDR Regulations').
2. The facts leading to the filing of the present appeal is, that investigation was undertaken with regard to the Initial Public Offer (hereinafter referred to as 'IPO') by HPC Biosciences Ltd. Based on the investigation, it was found that there was a manipulation in the IPO process and irregularities in the bidding and allotment of the IPO and subsequent diversion of IPO proceeds. An ad-interim order dated January 29, 2015 was passed restraining 254 entities from accessing the securities market and from buying, selling or dealing in securities, either directly or indirectly, in any manner. Subsequently, confirmatory orders were passed on various dates as it was found, 3 prima-facie, that the preferential allottees alongwith the funding group entities and trading group entities had used the stock exchange system to artificially increase the volume and price of the scrip of the company for ill-gotten gains.
3. The investigation further revealed that number of entities were directly or indirectly connected with the company which had funded the IPO applicants to enable them to make applications under IPO of the company. It was observed that money for making application for subscribing to the IPO were received from funding group entities, even though, it was mentioned in the prospectus that there was no buy-back, standby or any similar arrangement for the purchasing of the equity shares of the company through other sources. It was further observed that the company gave misleading information regarding the actual deployment of the IPO proceeds which was not in line with either the object of the issue stated in the prospectus or the utilization of the IPO proceeds as declared by the company to the stock exchange.
4. In the light of the aforesaid investigation, adjudication proceedings were initiated against the appellant and other noticees. The AO found that the company and the promoters were complicit in implementing a scheme to get the IPO subscribed successfully by 4 deceptively funding IPO applicants and then getting its securities listed and subsequently diverting the IPO proceeds by transferring funds to the entities which helped it to fund the IPO applications. The AO found that noticee Nos. 1 to 11 had colluded by fabricating the fraudulent scheme in the IPO of the company.
5. In so far as the appellant is concerned, she was noticee nos. 12 in the proceedings and contended that she joined the company as a trainee for internship purposes for Company Secretary. She was a student and a Company Secretary trainee and was pursuing graduation in law and Company Secretary course from ICSI. During her internship, she was offered the post of independent director which she accepted but subsequently resigned on July 13, 2015. The appellant contended that at no stage she had signed any documents relating to the IPO nor was ever involved in the day-to-day affairs of the management of the company. She has specifically stated that she never attended any board meeting nor was involved in the issuance of the IPO proceeds.
6. The AO gave a finding that since the appellant was chairman of the audit committee as well as a member of the Shareholder / Investors Grievance Committee, she had attended most of the board meetings, annual general meetings and occupied important positions 5 during her tenure and, therefore, she had deemed knowledge of the contents of the prospectus and the manner in which the IPO proceeds were being utilized. The AO further came to the conclusion that being associated with the company as an independent director for three and half years, the appellant cannot plead ignorance regarding the day to day affairs of the company. The AO further found that being chairman of the audit committee indicates that the appellant was aware that the company had not disclosed details regarding the loans in the prospectus under Clause 49 of the ICDR Regulations. The AO came to the conclusion that the appellant in her capacity as a trainee, company secretary would be assisting the board of directors in discharging their duties and, therefore, the appellant was cognizance / aware of the fraudulent scheme hatched by the company.
7. Before the Tribunal, evidence has been placed to show that she never attended any meeting of the board of directors in her capacity as an independent director nor did she ever attend meeting of the audit committee. The resolutions passed by the company in which she has been shown absent was obtained by her from the company and which has been annexed to the memo of appeal. These documents have not been denied, therefore, the finding of the AO 6 that she attended most of the meetings was based on the incorrect appreciation of the annual report and has not considered the minutes of the board meetings.
8. Similarly, we find that the appointment of the appellant as chairman of the audit committee was done by the board on the date when she was not present. The appellant was not made aware of her appointment. Further, there is no document to show that she attended any meeting of the audit committee.
9. In the light of the aforesaid, we are of the opinion that the finding of the AO against the appellant is passed on the surmises and conjunctures. The AO has not appreciated the facts that the appellant joined as a trainee which fact has not been disputed. In the absence of any finding that the appellant was part of the day-to-day management of the company and in the absence of any evidence to show that she was actively involved in the issuance of the IPO and diversion of the IPO proceeds, we are of the opinion that the appellant has wrongly been penalized for a violation which she did not commit.
10. Admittedly, new documents have been filed before this Tribunal which disapproved the findings of the AO. In normal 7 circumstances, we would have remanded the matter to the AO for fresh consideration but since the document so filed before us have not been disputed by the respondent and the same has been obtained by the appellant from the company, we are of the opinion that no useful purpose would be served in remanding the matter.
11. In view of the aforesaid, the impugned order in so far as it relates to the appellant cannot be sustained and is quashed. The appeal is allowed in so far as it relates to the appellant with no order as to costs.
12. 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 Ms. Meera Swarup RAJALAK Digitally signed SHMI by RAJALAKSHMI Technical Member 08.12.2022 HARISH HARISH NAIR Date: 2022.12.12 NAIR 16:41:51 +05'30' PTM