Securities Appellate Tribunal
Pushpanjali Investrade Private ... vs Sebi on 19 January, 2022
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision : 19.01.2022
Misc. Application No. 38 of 2022
And
Appeal No. 9 of 2022
Pushpanjali Investrade Private Limited
412, 4th Floor, Punit Tower,
B Wing, Sector 11, Belapur CBD,
Navi Mumbai, District Thane,
Maharashtra. ....Appellant
Versus
1.Securities & Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051.
2. ISMT Limited Panama House (Earlier Known As Lunkad Towers) Vimannagar, Pune - 411014.
3. Kirloskar Ferrous Industries Limited 13, Laxmanrao Kirloskar Road, Khadaki, Pune- 411 003. ... Respondents Mr. Zubin Behramkamdin, Advocate with Mr. Amit Mishra, Mr. Vijay Purohit, Mr. Kumarjit Ray, Ms. Mitakshara Goyal, Ms. Nikita Bangera, Mr. Pratik Jhaveri, Mr. Siddhanth Bajaj, Mr. Harshil Wason, Advocates i/b P&A Law Offices for the Appellant.
2Mr. Chander Uday Singh, Senior Advocate with Mr. Mihir Mody, Mr. Arnav Misra, Mr. Mayur Jaisingh, Advocates i/b. K. Ashar & Co. for the Respondent Nos. 1.
Mr. Janak Dwarkadas, Senior Advocate with Mr. Nitesh Jain, Mr. Hridhyay Khurana, Mr. Adrish Guha, Ms. Vidhi Barot, Advocates i/b Trilegal for the Respondent Nos. 2.
Mr. Zal Andhyarujina, Senior Advocate with Ms. Ishani Khanwilkar, Mr. Satish Kishanchandani, Mr. Sohil Shah, Mr. Rushad Irani, Mr. Soham Banerjee, Advocates i/b Pioneer Legal for the Respondent Nos. 3.
CORAM : Justice Tarun Agarwala, Presiding Officer Justice M. T. Joshi, Judicial Member Per : Justice Tarun Agarwala, Presiding Officer (Oral)
1. The present appeal has been filed by the appellant whereby Securities and Exchange Board of India (hereinafter referred to as 'SEBI') has disposed of the complaint of the appellant which was filed on the SEBI Complaints Redress System (hereinafter referred to as 'SCORES') platform by an order dated January 4, 2022.
2. The facts leading to the filing of the present appeal is, that the appellant is a shareholder in respondent nos. 2 company, ISMT Ltd. The appellant filed a complaint with SEBI on the SCORES platform 3 on December 19, 2021 alleging that the respondent nos. 2 is a public listed company and is a stressed enterprise which is highly indebted to several banks and financial institutions and has been classified as a non-performing asset for several banks and financial institutions. It was contended that respondent nos. 2 and 3 which is also a public listed company have entered into a Share Subscription Agreement (hereinafter referred to as 'SSA') on November 25, 2021 for issue of 15,40,00,000 equity shares for a total consideration of Rs. 476 crores at a rate of Rs. 30.95 per share by preferential allotment. By these proposed transactions, respondent nos. 3's shareholding in respondent nos. 2 company would come to 51.25%.
3. It was further alleged in the complaint that under this SSA respondent nos. 3 would extend an unsecured loan of Rs. 194 crores subject to fulfilment of all the conditions precedent contained under the SSA. The complaint alleges that acquisition and the unsecured loan given by respondent nos. 3 are intrinsically linked and had been structured as one composite transaction and, therefore, it is a part of the same package, namely that there is no loan without the acquisition. It was, thus, contended that this kind of transaction is violative of Section 67 of the Companies Act, 1956.
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4. The aforesaid complaint was disposed of by SEBI on January 4, 2022 with the following observation :-
"Your complaint was forwarded to relevant entities seeking their response. The entities have provided the response to the same. Upon perusal, it is noted that the response is satisfactory."
5. The appellant being aggrieved by the disposal of the complaint has filed the present appeal contending that order is cryptic and had been passed in a mechanical manner without recording any reason for disposing of the complaint of the appellant and without considering the glaring illegality in the proposed transaction which have been pointed out in the complaint.
6. We have heard Mr. Zubin Behramkamdin, the learned counsel with Mr. Amit Mishra, Mr. Vijay Purohit, Mr. Kumarjit Ray, Ms. Mitakshara Goyal, Ms. Nikita Bangera, Mr. Pratik Jhaveri, Mr. Siddhanth Bajaj, Mr. Harshil Wason, the learned counsel for the appellant and Mr. Chander Uday Singh, the learned senior counsel with Mr. Mihir Mody, Mr. Arnav Misra, Mr. Mayur Jaisingh, the learned counsel for the respondent Nos. 1 and Mr. Janak Dwarkadas, the learned senior counsel with Mr. Nitesh Jain, Mr. Hridhyay Khurana, Mr. Adrish Guha, Ms. Vidhi Barot, the learned counsel for the respondent Nos. 2 and Mr. Zal Andhyarujina, the learned senior 5 counsel with Ms. Ishani Khanwilkar, Mr. Satish Kishanchandani, Mr. Sohil Shah, Mr. Rushad Irani, Mr. Soham Banerjee, the learned counsel for the respondent Nos. 3 through video conference.
7. At the outset, the common submission of the respondents are that the present appeal is a misuse of process of the Court and the appeal should be thrown out at the threshold. The learned senior counsel for SEBI pointed out that the appeal is not maintainable against the order disposing of the complaint of the SCORES platform and further SEBI is not required to give any reason while disposing of the complaint. It was contended that if the appellant is aggrieved by the disposal of the complaint, it could take the matter to the next level, namely, the supervisory level where the complaint would be dealt with by giving a reasoned order. It was also contended that SEBI is receiving a large number of complaints from the SCORES platform and it was not humanly possible for SEBI to deal with each and every complaint and dispose of the same by giving a reasoned order.
8. The SCORES platform was created by SEBI for the purpose of allowing the investors to lodge their complaints pertaining to the securities market against the listed companies and SEBI registered intermediaries. All complaints received electronically by SEBI 6 against the listed companies was required to deal with in accordance with the circulars issued by the respondent.
9. Time and again, this Tribunal has held repeatedly that a complaint which is disposed of by SEBI on the SCORES platform is appealable before the Securities Appellate Tribunal (hereinafter referred to as 'SAT') under Section 15T of the Securities and Exchange Board of India Act, 1992. In a number of appeals, we have also held that while disposing of the complaint, SEBI is not required to give an opportunity of hearing to the complainant but is required to give reasons, however brief, it may be. The reason being is that the complainant is required to know the reasons for the disposal of the complaint which is an essence of Article 14 of the Constitution of India.
10. Some of the orders passed by this Tribunal was carried to the Hon'ble Supreme Court by SEBI contending that that no appeal was maintainable before SAT and that, in any case, no reason was required to be given while disposing of the complaint. Such submission raised by SEBI before the Hon'ble Supreme Court was rejected.
11. In one such case, Ashok Dayabhai Shah & Ors. vs. SEBI & Ors. in appeal no. 428 of 2019 dated November 14, 2019, the Tribunal observed that the disposal of the complaint indicated the non- 7 application of mind and non-consideration of the interest of the investors and that SEBI as a regulator has not performed its duty. The tribunal directed SEBI to pass a reasoned order. The aforesaid order of the Tribunal was challenged by SEBI in Civil Appeal No. 363 of 2020 SEBI vs. Ashok Dayabhai Shah & Ors. and the order of the Tribunal was affirmed by the Hon'ble Supreme Court by its decision dated January 27, 2020 and SEBI was required to deal with the complaint positively and objectively in accordance with law.
12. In view of the aforesaid, it is no longer open for SEBI to contend that the disposal of the complaint is not appealable for the reason which is required to be given. The Hon'ble Supreme Court has clearly held that SEBI is required to deal with the complaint positively and objectively. In the instant case, the same has not been done in that perspective.
13. Thus, without going into the merits of the submissions made by the parties, we quash the impugned order. The appeal is allowed at the admission stage. The matter is remitted to SEBI to pass an appropriate order giving reasons.
14. The present matter was heard through video conference due to Covid-19 pandemic. At this stage, it is not possible to sign a copy of this order nor a certified copy of this order could be issued by the 8 Registry. In these circumstances, 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. Parties will act on production of a digitally signed copy sent by fax and/or email.
Justice Tarun Agarwala Presiding Officer Justice M. T. Joshi RAJALA Digitally signed Judicial Member 19.01.2022 KSHMI by RAJALAKSHMI H NAIR Date: 2022.01.19 PTM H NAIR 21:07:36 +05'30'