TaxTMI 
TaxTMI 
2018 (4) TMI 682
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....ctly or indirectly for a period of 3 years and further the appellant is directed to disgorge the unlawful gain of Rs. 20,64,745/- along with interest thereon from February 2007 till payment. Appeal No. 20 of 2017 is filed against the direction of SEBI vide their letter dated December 22, 2016 advising the appellant to dissociate from discharging the obligations as a Merchant Banker in view of the 3 year restraint imposed by the order of the WTM of SEBI dated August 12, 2016 (impugned in Appeal No. 4 of 2017). Since the order impugned in the second appeal is a consequential direction of SEBI following the WTM's order impugned in Appeal No. 4 of 2017, it is evident that facts in both appeals are common and therefore, both the appeals are heard together and disposed of by this common decision. 2. Corporate Strategic Allianz Limited, the appellant company was incorporated in 2006 with Ashok Shah and his father Hiralal Shah as the only directors till April 1, 2007. The appellant company received a certificate of registration from SEBI as a Category I Merchant Banker on January 25, 2008. The appellant company has been granted permanent registration as a Merchant Banker by SEBI on August....
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....ring on behalf of the appellant except on the last date of hearing strenuously argued that the appellant did not receive any shares of Platinum; their alleged 10 lakh shares shown against the appellant was in fact shares belonging to another entity by the name Mahavir Impex who was not even questioned by SEBI. Since Mahavir Impex did not have a demat account, his shares were kept in the appellant's demat account and on instruction of Manish Shah of Mahavir Impex the appellant sold the shares through the broker Kotak Securities in January 2007 and kept Rs. 45,000/- as service charges and paid remaining Rs. 29,90,000/- to Mahavir Impex. Therefore, the shares were received by Mahavir Impex whose managing director Manish Shah requested the appellant in August 2006 to keep these shares in the appellant's demat account which was sold in January 2007 on their instruction and the consideration minus service charge paid to Mahavir Impex. Therefore, the appellant had no role in the entire matter. As such, the impugned order dated August 12, 2016 needs to be quashed and set aside and if any disgorgement is applicable it should be imposed on Mahavir Impex. 6. It was further argued by the Lear....
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....and that too without following any due process as provided in the Intermediaries Regulations 2008. 8. Shri Keval Ponkiya, Learned Counsel who appeared on behalf of the appellant on the last day of hearing also reiterated the above contentions made by the Learned Senior Counsel Shri P.N. Modi. 9. Shri Pradeep Sancheti, Learned Senior Counsel appearing on behalf of SEBI walked us through the full facts relating to the impugned order dated August 12, 2016. Platinum has changed its name multiple times since its incorporation as Kanugo Lease and Investment Ltd. in July 17, 1992. The name was finally changed to Platinum Corporation Ltd. on June 8, 2007. Based on a complaint received by SEBI on May 12, 2008 an investigation was conducted into buying, selling or dealing in the scrip of Platinum. Accordingly, show cause notice was issued on September 23, 2013 to Platinum and 39 other entities including the appellant herein. It is on record that Platinum made a number of corporate announcements and withdrew those announcements subsequently during 2005-07. As a result of all these corporate announcements the price of the scrip of Platinum increased from Rs. 1.19 to a high of Rs. 3.15. Simil....
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....milarly, Hiralal Shah (father of Ashok Shah, past director of Platinum and director of the appellant company during investigation period), Meena Shah (wife of Ashok Shah), Sarlaben H Shah (mother of Ashok Shah), Induram Developers Pvt. Ltd. (wherein Ashok Shah and Hiralal Shah were directors) and Exdon Trading managed by Ashok Shah are all part of the noticees in the present matter, some of them on separate appeals before us. 12. Regarding Appeal No. 20 of 2017 the Learned Senior Counsel for SEBI stated that the entire arguments of the appellant that the present directors and management of the appellant company have no relation to its past directors / management crumbles down by a sheer look at the latest filings made by the appellant company and Ashok Shah before Registrar of Companies (RoC). From the documents obtained by SEBI from the RoC and produced before us in affidavit the following have been noted:- (a) In the year FY 2006-07 Ashok Shah held 5000 shares (less than 1% in the appellant company). On July 20, 2011 he held 36,500 equity shares (6.6%). (b) Similarly, Vashi Construction held 2,49,500 shares, Exdon Trading - 15,000 shares, Meena Shah - 16,500 shares as per th....
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....y, sell or deal in securities except under, and in accordance with, the conditions of a certificate of registration obtained from the Board in accordance with the [regulations] made under this Act: Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control. 12A. No person shall directly or indirectly- (a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder; (b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed to be listed on a recognized stock exchange; (c) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognized stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder; (d)....
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....ry or on completion of such investigation or enquiry, namely:- 12 (a) suspend the trading of the security found to be or prima facie found to be involved in fraudulent and unfair trade practice in a recognized stock exchange; (b) restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities; (c) suspend any office-bearer of any stock exchange or self-regulatory organization from holding such position; (d) impound and retain the proceeds or securities in respect of any transaction which is in violation or prima facie in violation of these regulations; (e) direct and intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of a fraudulent and unfair transaction; (f) require the person concerned to call upon any of its officers, other employees or representatives to refrain from dealing in securities in any particular manner; (g) prohibit the person concerned from disposing of any of the securities acquired in contravention of these regulations; (h) direct the person concerned to dispose of any such securi....
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....ling in securities and therefore direction to a Merchant Banker not to undertake merchant banking business when under restraint is fully justified. There is no suspension or cancellation of the license of the Merchant Banker in the instant matter requiring separate procedure to be followed. In any case, the requirement of following the procedure laid out in the Intermediaries Regulations, 2008 would arise when a fresh matter is taken up against a Merchant Banker not when a restraint order is imposed on it on account of serious PFUTP violations. As such, both the appeals are without any merit and liable to be dismissed. 16. We find absolutely no merit in the argument of the appellant company that its present management is completely disconnected from the management prior to 2008. Similarly, we find no merit in the arguments of the appellant that Ashok Shah as a separate entity has been penalized by a separate order of SEBI and as such the impugned orders herein is a double whammy to the appellant company. 17. In fact we are constrained to add that there is all round lack of credibility in the arguments submitted by the appellant in the context of the fact that they are neither wil....