AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 835
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.... order several entities, including the appellants herein, have been held to have violated certain provisions of SEBI Act, 1992, Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 and / or Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Accordingly, various directions such as restraint from dealing in the securities market directly or indirectly / disgorgement of the unlawful gains made / direction to make an open offer as detailed therein have been issued. 2. Facts relevant to the appeals are as follows:- 3. Appellants are charged with aiding and abetting a fraudulent scheme launched by a company by the name Platinum Corporation Ltd. ('PCL' for short) and its directors / promoters. Impugned order has been passed against several entities based on an investigation conducted by SEBI relating to buying, selling and dealing in the scrip of PCL. PCL was incorporated on July 17, 1992 in the name of Kanugo Lease and Investment Ltd. Its shares were listed on BSE on January 9, 1997. Between July 20, 2005 and September 15, 2006 PCL made a....
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....) and Hirak Biotech (Noticee no. 24) 3 Mr. Dhrumal Kishor Vaidya Director (also listed as a promoter of PCL as per the last shareholding pattern reported to BSE) 4 Mr. Anindo Achinto Banerjee Director (also listed as a promoter of PCL as per the last shareholding pattern reported to BSE) 5 Mr. Jignesh D. Shah Director of PCL 6 Mr. Jayesh D. Shah Director of PCL 7 Ms. Nikita B. Dave Director of PCL 8 Vashi Constructions Pvt. Ltd. Ashok Shah (Noticee no. 9), Hiralal Shah (Noticee no. 28), Bhavana Shah (Noticee no. 10), and Rajesh Shah (Noticee no. 11) are directors. 9 Mr. Ashok H. Shah Signed the tripartite agreement on behalf of PCL (as its director) with NSDL. He is also a director of Vashi Constructions (Noticee no. 8), Induram Developers (Noticee no. 29) and Corporate Allianz (Noticee no. 27). In addition, he managed Exdon Trading Company Ltd. (Noticee no. 26) as its Director 10 Ms. Bhavana Rajesh Shah Director, Vashi Constructions and Sister of Ashok Shah (Noticee no. 9) 11 Mr. Rajesh C. Shah Director, Vashi Constructions (Noticee no. 8) and husband of Bhavana Shah (Noticee no. 10) 12 Ms. Neha....
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....icee no. 1) 29 Induram Developers Pvt. Ltd. Ashok Shah (Noticee no. 9) and Hiralal Shah (Noticee no. 28) are directors. 30 Ms. Meena Ashok Kumar Shah Wife of Ashok Shah (Noticee no. 9) 31 Ms. Meeta Bipin Kumar Shah Wife of Bipin Shah (Noticee no. 19), Director of Parvati Minerals (Noticee no. 32 and Pratik Minerals (Noticee No. 33) 32 Parvati Minerals Pvt. Ltd. Managed by Bharat Shah (Noticee no. 18), Bipin Shah (Noticee no. 19) and Meeta Shah (Noticee no. 31) 33 Pratik Minerals Pvt. Ltd. Managed by Bharat Shah (Noticee no. 18), Bipin Shah (Noticee no. 19) and Meeta Shah (Noticee no. 31) 34 Robinson Worldwide Trade Ltd. (presently known as Sun and Shine Worldwide Ltd.) Managed by Ramanlal Trivedi (Noticee no. 39) and promoter of PCL (Noticee no. 1) 35 Ms. Sarlaben Hiralal Shah Mother of Ashok Shah (Noticee no. 9, who signed tripartite agreement on behalf of PCL (Noticee no. 1) 36 Shalibhadra Steel Pvt. Ltd. Anand Trivedi (Noticee no. 25 and son of Ramanlal Trivedi (Noticee no. 39)-promoter of PCLs (Noticee no. 1) is a director. 37 Shankeshwar Metals Pvt. Ltd. Anand Trivedi (Noticee no. 25) (son of Rama....
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....f five years and direction to make a public announcement to acquire the shares of PCL in terms of Regulation 10 of SAST Regulations for fraudulent preferential allotment of shares of PCL. In other appeals (appeal nos. 303 and 306 of 2016 and 62 and 79 of 2018) only three years restraint from securities market and disgorgement of unlawful gains have been ordered for PFUTP violations. In case of appellants where both 3 years and 5 years restraint have been imposed that period would run concurrently. 12. The specific facts relating to each appellant are as follows:- (i) Appeal No. 303 of 2016:- (a) The basic charge against the appellant is that they have connived and conspired with PCL and its promotes / directors in hoisting the scheme of making the scrip liquid and thereafter selling them in the market and thereby made unlawful gains. The connection of the appellant to PCL is established through crossconnection between different entities. The appellant is managed by Bharat Shah, Bipin Shah and Meeta Shah. Bharat Shah and Bipin Shah are brothers and are directors of Dhanlaxmi Lease Finance (Appellant in Appeal No. 376 of 2017) and Meeta Shah is the wife of Bipin ....
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....ares from Jayesh Shah, promoter of PCL. The address of Appellant No. 1 prior to November 11, 2008 was the residential address of Ashok Shah a former director of PCL and director of a few entities that have been found to be connected to PCL in this impugned order. Appellant No. 2 to 4 were the directors of Rudra Securities and Capital Ltd. and were in-charge of its day-to-day affairs. Appellant No. 5 was the director of Rudra Securities & Capital Ltd. during the period of off loading all shares in the market i.e. between November 30, 2006 and February 14, 2007 and was responsible for its day-to-day affairs. (b) Except Appellant No. 5 all others were beneficiaries of the preferential allotment made by PCL. The Appellant No. 1 off loaded 25 lakh shares it received from Jayesh Shah and made a profit to the tune of Rs. 21,59,971/-. Appellant No. 1 was allotted 50 lakh shares of PCL as preferential allotment at the rate of Rs. 1.25 per share. These shares were pledged with banks as collateral securities for loan taken by PCL and its group entities. Accordingly, the Appellant No. 1 have been debarred for 3 years for conniving and conspiring with PCL and concurrent debarment of an....
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....the promoters of PCL. Appellant No. 1 has been punished for its role in the fraudulent preferential allotment with 5 years debarment from the securities market and the direction to make public announcement for open offer. (b) The directors of the company are Bharat Shah, Bipin Shah and Girish Joshi and are connected to PCL. The mobile number 09824019596 belonging to Ashok Shah are the contact number given in their KYC details for DP account. Ashok Shah, in turn, was a former director of PCL and director of Vashi Construction Pvt. Ltd., Induram Developers and Corporate Strategic Allianz Ltd. and manages Exdon Trading Company Ltd., all related entities in the impugned order. Bharat Shah (Appellant No. 2) received 20 lakh shares from Sbhuadraben Ramalal Patel and 15.40 lakh shares from Anand Trivedi (son of Ramanlal Trivedi who was the former director of PCL and also a director of Robinson Worldwide and CMD of Cartesian Computers). Bharat Shah also received 20 lakh shares from Tushar Shah (promoter of PCL) and 8 lakh shares from Bipin Shah. Appellant No. 4 Girish Joshi received 20 lakh shares from Jayesh Shah (promoter of PCL) and 4 lakh shares from Bipin Shah. Dhanlaxmi Leas....
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....d to the appellants is clearly explained in the table in para 7 of this order. 13. Shri J. J. Bhatt, Learned Counsel representing appellants in Appeal no. 303 of 2016, 374, 375 and 376 of 2017 submitted that the restraint order under Section 11/11B of SEBI Act, 1992 has been used as a punishment which is not the intention of these Sections and as such the impugned order is in violation of the SEBI Act; same legal provisions (both the Section 12A(a), (b), (c) of SEBI Act and Regulation 3(b), (c), (d) of PFUTP Regulations) have been used in amplifying the violations; those who have transferred shares in off-market have been subjected to only monetary penalty through adjudication orders while those who have sold shares in the market have been subjected to Section 11/11B proceedings, debarment and disgorgement thereby the impugned order suffers from inequitable and unfair approach in imposition of penalties; undue delay (more than 9 years) in the proceedings has caused irreparable damage to the appellants; the role and involvement of the appellants in the alleged conspiracy has not been proved; the appellants have no role in the corporate announcements made by the company and moreov....
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....tor nor a promoter of PCL. The appellants received the shares from Jayesh Sumesh Shah, from his demat account no. 30308092. Therefore, the entire premise in the impugned order that the appellants in these appeals were connected to the promoters of PCL because of their off-market dealing with promoters of PCL and also in preferential allotment are untrue and hence the very basis of the finding in the impugned order is invalid. 16. Relying on two judgments of this Appellate Tribunal in the matter of M/s. Opee Stock Link Ltd. & Anr. vs. SEBI (Appeal no. 20 of 2009) dated December 30, 2009 and in the matter of Libord Finance Ltd. vs. SEBI (Appeal no. 37 of 2008) dated March 31, 2008 he emphasized that the impugned order is vitiated because of undue delay and by using Sections 11/11B of the SEBI Act as a punishment which is held in the cited orders as illegal and unsustainable. 17. Shri J. P. Sen Learned Senior Counsel for the appellants in appeal no. 306 of 2016 submitted that appellant no. 1 in this appeal namely; Hiralal Popatlal Shah expired on October 8, 2012. Appellant no. 1 had no connection with PCL except that his son Ashok Shah was a past Director of PCL. Even Ashok Shah....
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....hich they have been holding for several years (since 1999). 19. Shri Prakash Shah, Learned Counsel appearing on behalf of appellants in appeal no. 62 and 79 of 2018, submitted as follows: Appellants in both these appeals have been charged with aiding and abetting the fraudulent scheme and, therefore, three years debarment from the securities market and disgorgement of the illegal gains made by means of offloading the shares received off-market after various corporate announcements. There has been inordinate delay in issuing this order; disgorgement is done arbitrarily since all the shares sold during the investigation period is not treated as illegal and the effect of corporate announcement is for a few days only and illegal gain should have been calculated only for trades done during those few days; shares bought between corporate announcements should not have been included for calculating illegal gains; while categorizing some sales as not illegal the correct position relating to appellants sales dates was not taken; the inability to produce purchase price etc. was due to passage of time since documents need to be preserved only for 8 years under Companies Act; and as such ave....
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..... Further, during the period of these corporate announcements the promoters of PCL offloaded 4 crore shares of PCL to various entities mainly off market who together made a profit of about Rs. 12 crore. Except one director neither PCL nor any other director gave any response to SEBI to the show cause notice nor appeared before SEBI, nor are on appeal herein. 22. Learned senior counsel further submitted that the impugned order establishes the connection between noticees, including the appellants herein very clearly and a chart showing the connection is also part of the impugned order. It was Ashok Shah as director of PCL who signed a tripartite agreement with NSDL etc. in March 30, 2000. Ashok Shah was a director of Vashi Construction, Corporate Strategic Allianz Limited, Induram Developers and Exdon Trading. Registered address of Rudra Securities was the same as that of Ashok Shah's residence. Registered address of Robinson Worldwide is the same address of Induram Developers which is managed by Ashok Shah, as a Director. The mobile number being used by Ashok Shah is given in the KYC details for depository account with Stock Holding Corporation by several appellants herein. Giris....
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....ncements. However, their arguments that the calculations are incorrect does not have any merit because the numbers indicated by them may be as per the date of trading, but the impugned order takes the correct position as reflected in their demat accounts. 24. On a specific question by the Bench as to whether open offer can be implemented after the company has been delisted, learned senior counsel Shri Sancheti submitted that though this issue has come up for first time it is not impossible to operationalize an announcement for an open offer even after delisting a company. In the instant matter PCL has been delisted on November 29, 2017 by BSE. Only difference between a normal open offer and in matters like the one under consideration is that the PAC buying the shares consequent to the open offer cannot sell it in the market. So in short, the direction to make an open offer can be implemented without any difficulties even though the company has been delisted. 25. We have perused the documents placed before us and heard the detailed submissions made by learned counsel appearing on behalf of the various appellants; Shri J. J. Bhat in Appeal nos. 303 of 2016 and 374, 375 and 376 ....
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.... (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under." "4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed....
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....llants in related appeals on PCL matter had taken the same stand of time bar even during 2011-12 when the "age" of this matter was only five years. 27. Appellants in Appeal no. 374 of 2017, 376 of 2017 and 62 of 2018 have submitted that part of their acquisition of shares is not from Jayesh D. Shah as alleged in the impugned order but from Jayesh Sumesh Shah who was neither a promoter nor director of PCL. He was only an ordinary investor. While the DP account number given in the order matches the middle name is not matching. However, the appellants are not able to furnish any other information relating to this ordinary investor Jayesh Sumesh Shah but their emphatic argument is that he is not a promoter or director of PCL. Since Jayesh Shah is not in appeal herein, we perused the records relating to his Appeal No. 94 of 2014 against an adjudication order of SEBI dated October 1, 2012 which was set aside by this Appellate Tribunal on the ground that SCNs were not received by the appellants and it was remanded for fresh orders. SEBI subsequently issued the order dated November 30, 2015 which is also challenged before this Appellate Tribunal but by only three of the original appella....
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....nos. etc. by some of the entities, the financial transactions between some of the entities, the offmarket transactions of shares of PCL between some of the promoters and directors of PCL connection between these entities have been conclusively established. 29. However, in the case of two appellants in Appeal no. 306 of 2016 i.e. Mrs. Sarlaben Hiralal Shah and Mrs. Meenaben A. Shah no such connection has been established except that they were related to Shri Hiralal Shah and Ashok Shah, the latter in turn related to PCL in the past. However, Hiralal Shah and Ashok Shah's continued connection to PCL is established through their Directorship in other entities in the group such as Vashi Construction, Induram Developers (where both were directors); Corporate Strategic Allianz Limited and Exdon Trading. We have also upheld the impugned order against Corporate Strategic Allianz vide our order dated February 1, 2018. 30. The affidavits submitted by Shri Ganatra (supra) belatedly before this Appellate Tribunal (not before WTM of SEBI) cannot be fully relied upon in the absence of supplementary evidences. What is stated in his affidavits is that in order to compensate for the shares of....
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....rd that 2.9 crore shares of PCL was given as preferential allotments to the 3 appellants and 4 directors of PCL. These 4 directors of PCL are not even on appeal and rather they let PCL to be compulsorily delisted rather than making the necessary correctives. It is also on record that the appellants had pledged these shares with bank as collateral for the loans taken by PCL and related entities. Accordingly, we find that the preferential allotment was not a vitiated issue but the appellants and others made it a vitiated one. Accordingly, there is no fault in the findings in the impugned order that the appellants are beneficiaries of a fraudulent preferential allotment and they need to make the public offer as per SAST Regulations, 1997. 32. Given the above facts and finding in the impugned order that appellants in all appeals, except Appellant nos. 2 and 3 in Appeal no. 306 of 2016, have violated Regulation 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(e), (k) and (r) of the PFUTP Regulations, 2003 cannot be faulted. Similarly, finding in the impugned order that the beneficiaries of the preferential allotment have violated Regulation 8(3) and Regulation 10 of SAST Regulations, 1997 also can....