TaxTMI 
TaxTMI 
2022 (3) TMI 1449
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....read with Regulation 3 of the Securities and Exchange Board of India (Collective Investment Scheme) Regulations, 1999 (hereinafter referred to as the 'CIS Regulations') and Regulation 4 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 (hereinafter referred to as the 'PFTUP Regulations'). 2. The facts leading to the filing of the present appeal are as follows. In 1997, Pancard Clubs Ltd. was incorporated as an unlisted public limited Company. The Company floated various time sharing schemes i.e. selling of rooms for a fixed duration of nights/days depending upon the scheme opted by its customers. The shareholding pattern of the Company was as under: Sr. No. Name of Shareholder No.of shares % of shareholding 1. Mr. Sudhir Moravekar 500,100 99.78% 2. Smt. Viidya S. Moravekar 600 0.12% 3. Mrs. Manda M. Phatarpekar 100 0.02% 4 . Mrs. Usha S. Tari 100 0.02% 5. Mrs. Sharmila S. Hadkar 100 0.02% 6. Mrs. Shobha R. Barde 100 0.02% 7. Mrs. Tejashree Arun Tari 100 0.02% ....
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....t October, 2013 intimating that they had examined the matter of the Company and had concluded that the same did not attract SEBI CIS Regulations. 9. However, SEBI again re-examined the matter and on 26th June, 2014 a show cause notice and thereafter on 10th June, 2016 a supplementary show cause notice was issued alleging violation of the provisions of Section 12(1B) of the SEBI Act read with Regulation 3 of CIS Regulations and Regulation 4(2)(t) of the PFUTP Regulations. During these adjudication proceedings, an ex-parte order dated 31st July, 2014 was passed directing PCL to stop all their businesses. This order was challenged in an appeal before this Tribunal by the Company and its Directors. By an order of 17th September, 2014 the ex-parte ad-interim order dated 31st July, 2014 was set aside and SEBI was directed to decide the matter on merits. Subsequently, SEBI carried on an examination and based on its examination report issued the supplementary show cause notice dated 10th June, 2016. The Adjudicating Officer after considering the replies of the noticees including the appellants came to the conclusion that the Company had violated Section 12(1B) of the SEBI Act and the ap....
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....Directors including the appellant were responsible for the conduct of business and failed to give evidentiary proof that they are not officers in default nor filed any evidentiary proof to show that they did not attend the board meeting when the scheme was launched and, therefore, all the Directors are officers in default and are responsible for the illegal mobilisation of the funds and have violated Regulations 4(2)(t) of the PFUTP Regulations. 14. We have heard Ms. Shradha Achliya, Advocate for the appellant and Mr. Shyam Mehta, Senior Advocate assisted by Mr. Mihir Mody, Mr. Arnav Misra and Mr. Mayur Jaisingh, Advocates for the Respondent. 15. In so far as the finding of the Adjudicating Officer that the time sharing business of the Company is a Collective Investment Scheme we find that the same issue was held against the Company by the Whole Time Member which order was challenged in appeal by the Company and its Directors including the appellant before this Tribunal and which order was affirmed. That order has become final inter se between the parties and, therefore, no further arguments were raised on this issue by the appellant. 16. The only contention raised by the ....
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....behaviour by a person depriving another of informed consent or full participation, (8) a false statement made without reasonable ground for believing it to be true. (9) the act of an issuer of securities giving out misinformation that affects the market price of the security, resulting in investors being effectively misled even though they did not rely on the statement itself or anything derived from it other than the market price. And "fraudulent" shall be construed accordingly; Nothing contained in this clause shall apply to any general comments made in good faith in regard to- (a) the economic policy of the government (b) the economic situation of the country (c) trends in the securities market; (d) any other matter of a like nature whether such comments are made in public or in private;" 18. A perusal of the definition of fraud means that where a person induces another person or connives with him or misrepresents or conceals material fact or deceives would be a fraud. 19. In the instant case, we have gone through the entire impugned order and we do not find any finding to indicate that ....
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....on of this Tribunal in Sayanti Sen v. SEBI, appeal no.163 of 2018 dated 9th August, 2019 is fully applicable. The relevant portion of the same is extracted hereunder: "10. Before proceeding further it would be essential to extract a few provisions of the Companies Act. For facility, Section 5 and Section 73 of the Companies Act is extracted hereunder:- Section 5 "Meaning of "officer who is in default" 5. For the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression "officer who is in default" means all the following officers of the company, namely: (a) the managing director or managing directors; (b) the whole-time director or whole-time directors; (c) the manager; (d) the secretary; (e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act; (f) any person charged by the Board with the responsibility of complying with that provision: Provided that the person so charged has....
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....ilisation against the Directors is patently erroneous. Till 2013 SEBI itself was under a belief that the time sharing business carried by the Company was not a Collective Investment Scheme but a legitimate business. This fact is not only admitted by SEBI but is also recorded in the order of this Tribunal while setting aside the ex-parte ad-interim order. The said finding are extracted hereunder: "13...It is important to note that the Respondent admits in its counter affidavit that prior to 2013, SEBI was of the view that time share schemes did not come within the purview of Section 11AA of the SEBI Act . ........... 20. The Respondent submits that prior to 2013 it was of the view that time share schemes were not covered by Section 11AA of the SEBI Act and hence did not constitute a CIS. The Respondent came to this conclusion via a macro examination of the activities of the, as opposed to an in-depth micro examination of every scheme of the Appellant individually. However, a development took place in the law related to Section 11AA when the Hon'ble Supreme Court, in the matter of PGF Limited observed that Section 11AA of the SEBI Act would not be res....
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....heme of a Club and Members would come within the ambit of CIS or not. However, it changed its mind thereafter and started investigating a couple of such schemes including the Rose Valley matter. SEBI may be within its right to change its stand on the interpretation of law after a lapse of more than a decade and such a change may not hold to be illegal and bad only on the ground of the principle of estoppel. We will, therefore, repel the contention of the Appellant on this count. But the crucial point to be considered is whether SEBI is entitled to change its stand by taking a somersault and suddenly pass an adverse order with serious civil consequences without affording an opportunity of being heard to the affected person. 55. To sum up, in the present case, Appellant has been knocking on the doors of SEBI since 2001 by seeking its decision on the question as to whether the time sharing business carried on by the Appellant is covered under CIS or not. Although no formal order was issued in the year 2001, it is now admitted by counsel for SEBI that since the very beginning SEBI was of the opinion that time sharing business is not covered under CIS. In fact, in the year 2010....