TaxTMI 
TaxTMI 
2023 (8) TMI 201
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....of twenty three noticees have filed separate appeals against a common order dated April 13, 2022 passed by the Adjudicating Office ("AO" for convenience) of the Securities and Exchange Board of India ("SEBI" for convenience) imposing penalty for violation of the SEBI (Prohibition of Insider Trading) Regulations, 1992 ("PIT Regulations" for convenience) and Section 12A of the SEBI Act, 1992 read with Regulations 3 & 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ("PFUTP Regulations" for convenience). Since the issue is common, all the appeals are being decided together. 2. The fact leading to the filing of the present appeal is, that noticee no. 1 who is the appellant in Appeal No. 552 of 2022 is the Company, namely, Unisys Softwares and Holding Industries Limited which issued a notice dated December 29, 2010 regarding issuance of convertible warrant on preferential basis wherein 25% of the conversion price was to be paid before the allotment i.e. March 28, 2011 and balance 75% of the amount was to be paid during March 2011. 3. Noticees no. 2-8 are the preferential allottees who have paid 25% of the amount prior....
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....ding Industries Limited i.e. the Company on February 11, 2011. These Noticees No. 2-8, i.e. preferential allottees had received Rs. 7.50 Crores from Noticee no. 11 i.e. Allbright Electricals Private Limited on February 10, 2011 which after receiving paid to Unisys Softwares and Holding Industries Limited. It was also alleged that Allbright Electricals Private Limited Noticee no. 11 had received Rs. 3 Crores and Rs. 5 Crores on February 10, 2011 from Noticee no. 9 Gulistan Vanijya Private Limited and Vibhuti Multi Trade Private Limited, Noticee no. 10, and upon receiving the same, on the same day transferred the amount to Noticees no. 2 to 8. On February 12, 2011 the Company transferred Rs. 2.75 crores to Allbright Electricals Private Limited. It was alleged on analyzing the bank statement it was observed that on February 10, 2011 the Company had a balance in its account to the tune of Rs. 1,58,150.84/- and on February 11, 2011 transferred Rs. 2,50,00,000/- to Noticee no. 12 and Rs. 2,75,00,000/- to Noticee no. 11. Thus transferring Rs. 5.25 crores to entities from which Noticees no. 2-8 had received funds for preferential allotment on the same day. 7. Similarly the balance 75% of ....
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....tion with the subscription made by the preferential allottees, namely, noticees 2-8. The AO accordingly found that the action of the Company and the other noticees were fraudulent and violated Section 12A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations. The AO accordingly imposed a penalty of Rs. 4 lakhs upon the Company noticee no. 1 under Section 23H of the SCRA for violating the PIT Regulations for non-disclosure of the shareholding pattern of the promoters of the Company. In addition to the aforesaid, the AO imposed a sum of Rs. 46 lakhs upon noticees no. 1-23 under Section 15HA to be paid jointly and severally by these noticees for violating Section 12A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations. 12. The learned counsel for the appellant-company further conceded that the Company did not make the necessary disclosures under the PIT Regulations with regard to the shareholding pattern of its promoters and therefore to that extent the impugned order does not suffer from any effort of law. 13. We have heard Shri Pandit Kasar, the learned counsel, Shri Vinay Chauhan, the learned counsel, Shri Himanshu Agarwal, the learned counsel ....
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....been given in paragraph 24 and 25 of the impugned order and we do not find any reason to differ from the conclusions arrived at. We are not satisfied with the contention that the Company was not aware of the funds transferred by Grafton Merchant Pvt. Ltd. and Allbright Electricals Pvt. Ltd. to other entities which eventually found its way to the preferential allottees. The very fact that the funds have moved from Grafton Merchant Pvt. Ltd. and Allbright Electricals Pvt. Ltd. to certain entities and to the allottees and from the allottees to the Company and from the Company to Grafton Merchant Pvt. Ltd. and Allbright Electricals Pvt. Ltd. within 48 hours leads to an irresistible conclusion that the fund transfer was only for the purpose of subscription of the preferential allotment by these preferential allottees. The pictorial no. 1 and 2 as displayed in the impugned order gives a clear picture of the modus operandi of the transfer of funds between the conduit entities to the preferential allottees and from the preferential allottees to the Company and from the Company to the conduits. Such round tripping of the funds was clearly fraudulent which shows no intention of genuine capit....
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....icee nos. 5 to 11 or by Mihir Consulting and Trading Company and Mainak Comtrade Pvt. Ltd to show that any loan agreement was executed nor anything has come on record to indicate that the period of loan, the nature of loan, the interest rate etc. Further, Mihir Consulting and Trading Company Mainak Comtrade Pvt. Ltd are not registered NBFCs. In the absence of any documentary evidence such as loan agreement, income tax returns etc., we are unable to accept that a bonafide loan transaction was given by these entities. Further, we find it strange that 7 preferential allottees entered into a loan transaction for the same amount on the same date without any documentation. Further, given the fact that these noticees had insufficient funds in their accounts, an irresistible inference can be drawn that the funds were transferred through noticee nos. 5 to 11 with the sole purpose to finance the subscription to the preferential allotment under a fraudulent scheme. We are of the opinion that the allotment to these 7 preferential allottees were fraudulent. We also find that out of these 7 preferential allottees, only noticee nos. 7, 9 and 11 have filed appeals before this Tribunal." 20. Simil....
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....ssed the following order on the issue of jointly and severally liability. Paragraph No. 4 of the said judgment is as under :- "4. It was urged that the direction of the AO to pay the penalty amount jointly and severally was wholly erroneous, since the appellant alongwith other noticees did not act in concert. In this regard, we find that the only connection shown of the appellant with other noticees has been indicated in paragraph no. 21 of the impugned order wherein the appellant has been shown to be connected with noticee no. 4, Invorex Vincom Pvt. Ltd. through off market transfer. There is nothing to indicate the appellant's connection with other noticees. Since eight noticees have been found to have violated provisions of the Section 12A read with Regulations 3 and 4 of the PFUTP Regulations and in the absence of any finding as to why all the noticees should be liable to pay jointly and severally, we are of the opinion that the direction of the AO to pay the penalty amount jointly and severally is harsh and arbitrary and without any reasons." 23. In SRSR Holdings Pvt. Ltd. vs. SEBI Appeal No. 01, 2019 decided on 02.02.2023 this Tribunal held: "91. We find that the directi....
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....idually. In such cases, damages cannot be paid jointly and severally. 96. In the instant case, apart from B. Ramalinga Raju and B. Rama Raju, others did not act concurrently or jointly but sold the shares at different moment of time. All the appellants made a series of acts at different point of time and therefore their acts will not make them liable jointly and severally. Further, the WTM has calculated the unlawful gains against each of the appellants. Once the amount is calculated, then each of them is only liable to pay the unlawful gains attributable to his own act. The unlawful gains cannot be clubbed together nor can any direction be issued to disgorge the amount jointly and severally. Thus, the direction of the WTM to disgorge the amount jointly and severally cannot be sustained." 24. This Tribunal in the case of Mahavirsingh N. Chauhan (supra) has held as under :- "20. In the end, the contention that the liability to disgorge the amount cannot be made joint and several under Regulation 11B of the SEBI Act has same force. In this regard, the explanation to Section 11B is extracted hereunder :- "Explanation. - For the removal of doubts, it is hereby declared that the ....