TaxTMI 
TaxTMI 
2018 (12) TMI 1979
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....rected to cease and desist from undertaking any activity in the securities market, directly or indirectly, in any manner whatsoever till further directions. 2. NSE and SEBI had carried out inspection of F6 Finserve and made the following observations based on analysis of samples: a. The broker had not maintained segregation between own and clients' securities. The broker met its proprietary ("PRO") pay-in obligations from the client's securities. b. NSE in its inspection had found that the broker had utilized securities belonging to other clients to meet pay-in obligations of client K. K. Advisor Pvt. Ltd on 100 instances. During the inspection conducted by SEBI, it was informed that three of its employees acting in collusion with the client had sold shares of its clients and that it had filed an FIR against the said employees. SEBI observed that the broker had failed to exercise due diligence which led to mis-utilization of client securities. c. There was a difference between quantity of securities available in Register of Securities (RoS) and holding statement of beneficiary accounts. d. The broker had availed overdraft facilities by pledgin....
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....1/2008 dated April 17, 2008 on account of misutilizing funds of credit balance clients to fund debit balance clients/for own purposes. d. SEBI Circulars no. MRD/DoP/SE/Cir-11/2008 dated April 17, 2008 and SMD/SED/CIR/93/23321 dated November 18, 1993 for raising funds by pledging securities of clients. e. Not fully complied with SEBI Circular CIR/DNPD/7/2011 dated August 10, 2011 read with SEBI Master Circular No. CIR/DNPD/1/2012 dated January 02, 2012 regarding short collection/non collection of client margins in derivatives segment by making wrong reporting about margin collection. Further, F6 Finserve has not fully complied with the provisions of NSE Circular No. NSE/INSP/19583 dated December 14, 2011. f. Regulation 21 of SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 (hereinafter referred to as "Stock Broker Regulations") for failing to cooperate with the inspecting authority and failing to provide complete information to the inspecting authority. g. Failure to comply with Clauses A (2) and A (5) of the Code of Conduct read with Regulation 9 (f) of the SEBI (Stock Brokers and Sub-brokers) Regulations, 1992. 4. The interim order dire....
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....r. Pankaj Goel had approached him for a loan in November, 2013 for some business venture and promised to return the funds. The Noticee has stated that he had given a total loan of Rs. 45 Lakhs. Mr. Pankaj Goel in Jan, 2016 offered him to join his business when in lieu of repayment of his funds. iii. Mr. Parveen Sharma along with his wife Ms. Asha Sharma joined F6 Finserve as Additional Non-Designated Directors w.e.f. April 11, 2016 and had nothing to do with the working of the company. He was only taking care of the Computer Department and making of an online trading app. iv. He has never dealt with any client, signed any bank loan papers or cheques, nor received any payment in FY 2017-18 and has not signed on any of the company's balance sheet. v. That Kotak Mahindra Bank informed him that they have his personal guarantee along with other directors to repay loan which is approx. Rs. 21 crores, and he does not recall signing personal guarantee papers as the bank never given a copy of the signed papers. vi. The Noticees have also enclosed copies of the following: a) Complaint dated May 25, 2018 to the SHO, Gurugram Police Station against ....
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....t which mandatorily requires the undersigned to disclose his personal information pertaining to assets he owns and therefore to this extent the impugned order exceeds jurisdiction. xi. The Noticees have also provided two Affidavits signed and notarized on April 12, 2018 and undertaking dated April 12, 2018 given by Noticee no. 3 i.e. Mr. Pankaj Goel stating that all responsibilities and liabilities inter alia incidental, consequential, supplemental and any other liabilities which are de- hors, whether past or present, are assumed by Mr. Pankaj Goel for all transactions and business carried on by the said company (keeping Mr. Sanjay Anand and Ms. Kavita Anand indemnified at all times) and that no other director is liable. xii. Mr. Sanjay Anand also submitted that he had given a loan of Rs. 73 lakhs to Mr. Pankaj Goel in 2012. When he demanded his money back, Mr. Pankaj Goel promised to repay the borrowed amount by way of transferring monthly salary to Ms. Kavita Anand, wife of Mr. Sanjay Anand if she became the director of the company, and that once the amount is repaid she can leave the company. Further, as Mr. Sanjay Anand was looking for business opportunities h....
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....y and that they been wrongly clubbed with other entities without examining the peculiar facts. In this regard, they have relied on the following orders to support their claim. o Pepsico India Holdings Pvt. Ltd. vs. Food Inspector and Another [(2011) 1 SCC 176], o Ashoke Mal Bafna vs. M/s Upper India Steel Mfg. & Engg. Co. Ltd. [2017 SCC Online SC 705], o Pooja Ravinder Devidasani vs. State of Maharashra and Another [(2014) 16 SCC 1], o K. K. Ahuja vs. V. K. Arora and Another [(2009) 10 SCCC 48] ix. The Noticees submitted that impugned transactions were carried out without their knowledge and consent, and therefore, they ought not to be made liable for any penal action since no fault is committed by them. x. The case of the Noticees falls under the proviso to section 27 of the SEBI Act. xi. The Noticees deny that they violated any circular issued by Stock Exchange and/ or SEBI, Regulation 21 of Stock Brokers Regulations and Clauses A (2) and A (5) of the Code of Conduct read with Regulation 9 (f) of Stock Brokers Regulations. xii. The proceedings against Noticee no. 9 and 10 may be dropped in light of the above ....
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.... Criminal complaint dated April 25, 2018, (ii) Representation dated April 25, 2018 submitted to Kotak Mahindra Bank by Noticees, (iii) Notice dated May 04, 2018 received from Kotak Mahindra Bank and its reply dated May 12, 2018, (iv) Copy of complaint under section 138 of Negotiable Instruments Act against Mr. Pankaj Goel, (v) Copy of complaint under section 156 (3) of Criminal Procedure Code against Mr. Pankaj Goel, (vi) Copy of order sheet dated July 10, 2018 in the complaint, and (vii) Kotak's notice of demand under section 13(2) of the SARFAESI Act and its reply. Consideration of Replies and Submissions in Personal Hearing 10. I have perused the interim order cum show cause notice, replies, submissions filed by the noticees and documents available on record to consider whether the interim order dated May 29, 2018 shall be confirmed or not. At the outset, as regards the submissions of the noticees that the principles of natural justice have not been followed while passing the ad-interim exparte order, I note that the interim order has been passed under sections 11 (4), 11B and 11C of the SEBI Act on the basis of prima f....
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....er detrimental to the interest of investors or securities market; or (iii) to secure the proper management of any such intermediary or person, it may issue such directions,- (a) to any person or class of persons referred to in section 12, or associated with the securities market; or (b) to any company in respect of matters specified in section 11A, as may be appropriate in the interests of investors in securities and the securities market. 11. While passing such directions, it is not always necessary for SEBI to provide the entity with an opportunity of pre-decisional hearing. The law with regard to doing away with the requirement of pre-decisional hearing in certain situations is also well settled. The following findings of the Hon'ble Supreme Court of India in the matter of Liberty Oil Mills & Others v. Union Of India & Other (1984) 3 SCC 465 are pertinent: "It may not even be necessary in some situations to issue such notices but it would be sufficient but obligatory to consider any representation that may be made by the aggrieved person and that would satisfy the requirements of procedural fairness and natural justice. There can be no ....
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....f the Noticee nos. 3 to 10 in F6 Finserve which is as under: Sr. no. Name of the director Designation Change in designation, if any Tenure 1 Mr. Pankaj Goel Director 26/12/2012 - till date 2 Mr. Parveen Sharma Additional Director Non - Executive Director on 03/04/2017 11/04/2016 - 02/01/2018 3 Ms. Meenu Goel Director 26/12/2012 - till date 4 Mr. Sanjay Anand Additional Director Non - Executive Director on 03/04/2017 10/02/2015 - 01/01/2018 5 Ms. Kavita Anand Additional Director Non - Executive Director on 03/04/2017 10/02/2015 - 01/01/2018 6 Ms. Asha Sharma Additional Director Non - Executive Director on 03/04/2017 11/04/2016 - 01/01/2018 7 Mr. Deepak Goel Director Non - Executive Director on 03/04/2017 27/01/2005 - 01/01/2018 8 Ms. Ruchika Goel Director Non - Executive Director on 03/04/2017 24/10/2016 - 01/01/2018 14. The Noticee no. 4, 6, 7 & 8 have contended that they were past non-executive directors of the company, and hence they cannot be held liable for the violations committed by the company. The notice nos. 9 & 10 have con....
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....against Noticee nos. 1, 2, 3 and 5 as stated in their reply and additional submissions which are recorded in para 7 and 9 of this order. The Hon'ble Supreme Court in Official Liquidator v. P.A. Tendolkar (1973) 1 SCC 602 has observed that "A Director may be shown to be so placed and to have been so closely and so long associated personally with the management of the Company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of the business of a Company even though no specific act of dishonesty is proved against him personally. He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the Company even superficially". Therefore, I am not inclined to accept the said contention of the Noticees that they had resigned or that they are non-executive directors, and hence, are not liable for violations committed by the company. 17. Mr. Parveen Sharma along with reply has enclosed letter dated April 05, 2017 from Kotak Mahindra Bank, Delhi Aerocity Branch to F6 Finserve which refers to its earlier sanction letter dated June 17, 2016 conveying sanction for the facilities to F6 Finserve. Through the said letter,....
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....f the above, I note that the Noticees had failed to exercise reasonable care and had failed to act diligently. Even though the following observations made by the Hon'ble Supreme Court were in the context of a listed company in N Narayanan v. Adjudicating Officer, SEBI the principle relied therein is equally applicable in the context of a director's duty to act diligently: "33. Company though a legal entity cannot act by itself, it can act only through its Directors. They are expected to exercise their power on behalf of the company with utmost care, skill and diligence. This Court while describing what is the duty of a Director of a company held in Official Liquidator v. P.A. Tendolkar (1973) 1 SCC 602 that a Director may be shown to be placed and to have been so closely and so long associated personally with the management of the company that he will be deemed to be not merely cognizant of but liable for fraud in the conduct of business of the company even though no specific act of dishonesty is provided against him personally. He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the company even superficially." 19. Noticee no. 9 and ....
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.... bearing on the present proceedings. 22. The Noticees have also relied on an undertaking submitted by Mr. Pankaj Goel claiming full responsibility for the acts done by F6 Finserve. In this regard, I note that the liability of directors is a statutory liability which cannot be done away with an undertaking in the nature of one furnished by the Noticees. I note the observations of the Hon'ble High Court of Calcutta in the matter of Universal Petrochemicals Ltd. v. Rajasthan State Electricity Board decided on April 17, 2001: "49. The proposition that a contract between the parties will prevail over an overriding statutory provision is contrary to basic norms of jurisprudence. A statutory provision is the sovereign will of the legislature and the same binds every one and certainly the parties who are coming under it unless the provision is made subject to contract or the law is repealed or declared unconstitutional by a competent Court. If the proposition laid down in Ganpatrai (supra) is followed the same will lead to disastrous consequences. Any two individuals would be allowed to contract out of a statutory liability. It is well settled that there can be no contract whic....
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....this stage, the Noticees have failed to give any plausible reasoning/ explanation for their acts and omissions as described in the interim order and have not been able to make out a prima facie case for revocation/ modification of the interim order. I, therefore, reject the prayers, if any of such Noticees for setting aside the interim order or for complete removal of the restraint imposed by it. I, therefore, do not see any reason to change or revoke the ad interim order as against the noticees. Order: 26. Considering the above, I, in exercise of the powers conferred upon me under Section 19 of the SEBI Act, read with Sections 11(1), 11(4) and 11D thereof, hereby confirm that the directions issued vide ad interim ex parte order dated May 29, 2018 as against the Noticees mentioned above, shall continue until further orders. 27. In the matter of Amrapali Aadya Trading & Investment Pvt. Ltd. decided on October 31, 2018 wherein similar circumstances existed, to protect the interest of clients/ investors it was directed that a separate demat account and separate interest bearing bank account shall be opened wherein the securities and funds belonging to the Noticee therein woul....