TaxTMI 
TaxTMI 
2025 (11) TMI 1208
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....tember 30, 2024, passed by the learned WTM Whole Time Member of SEBI Securities and Exchange Board of India holding appellants in violation of Regulation 3(a), 3(b), 3(c), 3(d) and 4(1), 4(2)(e), 4(2)(f), 4(2)(k) and 4(2)(r) of the PFUTP Regulations SEBI Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 read with Section 12A(a), 12A(b) and 12A(c) of the SEBI Act SEBI Act, 1992. Vide the impugned order, the learned WTM has issued the following directions in the case of the appellant Nos. 1 to 4 (corresponding with noticee Nos. 5 to 8). i. Restrain from buying, selling or dealing in securities, or accessing capital market either directly or indirectly, in any manner. ii. Restrain from associating themselves with any intermediaries registered with SEBI, any listed public company or any company that intends to raise money from the public. iii. Impounding the unlawful gains earned from the alleged fraudulent activities carried out by the appellants, as under: - Noticee Amount to be impounded (in Rs.) P K Shah 3,46,84,799 P K Shah HUF 4,03,03,518 CSB Projects 7,43,37,888 Credo ....
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....of bonus shares to existing shareholders On November 6, 2020, SSSL issued bonus shares in the ratio of 1:2, by which 1,12,22,500 additional shares were allotted at Nil consideration to existing shareholders, over and above the existing 224.45 lakh shares, which included 20,00,075 bonus shares to the appellant. Thus, within three months, the number of shares increased to 336.67 lakh. (d) Stock split in the ratio of 10:1 for the existing shareholders in December 2021 On December 30, 2021, SSSL executed stock split in the ratio of 10:1. As a result, against each existing share held by a shareholder, 10 shares were allotted, at Nil consideration. In result, 33,66,75,000 shares stood in the names of existing shareholders (at Nil consideration) by December 30, 2021. (e) Issue of Right shares in August 2023 In August 2023, the company issued Right issue by which 20,20,25,000 shares were allotted. As a result, company's shares increased to 53.86 crores (as on August 31, 2023) from 22.45 lakh as on July 31, 2020, without commensurate cash consideration received by company. 2.5 Based on the investigation, SEBI noted that there were mis-representations in t....
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....he CSB, the appellant No. 3) Rs. 1.20 crores to M/s Shree and Rs. 0.69 crores to Ms. Shail Shah (promoters connected). Notably, the original subscription of Rs. 6.06 crores made by appellants was funded by PKC itself on August 13, 2020, which had received an amount of Rs. 4.63 crores from M/s. Apollo and an amount of Rs. 1.20 cr. from M/s. Shree on the same day i.e. on August 13, 2020. 2.9 Learned WTM noted that through this device, subsequently, the appellant made following unlawful gains by selling the equity shares of SSSL to public shareholders: - Sr. No. Name Amount Period of Sale (From - to) 1. P K Shah 3,46,84,799 14/07/2022 -03/08/2022 2. P K Shah HUF 4,03,03,518 22/11/2023-07/12/2022 3. CSB Projects 7,43,37,888 27/05/2022 - 27/06/2022 4. Credo 20,16,28,362 02/11/2021-25/05/2022 2.10 Vide the impugned order appellants are inter-alia, directed to impound the above amounts till further orders. Against the same, this appeal has been filed. 3. We have heard Mr. Gaurav Joshi, learned senior advocate with Ms. Rishika Harish, Mr. Aditya Bhansali, Ms. Akshaya Bhansali, Ms. Nirali Mehta, Mr. Keshav Taori, Ms. Naina....
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.... with Examen and the Appellants continued both prior to and beyond the period under investigation. 4.3 It is further submitted that the original Land Agreement could not be produced during the investigation due to destruction in a fire at Mr. Rakesh Shah's office, which is duly supported by an FIR and media coverage. Nevertheless, the Appellants obtained a copy of the agreement and ledger confirmation from Mr. Manish Shah on October 30, 2024 which was produced during the appellate proceeding. The impugned Interim Order erroneously concluded that the Appellants fraudulently acquired SSSL shares and earned unjust profits of Rs. 35.09 Crores, which is now under appeal. 4.4 It was also contended that respondent has not shown any market disruption or investor' loss due to the Appellants' conduct. In fact, the shares were sold at prices lower than the prevailing market price, negating the allegation of unlawful gains. 4.5 It was alleged that the Respondent also disregarded Mr. Rakesh Shah's submissions, including evidence of the Land Acquisition Agreement and the explanation that appellant could not earlier produce the same due to a fire incident destroying records. This selecti....
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....on an overall reading of the order, if the ingredients necessary to justify the direction passed are found, then it is an adequate order. He places reliance on the judgment the Supreme Court in the matter of Mahendra Prasad Singh v. State of Bihar &Ors. (2011) 13 SCC 118 Regarding SEBI's powers to issue direction of impounding he relies on SEBI vs Alka Synthetics Limited &Ors. 1998 SCC OnLine Guj 365. 5.5 Mr. Kapadia also submitted that there is an absolute lack of bonafides on the part of these appellants as they have failed to even furnish/ disclose list of their assets during the course of proceedings before the respondent and submitted that the appeal may be dismissed. 6. We have heard both the parties, considered their submissions and perused the records made available to us. We note that allegedly the promoters of the company, in active collaboration with the appellants engineered a fraudulent device to defraud public investors. The following were the limbs of the said device: A. Increasing shares in SSSL without cash consideration/consideration transferred back. B. Misrepresentation in financial statements for FY 2021 to FY 2022-23 to give rosy pictures to invest....
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....vestigation, the SEBI gave a finding that the source of funding of Rs. 6,06,00,000/- from four appellants eventually came from entities relating to Mr. Manish Shah, namely, M/s. Apollo (Rs. 4.639 cr.) and M/s. Shree (Rs. 1.20 cr.), who passed on the funds via PKC - (a one person company of appellant No. 1) to appellants. This was only on a day prior to subscribing in 40 lakh preferential shares on August 14, 2020. On the same day, i.e. August 14, 2020, funds were returned to PKC by SSSL and through it to the entities from whom funds were initiated. As noted, in addition to these 40 lakh shares, within a few weeks 20 lakhs bonus shares were allotted to appellants, without any consideration and in the next year through splitting of shares, these 60 lakh shares become 6 crore, without making payment of any subscription to company. Reg. : B. Misrepresentation in financial statements for FY 2021 to FY 2022-23 to give rosy pictures to investors. 6.4 We note that the SEBI through a detailed investigation, reached to the finding that the company fraudulently manipulated its financial statements whereby false and misleading steep rise in revenue, profit and investments was projected t....
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....rding the device engineered by them, by blatant violation of securities laws, based on detailed investigation. The defence of appellants is on retraction of a very elaborate statement by Mr. Manish Shah and on proving genuineness of transfer Rs. 7.63 cr. to PKC for investment in the land claimed to be for business purposes. 6.8 However, we do not find any force in explanation with regard to the said transfer of Rs. 7.63 Cr., stated to be given by the company as an advance to M/s. PKC on the very next date of receipt of preferential share subscription of R. 6.06 cr., which emanated through PKC only. During the course of investigations, no copy of land agreement dated August 1, 2020 was made available. It is seen that immediately upon receipt of an amount of Rs. 6.06 Cr., the company transferred Rs. 7.63 Cr. (inclusive of Rs. 6.06 cr.) to M/s. PKC (entity of appellant no. 1), which further transferred an amount of Rs. 4,63,00,000/- back to M/s. Apollo and Rs. 1,20,00,000/- to M/s. Shree. It is no co-incidence that the identical amounts were earlier transferred by Apollo and Shree respectively, on August 13, 2020, a day ago to PKC, who had then transferred the same to appellants, w....