TaxTMI 
TaxTMI 
2026 (3) TMI 1255
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....of 2021 With Appeal No. 600 of 2021 With Appeal No. 617 of 2021 With Appeal No. 619 of 2021 With Appeal No. 634 of 2021 With Appeal No. 635 of 2021 With Appeal No. 636 of 2021 - -<br>Securities / SEBI<br>JUSTICE P.S. DINESH KUMAR, PRESIDING OFFICER MS. MEERA SWARUP, TECHNICAL MEMBER AND DR. DHEERAJ BHATNAGAR, TECHNICAL MEMBER For the Appellant : Mr. J. P. Sen, Senior Advocate with Mr. Nirav Shah, Ms. Yugandhara Khanvilkar and Ms. Ashwini Hariharan, Advocates i/b. DSK Legal, Mr. Yash Momaya, Advocate with Mr. Munaf Virjee, Mr. Rushabh Parekh and Ms. Mithali Shetty, Advocates i/b. AMR Law For the Respondent : Mr. Vyom Shah, Advocate with Ms. Khushbu Chhajed, Mr. Nishit Dhruva, Ms. Rasika Ghate and Ms. Khushbu Trivedi, Advocates i/b. MDP Legal ORDER Per: Justice P. S. Dinesh Kumar, Presiding Officer These appeals are directed against order dated July 2, 2021, passed by the AO (Adjudicating Officer), SEBI (Securities and Exchange Board of India) and order dated August 11, 2021, passed by the WTM (Whole Time Member), SEBI for violation of the SEBI Act (Securities and Exchange Board of India Act, 1992), SEBI (LODR) Regulations (SEBI (Listing Obligations and Disclosure Requ....
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....in Kapadia, learned Advocate for the appellants in Appeal No.619 of 2021; Mr. Deepak Shah, learned Advocate for the appellants in Appeal No. 634, 635 and 636 of 2021 and Mr. Vyom Shah, learned Advocate for the SEBI. 5. Brief facts of the case are, one Mr. Ganpatraj Chowdhary (Appellant No.2 in Appeal Nos.543 and 588 of 2021 and 'Ganpatraj' for short) was the CMD (Chairman and Managing Director) of a listed company called Riddhi Siddhi (Riddhi Siddhi Gluco Biols Limited) ('Company' for short). He submitted a proposal for delisting Company's scrip from the BSE. BSE granted in-principle approval for delisting. The delisting offer was opened on March 6, 2018 and closed on March 12, 2018. The price discovered in the reverse book building (RBB) was Rs. 630 per share. SEBI received complaints from investors and directed BSE to keep the delisting on hold and finally, on December 26, 2018 the in-principle approval was withdrawn. 6. SEBI conducted an investigation into Company's scrip for the period between December 1, 2016 and March 12, 2018 and it was observed that Riddhi Siddhi had not disclosed Stuti (Stuti Trademart Private Limited), Siwana (Siwana Agri Marketing Limited) and Vita....
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....ivate Limited) together held 20.58%. Creelotex and Vicas sold their shares in Stuti on March 29, 2016. Ganpatraj continued to hold 7.77% shares, which was also subsequently sold on March 30, 2017. 12. With regards to Siwana, he submitted that Ganpatraj and five others collectively held more than 20% shares till March 31, 2016. Shareholding of Ganpatraj and Creelotex increased in Siwana on account of separation of business post sale of starch business and therefore, it cannot be considered as a violation. 13. Mr. Sen submitted that Stuti and Siwana formed part of Group-B and hence, neither they are 'promoters' nor 'promoter entities'. In support of this contention, he relied upon the decisions of this tribunal in Shree Kumar Bangur v. Securities and Exchange Board of India (Appeal No.358 of 2019, order dated 9.11.2021), Mr. Veerendra Kumar Singh & Anr. v. Securities and Exchange Board of India (Appeal No.524 of 2022, order dated 19.01.2023) and the judgment of the Hon'ble Supreme Court of India in Agrotech Ltd. v. State of U.P. (2006) 9 SCC 203) 14. Mr. Sen further submitted that, shareholding of Ganpatraj, Vicas and Creelotex in Stuti could not have had any effect on Stuti....
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....ing shares of Riddhi Siddhi in Reverse book building (RBB) by Vital was immediately thereafter on March 8, 2018. 18. He submitted that Stuti, Siwana and Vital were not part of promoter group entities because they were not part of Group-A and therefore, they were correctly categorized as public shareholders while considering MPS requirements as per SCR Rules, 1957. (Securities Contract (Regulation) Rules, 1957) 19. Mr. Rushin Kapadia, learned Advocate for the appellants in Appeal No.619 of 2021 (Vital) adopted the main arguments of Mr. Sen. In addition, he submitted that the bid price by Vital was lower than the book value of Riddhi Siddhi cannot lead to an automatic inference of fraud, particularly in the light of Riddhi Siddhi's declining net worth. He submitted that SEBI has taken the scrip price as per the book value at Rs. 1,600/-, whereas for the period between 1996 and 2016, the maximum traded price of the scrip was Rs. 518 per share. Therefore, SEBI's assessment of share price at Rs. 1,600 is wholly incorrect. 20. Mr. Vyom Shah, learned Advocate for the SEBI submitted that the family arrangement cannot disregard or override the definition of 'promoter group' in ICDR....
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....425) 25. In reply, Mr. Vyom Shah submitted that there was sudden increase in the trading of shares of Riddhi Siddhi by those appellants during the frequently traded period (FTP). During the FTP, more than 80% shares were traded inter se between Noticee Nos.1, 2, 3 and Noticee Nos.14 to 33. The sudden increase in trades during that period is not similar to the investment made in similar scrips by these appellants. The alleged loans transactions between the parties are not bona fide transactions but created for the purpose of fraudulent transactions. Common submissions made on behalf of the appellants in Appeal Nos.634, 635 and 636 of 2021 26. Mr. Deepak Shah, learned Advocate for the appellants submitted that appellants are not connected to other entities falling within the definition of 'immediate relative'. He submitted that these appellants have been wrongly charged under Delisting Regulations and PFUTP Regulations. 27. In reply, Mr. Vyom Shah submitted that, appellant in Appeal No.634 of 2021 is Mr. Lalit Shah. Appellant in Appeal No.636 of 2021 is his daughter (Sneha Lalit Shah). Appellant in Appeal No. 635 of 2021 (Shobha Lalit Shah) is Lalit's wife. She is also da....
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....led bank, foreign portfolio investor other than Category III foreign portfolio investor and mutual fund shall not be deemed to be a promoter merely by virtue of the fact that ten per cent or more of the equity share capital of the issuer is held by such person; Provided further that such financial institution, scheduled bank and foreign portfolio investor other than Category III foreign portfolio investor shall be treated as promoter for the subsidiaries or companies promoted by them or for the mutual fund sponsored by them; (zb) "promoter group" includes: (i) the promoter; (ii) an immediate relative of the promoter (i.e., any spouse of that person, or any parent, brother, sister or child of the person or of the spouse); and (iii) in case promoter is a body corporate: (A) a subsidiary or holding company of such body corporate; (B) any body corporate in which the promoter holds ten per cent or more of the equity share capital or which holds ten per cent or more of the equity share capital of the promoter; (C) any body corporate in which a group of individuals or companies or combinations thereof which hold twent....
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.... Stuti and 37.1% in Riddhi Siddhi. Similarly in Siwana shareholding pattern is as per Table No.6 above. It was argued by the appellants that Stuti and Siwana are entities belonging to Group-B and as per the family arrangement, Group-B was not permitted to invest in Group-A. It was further contended that the family arrangement argument has not been rejected by the learned WTM by recording a categorical finding. According to the appellants, Ganpatraj and his two brothers could invest in Group-B companies and members of Group-B were not permitted to invest in Group-A. A careful perusal of Table No.4 clearly shows that three promoters (Ganpatraj, Vicas and Creelotex) collectively held 37.1% in Riddhi Siddhi and 20.58% in Stuti. Table No.6 shows that the promoter group mentioned therein held 48.57% in Riddhi Siddhi and the same group held 22.52% in Siwana. These figures are not in dispute. But, the argument canvassed is, there was a family arrangement by which the members were divided into two groups and further, Stuti and Siwana belonged to Group-B. With regard to Ganpatraj Chowdhary's investment in those two Companies, it was sought to be justified that he belonged to Group-A and Grou....
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....is controlled by Mohit Bagmar, son of Sayaridevi. He does not fall within the definition of 'promoter group' under Regulation 2(1)(zb)(ii) of ICDR Regulations. It was argued on behalf of SEBI that Mohit Bagmar controlled Vital only on paper. To substantiate this contention, Mr. Vyom Shah urged that Ganpatraj had transferred Rs. 31.25 Lakhs to his sister on June 20, 2017 and she in turn transferred it to her son, Mohit Bagmar, on the next day. Mohit Bagmar acquired Vital on June 29, 2017. According to him, this exercise was undertaken to exclude Vital from the promoter group of Riddhi Siddhi. On the other hand, appellants contended that Ganpatraj had gifted the said amount to his sister and there was nothing unnatural about it. While rejecting their contention, the WTM has recorded thus: "50.1. Large amount of fund is transferred in Sister's account by Ganpatraj, which is subsequent transferred to Mohit's account. 50.2. No other such gifts amount from Ganpatraj were observed before or after the above transferred amount. 50.3. The amount transferred by Ganpatraj in Sister's account matches almost exactly to amount for payment of acquisition of Vital. ....
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....69 and total 'sell' shares was 8,59,545. It is further recorded that the total quantity traded amongst Noticee Nos.1 to 3 and 14 to 33 was 7,06,435. As noted hereinabove, Creelotex alone accounts for trading of 5,90,808 shares. Even if the trades of alleged connected parties are excluded, considering the inter se transaction between Creelotex and Ganpatraj of 5,90,808 shares, the minimum requirement of trade turnover of 10% of total number of shares is not satisfied. 42. So far as inter se connections are concerned, the WTM has prepared a detailed chart with the mode of connections. The following are the connections pertaining to the appellants: Sr. No. Appeal No. Filed by Connection: 1. 588 of 2021 1) Riddhi Siddhi Gluco Biols Limited, 2) Ganpatraj Lalchand Chowdhary, 3) Siddharth G Chowdhary, 4) Creelotex Engineers Private Limited 5) Ganpatraj Chowdhary HUF and 6) Mukeshkumar R Samdaria Mukeshkumar R Samdaria: • He was CFO of Riddhi Siddhi for FY 2016 - 17 and 2017 - 18. • Analysed account number 4311450288 with Kotak Mahindra Bank for 01/01/16 to 30/09/18. • Received Rs. 1,79,61,200 from Creelotex E....
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....UF of Mr. Javerilal Gopilal Jain/Oswal. Tankidevi Javerilal Oswal: • Wife of Javerilal Oswal and mother of Ravi Oswal and Kalpesh Oswal Vanita Kalpesh Oswal: • Wife of Kalpesh Oswal Kalpana Javerilal Oswal: • Daughter of Mr. Javerilal Oswal and sister of Ravi and Kalpesh Oswal Kavita Javerilal Oswal: • Daughter of Mr. Javerilal Oswal and sister of Ravi and Kalpesh Oswal 4. 598 of 2021 1) Rajendrakumar Gopilal Jain, 2) Akshay Rajendrabhai Oswal 3) Akshita Rajendra Shah Ravikumar Javerilal Oswal: • Analyzed account number 0061330018544 with HDFC Bank, and follows observed. • On 22/03/17 received Rs. 25 lacs from Riddhi Siddhi through Kauvery Trexim Private Limited, which was transferred to Oswal Shares and Securities Limited. • On 23/03/17 received Rs. 25 lacs from Kauvery Trexim Private Limited of which Rs. 14 lacs and Rs. 10 lacs were transferred to Javerilal Oswal and Kalpesh Oswal. • On 03/04/17 received Rs. 100 lacs from Mukesh R Samdaria and transferred same to Oswal Shares and Securities Limited. Akshay Rajendrabhai Os....
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....ave admitted connection with promoters of Metroglobal Limited in statement recording dated February 05, 2019. • Son-in- law of Mr. Shankarlal L Chowdhary (brother of Mr. Ganpatraj Chowdhary 9. 635 of 2021 Shobha Lalitkumar Shah • Daughter of Mr. Shankarlal L Chowdhary (brother of Mr. Ganpatraj Chowdhary). • Wife of Lalitkumar Ranmal Shah • Has common email id [email protected] (HDFC account number 08881000000213) 10. 636 of 2021 Sneha Lalitkumar Shah • Daughter of Shobha L Shah and Lalitkumar R Shah 43. Appellants' case is, the connections shown in the above chart are not relevant and do not conclusively prove that the appellants had traded in order to project the scrip as 'liquid' scrip. A careful analysis of the above chart shows that the respective parties were connected. The trades in Table No.15 of the impugned order concerning Noticee Nos.14 to 33 and Table No.16 concerning Creelotex and Ganpatraj have not been disputed. Once the connections are admitted, in a case of this nature, by applying the principle of preponderance of probability, it is reasonable to infer that a genuine investo....