Ajay Goenka & Another vs Sebi

2. Sangeeta Goenka 201, Avdhesh House, Nr. Devang Park, Opp. Guru Govind Gurudwara, S.G. Highway, Thaltej, Ahmedabad - 380054. .....Appellants

(BY Mr. J. M. Bhalgat, Advocate for the Appellants.)

Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent 2

(BY Mr. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Komal Shah, Mr. Nishin Shrikhande and Mr. Harish Ballani, Advocates i/b. Vidhii Partners for the Respondent.)

With Appeal No.535 of 2022

1. Mr. Ajay Goenka 201, Avdhesh House, Nr. Devang Park, Opp. Guru Govind Gurudwara, S.G. Highway, Thaltej, Ahmedabad - 380054.

2. Sangeeta Goenka 201, Avdhesh House, Nr. Devang Park, Opp. Guru Govind Gurudwara, S.G. Highway, Thaltej, Ahmedabad - 380054. .....Appellants

(BY Mr. J. M. Bhalgat, Advocate for the Appellants.)

Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondent

(BY Mr. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Komal Shah, Mr. Nishin Shrikhande and Mr. Harish Ballani, Advocates i/b. Vidhii Partners for the Respondent.) 3

THESE APPEALS ARE FILED UNDER SECTION 15T OF SEBI ACT, 1992 TO SET ASIDE ORDER DATED OCTOBER 26, 2021 (Ex-A) AND MAY 27, 2022 PASSED BY WTM AND AO, SEBI.

THESE APPEALS HAVING BEEN HEARD AND RESERVED FOR ORDERS ON MARCH 06, 2025, COMING ON FOR PRONOUNCEMENT OF ORDER THIS DAY, THE TRIBUNAL MADE THE FOLLOWING:

ORDER

Per: Justice P.S. Dinesh Kumar, Presiding Officer

The appellants in these two appeals are common as also

the subject matter. Hence, we have heard these two

appeals simultaneously and disposing them by this

common order.

2. Appeal No.750 of 2022 is directed against order

dated 26.10.2021 passed by the WTM1, SEBI2

restraining the appellants (Noticee Nos.2 and 4) from

accessing the securities market for a period of three

years and restraining them from holding the position of

1 Whole Time Member 2 Securities and Exchange Board of India 4

a Director or KMP3 in any listed Company for a period

of three years.

3. Appeal No.535 of 2022 is directed against order

dated 27.05.2022 passed by the AO4, SEBI imposing a

penalty of Rs.20 Lakhs on appellant No.1 (Noticee

No.2) and Rs.10 Lakhs on appellant No.2 (Noticee

No.4).

4. We have heard Shri J. M. Bhalgat, Advocate for

the appellant and Shri Sumit Rai for the SEBI.

5. Brief facts of the case are, SEBI conducted an

investigation into the alleged irregularities into the

Global Depository Receipts (GDRs) issued by Rainbow

Papers Ltd. during the period 01.01.2010 to 28.02.2010.

6. During the investigation it was observed that on

27.01.2010, Rainbow Papers Ltd., a listed Company had

issued 1.02 million GDRs amounting to USD 27.02

million equivalent to 1,02,35,455 equity shares having

3 Key Managerial Person 4 Adjudicating Officer 5

par value of Rs.10. The issue was subscribed by only

one entity i.e. Vintage FZE. The subscription amount

was paid by Vintage by obtaining loan from EURAM

Bank5 by entering into loan agreement dated

11.01.2010.

7. After investigation, a Show Cause Notice ('SCN'

for short) dated 16.03.2018 was issued. After

adjudication, the WTM vide order dated 26.10.2021,

has restrained the appellants from accessing the

securities market and from holding the position as a

Director or KMP in a listed entity for a period of three

years. The period of restriction imposed by the WTM

has since expired on 25.10.2024, Appeal No.750 of

2022 is rendered infructuous.

8. Simultaneously, SEBI initiated proceedings under

Section 15HA of the SEBI Act and other provisions and

appointed an AO. An SCN dated 28.06.2018 was

issued. The appellants submitted their reply stating 5 European American Investment Bank AG. 6

inter alia that the documents such as pledge agreement

and certified true copy of the board resolution dated

27.11.2009 were not signed by them; that the SCN did

not demonstrate any personal gain made by the

appellants from dealing in the GDRs; and that they were

not aware of execution of pledge agreement and

creation of charge over the proceeds of the GDRs.

9. After adjudication, the AO has imposed a penalty

of Rs.20 Lakhs and Rs.10 Lakhs against the appellants

No.1 and 2 respectively.

10. Shri J. M. Bhalgat, Advocate for the appellant

submitted that:

 Appellants are innocent and are not aware of any

transaction whatsoever;

 SEBI has collected the documents from EURAM

Bank and not from the appellants. Therefore, the

burden of proving the documents lies on the SEBI;

7  Appellants have not signed any documents and

particularly the alleged Pledge document produced

at page No.106 of the appeal paper book.

11. In substance, the argument advanced on behalf of

the appellant is a total denial of execution of the pledge

agreement to the EURAM Bank.

12. In reply, Shri Sumit Rai, learned Advocate for

SEBI adverted to a table in paragraph No.38 of the

AO's order and submitted that appellant's Company has

transferred funds from its account in EURAM Bank to

its other Banks on various dates. He strongly contended

out that the amounts mentioned in column No.3 refer to

the repayment made by Vintage and the said sums

cross-matches with the amounts mentioned in column

No.4 which is the transfer of funds from Rainbow

Papers EURAM account. This shows that as and when

Vintage made repayments to the EURAM Bank, the

EURAM Bank permitted transfer of equivalent sums by 8

the appellant. Shri Rai submitted that there are several

cases of GDR, and in all cases, the very same modus

operandi has been used by the master mind one Mr.

Arun Panchariya, who is Noticee No.5 in this case. He

submitted that appellants have not taken any action such

as filing a police complaint to corroborate their

contention that the Pledge document was not signed by

the first appellant.

13. We have carefully considered the rival

submissions and perused the records.

14. Undisputed facts of the case are, Rainbow Papers

Ltd. had issued 1.02 million GDRs amounting to USD

27.02 million and the entire issue was subscribed by

only one entity, Vintage FZE. Rainbow Papers had

issued the GDRs on 27.01.2010. In the normal

circumstances, the Company issuing the GDRs receives

the entire money immediately. Hence, Rainbow Papers

ought to have received the entire subscription amount. 9

Appellant has produced the loan Agreement

No.K110110-011 dated 11.04.2010 between EURAM

Bank and Vintage. The nature and purpose of facility is

mentioned in the said loan agreement as follows:

"Nature and Purpose of Facility

To provide funding enabling Vintage FZE to take down GDR issue of 10,235,455 Luxemburg public offering and may only be transferred to Euram account nr.580 011, Rainbow Papers Limited."

15. The appellant has also produced the Pledge

agreement dated 11.01.2010 executed by appellant No.1

in favour of EURAM Bank. The preamble contained in

the pledge agreement reads as follows:

"Preamble

By loan agreement K110110-011 (hereinafter referred to as the "Loan Agreement") dated 11 January, 2010, the Bank granted a loan (hereinafter referred to as the "Loan") to Vintage FZE, AAH-213, AI Ahamadi House, Jebel Ali Free Trade Zone, Jebel Ali, Dubai, United Arab Emirates (the "Borrower") in the amount of USD 27,021,601.20. The Pledgor has received a copy of the Loan Agreement No.K110110-011 and 10

acknowledges and agrees to its terms and conditions."

16. A careful perusal of the loan agreement shows that

EURAM Bank had granted loan to enable Vintage to

subscribe 1.02 million GDRs issued by Rainbow Papers

Ltd. The pledge agreement executed by the appellant

No.1 is to secure the loan granted by EURAM Bank to

Vintage.

17. Appellants' case is that the GDRs Issue and their

subscription by Rainbow Papers Ltd. is genuine, and

that the appellants are ignorant about any transaction

between Vintage and EURAM Bank. Their another

argument is that the pledge agreement is a forged one.

To substantiate this argument, learned Advocate for the

appellant pointed out that the pledge agreement is dated

11.01.2010, whereas it is alleged to have been signed

before a notary in Mumbai on 14.01.2010. The SEBI

has not discharged its burden of proving the pledge

agreement.

11

18. In this case, the only point that arises for our

consideration is whether appellants were involved in the

GDR scheme?

19. Appellants admit that they have issued GDRs and

it was entirely subscribed by Vintage. Their only

grievance is that they have not executed the pledge

agreement.

20. The loan agreement shows that EURAM Bank had

agreed to fund Vintage to subscribe for 1.02 million

GDRs issued by Rainbow Papers Ltd. On 13.07.2010,

Arun Panchariya has acknowledged a letter written by

EURAM Bank stating that the Bank had agreed to

extend the outstanding loan amount under loan

agreement dated 11.01.2010 till 27.01.2011 (page

No.102 of paper book). Similarly, there are other

correspondences between EURAM Bank and Vintage.

21. The appellants' sole and principal argument that

they have not executed the resolution and the pledge 12

agreement is wholly untenable and liable to be rejected

firstly, because the table mentioned in paragraph 38 of

the impugned order contains five columns. The first

column contains the date, the second and third columns

show the repayment of loan by Vintage to EURAM and

columns 4 and 5 show the transfer of money from

Rainbow's EURAM account during the period

19.01.2010 and 28.07.2011. As rightly pointed out by

Shri Sumit Rai, the transfer of funds from Rainbow's

EURAM account cross matches with the repayment of

loan by Vintage to EURAM. It was rightly contended

by Shri Rai that as and when Vintage repaid the loan

amount to EURAM Bank, the EURAM Bank permitted

transfer of money by Rainbow. This fact remains

uncontroverted. As recorded hereinabove, if the

subscription of GDRs were to be genuine, the entire

subscription money ought to have been received by

Rainbow by one single transfer. GDRs are issued to 13

raise funds for specific purposes and for the benefit of

the Company. The tabular column in para 38 shows

that Rainbow has received money in bits and pieces in

32 tranches.

22. Secondly, though it was strenuously contended by

the learned Advocate for the appellant that the pledge

agreement was not signed by the appellant No:1,

surprisingly, no action such as lodging an FIR has been

taken by the appellants. Any prudent person alleged of

such serious charge, would have taken appropriate

remedial measures to vindicate his stand. Moreover,

appellant's company is the beneficiary of the GDR

proceeds and therefore there is no reason to presume

that an unrelated person would affix appellant's

signature on pledge documents.

23. In view of above discussion, we find no merit in

these appeals. Hence the following:

14

ORDER

i. Appeal No:535 of 2022 is dismissed;

ii.Appeal No:750 of 2022 is dismissed as having

become infructuous.

Pending interlocutory application(s) if any, stand

disposed of.

Justice P.S. Dinesh Kumar Presiding Officer

Ms. Meera Swarup Technical Member

Dr. Dheeraj Bhatnagar Technical Member

RAJALA Digitally by signed

28.03.2025 KSHMI NAIR RAJALAKSHMI H

Date: 2025.03.28 RHN H NAIR 14:18:05 +05'30'