Amalendu Mukherjee vs Sebi

Date of Decision: 14.03.2018

Misc. Application No. 45 of 2018 And Appeal No. 73 of 2018

Amalendu Mukherjee DSM- 340, DLF Trade Tower, Shivaji Marg, New Delhi- 110 015 ...Appellant

Versus

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

Mr. Manik Dogra, Advocate with Mr. Sidhartha Das and Mr. Rohan Jaitley, Advocates for the Appellant.

Mr. Gaurav Joshi, Senior Advocate with Mr. Tomu Francis and Mr. Vivek Shah, Advocates for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Dr. C.K.G. Nair, Member

Per: Justice J.P. Devadhar (Oral)

1.

This appeal is filed to challenge the ex-parte ad-interim order

passed by the Whole Time Member ("WTM" for short) of Securities and

Exchange Board of India ("SEBI" for short) on February 12, 2018. By

the said order several entities including the appellant are inter alia

restrained from accessing the securities market or buying, selling or

otherwise dealing in the securities in any manner whatsoever, either 2

directly or indirectly until further orders. The said order permitted the

appellant to file reply, if any, within 21 days from the date of receiving

the impugned order and also seek opportunity of hearing if deemed fit.

2. Instead of filing reply on merits, the appellant by a letter dated

February 15, 2018 addressed to the WTM of SEBI denied involvement of

the appellant in the investigation being conducted by SEBI and further

stated that detailed reply would be filed only after copies of requisite

documents were made available to the appellant.

3. Counsel for the appellant submitted that impugned ex-parte order

dated February 12, 2018 deserves to be quashed qua the appellant for the

following reasons:-

a) Financial irregularities allegedly committed by Ricoh

India Limited ("Company" for convenience) in the

year 2015 is being investigated by SEBI in the last

two years. In these two years SEBI has not chosen to

issue any notice/ summons to the appellant and,

therefore, passing ex-parte order after delay of more

than two years is wholly unjustified.

b) Out of the seven persons against whom the impugned

order is passed, six persons were heard before

passing the impugned order. However, in case of the

appellant, order is passed without giving any

opportunity of hearing which is in gross violation of 3

the principles of natural justice. In support of the

above contention reliance was placed on the decision

of this Tribunal in Appeal No. 254 of 2014 (Pancard

Clubs Ltd. v/s SEBI) decided on 17.09.2014.

c) SEBI is conducting investigation in the case of Ricoh

India Limited and the appellant had never been a part

of the management of that company and, therefore,

the ex-parte order passed against the appellant is

wholly unjustified.

d) Inspite of the letter addressed by the appellant on

February 15, 2018 copies of the documents set out

therein including the report submitted by

Pricewaterhouse Cooper ("PWC" for short) have not

been furnished to the appellant so far. It is submitted

that without furnishing a copy of the report submitted

by PWC against whom restraint order is passed by

SEBI on January 10, 2018, SEBI is not justified in

continuing the ex-parte order against the appellant.

Accordingly, counsel for the appellant submitted that while the appellant

is ready to appear before SEBI, for the reasons stated above, the

impugned order qua the appellant deserves to be quashed and set aside.

4. We see not merit in the above contentions.

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5. At the outset, it is relevant to note that the impugned order is

passed on the basis of facts gathered during the course of investigation

carried out by SEBI and not solely on the basis of the report submitted by

PWC. Therefore, the argument that without receiving a copy of the

report of PWC, appellant cannot reply is without any merit.

6. In any event, on perusal of the impugned order it is seen that the

WTM of SEBI has formed prima facie opinion that the appellant had

indulged in fraudulent and unfair practice, inter alia based on the tax

returns filed by Fourth Dimension Solutions Limited ("FDSL" for short)

in which the appellant is the Managing Director and in the case of

Redhex IT Solutions Pvt. Ltd., in which the brother of the appellant was

the Director at the relevant time.

7. Apart from the above, decision of the WTM of SEBI is also based

on analyzing the bank account statements of FDSL for the relevant

period. Since the investigation revealed, prima facie, that the financial

fraud allegedly committed by the key managerial personnel of Ricoh

India Ltd. was in collusion with the appellant, SEBI was justified in

passing the ex-parte order against the appellant.

8. Grievance of the appellant that key managerial personnel Ricoh

India Ltd., have been heard before passing the impugned order, but no

hearing was given to the appellant is without any merit. Investigation in

the present case commenced on receiving a letter from Ricoh India Ltd.,

that its key managerial personnel have committed financial fraud on the

company. Accordingly, the said key managerial personnel were heard 5

and thereafter on analyzing various documents including the tax returns/

bank statements of FDSL in which the appellant was the Managing

Director, the WTM of SEBI has formed a prima facie view that the

appellant has violated the SEBI (Prohibition of Fraudulent and Unfair

Trade Practices relating to Securities Market) Regulations, 2003

("PFUTP Regulations" for short).

9. Reliance placed by counsel for the appellant on a decision of this

Tribunal in case of Pancard Club (Supra) is misplaced. Observations

made therein were in the context of the decision of the Gauhati High

Court which was in favour of Pancard Club. In the present case, facts set

out in the impugned order prima facie establish involvement of the

appellant in the alleged fraud. Hence, decision of this Tribunal in case of

Pancard Club does not support the case of the appellant.

10. Thus, in the facts of present case we see no reason to entertain the

appeal at this stage and it would be open to the appellant to appear before

SEBI and put forth his contention for vacating the ex-parte order passed

against the appellant. If the appellant appears before SEBI, then SEBI

shall consider the plea of the appellant and pass appropriate order thereon

as expeditiously as possible.

11. In the result, we see no merit in the appeal and the same is hereby

dismissed with no order as to costs.

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12. In view of dismissal of the appeal, Miscellaneous Application No.

45 of 2018 becomes infructuous and the same is disposed of accordingly

with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Dr. C.K.G. Nair Member 14.03.2018 Prepared & Compared By: PK