Ashok Dayabhai Shah & Ors. vs Sebi

Order Reserved on: 18.10.2019

Date of Decision : 14.11.2019

Appeal No. 428 of 2019

1.

Ashok Dayabhai Shah 20, Alli Chambers, 2nd Floor, Tamarind Lane, Fort, Mumbai - 400 023.

2. Rupal Ashok Shah 20, Alli Chambers, 2nd Floor, Tamarind Lane, Fort, Mumbai - 400 023.

3. Pina Shah Flat 10, 4th Floor, Jolly Center, Tilak Road, Santacruz (West), Mumbai - 400 054.

4. Kuntal Hasmukhlal Shah 104, 1st Floor, Panchsheel, Plot No. 53, C Road, P.M. Shukla Marg, Churchgate, Mumbai - 400 020.

5. Hasmukhlal Vrijlal Shah 104, 1st Floor, Panchsheel, Plot No. 53, C Road, P.M. Shukla Marg, Churchgate, Mumbai - 400 020.

6. Shilpa Ajay Shah 107/4, Natwar House, V.P. Road, Near Girgaon P.O. Mumbai - 400 004.

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7. Nita Shailesh Shah 104, 1st Floor, Panchsheel, Plot No. 53, C Road, P.M. Shukla Marg, Churchgate, Mumbai - 400 020.

8. Pooja P. Goradia 104, 1st Floor, Panchsheel, Plot No. 53, C Road, P.M. Shukla Marg, Churchgate, Mumbai - 400 020.

9. Mihit Nimish Shah 104, 1st Floor, Panchsheel, Plot No. 53, C Road, P.M. Shukla Marg, Churchgate, Mumbai - 400 020.

10. Gautam Kantilal Pandhi Royal Garden, Flat No. 303, 3rd Floor, 203, New Palasia Indor, Madhya Pradesh, Indore - 452 001.

11. Madan Lal Narula 162, Venus Apartment, Cuffe Parade, Near President Hotel, Colaba, Mumbai - 400 005.

12. Sneha Anil Whabi Krishna Kunj, P. No. 41, Parkland Society, Near Bajaj Finserv, Viman Nagar, Pune - 411 014.

13. Anil Vithaldas Whabi Krishna Kunj, P. No. 41, Parkland Society, Near Bajaj Finserv, Viman Nagar, Pune - 411 014.

14. Pravin Hiralal Jain Flat No. 301, Queens Court Housing Society Ltd., Narangi Baugh Road, Off Boat Club Road, Pune - 411 001.

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15. Jain Pravinlal Hiralal HUF Flat No. 301, Queens Court Housing Society Ltd., Narangi Baugh Road, Off Boat Club Road, Pune - 411 001.

16. Lokesh Pravin Jain Flat No. 301, Queens Court Housing Society Ltd., Narangi Baugh Road, Off Boat Club Road, Pune - 411 001.

17. Vandana Pravin Jain Flat No. 301, Queens Court Housing Society Ltd., Narangi Baugh Road, Off Boat Club Road, Pune - 411 001.

18. Asha Manik 12 A II Palazzo Little Gibbs Road, Mumbai - 400 006.

19. Rohan Manik 12 A II Palazzo Little Gibbs Road, Mumbai - 400 006.

20. Jayshree Gokal 12 A II Palazzo Little Gibbs Road, Mumbai - 400 006.

21. Pankaj Shah 10/12, 4th Floor, Jolly Center, Tilak Road, Santacruz (West), Mumbai - 400 054.

22. Prasham Shah 10/12, 4th Floor, Jolly Center, Tilak Road, Santacruz (West), Mumbai - 400 054.

23. Gandhi Securities and Investment Pvt. Ltd.

9, Haji Kasam Building, 66, Tamarind Lane, Fort, Mumbai - 400 001.

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24. BRICS Securities Limited Office No. 72, 7th Floor, Maker Chambers - IV, Nariman Point, Mumbai - 400 021.

..... Appellants Versus

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

2. Bharat Nidhi Limited First Floor, Express Building, 9-10, Bahadur Shah Zafar Marg, New Delhi - 110 002.

3. PNB Finance and Industries Limited First Floor, Express Building, 9-10, Bahadur Shah Zafar Marg, New Delhi - 110 002.

4. Camac Commercial Company Limited First Floor, Express Building, 9-10, Bahadur Shah Zafar Marg, New Delhi - 110 002.

5. Mr. Vineet Jain, 15, Motilal Nehru Marg, New Delhi - 110 001.

6. Mr. Samir Jain, 15, Motilal Nehru Marg, New Delhi - 110 001.

7. Calcutta Stock Exchange of India Limited 7, Lyons Range, Dalhousie, Kolkata - 700 001, West Bengal.

8. National Stock Exchange of India Limited Exchange Plaza, C-1, Block G, Bandra Kurla Complex, Bandra (East), ....Respondents Mumbai - 400 051.

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Mr. Navroj Seervai, Senior Advocate with Mr. Gaurav Joshi, Senior Advocate, Ms. Arti Raghvan, Mr. Vikram Raghavi, Mr. Pulkit Sukhramani and Ms. Vidhi Jhawar, Advocates i/b J. Sagar Associates for Appellants.

Mr. Fredun DeVitre, Senior Advocate with Mr. Mihir Mody and Mr. Sushant Yadav, Advocate i/b K. Ashar & Co. for Respondent No. 1.

Mr. Venkatesh Dhond, Senior Advocate with Mr. V. Shetty, Mr. Nishant Upadhyay and Mr. Aditya Shivram, Advocates i/b AZB & Partners for Respondent No. 2.

Mr. Darius Khambata, Senior Advocate with Ms. Shruti Rajan, Mr. Rushin Kapadia and Mr. Pratham Masurekar, Advocates i/b Cyril Amarchand Mangaldas for Respondent No. 3.

Mr. Zal Andhyarujina, Advocate with Ms. Shruti Rajan, Mr. Rushin Kapadia and Mr. Pratham Masurekar, Advocates i/b Cyril Amarchand Mangaldas for Respondent No. 4.

Mr. Rohan Rajadhyaksha, Advocate i/b Sonu Tandon for Respondent No. 5.

Mr. Rashmin Khandekar, Advocate with Ms. Shruti Rajan, Mr. Rushin Kapadia and Mr. Pratham Masurekar, Advocates i/b Cyril Amarchand Mangaldas for Respondent No. 6.

Mr. Kaushik Chatterjee, Advocate for Respondent No. 7.

Mr. Rashid Boatwalla, Advocate with Ms. Shreya Anuwal, Advocate i/b Manilal Kher Ambalal & Co. for Respondent No. 8.

CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member

Per : Justice Tarun Agarwala, Presiding Officer

1. The appellants are aggrieved by the disposal of their

complaints on the SCORES platform by the Securities and 6

Exchange Board of India ('SEBI' for short) against which the

present appeal has been filed.

2. The facts leading to the filing of the present appeal is,

that the appellants are minority public shareholders of Bharat

Nidhi Limited ('BNL' for short), Respondent No. 2

Company, PNB Finance and Industries Limited ('PNBF' for

short), Respondent No. 3 Company and Camac Commercial

Company Limited ('Camac' for short), Respondent No. 4

Company.

3. BNL, Respondent No. 2 was a listed entity, whose

shares at the relevant time, were listed on the Delhi Stock

Exchange. The recognition of this Exchange was withdrawn

by SEBI on November 19, 2014 and thereafter the shares of

the BNL were listed on the Calcutta Stock Exchange on

February 19, 2015. It has been stated that the equity shares of

BNL were moved to the dissemination board of BSE Limited

('BSE' for short) and subsequently was transferred to

dissemination board of the National Stock Exchange of India

Limited ('NSE' for short). PNBF, Respondent No. 3 and

Camac, Respondent No. 4 are also a listed Company whose

shares were listed on the Calcutta Stock Exchange. 7

4. BNL, PNBF and Camac hold 24.41%, 9.29% and

13.30% shares respectively in Bennett, Coleman & Co. Ltd.

('BCCL' for short) which is alleged to be India's largest

media conglomerate. Mr. Vineet Jain and Mr. Samir Jain,

Respondent Nos. 5 and 6 are the Managing Directors of

BCCL through inheritance.

5. It is the case of the appellants that Respondent Nos. 2, 3

and 4 Companies are under the effective control of

Respondent Nos. 5, 6 and their family members. However,

Mr. Vineet Jain and Mr. Samir Jain, Respondent Nos. 5 and 6

exercise control over BCCL by virtue of their ownership /

control of Respondent Nos. 2, 3 and 4 Companies and 8 other

entities who are the shareholders of BCCL.

6. It is the further case of the appellants that since 2013

some of the appellants have jointly or individually filed

several complaints before SEBI, Respondent No. 1 urging

SEBI to investigate and take action in respect of two

violations, namely:-

(i) Incorrect disclosures being made by BNL, PNBF

and Camac regarding their promoter shareholding

thereby failing to disclose the true promoters; 8

(ii) Consequently, failure by these companies to

comply with Minimum Public Shareholding norms

prescribed under applicable securities laws;

7. It is the further case of the appellants that Respondent

No. 1 SEBI has time and again taken varying stands wherein

SEBI has either not responded to the complaints at all or

adopted a position that investigation in the matter is underway

or treated the complaints as market intelligence, without

concluding such investigations or passing any reasoned order

while disposing of the complaints of the appellants.

8. The contention of the appellant is that BNL, PNBF and

Camac are Companies which are owned and controlled by

Mr. Vineet Jain, Mr. Samir Jain and their family members

who are the Managing Directors of BCCL, more commonly

known as the Times Group. In this regard, the complaints

filed by the appellants can be detailed as under:-

[[

(i) On August 17, 2013 a complaint was filed with

SEBI relating to non-disclosure of promoter

shareholding of BNL and the violations of

minimum public shareholding requirements by

BNL. It is stated that till date no response has

been received from SEBI on this complaint. 9

(ii) Another complaint was filed on May 15, 2017on

the SCORES platform of SEBI raising issues

relating to violation of minimum public

shareholding requirements by BNL.

(iii) On June 28, 2017 a complaint was filed with

SEBI in relation to violation of minimum public

shareholding requirements by BNL.

(iv) Another complaint was filed on September 25,

2017 on the SCORES platform of SEBI in

relation to the violation of minimum public

shareholding requirements by BNL.

(v) Emails as reminders were sent to SEBI on

September 12, 2018, September 26, 2018,

October 1, 2018, October 13, 2018, October 25,

2018, May 15, 2019, June 17, 2019 and July 25,

2019.

(vi) On May 6, 2019 another complaint was filed on

SCORES platform of SEBI with regard to

violation of the minimum public shareholding

requirements of BNL.

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(vii) Another complaint dated June 27, 2019 was filed

relating to minimum public shareholding

requirements by BNL.

(viii) On August 9, 2019 a detailed complaint was

filed with SEBI and with the Ministry of

Corporate Affairs and the Ministry of Finance

relating to non-disclosure of promoter

shareholding of BNL.

(ix) Compliant dated August 3, 2019 was filed

against BNL and on August 16, 2019 individual

complaints were filed against Camac and PNBF

on the SCORES platform of SEBI.

9. It is alleged that all the complaints as stated aforesaid

remained unaddressed except complaint dated May 15, 2017,

September 25, 2017, May 6, 2019 and August 3, 2019 filed

on the SCORES platform. The last complaint dated August 3,

2019 was disposed of by the impugned order against which

the present appeal has been filed.

10. It was contended that the minimum public shareholding

of 25% by a listed company was not followed as per Rule

19A of the Securities Contracts (Regulations) Rules 1957 11

('SCRR' for short) read with Regulation 38 of the SEBI

(Listing Obligations and Disclosure Requirement)

Regulations, 2015 ('LODR Regulations' for short) and that

SEBI for reasons best known was neither actively considering

nor investigating the matter. It was urged that the repeated

inaction of SEBI to deal with the complaints filed by the

appellants since 2013 is writ large. It was also contended that

the manner in which the complaints of the appellants have

been disposed of in a mechanical and summary manner shows

total non-application of mind and which has caused great

prejudice to the complainants who are minority public

shareholders of BNL, PNBF and Camac. It was lastly urged

that the impugned order does not disclose any sound reasons

and a computer generated order has been passed mechanically

without any application of mind.

11. It was contended that Respondent Nos. 2, 3 and 4 have

concealed their actual promoter shareholding and have failed

to comply with the minimum public shareholding norms. It

was further urged that Respondent Nos. 5 and 6 Mr. Vineet

Jain and Mr. Samir Jain exercise total control over these three

companies and are the ultimate beneficial owners of the

Company and have wrongly classified themselves as public

shareholders of these companies which facts are so glaring, 12

but for the reasons best known, SEBI has turned a blind eye

and has disposed of the complaints in a cursory manner.

12. Some of the respondents have raised a preliminary

objection that the appeal is not maintainable under Section

15T of the SEBI Act, 1992 as no order has been passed. It

was urged that an appeal lies only against an order passed by

an Authority. In the instant case, a computer generated

communication disposing of the complaints is impugned

which cannot be termed as an appealable order. One of the

respondents further contended that a composite complaint

against Respondent No. 4 on a common issue cannot be

challenged in a single appeal and therefore the appeal is not

maintainable. Issue of mis-joinder of necessary parties was

also raised and it was also contended that since there was no

order as such no appeal could be filed. Respondent No. 7

Calcutta Stock Exchange of India Ltd. also appeared and

submitted that a report on this issue was submitted to SEBI

which prima facie showed that the Respondent Nos. 2, 3 and

4 had violated the SEBI LODR which provides for

requirement of maintaining minimum public shareholding of

25% by a listed company ('MPS Norms') and that the said

Company wrongly had shown it as public shareholders. 13

13. On the issue of maintainability of the present appeal the

respondents have placed reliance upon a decision of this

Tribunal in the matter of Mr. Deepak Mehra vs Securities

and Exchange Board of India & Ors. in Appeal No. 140 of

2009 decided on August 28, 2009 wherein the Tribunal held

that the appeal was premature as no final decision in the

matter was taken by the Authority. Reliance was also made

upon a decision of the Supreme Court in the matter of

National Securities Depository Limited vs. Securities and

Exchange Board of India (2017) 5 SCC 517 wherein the

question raised was whether an administrative circular issued

by SEBI under Section 11(1) of the SEBI Act could be a

subject matter of appeal under Section 15Tof the SEBI Act.

The Supreme Court held that the circulars issued by SEBI are

outside the appellate jurisdiction of the Tribunal and cannot

be questioned. Further reliance was made upon a decision of

this Tribunal in the matter of M.Z. Khan S/o M.A. Khan vs

Securities and Exchange Board of India decided on

September 8, 2009 MANU/SB/0113/2009 wherein this

Tribunal held that in the absence of any order of SEBI, no

appeal could lie. It was found that inaction on the part of

SEBI will not allow a party to file an appeal. 14

14. On the other hand, the appellants have placed reliance

upon a decision in the matter of Amit Bhagvatprasad Barot

vs Securities and Exchange Board of India & Ors. in Appeal

No. 157 of 2012 decided on September 3, 2013 wherein the

Tribunal held that a complaint which has been disposed of is

appealable under Section 15T by a person aggrieved. The

Tribunal held that an investor whose complaint is arbitrarily

rejected is a person aggrieved and is entitled to file an appeal

under Section 15T of the SEBI Act. Further reliance was

made by the appellants upon a decision of this Tribunal in the

matter of Victor Fernandes & Anr. vs Securities and

Exchange Board of India & Ors. in Appeal No. 42 of 2017

decided on June 22, 2018 where the disposal of the complaint

alleging non-compliance of Clause 36 of the Listing

Agreement was found to be appealable before this Tribunal.

15. Having heard the learned senior counsel for the parties

at some length we are of the opinion that an order /

communication by the respondent disposing of the complaint

of the appellants on the SCORES platform is an appealable

order under Section 15T of the SEBI Act. If the complainants

are aggrieved by the disposal of the complaint on the

SCORES platform the said complainants have a right to file

an appeal under Section 15T of the SEBI Act. We are further 15

of the opinion that the computer generated communication by

the respondent on the SCORES platform, even though it may

be an administrative communication is nonetheless an order

since it disposes of the lis between the parties and disposes of

the complaint and the issues raised by the complainants. The

said communication / order as the case may be, in our

opinion, is appealable. In the light of the aforesaid, the

decisions cited by the respondents are distinguishable and not

applicable in the instant case. The preliminary objection thus

raised by the respondents is rejected.

16. In the instant case, we find that written complaints made

to SEBI from 2013 onwards has not been disposed of as yet

but complaints filed on the SCORES platform has been

disposed of without deciding / settling the issue that was

raised in the complaints. Thus, disposal of the complaints by

the respondents on the SCORES platform is no disposal in the

eyes of law. It is merely an eye wash without disposing of the

complaints and without settling the controversy involved in

the complaints.

17. SCORES is an online platform designed to help

investors to lodge their complaints pertaining to the securities

market. These complaints are filed online with SEBI against 16

listed companies and SEBI registered intermediaries. All

complaints received by SEBI against listed companies are

dealt through SCORES. The complaint made by the

appellants on SCORES has been disposed of by the impugned

order in the following manner.

"Dear Sir / Madam,

With reference to your captioned complaint, Kindly be informed that the same has been disposed of in SCORES (www.scores.gov.in) with the following remarks:

The information provided by you will be treated as market intelligence. This information shall be treated as confidential. This information will be analysed and if found necessary, further action will be taken. The status of information cannot be ascertained as SEBI conducts the investigations confidentially in a holistic manner. In order to aid SEBI to carry out its surveillance activity, you are encouraged to provide correct and complete information. SEBI will neither confirm nor deny the existence of any investigation. Any regulatory actions taken by SEBI are published at SEBI website. You may contact the Dealing officer for clarification if any (Details of Dealing Officer SEBI is available under "view complaint status" by logging in to SCORES website i.e. www.sebi.gov.in or you may contact SEBI toll free helpline: (1800 22 7575 / 1800 266 7575)

Yours faithfully, For SECURITIES AND EXCHANGE BOARD OF INDIA

(Authorised Signatory)"

18. The complaint made by the appellants was a serious

issue with regard to incorrect disclosures being made by three

companies regarding their promoter shareholding and 17

consequently failure of these three companies from

complying with the minimum public shareholding

requirement as per Rule 19A of the SCRR read with 38 of the

LODR Regulations. The disposal of the complaint does not

refer to the issues raised by the complainants / appellants with

regard to the non-disclosure of the promoters' shareholding or

violation of the minimum public shareholding requirement

under the Rules and Regulations. On the other hand, the

communication intimated to the appellants has closed the

complaint in a roundabout manner intimating the appellant

that the information provided by the complainants would be

treated as market intelligence and would also be treated as

confidential. Why would the complaint of the appellants be

treated as market intelligence or be treated as confidential is

not known nor in our view the complaint is such which

requires SEBI to treat it as market intelligence or confidential.

It is not a price sensitive matter which requires SEBI to keep

such matters under wraps or confidential in nature.

19. We also find it strange to note that SEBI in the said

order / communication states that the information submitted

by the appellants would be analyzed and investigation would

be made in a holistic manner but, on the other hand, in the 18

same breath states that SEBI would neither confirm nor deny

the existence of any investigation conducted by them.

We find that before the Delhi High Court SEBI informed that

the matter is under investigation by them. We find it strange

that while disposing of the complaint SEBI would neither

confirm nor deny as to whether investigation in the complaint

is going on or not.

20. We find the approach adopted by the respondents to be a

strange one. Such computer generated disposal of a serious

complaint speaks volume on the conduct of the respondents in

treating the minority shareholders in this shabby manner. It

seems that the respondents have lost sight of the mandate

provided to them under Section 11 of the SEBI Act which

mandates SEBI to safeguard the interest of the investors.

Disposal of the complaint in this manner in the instant case

indicates non-application of mind and non-consideration of

the interest of the investors. We have no hesitation in stating

that the SEBI as a regulator in the instant case has not

performed its duties and has kept the complaint pending for

more than six years which speaks volumes by itself. The

Tribunal fails to fathom as to why the complaint could not

have been decided unless SEBI officials had a vested interest

in not deciding the matter.

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21. In the light of the aforesaid, we set aside the

communication / order passed by the SEBI on the SCORES

platform. The appeal is allowed. We direct the appellants to

file a consolidated representation / complaint before SEBI

annexing the earlier complaints within four weeks from today.

If such an application is filed SEBI will consider and decide

the matter by a reasoned and speaking order within six weeks

from the date of the presentation of the complaint along with

the certified copy of our order. It would be open to SEBI to

grant an opportunity of hearing to the parties if they think it

appropriate. In the circumstances of the case, parties shall

bear their own costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member 14.11.2019 Prepared and compared by:msb