Banas Finance Ltd. Anr. vs Sebi

Date: 26.7.2019

Appeal No.275 of 2018

1.

Banas Finance Ltd.

E/109, Crystal Plaza, New Link Road, Andheri (West), Mumbai-400053.

2. Handful Investrade Private Limited E/109, Crystal Plaza, New Link Road, Andheri (West), Mumbai-400053. .... Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051. ... Respondent

Mr. Deepak Dhane, Advocate with Mr. Shantibhushan Nirmal and Mr. Ravi Kant Purohit, Advocates i/b. Profess Law Associates for the Appellant.

Mr. Sumit Rai, Advocate with Mr. Kaushal Parsekar, Advocate i/b. Legasis Partners for the Respondent.

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

Per : Justice M.T. Joshi (Oral)

1. Aggrieved by the decision of the Adjudicating Officer

dated 27th April, 2018 directing the present appellants to 2

jointly and severally pay penalty of Rs.10 lakhs for not

making disclosures under Rules 7(3), 8(3) of Securities and

Exchange Board of India (Substantial Acquisition of Shares

and Takeovers) Regulations, 1997 and Rule 13(6) of the

Securities and Exchange Board of India (Prohibition of

Insider Trading) Regulations, 1992 (hereinafter referred to as

'SAST Regulations' and 'PIT Regulations' respectively) the

present appeal is preferred.

2. The Appellant no.1 had allotted 99 lakh equity shares at

a price of Rs.20 per share on preferential basis to 49 entities

including one of his promoter i.e. Appellant no.2 Handful

Investrade Private Limited. Out of these equity shares 14.50

lakh equity shares (i.e.14.22% shares) were allotted to

appellant M/s. Handful Investrade Private Limited. In view

of this fact Handful Investrade Private Limited had acquired

more than five percent of share capital it was therefore

required to make disclosure to the stock exchange. Similarly,

Appellant no.1 was also required to make disclosure received

from Handful Investrade Private Limited to stock exchange

and hence for want of disclosures the violation was alleged.

3. In short, the submission of the appellant Handful

Investrade Private Limited was that in fact the required 3

disclosures were made to the BSE within the time frame.

Handful Investrade Private Limited had submitted the copy

of the disclosure letter dated 30th December, 2010 addressed

to BSE which had the acknowledgment of BSE on 30th

December, 2010. So far as the appellant Banas Financial

Ltd. is concerned it also filed a copy of the letter dated 2nd

January, 2011 addressed to BSE bearing acknowledgement

seal of BSE dated 30th December, 2010.

The Adjudicating Officer (hereinafter referred to as

'A.O.') however found apparent contradiction in the said

letter. It was pointed out by A.O. that though the copy of this

disclosure letter is dated 2nd January, 2011, the

acknowledgment seal of BSE is dated 30th December, 2010.

Therefore, the A.O. concluded that the document is a

fabricated document created as an afterthought to create

documentary evidence.

In affidavit-in-reply to the present appeal respondent

SEBI had additionally supported the said reasoning by

showing that when the present appellant made the claim of

making disclosure to BSE, the respondent had sent an email

to BSE. BSE's response to it dated 9th January, 2015 would

show that as per the exchange record it had not received 4

documents as referred above. It further pointed out the

contradiction in the date of the letter and exchange

acknowledgment stamp as detailed by the Adjudicating

Officer. In the circumstance, the respondent SEBI submitted

that the plea of the appellant cannot be accepted.

The explanation of the appellant was that the letter was

post dated for a last date as per the requirement but the same

was handed over to BSE earlier. Neither there is the

contention of BSE in the email that the acknowledgment

stamp is a forged one nor any officer from the side of BSE

was examined by the Adjudicating Officer before confirming

his view on acknowledgment of document. Additionally,

learned counsel for the appellant during the course of

argument filed on record a true copy of the order delivered by

another Adjudicating Officer on 8th May, 2017 in the case of

Shreenath Commercial & Finance Ltd. The similar situation

had arisen in that case wherein the Adjudicating Officer had

examined Officer of BSE. In para nos. 15 and 16 of the

order said Adjudicating Officer had made the following

observations:

"15. I note that the noticee has submitted copy of acknowledgement which bears stamp of BSE inward section dated December 10, 2009 for 5

filing of disclosures to BSE under Regulation 7(3) of SEBI (SAST) Regulations, 1997, and Regulation 13(6) of SEBI (PIT) Regulations, 1992.

16. During the cross examination, the witness, Shri Abijit Pai, Assistant General Manager, BSE has also admitted that in 2009, the inward section in BSE was receiving the letters in physical form against acknowledgement and it could be that at the entry level the correspondence was received. However, it was not received in the listing department where it requires to be examined."

Resultantly the proceedings were dropped.

4. In the circumstances, he submits that though the copy

of the disputed disclosure letter was sent as an attachment to

the email issued by SEBI as can be seen from affidavit-in-

reply, the reply of BSE does not allege that the

acknowledgment over the said letter is fabricated and what is

merely stated is that it had not received the said disclosure

letter. He further submits that there could be a

communication gap between the various departments of BSE

as has been highlighted by another Adjudicating Officer as

detailed above is not taken into consideration in the present

case.

5. Upon hearing both sides, in our view, since there is no

material to show that the copy of the disclosure letter is 6

fabricated, merely because it is post dated no direct

conclusion could have been drawn by the Adjudicating

Officer that the said document is fabricated. More

particularly taking into consideration the decision taken by

another Adjudicating Officer in the case of Shreenath

Commercial & Finance Ltd dated 8th May, 2017 as detailed

supra in our view the appellant had shown that the required

disclosure was made.

6. In the circumstances, the appeal is allowed without any

order as to costs. The impugned order of the Adjudicating

Officer is hereby quashed and set aside.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member

26.7.2019 Prepared and compared by RHN