Disposal of the representation of Prabhudas Lilladher Financial Services Pvt. Ltd. in respect of Mr. Divesh Agarwal and Ms. Anshu Agarwal.

1. Securities and Exchange Board of India ("SEBI"), vide an ad interim ex-parte order dated March 29, 2016 (hereinafter referred to as “interim order”), restrained 246 entities, including Shri Divesh Agarwal (PAN - AEBPA2498H) and Smt. Anshu Agarwal (PAN – ABYPA0389D), (hereinafter referred to as “debarred clients”), from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, till further directions

2. Towards implementation of the said direction, the demat account number 1201130000541223 held by Mr. Divesh Agarwal and demat account number 1201130000541204 held by Ms. Anshu Agarwal, has been frozen by the depositories for credit and debit of securities therein.

3. While the proceedings pursuant to the interim order are still in progress, Prabhudas Lilladher Financial Services Pvt. Ltd. (hereinafter referred to as "PLFS"), vide letters dated March 31, 2016, April 20, 2016, June 03, 2016 and August 03, 2016, inter-alia, requested for de-freezing of the aforesaid demat account numbers "1201130000541223" and "1201130000541204" and made the following submissions:

(a) PLFS is a RBI registered non deposit taking NBFC engaged in providing finance against approved shares and securities. (b) The debarred clients’ namely Mr. Divesh Agarwal and Ms. Anshu Agarwal availed Margin Trading Facility (MTF) from PLFS, against security of equity shares and accordingly, opened separate demat account no. "1201130000541223" and "1201130000541204" respectively, with Prabhudas Lilladher Pvt. Ltd., in CDSL and gave the power of attorney (POA) for operating the said demat account to PLFS. (c) All the shares purchased by the debarred clients under MTF get credited in the above demat accounts and on sale of stocks, PLFS being the POA holder delivered the stocks to the stock broker for pay-in on behalf of the debarred clients.

Disposal of the representation in respect of Shri Divesh Agarwal and Smt. Anshu Agarwal (d) No funding has been granted by PLFS to the debarred clients against the shares of Kailash Auto Finance Limited. (e) As on July 31, 2016, PLFS had granted loan amount (including interest) of `1,46,37,011.98 to Mr. Divesh Agarwal and ` 59,92,126.68 and Ms. Anshu Agarwal, against security of shares lying in their respective demat accounts. The list of shares lying in the said demats accounts of the debarred clients are given below:

Mr. Divesh Agarwal Scrip Name ISIN Quantity ASTRA MICROWAVE PROD INE386C01029 70000 CIGNITI TECHNOLOGIES INE675C01017 51652 GANESHA ECOSPHERE LT INE845D01014 10994 H C L INFOSYSTEMS INE236A01020 30000

Ms. Anshu Agarwal Scrip Name ISIN Quantity CIGNITI TECHNOLOGIES INE675C01017 2500 GANESHA ECOSPHERE LT INE845D01014 7000 H C L INFOSYSTEMS INE236A01020 120000 KOPRAN LTD INE082A01010 7808 (f) Pursuant to the interim order, the aforesaid demat accounts of the debarred clients were frozen and hence, PLFS or the debarred client are not able to sell the shares kept in the demat accounts to clear the dues of the debarred clients. 4. In support of aforesaid claims, PLFS made the following submissions: a. PLFS’s letter dated March 14, 2014 to Mr. Divesh Agrawal and letter dated March 18, 2014 to Ms. Anshu Agarwal, to extend the facility of loan against shares detailing the Terms and Conditions. b. PLFS’s letter dated April 21, 2014 to enhance sanction limit of loan for Ms. Anshu Agarwal c. Holding position of Mr. Divesh Agarwal and Ms. Anshu Agarwal, as on April 21, 2014. d. Copies of separate loan agreements dated March 27, 2014 between PLFS and Mr. Divesh Agarwal and PLFS and Ms. Anshu Agarwal. e. Loan Ledger for Mr. Divesh Agarwal and Ms. Anshu Agarwal from April 21, 2014 till July 31, 2016.

5. Further, upon its request, PLFS was granted permission and accordingly attended the hearing before WTM, along with Mr. Divesh Agarwal and Ms. Anshu Agarwal on August 24, 2016 wherein it reiterated the request for de-freezing the aforesaid demat account numbers "1201130000541223" and "1201130000541204" of the debarred clients to be able to sell the shares to the extent of recovering its dues. It also assured that it shall not transfer any shares or sale proceeds to these debarred clients without prior permission or order or direction of SEBI.

6. Upon enquiry, CDSL confirmed that the value of the portfolio of securities lying in the debarred clients’ demat account, as on March 29, 2016 is as follows:

Client name Portfolio value as on March Loan outstanding as on August 3, 29, 2016 (in `) 2016 (in `) Mr. Divesh Agarwal 3,13,05,558.60 1,46,37,011.98 Mrs. Anshu Agarwal 80,08,953.20 59,92,126.68 Total 3,93,14,511.80 2,06,29,138.66

7. In view of the submissions, I note that the lender, PLFS has not been restrained by the aforesaid interim order. The demat account operated by the debarred clients or transactions therein are not part of the scheme alleged in the interim order.

8. I also note the decisions taken in some of the similar earlier matters: a. In the matter of M/s. Kunvarji Finstock P Ltd. (Appeal no 161 of 2012) in the scrip of Tijaria Polypipes Limited, the Hon’ble SAT vide order dated August 6, 2012, inter-alia provided the following: “Therefore, in the peculiar facts and circumstances of the case, we are of the considered view that no prejudice will be caused to the ongoing investigations of the Board into the IPO manipulation of Tijaria Polypipes Ltd. if the appellant is allowed to square off the position by selling the shares of M and B Switchgears Ltd. in the account of the appellant to the extent it is required to realize its dues from the client. The shares, if any, that remain after recovering its dues shall be transferred to the demat account of the client. The appellant is directed to inform the Board and the client soon after the sale. The details of the adjustments so made shall also be furnished. The appellant has also undertaken that in the event it is called upon by the Board or by this Tribunal to bring back the money which it would have realised by the sale of shares, it shall do so forthwith. The undertaking is recorded. It is, however, made clear that if and when the appellant is called upon to bring back the money, it shall be open to it to challenge the said directions and avail of such remedy, as may be available in accordance with law.”

b. In the appeal of Shaswat Stock Brokers Private Limited in respect to the Interim Order in the matter of SMS Techsoft (India) Ltd., in accordance with the instructions of the Hon’ble SAT, SEBI had permitted Shaswat Stock Brokers Private Limited to square off the position by selling shares pertaining to the debarred client lying in its Account, to the extent required for realizing its dues from the client. The remaining shares, if any, after recovering the dues was to be transferred to the demat account of the client.

9. Considering the aforesaid submissions, evidences brought on record and the precedents, I am of the view that the balance of convenience is in favour of the lender, PLFS. Accordingly, I allow PLFS to sell the shares pertaining to the debarred clients, lying in the demat account – "1201130000541223" and "1201130000541204", to the extent required for realizing its dues from the respective debarred clients. The remaining shares, if any, after recovering its dues shall be transferred to the respective demat accounts of the debarred clients. PLFS may also be advised to inform SEBI and the debarred clients soon after the sale.

10. PLFS shall also provide an undertaking that in the event it is called upon by the Board to bring back the shares or the money which it would have realised by the sale of shares, it shall do so forthwith.

11. The aforesaid shall be subject to the supervision of exchanges and depositories and shall be without prejudice to the findings of pending investigation in the matter.

12. Accordingly, the representations of PLFS in this regard are disposed off.

Sd/- DATE: October 21, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA