Dr. Shivinder Mohan Singh vs Sebi

Order Reserved On: 21.12.2020 Date of Decision : 24.12.2020

Appeal No. 522 of 2020

Dr. Shivinder Mohan Singh C-110 South Extension Part-II, New Delhi- 110 038 ...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. Ashim Sood, Advocate with Mr. Rhythm Buaria, Mr. Arman Pratap Singh, Mr. Abhishek Singh, Ms. Swati Sutar, Advocates i/b Dhruv and Co. and Mr. Shivinder Mohan Singh for the Appellant.

Mr. Shiraz Rustomjee, Senior Advocate with Ms. Shreya Parikh, Mr. Abhiraj Arora, Advocates i/b ELP for the Respondent.

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 appellant has filed the present appeal questioning the

confirmatory order dated September 11, 2019 passed by the 2

Whole Time Member ("WTM" for convenience) of the

Securities and Exchange Board of India ("SEBI" for

convenience) under Sections 11(1), 11(4) and 11B of the

Securities and Exchange Board of India Act, 1992 read with

Regulation 11 of the SEBI (Prohibition of Fraudulent and

Unfair Trade Practices relating to Securities Market)

Regulations, 2003 ("PFUTP Regulations" for convenience) in

the matter of Religare Enterprises Limited ("REL" for

convenience) and its subsidiary Religare Finvest Limited

("RFL" for convenience) which is an unlisted company. By the

said impugned order the WTM confirmed the ex-parte interim

order dated March 14, 2019.

2. On March 14, 2019 an ex-parte interim order was passed

against the appellant/ common noticee no. 25 and 24 other

entities. The directions are extracted hereunder:-

"Securities and Exchange Board of India (hereinafter referred to as "SEBI") passed an ad-interim ex-parte order dated March 14, 2019 read with corrigendum dated April 18, 2019 (together referred to as „the Interim Order‟) in the matter of Religare Enterprises Ltd. against Religare Enterprises Ltd. (REL), Religare Finvest Ltd. (RFL), OSPL Infradeal Pvt. Ltd.

3 (OSPL), Bharat Road Network Ltd. (BRNL), Platinum Infrastructure Pvt. Ltd., Ad Advertising Pvt. Ltd., Artifice Properties Pvt. Ltd., Best Health Management Pvt. Ltd. (Best), Devera Developers Pvt. Ltd.

(Devera), Vitoba Realtors Pvt. Ltd. (Vitoba), Fern Healthcare Pvt. Ltd. (Fern), Modland Wears Pvt. Ltd. (Modland), Rosestar Marketing Pvt. Ltd., Star Artworks Pvt. Ltd., Tripoli Investment & Trading Co., Volga Management and Consultancy Pvt. Ltd., Zolton Properties Pvt. Ltd., Religare Comtrade Ltd., RHC Holding Pvt. Ltd.

(RHC Holding), Ranchem Pvt. Ltd.

(Ranchem), ANR Securities, Shivi Holdings Pvt. Ltd., Malav Holdings Pvt. Ltd., Malvinder Mohan Singh and Shivinder Mohan Singh (collectively referred to as „the Noticees‟) for the alleged prima facie violation of the provisions of Section 12A(a),

(b) & (c) of the SEBI Act, 1992 and Regulations 3(b), (c) & (d), 4(1) and 4(2) (f) & (r) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations, 2003) and various provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) and the Listing 4

Agreement. Vide the Interim Order, the following directions were issued against the Noticees:

i. REL and RFL (i.e. Noticee nos. 1 & 2) shall initiate steps to recall all the loans, amounting to Rs.2315.09 Crores (approx.) , as specified in the Interim Order, extended, either directly or indirectly, to the Noticee nos. 3 to 25 (viz. OSPL Infradeal Private Limited, Bharat Road Network Limited, Platinum Infrastructure Pvt. Ltd, Ad Advertising Pvt. Ltd, Artifice Properties Pvt. Ltd, Best Health Management Pvt. Ltd, Devera Developers Pvt. Ltd, Vitoba Realtors Pvt. Ltd, Fern Healthcare Pvt. Ltd, Modland Wears Pvt. Ltd, Rosestar Marketing Pvt. Ltd, Star Artworks Pvt. Ltd, Tripoli Investment & Trading Co, Volga Management and Consultancy Pvt. Ltd, Zolton Properties Pvt. Ltd, Religare Comtrade Limited, RHC Holding Pvt Ltd , Ranchem Pvt. Ltd, ANR Securities, Shivi Holdings Pvt. Ltd, Malav Holdings Pvt. Ltd, Shri Malvinder Mohan Singh and Shri Shivinder Mohan Singh), along with 5

due interest, within three months of the date of the order.

ii. The Noticee nos. 3 to 25 shall, pending completion of the investigation and till further orders, not dispose of or alienate any of their assets or divert any funds, except for meeting expenses of day-to-day business operations, without the prior permission of SEBI.

iii. The Noticee nos. 24 and 25 (viz. Shri Malvinder Mohan Singh and Shri Shivinder Mohan Singh) shall not associate themselves with the affairs of REL and RFL, in any manner whatsoever, till further directions."

3. The aforesaid ad-interim order was passed based on

complaints received by SEBI with regard to diversion of funds

by the Directors and Promoters of the company. A Forensic

Auditor was appointed and based on the preliminary reports the

aforesaid ex-parte ad-interim order was passed. Subsequently,

after considering the matter and the objection raised by the

parties the WTM confirmed the ex-parte interim order by the

impugned order and passed the following directions:- 6

29. In view of the foregoing, in order to protect the interest of the investors and the integrity of the securities market, I, in exercise of the powers conferred upon me by virtue of section 19 read with sections 11(1), 11(4)(d) and 11B of the SEBI Act, 1992, hereby confirm the directions issued vide the Interim Order, subject to modifications as specified hereunder:

(i) REL and RFL (i.e. Noticee nos. 1 & 2) shall continue with the steps to recall the loans, amounting to Rs.2065.09 Crores (approx.), extended, either directly or indirectly, to the Noticee nos. 5 to 17 and 19 to 25 (viz.

Platinum Infrastructure Pvt. Ltd, Ad Advertising Pvt. Ltd, Artifice Properties Pvt. Ltd, Best Health Management Pvt. Ltd, Devera Developers Pvt. Ltd, Vitoba Realtors Pvt. Ltd, Fern Healthcare Pvt. Ltd, Modland Wears Pvt. Ltd, Rosestar Marketing Pvt. Ltd, Star Artworks Pvt.

Ltd, Tripoli Investment & Trading Co, Volga Management and Consultancy Pvt. Ltd, Zolton Properties Pvt. Ltd, RHC Holding Pvt Ltd , Ranchem Pvt.

Ltd , ANR Securities, Shivi Holdings Pvt. Ltd, Malav Holdings Pvt. Ltd, Shri 7

Malvinder Mohan Singh and Shri Shivinder Mohan Singh), along with due interest.

(ii) The Noticee nos. 5 to 17 and 19 to 25 shall, pending completion of the investigation and till further orders, not dispose of or alienate any of their assets or divert any funds, except for meeting expenses of day-to-day business operations, without the prior permission of SEBI.

(iii) The directions contained in para 10(ii) of the Interim Order in respect of the Noticee no. 4 (Bharat Road Network Limited) and the Noticee no. 18 (Religare Comtrade Limited) stand revoked.

(iv) The Noticee nos. 24 and 25 (viz. Shri Malvinder Mohan Singh and Shri Shivinder Mohan Singh) shall not associate themselves with the affairs of REL and RFL, in any manner whatsoever, till further directions."

4. By a separate order dated December 21, 2020 we have

condoned the delay on account of the fact that the appellant was

arrested on October 10, 2019 and is still in custody. Thus, 8

considering the said fact the delay in filing the appeal was

condoned.

5. The facts leading to the filing of the appeal is, that SEBI

received complaints regarding financial mismanagement and

diversion of funds in REL, a subsidiary of REL which is a listed

company by the promoters/ group companies of REL. The

appellant is a Director /Promoter in the company and contended

that he had no role to play in the entire diversion of funds and

have accused other noticees who have orchestrated the alleged

diversion. The appellant has accused his brother Malvinder

Mohan Singh for diversion of funds.

6. The WTM after considering the forensic report and the

evidence with regard to the diversion of funds and considering

the fact that a detailed investigation was still in progress and

which would revealed the layers of the fraud committed by the

various entities and the specific role which each entity have

played, the interim order was confirmed.

7. We have heard the learned counsel for the parties at some

length. The learned counsel for the appellant basically

contended that the direction contained in the ex-parte ad-interim 9

order which was eventually confirmed directing REL and RFL

to take steps to recall loans, amounting to Rs. 2065.09 Crores is

illegal and that such direction cannot be passed under Sections

11B or 11(4) of the order. It was contended that admittedly the

investigation is going on and, therefore, it was not appropriate

for the WTM to pass an order for the recovery of the alleged

loan without having it finally adjudicated. It was contended that

a final order for recovery of the impugned order cannot be

passed at an ad-interim stage and, in any case, such orders was

not permissible under Sections 11B or 11(4) of the Act.

8. It was contended that the aforesaid direction was in the

nature of disgorgement which could not be made at this stage

since the investigation was still in progress. It was contended

that such order which has the element of finality could only be

passed after a complete inquiry which admittedly in the instant

case has not been completed.

9. It was contended that the impugned order is manifestly

illegal, unreasonable, unconscionable and arbitrary since it was

passed without adherence to the principle of natural justice. It

was contended that the impugned order passed on the basis of

material which was not disclosed to the appellant and has been 10

passed without applying its mind. It was contended that ex-

parte order could not have been passed without notice to the

appellant and it was contended that an ex-parte order could only

be passed if compelling circumstances existed which in the

instant case was non existent.

10. Having heard the learned counsel for the appellant, we

find that the appellant did not challenge the ex-parte interim

order dated March 14, 2019. Nothing prevented him from filing

an appeal. The appellant was arrested much later on October

10, 2019 after passing of the confirmatory order. The said

orders have been continuing against the appellant and there is

no reason why the said order should not continue till the

completion of the proceedings.

11. We have been informed that a show cause notice has been

issued to the appellant on November 17, 2020 directing the

appellant to file his objection, if any. In our view, once a show

cause notice has been issued it would appropriate that the

appellant contest the matter before the WTM and file his

objection. At this belated stage it is not appropriate to dwell

into the contention raised by the appellant that such interim

orders cannot be passed either under Section 11B or under 11 Section 11(4) especially when such orders have been continuing

since March 14, 2019.

12. We also find that the appellant was a Director and

Promoter in REL/ RFL when the alleged diversion of funds took

place. Thus, at this stage the contention of the appellant that he

has nothing to do with the diversion of funds cannot be accepted

in principle at this stage. It is, however, open to the appellant to

contest the matter before the WTM and prove by filing cogent

evidence that he has nothing to do with the alleged diversion of

funds.

13. In the light of the aforesaid, we are not inclined to

interfere in the impugned orders at this belated stage. The

appeal fails and is dismissed with a direction that the WTM will

decide the matter within six months (6 months) from the date

the appellant files his objection/ reply to the show cause notice.

In the circumstances of the case, parties shall bear their own

costs.

14. The present matter was heard through video conference

due to Covid-19 pandemic. At this stage it is not possible to sign

a copy of this order nor a certified copy of this order could be 12

issued by the Registry. In these circumstances, this order will be

digitally signed by the Private Secretary on behalf of the bench

and all concerned parties are directed to act on the digitally

signed copy of this order. Parties will act on production of a

digitally signed copy sent by fax and/or email.

Justice Tarun Agarwala RAJALAKS Digitally signed by RAJALAKSHMI H NAIR Presiding Officer HMI H NAIR Date: 2020.12.28 15:24:28 +05'30'

Dr. C.K.G. Nair Member

Justice M. T. Joshi Judicial Member 24.12.2020 PK