First Custodian Fund (I) Ltd. vs Sebi

Date of Decision: 07.03.2016

Appeal No. 140 of 2014

Shrikant G. Mantri Surya Mahal, 2nd Floor, Nagindas Master Road, Fort, Mumbai 400 023 ...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. Gaurav Joshi, Senior Advocate with Mr. Sunil Gangan and Mr. Jayesh Mestry, Advocates i/b RMG Law Associates for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Mihir Mody, Mr. Saurabh Bachhawat and Mr. Harekrishna Ashar, Advocates i/b K Ashar & Co. for the Respondent.

WITH Appeal No. 139 of 2014

First Custodian Fund (I) Ltd. Surya Mahal, 3rd Floor, Nagindas Master Road, Fort, Mumbai 400 001 ...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. Deepak Dhane, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Mihir Mody, Mr. Saurabh Bachhawat and Mr. Harekrishna Ashar, Advocates i/b K Ashar & Co. for the Respondent. 2

AND Appeal No. 141 of 2014

Harvestdeal Securities Ltd. Surya Mahal, 3rd Floor, Nagindas Master Road, Fort, Mumbai 400 001 ...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. Piyush Raheja, Advocate with Mr. Tejas Gokhale, Advocate i/b Ashok Purohit & Co. for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Mihir Mody, Mr. Saurabh Bachhawat and Mr. Harekrishna Ashar, Advocates i/b K Ashar & Co. for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Jog Singh, Member

Per: Justice J.P. Devadhar (Oral)

1.

By three separate ex-parte orders all dated May 15, 2014, the

Whole Time Member ("WTM" for short) of Securities and Exchange

Board of India ("SEBI" for short) has suspended the certificate of

registration granted by SEBI to the appellants for a period of two weeks.

Since the dispute in all these appeals relate to the trades executed by the

appellants in the shares of BPL Ltd., Videocon International Ltd. and

Sterlite Industries Ltd. during the period from April & May 1998, all

these appeals are heard together and disposed of by this common

decision.

2. Basic grievance of the appellants is that, when the adjudication of

the show cause notices took more than 16 years, there was no reason for 3

the WTM of SEBI to reject the application made by the appellants

seeking adjournment of the personal hearing fixed in the matter and to

pass the impugned ex-parte orders. It is also contended that without

seeking remand, the appellants can easily demonstrate that the impugned

orders cannot be sustained as the said orders have been passed without

considering various arguments advanced on behalf of the appellants,

which if considered would clearly show that no action need be taken

against the appellants.

3. Counsel for SEBI on the other hand submitted that the delay in

disposing of the show cause notices issued to the appellants in the year

1998 was primarily due to the adjournments sought by the appellants

from time to time and also on account of change of officers to whom

these matters were entrusted. It is further submitted that merely because

the WTM of SEBI has concurred with the findings recorded in the

investigation report, it cannot be said that the WTM of SEBI has not

considered the arguments advanced on behalf of the appellants.

4. On perusal of the Appeal Memo it is seen, that the appellants in

their reply to the show cause notice had specifically stated that the data

considered for issuing show cause notice are inaccurate and misleading.

The appellants in their reply had given facts and figures to demonstrate

that the very basis for initiating the proceedings against the appellants is

unjustified. However, neither the investigating authority nor the WTM of

SEBI have considered the said statements made by the appellants. When

the appellants had contended that the investigation department has not

considered the basic plea raised by them, the WTM was not justified in 4

merely concurring with the findings recorded in the investigation report.

The appellants have submitted a chart to show that several arguments of

the appellants have not been considered in the impugned order.

5. In these circumstances and also for the reason that the impugned

orders are ex-parte orders, we deem it just and proper to quash and set

aside the impugned orders and remand the matters for fresh decision on

merits and in accordance with law.

6. Accordingly, the impugned orders all dated May 15, 2014 are

quashed and set aside and the matters are restored to the file of WTM of

SEBI for passing fresh orders on merits and in accordance with law. All

contentions of both parties are kept open.

7. All the appeals are disposed of accordingly with no order as to

costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

07.03.2016 Prepared & Compared By: PK