Himanshu Arora vs Sebi

3. Briefly stated the facts of the case are, pursuant to an

investigation conducted by SEBI into the affairs of Allied

Financial Services Pvt. Ltd. ('AFSPL' for short), which is a

SEBI registered Broker and Depository Participant, it was

observed that AFSPL had entered into agreements with certain

entities to manage the trading and demat account of Dalmia

group of companies. The connected entities, namely, Shri

Ashwini Kumar Mishra, M/s. Money Mishra Financial

Services ('MMFS' for short) and M/s. Money Mishra

Securities Pvt. Ltd. ('MMPL' for short) had acted as Portfolio

1 Chief General Manager 2 Securities and Exchange Board of India 3

Managers without obtaining a certificate of registration from

SEBI which is in violation of Section 12(1) of the SEBI Act3,

1992 read with Regulation 3 of the SEBI (Portfolio Managers)

Regulations, 1993. Appellant is a Director with AFSPL.

4. SEBI issued a show cause notice dated July 3, 2023

alleging inter alia that:

 AFSPL, its Managing Director, MMFS and MMPL had

entered into separate agreements with Dalmia group

entities;

 The noticee No.1 had stated in his letter dated May 30,

2022 that the purpose for entering into the said

agreements was to generate income for different promoter

held Dalmia group companies;

 As per the terms of the agreement, AFSPL was required

to execute the trades in F&O and Equity segments for its

investors.

and, thus, the notices had violated the provision of law

mentioned in the show cause notice.

3 Securities and Exchange Board of India Act, 1992 4

5. In substance, the allegation is that AFSPL, its Managing

Director, MMFS and MMPL were providing Portfolio

Management Services without having a valid certificate of

registration.

6. So far as the appellant is concerned, it is alleged in the

show cause notice that he was a Director in AFSPL during the

investigation period when the agreements were entered into

with Dalmia group entities to offer Portfolio Management

Services.

7. The noticees were called upon to show cause as to why

directions under Section 11(1), 11(4) and 11B(1) of the SEBI

Act read with SEBI (Portfolio Managers) Regulations be not

issued and penalty be not imposed. Appellant submitted his

reply dated July 29, 2023 to the show cause notice contending

inter alia that;

 He was merely an employee of AFSPL having job

profile in IT Division. He was looking after the

connection of terminal, server retrieval and other IT

related works;

5

 He was appointed as a Director of AFSPL only for

name sake without any power or control in the

company;

 He has not signed any agreement providing Portfolio

Management Services.

8. After granting an opportunity of hearing, the impugned

order has been passed by the SEBI.

9. Assailing the correctness of the impugned order Shri

Amit Gupta, learned Advocate for the appellant mainly

submitted that appellant was involved only with computer

related work. He urged that appellant was in no way

connected with the affairs of the Company's Portfolio

Management Services. Shri Ashwani Kumar Mishra was the

Managing Director of AFSPL. Appellant was appointed as a

Director with AFSPL only for name sake.

10. Opposing the appeal, learned Advocate for the SEBI

submitted that three agreements were entered into between

Allied group entities and Damlia group entities. Appellant was

the Director of AFSPL between December 15, 2017 and

January 17, 2019. He was also the Compliance Officer when 6

the transactions have taken place. Adverting to appellant's

statement recorded during the proceedings, he pointed out that

appellant has admitted that he was the Compliance Officer.

11. We have carefully considered rival contentions and

perused the records.

12. Undisputed facts of the case are, that appellant was a

Director of AFSPL from December 15, 2017 and January 17,

2019. He was appointed as the Compliance Officer on July 22,

2017.

13. Portfolio Management Services were provided by

AFSPL group to ACHPL4, VDPL5 and CTPL6. SEBI in

paragraph No.12 of its reply has stated the period when the

fund transactions and Portfolio Management trades occurred in

the accounts of Dalmia group entities and it reads as follows:

ACHPL VDPL CTPL Fund PMS Trades Fund PMS Trades Fund PMS Trades

Transaction [12.12.2018 Transaction [11.12.2017 Transaction [13.01.2018 [02.06.2017 to [21.09.2017 to [11.01.2017 to to 26.12.2018] to 17.01.2019] to 28.03.2018] 10.04.2018] 31.08.2018] 11.04.2018] Himanshu Almost 4 Entire More than 8 Almost Almost 4 More than 3 Arora Months Period Months Entire Months Months (Director)* Period Himanshu Entire Entire Entire Entire Entire More than 8 Arora Period Period Period Period Period Months (Compliance except 1 Officer)** month

4 Antordaya Commercial and Holdings Pvt. Ltd. 5 Vinimay Developers Pvt. Ltd.

6 Cointribe Technologies Pvt. Ltd.

7

14. We have perused appellant's statement recorded on oath

during the proceedings. To a pointed question with regard to

his appointment as Compliance Officer, appellant has stated

thus:

"Q4. Whether you were also the compliance officer at AFSPL for both Broker and DP function of AFSPL? lf Yes, since when?

A.4 I was given the post of compliance officer for both Broker and DP function of AFSPL, however, I used to handle only IT related work as referred at A.3 Above. I do not remember the date I was assigned the designation/role of compliance officer at AFSPL. Further, I don't have any document w.r.t assignment of the designation/role"

15. A Compliance Officer is required to ensure and monitor

compliance with SEBI Act, Rules, Regulations etc. He is also

required to report any non-compliance to the SEBI.

16. Appellant has not disputed the fact that he was appointed

as Director and Compliance Officer but his defense is that his

appointment was only for name sake. We are unable to

persuade ourselves to accept the said plea as ignorantia juris

non excusat, meaning ignorance of law is no excuse. 8

17. In view of undisputed fact that appellant was the

Director and Compliance Officer during the transaction period,

we find no legal infirmity in the impugned order. Hence, this

appeal must fail and is accordingly dismissed.

18. No costs.

Justice P.S. Dinesh Kumar Presiding Officer

Ms. Meera Swarup Technical Member

Dr. Dheeraj Bhatnagar Technical Member

RAJALA Digitally by signed

KSHMI NAIR RAJALAKSHMI H

14.01.2025 Date: 2025.01.14 H NAIR 14:04:23 +05'30' RHN