Kalpana Dilip Mehta vs Sebi

its clients assuring fixed returns and was potentially carrying out

the same in the nature of Portfolio Monitoring Services ('PMS')

the forensic audit revealed that Anugrah was offering two plans,

namely, Gold and Platinum having minimum investment of

Rs. 10 lakhs and Rs. 1 crore respectively. Under these plans the

Anugrah was offering an assured return of 12% per annum with

a lock-in period of one year under the Platinum plan. The

forensic audit revealed a list of clients of Anugrah who were 10

availing DAS. The appellants name figured in the list which

availed DAS.

4. The Stock Exchange thereafter declared Anugrah as a

defaulting trading member by an order dated November 26,

2020 under Chapter XII of the Bye Laws of the Stock Exchange

and accordingly expelled Anugrah as a stock broker from the

Exchange.

5. On February 19, 2021 the appellant Sameer Himatlal Shah

lodged a claim for payment of Rs. 58.71 lakhs under the

Investor Protection Fund. This claim was found to be

inadmissible and was rejected by the Committee on March 27,

2021. A Review Application was filed which was also

dismissed as not maintainable. The appellant filed an appeal

before this Tribunal which was allowed by an order of this

Tribunal dated November 24, 2022 and the matter was remitted

to the Committee to decide the matter afresh in accordance with

law. Based on the directions the impugned order has been

passed again rejecting the claim of the appellant.

6. Similar are the facts of the other appellants who were

registered with Anugrah and deposited various sums of money.

Their claim was also rejected and after remand from this 11

Tribunal the impugned order was again passed rejecting their

claims.

7. By the impugned orders the claim of the appellants to

receive compensation under the Investors Protection Fund has

been rejected on the ground that the appellant has been availing

DAS. In the case of Sameer Shah the Committee found that the

appellants Unique Client Code was mentioned in the list of

clients availing DAS which formed part of the forensic audit

report and that the appellant was receiving assured/ guaranteed

returns. The returns that were received by the said appellant is

extracted hereunder:-

Sr. No. Account Code Date Amount 1. PSS177 09-Apr-19 46,200.00 2. PSS177 04-Jun-19 75,000.00 3. PSS177 10-Jun-19 59,850.00 4. PSS177 10-Jul-19 63,000.00 5. PSS177 09-Aug-19 63,000.00 6. PSS177 09-Sep-19 2,900.00 7. PSS177 11-Sep-19 62,552.00 8. PSS177 10-Oct-19 63,000.00 9. PSS177 04-Nov-19 9,600.00 10. PSS177 11-Nov-19 63,000.00 11. PSS177 05-Dec-19 6,400.00 12. PSS177 10-Dec-19 63,000.00 13 PSS177 19-Dec-19 8,000.00 14. PSS177 09-Jan-20 78,750.00 15. PSS177 28-Jan-20 25,000.00 16. PSS177 10-Feb-20 70,650.00 17. PSS177 09-Mar-20 4,800.00 18 PSS177 11-Mar-20 63,000.00 12

8. Similar returns were given to the other appellants and a

similar finding has been given by the Committee.

9. We have heard Shri Sandip Parikh, the learned counsel

and Shri Kamal Agrawal, Authorised Representative for the

appellants and Shri Gaurav Joshi, the learned senior counsel and

Mr. Jaikishan Lakhwani, Mr. Ishan Agrawal, and Ms. Krushi

Barfiwala, the learned counsel for the Respondent.

10. The basic contention of the appellants is, that they have

sold and purchased shares through transactions on the Stock

Exchange platform and the broker i.e. Anugrah has given the

pay-outs which is not related to any assured returns. In support

of their contention some of the appellants have annexed the

contract notes in their memorandum of appeal. Even though,

such contract notes were not placed before the Committee it was

contended that based on the contract notes, sale and purchase

were made and pay-outs were given by the broker which is

reflected in the ledger account and that such pay-outs are not

assured returns. Some of the appellants also stated that the

contract notes were filed but were not considered. 13

11. Having perused the record in each appeal, one finds that

the contract notes annexed to the memorandum of appeal have

no bearing with the assured return paid to the appellants and

which is reflected in the impugned order.

12. In the case of Sameer Shah it was urged strenuously that

the appellants have sold and purchased shares based on the

contract notes and pay-outs were accordingly made. A perusal

of the contract notes indicate that the transactions were done on

the basis of the scheme floated by the broker under the DAS

which was not permissible. The learned counsel for the

appellant had no answer to the usage of the word 'DAS' in the

contract notes filed in the memorandum of appeal.

13. Further, the contract notes submitted by the said appellant

Sameer Himatlal Shah and other appellants does not reflect the

pay-outs of these transactions as that indicated in the impugned

order. Further, the returns/ amount paid by the broker to the

appellants which is reflected in the impugned order has not been

denied by the appellants. No contract notes have been filed

relating to the amount received by the appellants and depicted in

the impugned orders.

14

14. We find that no evidence has been filed to show that the

amounts received by the appellants as depicted in the impugned

order were pursuant to the contract notes which they have

annexed in their memorandum of appeal.

15. Under Rule 8(f) of the Securities Contracts (Regulation)

Rules, 1957 no person is eligible to be elected as a member if he

is engaged in any business other than that of securities or

commodity derivatives except as a broker or agent who is not

involved in any personal financial liability. The offering of

DAS by Anugrah to its clients which included the appellants

assuring fixed returns was prohibitive and, therefore, the claim

was not permissible under the Investors Protection Fund under

Chapter XIII of the Bye Laws.

16. There is ample evidence to indicate that the pay-outs

received by the appellants were not against the transaction

executed on the trading platform but the same was in the form

of an assured return which is prohibited. Offering of DAS in

our opinion is against the Rules, Regulations, Bye Laws and

Circulars of the Exchange and Securities and Exchange Board

of India ('SEBI'). Nothing has been brought to our knowledge 15

to show that DAS is permissible under the Rules and

Regulations.

17. In view of the aforesaid, we are satisfied that since the

appellants were receiving an assured return, the claim to receive

compensation from the Investor Protection Fund was

inadmissible. The impugned order does not contain any error of

law. All the appeals fail and are dismissed with no order as to

costs.

18. 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. Certified copy of

this order is also available from the Registry on payment of

usual charges.

Justice Tarun Agarwala Presiding Officer

Ms. Meera Swarup PRERNA Digitally signed Technical Member by PRERNA 15.05.2023 MANISH MANISH KHARE PK Date: 2023.05.15 KHARE 16:03:10 +05'30'