Kejas Parmar vs Sebi

Date of Decision : 15.04.2016

Misc. Application No. 188 of 2014 And Appeal No. 419 of 2014

Kejas Parmar Flat No. 101, Johnson Avenue, Uttan Road, Near Jay Bhawani Bldg., Murdha Village, Near Murdha, Bhayander (W), Mumbai - 401 101. ...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 with Mr. Ramesh Gogawat, Advocate i/b Joby Mathew & Associates for the Appellant.

Mr. Tomu Francis, Advocate for the Respondent.

WITH Appeal No. 431 of 2014

Shreya Multitrade Private Limited Flat No. 101, Johnson Avenue, Uttan Road, Near Jay Bhawani Bldg., Murdha Village, Near Murdha, ...Appellant Bhayander (W), Mumbai - 401 101.

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 with Mr. Ramesh Gogawat, Advocate i/b Joby Mathew & Associates for the Appellant.

Mr. Tomu Francis, Advocate for the Respondent. 2

WITH Misc. Application No. 92 of 2015 And Appeal No. 136 of 2015

Rajan Babu Bhambale Arihant Chawl Committee, Milind Nagar, Gavdevi, V P Line, Santacruz (East), Mumbai - 400 055. ...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. Hasmukh Ravaria, Advocate i/b Rajesh Khandelwal for the Appellant.

Mr. Tomu Francis, Advocate for the Respondent.

WITH Appeal No. 341 of 2014

Mr. V.K. Prasada Rao 10 A, Environ Enclave, Saibabanagar Colony, Kukatpally, Hyderabad - 500 072. ...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. S. Chidambaram, Practicing Company Secretary for the Appellant.

Mr. Tomu Francis, Advocate for the Respondent.

CORAM : Justice J.P. Devadhar, Presiding Officer Jog Singh, Member Dr. C.K.G. Nair, Member

Per : J.P. Devadhar (Oral) 3

Misc. Application No. 188 of 2014 In Appeal No. 419 of 2014

There is delay of 46 days in filing the appeal. By Miscellaneous

application applicant seeks condonation of the said delay. For the reasons

stated in the application, delay is condoned. Miscellaneous Application is

disposed of accordingly.

Misc. Application No. 92 of 2015 In Appeal No. 136 of 2015

There is delay of 90 days in filing the appeal. By Miscellaneous

application applicant seeks condonation of the said delay. For the reasons

stated in the application, delay is condoned. Miscellaneous Application is

disposed of accordingly.

Appeal Nos. 419 of 2014, 431 of 2014, 136 of 2015 and 341 of 2014

1.

Appellants in all these appeals are aggrieved by the common

adjudication order passed by the Adjudicating Officer ('AO' for short) of

Securities and Exchange Board of India ('SEBI' for short) on June 30, 2014

whereby varying penalties have been imposed on the appellants u/s 15HA of

the Securities and Exchange Board of India Act, 1992 for violating Section

12A(a),(b) & (c) of SEBI Act read with regulation 3(b),(c),(d) & regulation

4(1) and some of the clauses in regulation 4(2) of Securities and Exchange

Board of India (Prohibition of Fraudulent and Unfair Trade Practices

relating to Securities Markets) Regulations, 2003 ('PFUTP Regulations

2003' for short). Since common order is challenged in these appeals, all

these appeals are heard together and disposed of by this common decision. 4

2. It is not in dispute that the impugned order is an ex-parte order. Basic

grievance of the appellants in Appeal Nos. 419 of 2014 and 431 of 2014 is

that they were neither served with the show cause notice nor served with the

notice for personal hearing. It is the case of the appellants that there was

change in their correspondence address and by letter dated April 9, 2014 the

said change in the address was brought to the notice of AO. However,

without issuing any notice to the appellants, the impugned ex-parte order

has been passed on June 30, 2014. Fact that the appellants had informed

SEBI about the change in address by letter dated April 9, 2014 is not in

dispute. In these circumstances, we deem it proper to set aside the ex-parte

order qua the appellant in Appeal No. 419 of 2014 and appellant in Appeal

No. 431 of 2014 and restore the matter to the AO for passing fresh order on

merits and in accordance with law, after serving the show cause notice and

after giving an opportunity of filing reply and personal hearing to each

appellant.

3. Grievance of the appellant in Appeal No. 341 of 2014 is that the

ex-parte order is passed against him without furnishing the requisite

documents called for by appellant vide letter dated November 26, 2013. It is

not in dispute that the appellant even after receiving partial inspection of

document, by a letter dated November 26, 2013, had sought inspection of

certain documents. Although inspection of documents was given on

December 30, 2013, it is the case of the appellant that full inspection has not

been given. It is relevant to note that the appellant for the first time in this

appeal has emphatically denied the charge that the appellant had certified

the financial statement from April 2011 to March 2012. Although SEBI in

its reply has reiterated that the appellant had certified the said financial

statement, there is nothing on record to suggest that SEBI has verified the

signature on the relevant financial statement and found that the said 5

signature is that of the appellant. In any event since the impugned order is

an ex-parte order and the order passed against the company in which the

appellant was a director is set aside and restored for fresh decision, it would

be just and proper to set aside the impugned order qua the appellant in

Appeal No. 341 of 2014 and restore the matter for fresh decision on merits

and in accordance with law. AO is directed to give inspection of the

financial statement allegedly certified by the appellant and other related

documents claimed by the appellant and thereafter proceed to hear the

appellant and pass order as deemed fit.

4. Appellant in Appeal No. 136 of 2015 was admittedly served with the

show cause notice, but the appellant herein has failed to file reply to the

show cause notice and has failed to attend the personal hearing offered to

the appellant. In such a case, although no fault can be found with the AO in

proceeding to pass ex-parte order, in the facts of present case, since the

impugned order passed against the Company (Appellant in Appeal No. 431

of 2014) and the director Mr. Kejas Parmar (Appellant in Appeal No. 419 of

2014) is set aside and restored to the file of AO for fresh decision on merits,

in our opinion, it is just and proper to set aside the impugned order against

the appellant in Appeal No. 136 of 2015 who was also at the relevant time a

director of the Company and restore the matter for fresh decision on merits

and in accordance with law.

5. There is one more reason for remanding all these matters and that

reason is the conflicting orders passed by the AO of SEBI while imposing

penalty under Section 15HA of SEBI Act. In some cases, for example in

case of Krishna Enterprises vs. SEBI (Appeal No. 131 of 2015) the AO has

held that where a person adopts fraudulent and deceptive devices, then that

person violates Section 12A of SEBI Act as well as regulation 3 of PFUTP 6

Regulations 2003 and in such a case, penalty imposable under Section

15HA of SEBI Act for violating Section 12A of SEBI Act and for violating

regulation 3 of PFUTP Regulations 2003 would be independent and

separate. However, in the cases in hand the AO has considered the

violations under Section 12A and regulation 3 together and imposed a

common penalty under Section 15HA of SEBI Act. It is relevant to note that

penalty imposable under Section 15HA is up to Rs. 25 crore. In such a case,

it would be improper on part of AO's of SEBI to pass conflicting orders

which is neither in the interests of SEBI nor in the interests of the securities

market.

6. In these circumstances, for all the aforesaid reasons, we set aside the

impugned order qua the appellants herein and restore the matters to the file

of AO for fresh decision on merits and in accordance with law as

expeditiously as possible. All contentions of both sides kept open.

7. All four appeals are disposed of in the aforesaid terms with no order

as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member 15.04.2016 Prepared and compared by:

msb