Lakhan Chouhan vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision : 24.11.2022 Appeal No. 931 of 2022 Lakhan Chouhan Gram - Khudel Khurd, District Indore, Madhya Pradesh - 452 016. .....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. Saurabh Bacchawat, Advocate i/b Corporate Pleaders for the Appellant. Mr. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Deepti Mohan, Ms. Binjal Samani, Ms. Purvi Jain and Mr. Niket Dalal i/b Vidhii Partners for the Respondent. Appeal No. 932 of 2022 Rohit Soni 92, Omex City - 1, Dewas Bypass, Indore, Madhya Pradesh - 452 001. .....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 2 Mr. Deepak Dhane, Advocate i/b Corporate Pleaders for the Appellant. Mr. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Deepti Mohan, Ms. Binjal Samani, Ms. Purvi Jain and Mr. Niket Dalal i/b Vidhii Partners for the Respondent. CORAM : Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member Per : Justice Tarun Agarwala, Presiding Officer (Oral) 1. Two appeals have been filed against a common order dated August 30, 2022 passed by the Whole Time Member ('WTM' for short) of the Securities and Exchange Board of India ('SEBI' for short) whereby the appellants were directed to refund the money received from the investors jointly and severally.

2. The facts leading to the filing of the present appeal is, that the show cause notice dated July 31, 2021 was issued to the appellants and another person named as Ms. Shivani Thakur who were all named as proprietors of M/s. RNS Global Capital at different point of time and were found to be engaged in investment advisory services without obtaining a certificate of registration in violation of the provisions of Section 12(1) of the Securities and Exchange Board of India Act, 1992 ('SEBI Act' for short) and Regulation 3(1) of the 3 SEBI (Investment Advisers) Regulations, 2013 ('IA Regulations' for short). The appellants appeared and filed their replies contending that they had no concern with the investment advisory services. Insofar as appellant Lakhan Chouhan was concerned he contended that he was illiterate office boy who knew nothing about the financial market and is presently working at a petrol pump. The said appellant contended that Ms. Shivani Thakur is the master mind who opened a bank account in his name on the pretext of paying salary and that Ms. Shivani Thakur was operating the bank account.

3. Insofar as Rohit Soni is concerned he contended that he knew Ms. Shivani Thakur and helped her in establishing the business by providing her office space and business documents etc. and also opened a bank account but never realized that the business which Ms. Shivani Thakur was doing was in contravention to the SEBI laws. The said appellant contended that when he came to know about the illegal activities he told Ms. Shivani Thakur to close down the business but she assured that the appellant would not face any problem and that she would accept all responsibilities. Thus by giving false assurances she continued to run the business. 4 It was contended that the Ms. Shivani Thakur misused his goodwill and the documents of the appellant. 4. The WTM after considering the material evidence on record found that three accounts were opened in the name of the Company at different point of time in which the appellant was shown as proprietor. The WTM further found that money that was credited in the accounts were for investment advisory services given by the said Company. The WTM further found that since the investment advisory services that was being carried out by the Company was without registration the appellants and the third noticee were liable to pay refund the money of the investors jointly and severally.

5. We have heard Shri Saurabh Bacchawat and Shri Deepak Dhane, the learned counsel in respective appeals and Shri Sumit Rai, the learned counsel for the respondent. 6. The only ground urged was that Ms. Shivani Thakur was the sole person carrying on the business of investment advisory services and that she was the master mind and that the appellants were totally unaware of the activities. It was contended that though they knew that bank accounts were opened in their names they were totally unaware of the credits 5 of the monies in the account and that the accounts were handled by Ms. Shivani Thakur. 7. Be that as it may. We find that the appellants knew about opening of their bank accounts in their names and did not stop at that. The appellants knew the business that was being carried out by Ms. Shivani Thakur and were part of the running of the investment advisory services. The appellant Rohit Soni admitted that he was a friend of Ms. Shivani Thakur and assisted her in procuring the office space and providing various documents for running the business. Further the said appellant admits opening the bank account which was used for receiving the consideration towards investment advisory services.

We also find that no proof has been filed by the appellants to show that the amount credited in their account were for other purposes other than advisory services. We are consequently of the opinion that appellants willingly lent their names and documents for investment advisory services and no document has been produced to indicate that they were not a willing party to the acts of unregistered investment advisory activities. 8. In view of the aforesaid, we do not find any error in the directions issued by the WTM. We, however, modify 6 direction no. 26 (a) which directs the appellants and other noticees to refund money jointly and severally and we modify the same to the extent that appellants would be alone liable to refund that portion of the money which has been found in their bank account and which has been depicted in the chart in paragraph 15 of the impugned order. The joint and several liability will however continued against the third noticee. 9. In view of the aforesaid observations, both the appeals are dismissed with no order as to costs. 10. 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 RAJALAKS Digitally signed HMI by RAJALAKSHMI Technical Member 24.11.2022 HARISH HARISH NAIR Date: 2022.12.01 NAIR 17:18:29 +05'30' msb