Mr. Amish Rameshchandra Desai And ... vs Sebi

Order Reserved on : 28.8.2019 Date of Decision : 4.9.2019

Appeal No.112 of 2018

1.

Mr. Amish Rameshchandra Desai 15, Omkrishnakunj, M.G. Road, 3, Kandivali (West), Mumbai - 400067.

2. Mr. Bhrugesh Pankaj Mehta 1006, Devani Pol Khambat, 22, Cambay, Anand - 388 620.

3. Mr. Bhupendra M. Soni B-9, Bhagwan Nagar Soc.

Opp: Govind Vadi Isanpur Ahmedabad-382 443.

4. Ms. Palak Premal Trivedi 9/1198, Nani Chipwad, Balaji Road, Surat - 395 003.

5. Ms. Pinal Rajeshbhai Mehta 7/A, Deepmala Apartment, Nr. Maniyasa Maninagar, Ahmedabad-380 008.

6. Mr. Premal Yogendra Trivedi 7/A, Deepak Apartment, Nr. Maniyasa Maninagar, Ahmedabad-380 008.

7. Mr. Rajesh Rajnikant Mehta 7/A, Deepak Apartment, Nr. Maniyasa Maninagar, Ahmedabad-380 008.

2

8. Mr. Sawan Ajit Joshi D-104, Sparsh Arishta B/hd.Swaminarayan Park, Vasna, Guj.

9. Mr. Shirish Rameshbhai Desai 15, Omrishnakunj, M.G. Road 3, Kandivali (West), Mumbai-400 067.

10. Mr. Shiv Navinchandra Raval C-5, Shivji Flats, Juna Wadaj, Ahmedabad-380013.

11. Mr. Jayesh N. Kavi 10, Allied Apartment Opp. L.G. Hospital, Maninagar Ahmedabad 380 008. .... Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, C-4A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400051. ... Respondent

Mr. J.J. Bhatt, Advocate with Ms. Rinku Valanju and Ms. Hiral Shah, Advocates i/b. R.V. Legal for the Appellants.

Mr. Vishal Kanade, Advocate with Mr. Anubhav Ghosh and Ms. Rashi Dalmia, Advocates i/b. The Law Point for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Justice M.T. Joshi, Judicial Member

Per : Justice Tarun Agarwala

1. One Saurin Kavi was Chairman and Managing Director

of Jay Energy and S Energy Ltd. Investigation for alleged

violations of the provision of Securities and Exchange Board 3

of India Act, 1992 (hereinafter referred to as 'SEBI Act') and

Securities and Exchange Board of India (Prohibition of

Insider Trading) Regulations, 1992 (hereinafter referred to as

'PIT Regulations') regarding change of promoters during

September, 2010 quarter was investigated and it was found

that the appellants were the new promoters replacing the

earlier promoters. It was found that 10,34,915 shares were

transferred on 1st September, 2010 in favour of the appellants

which constituted 15.23% of the share capital of the

Company. Thus, necessary disclosures under Securities and

Exchange Board of India (Substantial Acquisition of Shares

and Takeovers) Regulations, 1997 (hereinafter referred to as

'SAST Regulations') and PIT Regulations were required to

be made. Accordingly, summons was issued to the appellant

on 11th November, 2014, 13th January, 2015 and reminder

letter was issued on 22nd January, 2015. The appellant did

not respond to the said summons. Similarly, summons were

also sent to the Company and, it is alleged that the Company

also did not respond to the queries sought by the respondent.

It was also found in the investigation that two promoters

namely Mr. Jayesh Kavi and Mr. Saurin Kavi had inter se

transferred 2,50,000 shares on 30th July, 2010. Such 4

transfers were required to be disclosed under Regulation

13(3) of the PIT Regulations for change in the shareholding

for which information was sought and no response was

given.

2. Consequently, a show cause notice dated 31st October,

2015 was issued to show cause why penalty should not be

imposed for violating Regulation 13(3) of the PIT

Regulations and Sections 11C(2) and 11C(3) of the SEBI Act

for not furnishing information pursuant to the summons.

Replies were given and after considering the matter the

impugned order was passed imposing a penalty of

Rs.3,50,000/- on each of the appellants for violation of

Sections 11C(2) and 11C(3) of the SEBI Act and a sum of

Rs. 3 lakhs was imposed on one of the appellants Mr. Jayesh

Kavi for violation of Regulation 13(3) of the PIT

Regulations. The appellants, being aggrieved by the

aforesaid order, have filed the present appeal.

3. The appellants contended that they are relatives of

Saurin Kavi, Chairman and Managing Director of the

Company and are not promoters or part of the promoters

group of the Company. The appellants denied that any shares

were transferred in their favour to their knowledge and 5

contended that there has been foul play, wrong doing and

misuse of their names, demat accounts, pan card, forging and

fabrication of their signature on certain documents which was

primarily done by the Managing Director without knowledge

of the appellants. It was contended that the appellants at no

stage gave any consent to Saurin Kavi to use their names for

the purpose of transfer of shares or to treat the appellants as

promoters. The appellants further contended that they did

not have the financial capacity to buy those shares and some

of the appellants were unemployed.

4. It was contended that the appellants received the

summons, reminders and accordingly approached Saurin

Kavi who advised the appellants that he would look after the

proceedings. Since the appellants were unaware of the

alleged violations the appellants in good faith gave a letter of

authority to Saurin Kavi.

5. It has also come on record that Saurin Kavi did not

respond to the summons and reminders and pursuant to the

show cause notice the appellants filed a reply contending that

they were not involved in any transfer of the shares of the

Company and had no knowledge or information. Further the 6

appellants and that they had authorized Saurin Kavi to

provide all information to the authority.

6. It has also come on record from a perusal of the

adjudication proceedings dated 18th September, 2017 that

Saurin Kavi appeared before the Adjudicating Officer and

stated that when SEBI sought information from the

appellants in November, 2014 and January, 2015 the said

appellants communicated to Saurin Kavi and informed him

that they did not have any information as they were not

dealing with the matter. Saurin Kavi categorically stated

before the Adjudicating Officer that the appellants do not

know anything about the proceedings and that Saurin Kavi

owns full responsibility for these proceedings.

7. In view of the aforesaid it was apparently clear that

Saurin Kavi took upon himself the responsibility of the

proceedings that was initiated by SEBI. He also

categorically informed SEBI that the appellants have nothing

to do in the matter.

8. Inspite of the aforesaid admission by Saurin Kavi, the

Adjudicating Officer did not accept this submission and held

that since the summons were issued to the appellants seeking

information the appellants were responsible to ensure 7

compliance. Since necessary information was not supplied

by the appellants there was violation of Sections 11C of the

SEBI Act.

9. Having heard the learned counsel for the parties, we are

of the opinion that the approach of the Adjudicating Officer

was incorrect. When the appellants have come forward

alleging that they had nothing to do with the matter and

pursuant to the summons have reported to the Managing

Director who said that he would do the needful on their

behalf and also approached on their behalf before the

Adjudicating Officer admitting that he was responsible then

it was not open to the Adjudicating Officer to hold that the

appellants were still responsible for supplying the

information.

10. If the appellants do not have the information they are

obviously not in a position to supply the information sought

and, therefore, the appellants had approached the Managing

Director to provide the requisite information to the

Adjudicating Officer. If the same was not done by the

Managing Director the liability if any ought to have been

fastened upon the Managing Director. 8

11. At this stage we are also informed that before the

impugned order was pronounced the Managing Director

Saurin Kavi died on 6th December, 2017.

12. Thus, on this short ground the impugned order cannot

be sustained and is quashed. The matter is remitted to the

Adjudicating Officer to redecide the matter after considering

the submissions and the relevant record. If it is found that

there has been interpolation, fabrication of documents etc in

the transfer of shares in favour of the appellants then the

matter would be closed but if it is found that the appellants

had knowledge of the transfer and consequently did not

respond to the summons then appropriate order on penalty for

violation of Section 11C(2) and 11C(3) of SEBI Act would

be awarded.

13. In the light of the aforesaid, since the matter is being

remanded back the finding of violation by one of the

appellants on Regulation 13(3) is also set aside with a

direction that the said alleged violation will again be decided

afresh after giving an opportunity of hearing to all the parties

concerned.

14. In view of the aforesaid, the impugned order is

quashed. The appeal is allowed and the matter is remitted to 9

the Adjudicating Officer to decide the matter afresh. For the

aforesaid purpose the appellants shall appear before the

Adjudicating Officer on 26th September, 2019 on which date

the appellant shall provide their address, email, mobile

number etc to the Adjudicating Officer. It will be open to the

appellants to appear personally or through their Advocate.

The Adjudicating Officer will proceed thereafter and decide

the matter in accordance with law after giving an opportunity

of hearing.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Justice M.T. Joshi Judicial Member

4.9.2019 Prepared and compared by RHN