Mr. Nilesh Kapadia & Anr. vs Sebi

Date of Decision : 04.03.2016

Appeal No. 4 of 2016

1.

Mr. Nilesh Kapadia

2. Kalpana Kapadia

Oberoi Park view, Tower B, Flat No. 306, Thakur Village, Nr. Thakur Cinema, Kandivali (E), Mumbai - 400 101. ...Appellants

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. Zal Andhyarujina, Advocate with Mr. Joby Mathew and Mr. Deepak Dhane, Advocates for the Appellant.

Mr. J.P. Sen, Senior Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point for the Respondent.

WITH Appeal No. 5 of 2016

1. Rajiv Sanghvi

2. Rajiv Sanghvi-HUF

3. Sanjay Sanghvi

4. Sonal Sanghvi

Neelam, Plot #5, 1st Lane, Hindu Colony, Dadar (E), Mumbai 400 014. ...Appellants

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. P.N. Modi, Senior Advocate with Mr. Neville Lashkari, Mr. Joby Mathew and Mr. Deepak Dhane, Advocates for the Appellant.

Mr. J.P. Sen, Senior Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point for the Respondent.

2

CORAM : Justice J.P. Devadhar, Presiding Officer Jog Singh, Member

Per : J.P. Devadhar (Oral)

1. Appellants in these two appeals are aggrieved by the ex-parte ad-

interim order passed by the Whole Time Member ('WTM' for short) of

Securities and Exchange Board of India ('SEBI' for short) on January 15,

2016. By the said order, appellants in Appeal No. 4 of 2016 are held to have

made undue profits amounting to Rs. 47,24,293/- during the period from

November 2001 to September 2011 and it is held that interest @ 12% per

annum payable on the said amount would be Rs. 71,21,345/-. Similarly, by

the said order dated January 15, 2016 it is held that the appellants in Appeal

No. 5 of 2016 along with Dipti Mehta have made undue profits of Rs.

1,05,02,417/- during the period from November 2001 to September 2011

and interest @ 12% per annum payable on the said amount would be Rs.

1,12,11,866/-. By the impugned ex-parte ad-interim order, the WTM of

SEBI has sought to impound the aforesaid undue profit with interest u/s.

11(4)(d) of the Securities and Exchange Board of Act, 1992 and direct the

banks and depositories not to make any debits in the bank accounts and

demat accounts held jointly or severally by the appellants, without the

permission of SEBI. By the said order appellants are also directed not to

dispose of or alienate any of their assets / properties / securities, till such

time the aforesaid amounts with interest are credited to an escrow account

created specifically for the purpose in a Nationalized Bank. Challenging the

aforesaid order the present appeals are filed.

2. Counsel for the appellants submit that neither the quantum of alleged

undue profits set out in the impugned order are true nor SEBI is justified in

seeking to recover the said amount with interest @ 12% per annum by 3

passing an ex-parte ad-interim order. However, without prejudice to their

right to contend that the amounts claimed in the impugned order are without

any merit, with a view to seek immediate release of bank accounts and

demat accounts, it is submitted that the appellants be permitted to sell the

securities lying in the respective demat account of the appellants and on

deposit of the amount of Rs. 47,24,293 and Rs. 1,05,02,417 respectively in

the escrow account, attachment levied on various accounts be directed to be

lifted forthwith. As regards the interest claimed in the impugned order, it is

submitted that without establishing undue profits by passing a final order

SEBI is not justified in claiming interest on undue profits allegedly

determined on prima facie basis by passing an ex-parte order.

3. Counsel for SEBI while agreeing with the suggestion made by the

appellants for selling the securities lying in the respective accounts of the

appellants, submitted, that in the interest of justice, the appellants be

directed to deposit the undue profits with interest as stated in paragraph 6 of

the affidavit by the appellants on February 15, 2016.

4. As the investigation is still in progress, the actual amount of undue

profits if any, made by the appellants can be determined only on completion

of investigation and therefore, in our opinion, it would not be just and

proper on part of SEBI to demand interest on undue profits quantified in the

impugned ex-parte order on prima facie basis. Accordingly, we permit the

appellants to sell the securities lying in their respective demat accounts so as

to enable them to deposit only the amount of undue profits set out in the

impugned order and not the interest amount. Counsel on both sides agree

that the orders passed by SEBI on June 17, 2010 and July 24, 2014 against

the appellants shall not come in the way of the appellants in selling the

securities lying in their respective demat accounts in implementation of our

present order.

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5. On the appellants depositing the quantum of undue profits in the

manner set out in the impugned order, SEBI shall defreeze all the accounts

of the appellants and intimate the same to the concerned authorities

forthwith.

6. It is made clear that the amounts to be deposited by the appellants in

the respective escrow account shall be without prejudice to the contentions

of the appellants that they have not made any undue profit. All contentions

on both sides are kept on.

7. Both the appeals are disposed of in the above terms with no order as

to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

04.03.2016 Prepared and compared by:

MSB/RHN