Mr. Vinay Mehta vs Sebi

Date of Hearing : 18.08.2016 Date of Decision : 07.10.2016

Review Application No. 5 of 2016 In Appeal No. 300 of 2014

Mr. Vinay Mehta B 96/2, East of Kailash, ..... Applicant New Delhi - 110 065. (Org. 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. Ajai Achuthan, Advocate i/b Bharucha & Partners for the Applicant. Mr. Mihir Mody, Advocate with Mr. Saurabh Bachhawat, Mr. Harekrishna Ashar, Advocates i/b K. Ashar & Co. for the Respondent.

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

Per : Jog Singh

1.

We have heard both the learned counsel for the parties on the

question of review of our order dated May 13, 2016.

2. The present review application seeks a review of our order dated

May 13, 2016 on the ground that the Appellant's submissions have not

been considered in order dated May 13, 2016 by this Tribunal. Due to an

oversight, a few paragraphs pertaining to the Applicant's submissions have

not been dealt with in our order dated May 13, 2016. Paragraphs produced

hereinbelow may accordingly be added in their appropriate places in order

dated May 13, 2016.

2

1A In addition, the appellant in Appeal No. 300 of 2014, has advanced

additional submissions which are being dealt with below paragraphs Nos. 8

and 41.

8A. The Appellant submits in Appeal No. 300 of 2014 that in his

capacity as MD and CEO of Almondz, the appellant was not in-charge of

the day to day functioning of the said company, but rather was primarily

involved in the growth and expansion of the business of Almondz. The

Appellant never had anything to do with the merchant banking activities of

the company. It is submitted by the Appellant that he was never part of the

due diligence process as undertaken by Almondz for the IPO of PGEL and,

therefore, should not be held liable for any failure of the Appellant in the

matter of the said IPO. It was the compliance officer of Almondz who was

responsible for PGEL's IPO, being in-charge of the execution of the

mandates of the merchant banking division. It is the Appellant's submission

that the Respondent has erroneously held him liable in the present case and

that his conduct as MD and CEO has been impeccable.

41A. As far as the role of the MD and CEO of Almondz is concerned,

Section 27(1) of the SEBI Act makes it abundantly clear that every officer

in charge of the functioning of the company in default, and responsible for

the same shall be held liable for any misdemeanor committed under the

provisions of the SEBI Act. Section 27(1) is reproduced herein for the sake

of convenience.

"27(1): Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

3 Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence."

41B. On a perusal of the section, it is borne out that any person

responsible for the conduct of a company will be held liable along with the

company for an offence committed in contravention of the SEBI Act. The

only defense allowed to such a person responsible for the functioning of a

company is twofold: first, that the person in-charge proves satisfactorily

that the offence was committed without his knowledge or second, that he

had exercised due diligence to prevent the offence from occurring. Now, it

is an admitted position that while Almondz was acting as the BRLM for the

IPO of BGIL, the Appellant - Vinay Mehta was indeed the MD and CEO of

Almondz throughout the period that Almondz discharged its duties as

BGIL's BRLM.

41C. Therefore, it emerges on a plain reading of Section 27(1) that any

person in the position of an MD and CEO of a company and actually

discharging responsibilities in that position, and who is not a mere

figurehead, will attract the relevant penalty for any contravention

committed by his company of the SEBI Act. Further, the nothing concrete

has been brought on record to prove that the Appellant as MD and CEO of

Almondz merchant banking activities or that Mr. Mehta did everything

reasonable in his power to prevent the contravention concerned. Therefore,

we uphold the finding of SEBI qua the appellant that as MD and CEO of

Almondz he failed to ensure proper and strict compliance with the

regulatory norms prescribed by SEBI in the present matter. Since we have

already held that Almondz, along with its directors, has undergone

excessive punishment of debarment of about four and half years as 4

compared to the violation in question, we also hold in the case of the

appellant in Appeal No. 300 of 2014 that the remaining punishment

imposed in impugned order be quashed and the appeal be partly allowed.

Ordered accordingly.

3. The registry is directed to incorporate paragraphs 1A, 8A, 41A, 41B

and 41C after paragraphs 1, 8 and 41 respectively, and issue a fresh copy of

the order dated May 13, 2016 to all the parties accordingly.

4. Accordingly, the review application is disposed of.

Sd/-

Justice J. P. Devadhar Presiding Officer

Sd/-

Jog Singh Member 07.10.2016 Prepared & Compared by PTM