Mrs. B. Shyamala vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Order Reserved On: 12.06.2017 Date of Decision: 14.06.2017

Misc. Application No. 210 of 2016 And Misc. Application No. 100 of 2017 And Appeal No. 261 of 2016

Mrs. B. Shyamala Pocket-A, Flat-41A, SFS Flats, Mayur Vihar- 3 Delhi-110 096 ...Appellant

Versus

1.

Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai -400 051

2. M/s. Taneja Aero Space and Aviation Ltd.

3. Mr. Salil Taneja, Chairman

4. Mr. C.S. Kameswaran, Managing Director Address of the Respondent Nos. 2 to 4 M/s. Taneja Aero Space and Aviation Ltd.

Belagondapalli-Village, Thally-Road, Denkanikottai TK, Belagondapalli- 635 114(TN) ...Respondents

Mr. V. S. Balasubramaniam, Authorised Representative for the Appellant.

Mr. Rajesh Nagori, Advocate with Mr. Pulkit Sukhramani, Ms. Siddha Pamecha and Ms. Vidhi Jawar, Advocates i/b The Law Point for Respondent No. 1.

Mr. Chirag Shetty, Advocate for Respondent No. 2.

Mr. Kumar Desai, Advocate for Respondent Nos. 3 & 4.

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

Per: Justice J.P. Devadhar 2

Misc. Application No. 210 of 2016

There is delay of 27 days in filing the appeal. By this

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 No. 261 of 2016

1. Appellant is aggrieved by the order passed by the Whole Time

Member ("WTM" for short) of Securities and Exchange Board of India

("SEBI" for short) on January 11, 2016. By the said order, the complaint

filed by the appellant against the respondent no. 2 company i.e. Taneja

Aero Space and Aviation Limited ("TAAL" for short) and its Chairman,

Mr. Salil Taneja (respondent no. 3) and its Managing Director, Mr. C. S.

Kameswaran (respondent no. 4) has been disposed of by holding that it is

not a fit case for issuance of any direction under Section 11(4) and 11B

of SEBI Act and under Section 12A of the Securities Contracts

(Regulation) Act, 1956 ("SCRA" for short).

2. Although, maintainability of an appeal against the above order is

questioned by the respondents, in the facts of present case, without going

into the question of maintainability, we deem it proper to dispose of the

appeal on merits.

3. Appellant at the relevant time held 14300 shares of respondent no.

2 company.

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4. It is the case of the appellant that the respondent no. 3 & 4 as

Chairman & Managing Director of respondent no. 2 have during the

period from 2007 to 2009 acted in a mala fides manner and thereby the

respondent no. 3 & 4 have unjustly enriched themselves to the detriment

of investors of the respondent no. 2 including the minority investors like

the appellant.

5. It is contended by the Authorised Representative of the appellant,

that the fraudulent transactions carried out by respondent no. 3 & 4 in the

name of respondent no. 2 were repeatedly brought to the notice of the

Registrar of Companies ("ROC"). However, no action was taken by the

ROC. Hence, the appellant moved SEBI seeking redressal in the matter.

However, it is contended that the WTM of SEBI has failed to consider

the case of the appellant in the proper perspective and therefore the

present appeal is filed to challenge the impugned order.

6. Although several issues are raised in the Memorandum of Appeal,

the Authorised Representative of the appellant restricted his argument to

the following issues, viz:-

a) In the Year 2009-2010 the respondent no. 3 & 4 had

written off the inventories of the respondent no. 2 to

the extent of ` 19.46 crore without any justification to

the detriment of the interests of shareholders.

b) In the Year 2008-2009 respondent no. 2 company had

transferred ` 20 crore from the revaluation reserve to 4

the profit and loss account in violation of the

prescribed accounting standards.

c) In the Year 2009 decision was taken to merge TAAL

Technologies Private Limited ("TTPL" for short), a

subsidiary of the respondent no. 2 company with the

respondent no. 2 without convening the shareholders

meeting and without obtaining shareholders approval.

d) During the Year 2007-2009 various funds of the

respondent no. 2 company were transferred to the

subsidiary company of respondent no. 2 in gross

violation of Clause 36 of the Listing Agreement.

7. It is contended by the Authorised Representative of the appellant

that the WTM of SEBI has failed to consider the above grievances raised

by the appellant in the proper perspective and therefore, the impugned

order be quashed and set aside and restored to the file of WTM of SEBI

for fresh decision on merits and in accordance with law. Alternatively, it

is submitted that the impugned order be quashed and set aside and that

appropriate action be taken against respondent no. 3 & 4 as this Tribunal

deems feet and proper.

8. We see no merit in the above contentions.

9. At the outset, it is relevant to note that the violations allegedly

committed by respondent no. 2 to 4 basically relate to the violation of the

provisions contained in the Companies Act and not the violation of the 5

securities laws. However, since, it is contended that the interests of the

minority shareholders like the appellant have been prejudicially affected

by the acts of respondent no. 3 & 4, the WTM of SEBI has looked into

the grievances made by the appellant against respondent no. 2 to 4.

10. First and the second violation alleged by the appellant relate to

writing off the inventories of the respondent no. 2 to the extent of ` 19.46

crore during the Year 2009-2010 and transfer of ` 20 crore during the

Year 2008-2009 from the revaluation reserve to the profit and loss

account in violation of the prescribed accounting standards.

11. In para 38 of the impugned order, the WTM has recorded a finding

that the scheme sanctioned by the Madras High Court for merger of

TTPL with TAAL permitted use of revaluation profits to write off all the

amounts debited to P & L account and also to write off any diminution in

the value of assets and appreciation in the value of the liabilities of

TAAL & TTPL. It is further recorded in the impugned order that as per

the sanctioned scheme, balance of excess revaluation profits could be

transferred to General Reserve. Nothing is brought on record to

demonstrate that the accounting treatment in the present case is contrary

to the sanctioned scheme. Therefore, the first and the second grievance

of the appellant that the write off of the inventories and transfer of funds

from the revaluation reserve being not in consonance with the accounting

standard cannot be accepted as they are in accordance with the scheme

sanctioned by the Madras High Court.

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12. Third violation alleged by the appellant is that in the Year 2009

decision to merge TTPL with TAAL was taken without convening

shareholders meeting and without obtaining shareholders approval. From

the complaint addressed by the appellant on 06.03.2012 (Page 61 of the

Appeal Memo) it is seen that the Madras High Court by its order dated

November 03, 2009 had dispensed with convening the meeting of the

shareholders/ creditors etc. for merger of TTPL with TAAL (respondent

no. 2). In view of the aforesaid order passed by the Madras High Court

no fault can be found with respondent no. 2 to 4 in not convening

shareholders meeting to seek approval for merger of TTPL with TAAL.

13. Fourth violation alleged by the appellant is that during the Year

2007-2009 funds of respondent no. 2 were transferred to the subsidiary

company of respondent no. 2 in violation of Clause 36 of the Listing

Agreement. In para 44 & 46 of the impugned order the WTM has

recorded a finding that the allegation is based on mere probabilities and is

not supported by any basis and that adjudication proceedings would be

initiated under Section 23(I) of the SCRA if in the future it is found that

Clause 36 of the Listing Agreement has been violated by respondent no.

2 to 4. In the absence of any specific instance pointed out by the

appellant to demonstrate that there is violation of Clause 36 of the Listing

Agreement, the WTM was justified in rejecting the fourth violation

alleged by the appellant.

14. In these circumstances, we see no merit in the appeal and the same

is hereby dismissed with no order as to costs. 7

15. In view of the disposal of the Appeal, the Misc. Application

No. 100 of 2017 becomes infructuous and is disposed of accordingly.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member 14.06.2017 Prepared & Compared By: PK