Ms. Girija Banerjee & Ors. vs Sebi

Date of Decision: 26.4.2023

Appeal No.637 of 2022

1.

Ms. Girija Banerjee P1 Unique Park, Behala, Circus Avenue, Kolkata, West Bengal-700034.

2. Mr. Vikash Dubey Ganiyari Road, Waidhan Ward No.41, Singrauli, Madhya Pradesh-486886.

3. Mr. Bhaskar Paul 5B, Rishi Bankim Chandra Road, Behala, Kolkata, West Bengal-700 034. ...Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai-400021. ...Respondent

Ms. Rinku Valanju, Advocate with Ms. Akshita Sharma and Mr. Amit Kumar, Advocates i/b. R V Legal for the Appellant.

Ms. Rathina Manivaran, Advocate with Mr. Aditya Sarangarajan, Advocates i/b. Mansukhlal Hiralal & Co. for the Respondent.

With 2

Misc. Application No.1125 of 2022 And Appeal No.784 of 2022

Trinity Tradelink Ltd.

16 & 17, Washington Plaza, Dispensary Road, Goregaon (West), Mumbai-400062. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai-400021. ...Respondent

Ms. Rinku Valanju, Advocate with Ms. Akshita Sharma and Mr. Amit Kumar, Advocates i/b. R V Legal for the Appellant.

Ms. Rathina Manivaran, Advocate with Mr. Aditya Sarangarajan, Advocate i/b. Mansukhlal Hiralal & Co. for the Respondent.

With Misc. Application No.1124 of 2022 And Appeal No.785 of 2022

Vikrant Kayan Flat-1D, 9 Sunny Park, Ballygunge, Kolkata, West Bengal-700 019. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 3

G Block, Bandra Kurla Complex, Bandra (E), Mumbai-400021. ...Respondent

Ms. Rinku Valanju, Advocate with Ms. Akshita Sharma and Mr. Amit Kumar, Advocates i/b. R V Legal for the Appellant.

Ms. Rathina Manivaran, Advocate with Mr. Aditya Sarangarajan, Advocates i/b. Mansukhlal Hiralal & Co. for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member

Per: Justice Tarun Agarwala, Presiding Officer (Oral)

1. Three appeals have been filed against the order

dated 29th June, 2022 passed by the Whole Time

Member ('WTM' for short) restraining the appellant

from accessing the securities market and further

prohibiting them from buying, selling or otherwise

dealing in securities directly or indirectly or being

associated with the securities market, in any manner,

whatsoever for specified period of one year. In

addition to the above, the WTM also imposed penalties

of different amounts totalling Rs.42 lakhs. 4

2. The facts leading to the filing of the present appeal

is, that on 9th June, 2017 the Ministry of Corporate

Affairs issued a letter annexing a list of 331 shell

companies and requesting SEBI to take appropriate

action under the Securities and Exchange Board of

India Act, 1992 (hereinafter referred to as the 'SEBI

Act') and its regulations.

3. Based on the said letter, SEBI issued an order dated

7th August, 2017 placing trading restrictions on the

appellant Company, its Directors and promoters. The

Company filed Appeal no.216 of 2017 which was

disposed of by this Tribunal by an order of 24th

August, 2017 directing SEBI to decide the

representation.

4. Subsequently, based on further investigation SEBI

passed an ex-parte ad-interim order dated 13th

September, 2017 which included a direction for

appointment of a forensic auditor to verify

misrepresentations including financial and misuse of 5

funds in books of accounts of the Company.

Subsequently, a confirmatory order was passed.

5. Based on the forensic audit report and further

investigation made by SEBI a show cause notice dated

14th February, 2020 was issued. The broad charges in

the show cause notice are as follows:-

A. Violations of provisions of LODR Regulations due to misrepresentation including of financials and misuse of funds / books of accounts;

B. Other violation of provisions of LODR Regulations;

C. Violation of provisions of PFUTP Regulations, 2003.

6. The WTM after considering the replies of the

appellant and the material evidence on record

concluded that the appellant misrepresented its

financials and violated the accounting standards. The

WTM found that various provisions of LODR

Regulations was not complied with during the three

financial years and there were lapses on the part of the

Company in not making the disclosures within the 6

stipulated period. The WTM further found that there

was no violation of Section 12A of the SEBI Act and

Securities and Exchange Board of India (Prohibition of

Fraudulent and Unfair Trade Practices Relating to

Securities Markets) Regulations, 2003 (hereinafter

referred to as 'PFUTP Regulations') as there was no

misappropriation of the funds nor the Company nor its

Directors had played a fraud upon the investors nor

was there any disproportionate gain or unfair

advantage nor any specific loss was incurred by any

investor. The WTM accordingly for the above

violations debarred the appellant from accessing the

securities market for specified periods and imposed

different amounts of penalties on the appellants.

7. We have heard Ms. Rinku Valanju, Advocate

assisted by Ms. Akshita Sharma and Mr. Amit Kumar,

Advocates for the appellant and Ms. Rathina

Manivaran, Advocate assisted by Mr. Aditya

Sarangarajan, Advocates for the Respondent. 7

8. Having heard the learned counsel for the parties we

are of the opinion that the controversy involved in the

present appeals are squarely covered by various

decisions of this Tribunal, namely, Appeal no. 750 of

2021, V.B. Industries Limited & Ors. vs. SEBI,

decided on July 29, 2022, Appeal no.471 of 2022,

Dalmia Industrial Development Limited vs. SEBI and

other connected appeals decided on September 1,

2022, Appeal no.801 of 2021, SVAM Software Ltd &

Ors. vs. SEBI decided on October 13, 2022 and Tatia

Global Vennture Ltd. & Ors. vs. SEBI decided on

August 24, 2022 wherein similar controversies the

debarment passed by the WTM was set aside and the

penalties was reduced appropriately.

9. We, thus, find that the Company had made certain

lapses and failed to comply with the LODR

Regulations. However, these lapses are not intentional

but such lapses occurred on account of procedural and

technical issues.

8

10. We also find that the entire enquiry was initiated

with regard to the allegation that the Company was a

shell Company which fact was found to be false.

Further, the WTM has given a clear finding that there

was no violation of the PFUTP Regulations and there

was no diversion of funds nor there was any

manipulation in the price of the scrip and,

consequently, no fraud or unfair advantage was caused

to any shareholder or investor. In the absence of any

specific loss being caused to anyone it was contended

that the penalty imposed in the given circumstances

was totally disproportionate to the alleged violation

apart from being harsh and excessive.

11. Admittedly, a clear finding has been given by

WTM that there is no misappropriation of funds of the

Company nor there is any manipulation in the price of

the scrip. The WTM has given a categorical finding

that Section 12A of the SEBI Act or PFUTP

Regulations have not been violated. 9

12. In the absence of any finding of any fraudulent

activities or misappropriation of funds or diversion of

funds, we are of the opinion that direction of

debarment and the penalty given for violation of the

LODR Regulations appears to be harsh and excessive.

13. In the instant case, we find that the violation of the

LODR Regulations gave no disproportionate gain to

anyone nor created any unfair advantage to the

appellant nor any specific loss was caused to any

investors and, therefore, in our opinion the direction of

debarment and penalty imposed for violation of the

LODR Regulations appears to be harsh and excessive.

14. While affirming the violation committed by the

Company with regard to non-compliance of the LODR

Regulations we direct that period undergone towards

debarment of the appellant is sufficient for the

aforesaid violation and consequently the period is

reduced to the period underwent by the appellants. In

addition to the above, we reduce the penalty directing 10

the appellant Company to pay a sum of Rs.10 lakh for

violation of the LODR Regulations. The penalty

against the appellant Mr. Vikrant Kalyan is reduced to

Rs.5 lakhs.

15. The appellants Ms. Girija Banerjee, Mr. Vikas

Dubey and Mr. Bhaskar Paul are Non-Executive

Independent Directors and are not involved in the day

to day affairs and the running of the Company. In our

opinion, they cannot be charged for non-compliance of

various provisions of the LODR Regulations. In

similar matters we have exonerated the Non-Executive

Independent Directors and the said appellants are also

entitled for a similar relief. The penalty imposed upon

them is set aside.

16. In view of the aforesaid, the appeals are partly

allowed.

17. 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 11

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 RAJALA Digitally signed Technical Member KSHMI by RAJALAKSHMI

HARISH HARISH NAIR

26.4.2023 NAIR Date: 2023.05.02 10:45:10 +05'30'

RHN