Nirmal Singh Bhangoo vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision: 01.01.2016 Appeal No. 505 of 2015 Nirmal Singh Bhangoo ...Appellant

Versus

Securities and Exchange Board of India ...Respondent

Mr. P. N. Modi, Senior Advocate with Mr. Prakash Shah, Mr. Bharat Redij, and Mr. M. Jain, Advocates for the Appellant.

Mr. Kumar Desai, Advocate with Ms. Shruti Chiniwar and Mr. Saurabh Bachhawat, Advocates for the Respondent.

ORDER:

1. The appellant, Shri Nirmal Singh Bhangoo, has preferred the

present appeal mainly against the learned recovery officer's orders dated

December 11, 2015 regarding bank accounts and demat accounts

respectively. Both these orders are annexed at pages 16 and 21 of the

appeal. Same appellant has earlier filed an Appeal No. 94 of 2015

challenging the order dated August 22, 2014 passed by SEBI. By way of

Misc. Application No. 347 of 2015 in Appeal No. 94 of 2015, the

applicant, Shri. Nirmal Singh Bhangoo, is seeking stay of the operation

of impugned order dated August 22, 2014 qua him. This order stands

upheld by this Tribunal in a bunch of appeals preferred by the company

PACL and some of other directors by order dated August 12, 2015 and

Special Leave Petitions are stated to have been preferred before the

Hon'ble Supreme Court. With the consent of the parties fresh Appeal

No. 505 of 2015 as well as Misc Application No. 347 of 2015 in Appeal

No. 94 of 2015 moved by the same applicant are being taken up together

for hearing.

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2. We have heard Learned Senior Counsel Shri. P. N. Modi, and

Learned counsel for SEBI, Shri. Desai, who submits that the present

recovery order emanates mainly from the order dated August 22, 2014.

Said order was passed in respect of the company i.e. PACL Limited and

certain other directors, including the appellant, directing them to wind up

the various Collective Investment Schemes in question and refund an

amount of about Rs. 49,100 crore to the investors.

3. Per contra, Shri. Modi, Learned Senior Counsel submits that the

appellant, Mr. Nirmal Singh Bhangoo, was appointed as director on June

03, 1996 and he resigned from the directorship of the said company on

February 03, 1998. During this period the Regulations to regulate CISs

were not in force despite insertion of Section 12(1B) in the SEBI Act,

1992 in the year 1995. Therefore, the appellant cannot be retrospectively

held guilty of running CISs contrary to law even for a period while he

was director in the said company or while he was associated with that

company as an advisor because of his reach experience of sale and

purchase of agricultural land and real estate.

4. After hearing both the learned counsel for the parties, it is noted

that the appellant has already filed Appeal No. 94 of 2015 impugning the

main order dated August 22, 2014 and the said appeal has not yet been

decided by this Tribunal, although all other connected appeals have since

been dismissed by this Tribunal's order dated August 12, 2015,

upholding the main impugned order dated August 22, 2014. It is also

brought to our notice that the Appeal No. 94 of 2015 is being listed on 3

January 29, 2016 for final hearing and both the learned counsel for the

parties agree that this present appeal arises out of the main impugned

order dated August 22, 2014. It would, therefore, be in the interest of

justice to list this appeal on January 29, 2016 for final disposal alongwith

Appeal No. 94 of 2015 preferred by the same appellant. In the meanwhile

SEBI is directed to file reply in Appeal No. 505 of 2015 with a period of

two weeks. Shri. Desai, undertakes to serve an advance copy of the reply

to the other side by January 14, 2016. Rejoinder, if any, be filed by

January 25, 2016 by the appellant.

5. As regards the interim relief in the Appeal No. 505 of 2015, Shri

Desai, learned counsel for SEBI, fairly states that the respondent shall

maintain status-quo as of today as regards the two impugned orders dated

December 11, 2015 annexed at pages 16 and 21 in Appeal No. 505 of

2015. Ordered accordingly.

Misc. Application No. 347 of 2015 In Appeal No. 94 of 2015

Nirmal Singh Bhangoo Farm No. 2, Creative Farm, Near Parkland Retreat, Silveroak Lane, Satbari, South Delhi, Delhi- 11 00 74 ...Applicant

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. Bharat Redij and Mr. M. Jain, Advocates i/b Mr. Prakash Shah, Advocate for the Applicant.

Mr. Kumar Desai, Advocate with Ms. Shruti Chiniwar and Mr. Saurabh Bachhawat, Advocates i/b K. Ashar & Co. for the Respondent. 4

CORAM: Jog Singh, Member

Per: Jog Singh (Oral)

1. This Misc. Application has been moved by the applicant,

Mr. Nirmal Singh Bhangoo, who acted as an Advisor/Director of PACL

Limited for a certain period between the years 1996 to 1998 for stay of

the impugned order dated August 22, 2014. By this said order the

applicant, alongwith others including the company PACL, has been

mainly directed as under:-

38e. In the event of failure by PACL Limited and its

directors/ promoters to comply with the above directions,

the following actions shall follow:-

- PACL Limited and its directors, including

Mr. Tarlochan Singh, Mr. Sukhdev Singh,

Mr. Gurmeet Singh, Mr. Subrata Bhattacharya,

Mr. Anand Gurwant Singh, Mr. Nirmal Singh

Bhangoo, Mr. Uppal Devinder Kumar, Mr. Tyger

Joginder and Mr. Gurnam Singh (R/o Wazidpur)

shall immediately (on expiry of the three months

period available for making refunds) be restrained

from accessing the securities market and would

further be prohibited from buying, selling or

otherwise dealing in securities market till all the

Collective Investment Schemes of PACL Limited are

wound up and all the monies mobilized through such

schemes are refunded to its investors with returns

which are due to them.

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- SEBI would make a reference to the State

Government/ Local Police to register a civil/criminal

case against PACL Limited, its promoters, directors

and its mangers/ persons in-charge of the business

and its schemes, for offences of fraud, cheating,

criminal breach of trust and misappropriation of

public funds; and

- SEBI would make a reference to the Ministry of

Corporate Affairs, to initiate the process of winding

up of the company, PACL Limited.

- Without prejudice to the above, SEBI shall also

initiate attachment and recovery proceedings under

the SEBI Act and rules and regulations framed

thereunder.

2. Heard both the learned counsel for the parties at length. At the

outset, it is brought to the notice of the Tribunal by Shri Desai that the

main impugned order dated August 22, 2014 itself provides for

attachment of accounts as well as recovery of the huge amount in

question. It is further noted from the records that the impugned order

dated August 22, 2014 was belatedly challenged by the applicant

alongwith the company PACL and other directors, although by

separate appeals, before this Tribunal and all the appeals were taken

up together and heard on March 02, 2014. Certain directions were

issued to the parties to be complied with. It is also seen from the

proceedings that the applicant has been a party to seek repeatedly

adjournments in the matter and never pressed for any stay of the order

dated August 22, 2014. The applicant's role in the affairs of the PACL 6

as an Advisor or Director during the period June 03, 1996 to February

03, 1998 as reflected in the supplementary show cause notice dated

June 14, 2013 read with earlier show cause notices dated November

03, 1999 and December 10, 1999 and connected records, has yet to be

looked into by this Tribunal in this present proceedings. The

applicant, therefore, cannot claim to have made out a prima-facie case

for grant of stay of the order in question particularly at this stage when

the pleadings are complete and the matter is to be listed on January

29, 2016 for final hearing and order of status-quo, as of now, has

already been directed to be maintained so far as the two attachment

orders dated December 11, 2015 are concerned and which are the

subject matter of connected Appeal No. 505 of 2015 preferred by the

same person namely Shri. Nirmal Singh Bhangoo.

3. It is a matter of fact that the applicant Shri. Nirmal Singh

Bhangoo, in view of his claimed vast experience in the field of sale

and purchase of agriculture land etc. had promoted one PGF Limited

Company and worked as its Chairman-cum-Managing Director.

Thereafter, because of this expertise, it is submitted by the applicant,

that he was appointed as an Advisor too and a Director of PACL.

These facts are not in dispute, but the role of Shri. Nirmal Singh

Bhangoo, and its connections with PACL have not been considered in

the appeal. Therefore, it would be against the interest of justice to

grant any stay of the said impugned order dated August 22, 2014

which will prejudice further actions as may be taken by SEBI against

the applicant in accordance with law and as mentioned in the said

impugned order dated August 22, 2014. Further, grant of any stay 7

would preclude and pre-empt the respondent from taken any legal

action/steps against the applicant as well as other directors/company

i.e. PACL Limited purely on hypothetical considerations as submitted

by the applicant. The Tribunal would be undoubtedly reluctant to do

so in the absence of any prima-facie case having been made by the

applicant in the present application for grant of stay of the main

impugned order dated August 22, 2014.

4. Mr. Modi, learned senior counsel for applicant has pointed out

two judgments. One of them is in Appeal No. 140 of 2003 decided on

April 16, 2014 in the case of Radhavallabh Dhoot vs SEBI by this

Tribunal. The same has been perused. Said judgment is prima-facie

distinguishable as it pertains to activities of a non-executive director

of the company in that case. Whereas the applicant in the present case

has not only been an active director but also acted as an advisor of

PACL as per his own admission. Similarly, the case of Radhavallabh

Dhoot does not take into consideration the implication of Section 12

(1B) of the SEBI Act, 1992 which was inserted in the year 1995.

Therefore, this judgment, at least, cannot be looked into for the

purpose of grant of stay of the impugned order. Similarly, Mr. P. N.

Modi, has point out the judgment of the Hon'ble Delhi High Court

CRL. M.C. 2145/2006 in the case of Virender Kumar Singh & Anr.

vs. SEBI to bring home the point that during the relevant period, the

applicant had ceased to be the director of the company. We have gone

through the judgment of Hon'ble High Court of Delhi. In that case the

person against whom a criminal complaint was preferred by SEBI for

non-compliance of its directive regarding sending of an information 8

memorandum to all investors giving the details of various CISs by

February 20, 2000, failed to do so despite reminders by SEBI. In that

context the Hon'ble High Court of Delhi noted that the time of

commission of an offence was a matter of fact and not of conjecture.

It is true that in the case before Hon'ble Delhi High Court the person

ceased to be the director of the company prior to the action which was

sought to be taken against the company. In the present case, it is

however noted that the applicant is seeking stay of the impugned

order only on surmises and hypothetical grounds that in future SEBI

might take certain steps against the applicant. As already noted

hereinabove, the Tribunal cannot stop SEBI from taking appropriate

action against the applicant and other entities/persons in accordance

with law and as per the impugned order dated August 22, 2014 which

has since been upheld by this Tribunal vide its order dated August 12,

2015. Therefore, the prayer for grant of stay at this stage is rejected

and the Misc. Application No. 347 of 2015 in Appeal No. 94 of 2015

is dismissed. Both the appeals i. e. 505 of 2015 and 94 of 2015 are

directed to be listed on January 29, 2016 for final hearing when the

matter shall be heard on merit without entertaining request for

adjournment by one of the parties.

Sd/-

Jog Singh Member

01.01.2016 Prepared & Compared By: PK