Order in respect of Mr J. P. Madaan

WTM/RKA/EFD-DRA-I /89/2016 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER IN THE MATTER OF VITAL COMMUNICATIONS LTD. In respect of Mr J. P. Madaan 1. SEBI had passed an order dated July 31, 2014 in respect of 24 entities including one Mr. J. P. Madaan. Mr. J. P. Madaan was found to have contravened the provisions of regulation 3, 4, 5 and 6 of the SEBI (Prohibition of fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 read with regulations 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 and was accordingly restrained from accessing the securities market and was further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of three years in terms of the said order. 2. Aggrieved by the said order, Mr. Vinay Talwar and Mr. J. P. Madaan preferred appeals before Hon’ble Securities Appellate Tribunal (SAT) which were disposed of by Hon’ble SAT vide order dated April 28, 2016 with following directions: “3. In view of the fact that the appellants are not contesting the impugned decision on merits but are only interested in getting the debarment period reduced, we deem it proper to dispose of the appeals by passing the following order: (a) Appellants are at liberty to make a representation to SEBI seeking reduction of the debarment for a period lesser than three years, within a period of two weeks from today. (b) If such a representation is made within a period of two weeks from today, then SEBI shall consider the same on its own merits and pass appropriate order as it deems fit within a period of four weeks from the date of receiving the representation.” 3. Mr. Vinay Talwar filed a representation vide letter dated May 5, 2016 received by SEBI on May 9, 2016. However, SEBI did not receive any representation from Mr. J. P. Madaan within the timeline as specified in SAT order dated April 28, 2016. Accordingly, SEBI passed an order dated June 08, 2016 in respect of Mr. Vinay Talwar. 4. Subsequently, Mr. J. P. Madaan filed application before Hon'ble SAT seeking review of its order dated April 28, 2016, which was disposed of by Hon'ble SAT vide order dated June

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28, 2016 with following direction: Review Application No. 8 of 2016 in Appeal No. 388 of 2014 1. After hearing the counsel for applicant we see no reason to review of our order passed in Appeal NO. 388 of 2014. However, time to file application before SEBI is extended by one week from today. 2. Review Application is disposed of accordingly with no order as to costs.

5. Mr. J. P. Madaan filed a representation vide his letter dated July 05, 2016 received by SEBI on July 07, 2016. I note that Mr. J. P. Madaan made his submissions on merit as well as on the issue of period of debarment. 6. I note that in his representation, Mr. J. P. Madaan has made the same submissions which he had made during the proceedings that have culminated in the order dated July 31, 2014. All those submissions have already been dealt with in detail in the order dated July 31, 2014. His role in the entire scheme has been clearly brought out in the order dated July 31, 2014. In para. 15 and 17 of the order clear reasons have been given for not accepting his contentions. In para 21 of the order the complicity of Mr. J. P. Madaan has been established in the whole scheme. The facts and circumstances particularly those summarised in para. 32 and 35 of the said order have led to the finding that the whole scheme of things pertaining to preferential allotment during December 1999 to 15 entities which were connected to the company, its promoters/ directors including Mr. J. P. Madaan and subsequent sale were carried out as a device to enable fraudulent gains to the promoters and directors.

Mr. J. P. Madaan has been found to be party to the fraudulent preferential allotment which was to cheat the investors. He had knowingly indulged in such fraudulent activities. Mr. Vinay Talwar's role has been more particularly described in para. 32 (e), (f) and (g), para. 33, para. 34 and para 35 read with para. 17 and 21 of the order dated July 31, 2014 and I do not consider it necessary to burden this order with same findings again. 7. In this case, after the order dated July 31, 2014 was passed, Mr. J. P. Madaan had a remedy provided by law by filing appeal under section 15T of the SEBI Act before the Hon'ble SAT. In terms of said section 15T, any person aggrieved by an order of the Board may prefer an appeal to the Hon'ble SAT. In terms of section 15T(4) of the SEBI Act, Hon'ble SAT may confirm, modify or set aside the order appealed against. In this case, as observed by Hon'ble SAT in its order dated April 28, 2016, while availing this remedy Mr. J. P. Madaan has not contested the order dated July 31, 2014 on merits and he was only interested in reduction of the debarment period.

Further, Mr. J. P. Madaan had filed review application which has been rejected by the Hon'ble SAT vide its order dated June 28, 2016. In terms of the said orders of Hon'ble SAT, the only question that remains to be examined is whether the debarment period of three years imposed upon Mr. J. P. Madaan should be reduced in view of the Order in respect of Mr. J. P. Madaan 2 of 3 submissions made by him in his representation. 8. Mr. J. P. Madaan has submitted in his representation that the period of debarment against him is contrary to the principles of parity as, according to him, the main culprit Mr. Vijay Jhindal was also awarded same period of debarment and lenient view was taken against his wife, Ms. Shubha Jhindal. In the order dated July 31, 2014, entire facts and circumstances have been taken into account, while awarding the debarment. Further, the period of debarment have been awarded considering the role and involvement of respective entities as mentioned in para. 37 of the order dated July 31, 2014. Mr. J. P. Madaan was Director of the company when the misleading advertisements pertaining to the buyback of shares, bonus and preferential issue of shares during the period May-June 2002 were issued.

This apart, he was actively involved in the fraudulent scheme as has been detailed in the said order. I, therefore, do not agree with this contention of Mr. J. P. Madaan. 9. Mr. J. P. Madaan has further submitted that he was prohibited for a period of 6 months for similar violation vide SEBI order dated February 20, 2008. I note that as against Mr. J. P. Madaan's submissions, vide order dated February 20, 2008 SEBI had restrained Vital Communications Ltd. and its Directors Mr. J P Madaan, Mr. R K Garg, and Mr. Vijay Jhindal, from accessing the securities market and prohibit them from buying, selling and dealing in securities in any manner for a period of two years. In this regard, it is relevant to mention that the order dated February 20, 2008 had been set aside by Hon'ble SAT vide its order dated August 28, 2008 in the appeals filed by Mr. J. P. Madaan, Mr. Vijay Jhindal and Ms. Shubha Jhindal and had remanded the matter back to SEBI to issue fresh show cause notice(s). 10. Considering the facts and circumstances of the case, I do not find any reason to reduce the debarment for a period lesser than three years, as has been imposed vide order dated July 31, 2014 in respect of Mr. J. P. Madaan.

The representations of Mr. J. P. Madaan are disposed of accordingly.

Sd/- DATE: July 28th, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

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