Order in the matter of Altius Finsev Pvt. Ltd

WTM/GM/EFD/72/2019-20 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under Section 12 (3) of SEBI Act, 1992 read with Regulation 28 (2) of SEBI (Intermediaries) Regulations, 2008 in the matter of Altius Finserv Private Limited.

NOTICEE PAN SEBI REGISTRATION NO Altius Finserv Private Ltd. PAN: AAACU3953D INM000011732

Background 1.1 Securities and Exchange Board of India (“SEBI”) granted a Certificate of Registration as a Merchant Banker to Altius Finserv Private Limited (“AFL/Noticee”) in accordance with the SEBI (Merchant Bankers) Regulations, 1992 (“Merchant Bankers Regulations”) on June 10, 2010 for a period of three years. Thereafter, vide letter dated March 26, 2013, a deemed extension of registration for a period of two years was granted to the Noticee.

1.2 Mr. Pawan Bansal was the Managing Director of Altius Finserv from November 2, 2009 onwards. In August 2014, SEBI took on record certain newspaper clippings, reporting a bribery case in Syndicate Bank involving Bhushan Steel Limited (“Bhushan Steel”) which resulted in the arrest of Mr. Pawan Bansal along with Mr. S. K. Jain (the then Chairman and Managing Director, Syndicate Bank) and 9 other individuals, by the Central Bureau of Investigation (“CBI”). Mr. Pawan Bansal was arrested on alleged charges of taking a bribe of ₹50 Lakhs to enhance the credit limit of 2 companies - Bhushan Steel and M/s Prakash Industries Limited (“Prakash Industries”).

1.3 In the Report of Merchant Bankers for the Half Year ended September 2014 (dated April 06, 2015), submitted by AFL to SEBI, it was disclosed that CBI had registered an FIR (FIR no. RC-AC1-2014-A0005) against Mr Pawan Bansal on August 01, 2014. It was also stated

Order in the matter of Altius Finserv Private Limited that Mr. Pawan Bansal was arrested by the CBI on August 02, 2014 and was released on bail by the Competent Court on October 01, 2014.

1.4 On October 10, 2014, Mr Pawan Bansal, apart from continuing as the MD, was also appointed as the Compliance Officer and Principal Officer of AFL.

1.5 Based on the above, a Show Cause Notice (SCN) dated June 04, 2015 was issued u/s 11 and 11B of SEBI Act, 1992 read with Regulation 35 of Merchant Bankers Regulations by SEBI alleging that the Noticee was not in compliance with Regulations 6 (gg), 6A, 12(1) & (2) of the SEBI (Merchant Bankers) Regulations, 1992 and Schedule II of SEBI (Intermediaries) Regulations, 2008 (“Intermediaries Regulations”) and Clause 28 of Code of Conduct for Merchant Bankers under Regulation 13 of Merchant Bankers Regulations.

1.6 The SCN culminated in SEBI passing an order dated March 17, 2016 under Sections 11 and 11B of the SEBI Act read with Regulation 35 of the Merchant Bankers Regulations, whereby it was directed that – i. Shri Pawan Bansal [PAN: ACFPB2226A], Managing Director and Key Management Person of Altius Finserv, is restrained from associating himself, either directly or indirectly, with any intermediary or holding any controlling shareholding in any intermediary till such time he is freed by the Competent Court, of the charges alleged in the FIR (FIR no. RC-AC1-2014-A0005) registered against him, by the CBI on August 1, 2014.

ii. SEBI shall not consider any application of Altius Finserv Private Limited [Registration No. INM000011732; PAN: AAACU3953D], for a Certificate of Registration to act as an intermediary in any capacity till such time a. Shri. Pawan Bansal is freed by the Competent Court of the charges alleged in the aforementioned FIR and b. Holds office in Altius Finserv Private Limited as Managing Director or Key Management Person or holds controlling shareholding therein.

1.7 Noticee preferred an appeal against the said order before the Hon'ble Securities Appellate Tribunal. Hon'ble Tribunal vide Order dated May 09, 2016 disposed off the Appeal and gave liberty to the Noticee to make representation to SEBI.

1.8 The representation made by the Noticee as per the Tribunal order was disposed off by SEBI vide order dated August 04, 2016, holding that, - "It is however, clarified that should there be any change in the factual circumstances concerning the conditions contained in paragraph 11.1(ii)(a) and (b) of the SEBI Order dated March 17, 2016, Altius Finserv may approach SEBI with an application for a Certificate of Registration to act as an intermediary and SEBI shall consider the same on merits."

1.9 Simultaneously with the aforesaid proceedings, SEBI initiated enquiry proceedings against the Noticee under Chapter V of the SEBI (Intermediaries) Regulations, 2008 ("Intermediaries Regulations") and appointed a Designated Authority ("DA") to enquire into whether the alleged violation of Regulations 6 (gg), 6A, 12(1) & (2) of Merchant Bankers Regulations and Schedule II of Intermediaries Regulations and Clause 28 of Code of Conduct for Merchant Bankers under Regulation 13 of Merchant Bankers Regulations by the Noticee warranted cancellation or suspension of the certificate of registration granted by SEBI or any other action provided in Chapter V of the Intermediaries Regulation. On completion of the proceedings, the DA submitted the report dated May 15, 2018 (DA’s Report) recommending that the Noticee is not a fit and proper person and the certificate of registration of the Noticee as a merchant banker be considered as cancelled.

1.10 Pursuant to this, a post enquiry SCN dated May 29, 2018 was issued to the Noticee under Regulation 28 (1) of SEBI (Intermediaries) Regulations, 2008 to show cause as to why action, as recommended by the DA or any other action as considered appropriate by the Designated Member, should not be taken against the Noticee. A copy of the DA’s Report was also forwarded to the Noticee along with an advice to file reply, if any, within 21 days from the date of receipt of the notice. The Noticee did not file any reply to this Notice.

1.11 Thereafter, vide letter dated December 17, 2018 the Noticee was granted another opportunity to file its reply and was also given an opportunity of personal hearing on June 12, 2019. Noticee vide email dated June 03, 2019 submitted its reply inter alia stating that,- a. Noticee had vide letter dated October 14, 2014 applied for voluntary surrender of certificate of registration. Noticee has not carried out any activity as a merchant banker as defined under Merchant Banker regulations after the said date.

b. Since the period for which registration as a merchant banker by SEBI has already expired and since the Noticee no longer holds a valid certificate of registration as a merchant banker as on date of Report dated May 15, 2018, no proceedings under Intermediary Regulation ought to be initiated against Noticee. The Report should be quashed and set aside.

c. For the same cause of action, SEBI has already passed an order dated March 18, 2016 against the Noticee. Therefore, initiation of the present proceedings amounts to double jeopardy.

d. In para 3 of the DA Report, it is mentioned that in the Syndicate Bank bribery case, Mr. Pawan Bansal is alleged to have facilitated defaulters from adverse action in relation to the loan to Bhushan Steel; and in the case of Prakash Industries Ltd., facilitated sanction of External Commercial Borrowing (ECB) facility. The Noticee, however, submitted that they were never associated with Bhushan Steel and their names are not mentioned in Bhushan Steel FIR. As regards charge of bribery for granting ECB facility for Prakash Industries Ltd., it was submitted that the company had not availed the aforesaid facility and had not signed any loan documents in that regard. Prakash Industries account was a standard account at the time of sanction of the facility.

e. Said allegations which forms the subject matter of the Report is sub judice and is pending before Hon’ble Court. The outcome of proceedings shall have direct bearing on the outcome of the present proceedings.

f. The FIR against Mr. Pawan Bansal was registered by CBI on hearsay evidence only and thereupon SEBI has relied upon and taken cognizance merely on allegations made by CBI g. It is a cardinal principle of jurisprudence that a person is deemed to be innocent until proven guilty.

h. With regard to the alleged violation of provisions for Regualtion 6(gg), 6A, 12(1) and 12 (2) of Merchant Banker regulations and Schedule II of Intermediaries Regulations and clause 28 of Code of Conduct for Merchant Bankers Regulations, it was denied by the Noticee and following submissions were made,- i. The company has paid all relevant fee on a timely basis.

ii. The Noticee has always employed persons who are qualified and who are fit and proper to carry business of the Company.

1.12 In the hearing held on June 12, 2019, the Noticee was represented by Mr. Prakash Shah, Advocate and Mr. Pawan Bansal, Managing Director of the Noticee.

1.13 I have considered the Report submitted by the DA, the Post-Enquiry SCN issued to the Noticee, oral and written submissions of the Noticee along with the documents contained therein and other material available on record. 1.14 It is noted that the basis of the allegation against the Noticee emanates from the FIR and subsequent arrest of the Managing Director and KMP of the Noticee – Mr. Pawan Kumar Bansal, by CBI. Pursuant to this, SEBI initiated the present proceedings against the Noticee under Chapter V of the SEBI (Intermediaries) Regulations, 2008 to determine whether the Noticee satisfied the fit and proper criteria specified under Schedule II of Intermediaries Regulations and Clause 28 of Code of Conduct for Merchant Bankers Regulations. 1.15 In terms of Regulation 27 of Intermediaries Regulations, the actions that can be taken against an intermediary in proceedings initiated under Regulation 24 are as follows,- (i) suspension of certificate of registration for a specified period; (ii) cancellation of certificate of registration; (iii) prohibiting the noticee to take up any new assignment or contract or launch a new scheme for the period specified in the order; (iv) debarring a principal officer of the noticee from being employed or associated with any registered intermediary or other registered person for the period specified in the order; (v) debarring a branch or an office of the noticee from carrying out activities for the specified period; (vi) warning the noticee 1.16 I note from the material available on record that the Certificate of Registration granted to the Noticee, by SEBI, to act as a Merchant Banker, had expired on June 09, 2015. In view of the same, any order suspending or cancelling the certificate of registration would be infructuous at this point. Further, as noted in para 1.6 and 1.8 above, SEBI has already issued directions vide order dated March 17, 2016 (which was confirmed vide Order dated

August 04, 2016) that any application made by Noticee seeking registration as intermediary would not be considered by SEBI till such time Mr. Pawan Bansal is exonerated by a competent court of the charges levelled against him and he holds office in Noticee as an MD or KMP or continues as controlling shareholder. 1.17 In light of the above, I am constrained to note that issuance of any directions, provided under Regulations 27 of Intermediaries Regulations, against the Noticee at this stage is not warranted, given the facts and circumstances of the present proceedings.

Order –

2. I, in exercise of powers conferred under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Regulation 28(2) of the SEBI (Intermediaries) Regulations, 2008, hereby conclude the proceedings against the Noticee / Altius Finserv Pvt. Ltd. – (SEBI Registration No. INM000011732) without issuance of any directions.

Place: Mumbai G. MAHALINGAM Date: February 24, 2020 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA