Order in the matter of Illiquid Stock Options in respect of Jai Annanya Investments Private Limited[SAT Appeal No.:259/2016

WTM/RKA/ISD/103/2016 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER On representation of Jai Annanya Investments Private Limited (PAN: AABCG0769Q)

1. Vide its letters dated August 13, 2016 Jai Annanya Investments Private Limited (hereinafter referred to as “Jai Annanya”) has made following requests:- a) Allow it to pay statutory dues of TDS to Government of India under the Income Tax Act, 1961; and b) Allow it to use the sale proceeds of its securities and amount lying in the escrow account to repay its total outstanding dues to Adventz Finance Private Limited (Adventz). 2. The aforesaid requests have been made by Jai Annanya pursuant to the order number WTM/RKA/ISD/90/2016 dated July 30, 2016 whereby the interim directions including the restraint on it from buying, selling or dealing in securities imposed vide the ad interim ex-parte order dated August 20, 2015 have been confirmed qua it subject to certain reliefs granted to it vide letter dated February 08, 2016 and the order dated July 30, 2016. 3. Vide its another letter dated August 04, 2016 addressed to the Commissioner of Income Tax (TDS) [CIT(TDS)], a copy endorsed to SEBI, it has requested CIT (TDS) to grant stay on operation of TDS provisions with its fund transactions with Adventz Finance Private Limited (Adventz) from the date of ad interim ex-parte order dated August 20, 2015. It its letters it has reiterated that it had borrowed ` 40 crore in two tranches in 2014 which for a period of one year with interest at the rate of 12.50% per annum and has represented that :- a) Jai Annanya repaid to Adventz, `5 crores on September 30, 2014 and ` 10 crores on July 16, 2015.

b) From September 2014 to June 2015 it had credited an interest amount of ` 2,55,99,315/ less TDS of ` 25,59,932/ for quarter ended December 2014; ` 1,07,87,671 less TDS of `10,78,767/for the quarter ended March 2015 and ` 1,09,07,534/ less TDS of `10,90,753/ for the quarter ended June 2015 to Adventz.

c) Pursuant to the relief granted to it by SEBI vide letter dated February 08, 2016 it had sold shares worth `7.9 crores and repaid approximately `6.8 crores towards

Order in the matter of Illiquid Stock Options principal loan outstanding and balance `1.1 crore was deposited in an interest bearing escrow fixed deposit account as per SEBI’s direction. d) Jai Annanya carries on its business with borrowed funds and it still has an outstanding amount of approx. ` 30 crores to be paid to Adventz. e) Jai Annanya and Adventz are not connected in any manner as on the date of the ad interim ex-parte order dated August 20, 2015 or as on date. In this regard it has relied upon shareholding pattern of Bright Tradelink Private Limited certified by one of directors of this company and showing that Adventz is not a shareholder in Bright Tradelink Private Limited. In any case, there is no law which states that loan liability towards a connected company is not to be repaid. f) Jai Annanya has all its assets in the form of securities lying in the demat account which has been frozen pursuant to the ad interim ex-parte order dated August 20, 2015. Hence, it has not been able to repay to Adventz. g) The SEBI’s order dated July 30, 2016 has resulted in to a situation that Jai Annanya does not have any free cash or free assets which can be used for payment of TDS to the Government of India. h) It is unable to repay the interest on loan to Adventz and TDS on the accrued interest to the Income Tax Department. In consequence, it will be liable to pay interest on TDS amount not paid, be treated as assesse in default and would become liable to penalty proceedings, prosecution or punishment of rigorous imprisonment, under relevant provisions of the Income Tax Rules.

4. Jai Annanya has now sought further reliefs as aforesaid relying upon certain additional documents. The documents relied upon by it are:- a) The copies of letters dated May 16th, 2014 and August 08,2014 written to it by Adventz whereby Adventz had informed Jai Annanya that it had sanctioned ICD loan of ` 40 crore and disbursed ` 25 crore on May 16, 2014 and ` 15 crore on August 08,2016 to it; b) Its Bank Account statements with RBL Bank showing aforesaid fund disbursement by Adventz. c) Copies of Form 16A under section 203 of the Income Tax Act and copies of TDS/TCS Challan receipts for TDS for Q3 FY 2014-15, Q4-FY2014-15 and Q1 2015-16 during the Assessment year 2015-16.

d) Form 26AS of Adventz reflecting of TDS. e) Copies of CA certified audited Balance Sheet as on March 31, 2015 and relevant ledger account/ confirmation of account. f) A copy of certificate of a director of Bright Tradelink Private Limited with regard to shareholding pattern of the said company as on August 20, 2015. 5. I have considered the representations of Jai Annanya and documents filed by it in support thereof. With regard to its request to allow utilisation of sale proceeds lying in the escrow account to repay its total outstanding dues to Adventz it is noted that the Jai Annanya has not been able to make out a case that the its claimed fund transactions with Adventz Finance Private Limited were secured by the collateral of shares that were lying in its portfolio of Jai Annanya. It has not been able to show that it is not connected to Adventz as the documents including the shareholding pattern certified by a director of Bright Tradelink Private Limited is not sufficient to negate the findings as given in the order dated July 30, 2016. Further, considering the facts and circumstances of the case relating to ad interim ex-parte order dated August 20, 2015 general common reliefs have already been permitted to restrained entities including Jai Annanya vide a separate order dated August 22,2016.

6. As regards payment of TDS pot of amounts lying in the escrow account it is noted that Jai Annanya has demonstrated on the basis of relavnt documents that it has been paying TDS towards repayments to Adventz under its statutory obligations to pay sovereign dues under the provisions of the Income Tax Act. In my view, the request of Jai Annanya to utilise the proceeds of its portfolio lying in the escrow account can be allowed so as to pay government dues under the Income Tax Act. It is, however, clarified that such payment of TDS shall not be subject any restriction with regard to retention of proceeds in the escrow account in terms of the aforesaid order dated August 22,2016. I order accordingly. 7. The aforesaid representations made by Jai Annanya Investments Private Limited are disposed of accordingly.

Sd/- Date: August 22nd, 2016 RAJEEV KUMAR AGARWAL Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA