Order in the matter of Illiquid Stock Options in respect of Ms. Minal Patel

1. Vide an ad interim ex-parte order dated August 20, 2015 (hereinafter referred to as “interim order”), 59 entities including Mr. Bharat J. Patel have been restrained from accessing the securities market and have been further prohibited from buying, selling or dealing in securities in any manner whatsoever, till further directions. The said interim order is an ex parte order - cum - show cause notice and has provided these restrained entities to file their objections, if any, within 21 days and to avail opportunity of personal hearing, if they so desire. 2. While the proceedings pursuant to the interim order were underway, Ms. Minal B. Patel, who is not a party in the interim order, had made, inter alia, the following representations vide her letters dated September 4, 2015 and September 28, 2015: (i) She is wife of Mr. Bharat Patel and maintains beneficiary account (number “10564804”) with the depository participant IndusInd Bank Ltd. (DP Id: IN300159). (ii) She is the first holder in the said beneficiary account whereas Mr. Bharat Patel is the second holder. The name of Mr. Bharat Patel is added to various beneficiary accounts of Ms. Minal Patel for the purpose of convenience only. (iii) She is a person of high net worth and has been making investments in shares and securities on the stock exchanges independently and through her own resources, i.e., all the purchases and sales in the said beneficiary account are done from her own resources and on her own behalf only. (iv) Further, she has not taken or given any loan to Mr. Bharat Patel. Ms. Minal Patel also submitted income tax return for the assessment years i.e. 2013-14 and 2014-15. (v) She is not directly or indirectly concerned with the dealings in any of the transactions which are the subject matter of the interim order that may have been done by Mr. Bharat Patel. No cause or concern of any nature whatsoever has been raised against Ms. Minal Patel in the interim order. However, the said beneficiary account has been frozen for debit and credit pursuant to the interim order as Mr. Bharat Patel is the second holder of the said beneficiary account. 3. While the matter was under consideration, Ms. Minal Patel filed an appeal before the Hon'ble Securities Appellate Tribunal (SAT). The Hon’ble SAT while disposing of the appeal vide its order dated January 6, 2016 directed SEBI as under:

Order in the matter of Illiquid Stock Options in respect of Bharat J. Patel

''On behalf of the appellant, Shri Neville Lashkri, learned advocate undertakes to submit relevant documents/ information to SEBI within a period of one week along with brief submissions. Learned counsel for SEBI states that Ld. WTM of SEBI would grant personal hearing to the appellant within a period of two weeks thereafter. After hearing the appellant, Ld. WTM shall pass appropriate order qua the appellant within three weeks thereafter.'' 4. Pursuant to the said order of the Hon’ble SAT, vide letter dated January 12, 2016, Ms. Minal Patel made, inter alia, the following additional representations/ submissions alongwith documents: (i) Out of four beneficiary accounts held by her, Bharat Patel appears as a second holder in only one beneficiary account and the same has been frozen pursuant to the interim order. (ii) All investments by Ms. Minal Patel in the capital market are made in her own client code and through her own funds. Ms. Minal Patel has been investing in shares of various companies since Financial Year 2001-02. (iii) Client's income for all the years consists of long term/short term capital gains, dividend income, bank interest and PPF interest. (iv) Client's income for all the years consists of long term/short term capital gains, dividend income, bank interest and PPF interest and all her long term capital gains/losses have been duly reflected in her respective Income Tax Returns. (v) Ms. Minal Patel's investments in capital market are independent and amounts to her 'Stridhan'. 5. Ms. Minal Patel was given an opportunity of personal hearing on January 25, 2016 when Mr P. N. Modi (Senior Advocate) appeared and made submissions on behalf of Ms. Minal Patel and sought one week’s time to make additional written submissions in order to substantiate Ms. Minal Patel’s claim of the actual beneficial ownership of the securities lying in the frozen demat accounts.

6. Vide letter dated February 2, 2016 and email dated February 16, 2016, Ms. Minal Patel made additional submissions relying upon certain documents.

7. After considering the submissions and documents relied upon by Ms. Minal Patel, SEBI, vide letter dated February 24, 2016, rejected the request of Ms. Minal Patel on the following grounds: (i) Ms. Minal Patel and Mr. Bharat Patel are the joint beneficial owners of the securities lying in the said beneficiary account. Thus, there is legal presumption that Ms. Minal

Order in the matter of Illiquid Stock Options

Patel and Mr. Bharat Patel are joint beneficial owners of the securities lying in the aforesaid beneficiary demat account. (ii) Based on the submissions, it is difficult to ascertain the real owners of the securities lying in the joint beneficiary demat account. A perusal of the bank account statements provided by Ms. Minal Patel where incidentally Mr. Bharat Patel is a joint holder, it could not be reasonably inferred that the money utilized towards the purchase of securities were her own funds. There were substantial movements of funds to and from their personal bank accounts. (iii) Ms. Minal Patel failed to substantiate her claims that the securities lying in the aforesaid beneficiary account were purchased by her using her own funds and no benefit arising from the ownership/sale of securities was transferred to Bharat Patel. 8. Ms. Minal Patel, challenged the aforesaid communication dated February 24, 2016 in Appeal No. 62 of 2016 before Hon’ble SAT impugning the same as an order passed by SEBI and praying for setting aside the same and to grant her relief as she has been claiming. Vide her letter dated March 28, 2016 again requested SEBI for directions to Depositories to defreeze her demat account no. “10564804”, maintained with the DP IndusInd Bank (DP Id - IN300159).

9. Vide its order dated August 8, 2016, Hon’ble SAT disposed of the appeal filed by Ms. Minal Patel and permitted SEBI to withdraw the letter dated February 24, 2016 and pass an order, within two weeks, after considering the representations/ submissions; failing which, the freezing of Ms. Minal Patel’s demat account no. “10564804”, maintained with the DP IndusInd Bank (DP Id – IN300159), will cease to operate on the expiry of two weeks from the date of this SAT order.

10. It is noted from the order dated August 08, 2016 that Ms. Minal Patel had furnished certain additional documents in her appeal and Hon’ble SAT has directed to consider her representation and documents furnished by her in the appeal. As the communication dated February 24, 2016 has been withdrawn, I proceed to deal with the matter afresh in accordance with the aforesaid orders of Hon’ble SAT in respect of representations of Ms. Minal Patel.

11. I have considered the replies/submissions and representation made by Mr. Bharat Patel and Ms. Minal Patel. The issue in this regard is whether suspension of a joint account [beneficiary account no. 10564804 maintained with DP IndusInd Bank Ltd. (DP Id: IN300159)] needs to be continued where only second holder (i.e., Mr. Bharat Patel) is prohibited from buying, selling or dealing in securities in any manner.

Order in the matter of Illiquid Stock Options

12. I note that Ms. Minal Patel has claimed that she is the actual owner of the securities lying in the joint beneficiary account with Mr. Bharat Patel. She has also claimed that payments towards the purchase of the securities lying in her joint beneficiary account with Mr. Bharat Patel was made through her own funds and that her income for all the years consists of long term/short term capital gains, dividend income, bank interest and PPF interest. In order to substantiate her claim, Ms. Minal Patel has submitted certain documents alongwith her aforesaid representations and certain additional documents in her appeal filed before Hon’ble SAT challenging SEBI letter dated February 24, 2016. Thus, she has filed copies of following documents as on date :- (i) Details of Demat Account along with client master list of each of her four Demat Accounts. (ii) Income Tax Return (ITR-4 for Assessment year AY 2013-2014, AY 2014-2015 and AY 2015-2016) (iii) Statement of investments and statement of Long Term Gain and Statement of Short Term Gain for the assessment years AY 2013-2014, AY 2014-2015 and AY 2015- 2016. (iv) Financial statements viz. Balance Sheet and Capital Accounts for the year ended March 31, 2013, 2014 and 2015 (v) Statement of Investment co-relating with demat holdings as of March 31, 2015 along with copy of demat statement reflecting holding as on March 31, 2015. (vi) Copy of Statement of Holdings and Client Master details of the said beneficiary account. (vii) Statement of Investment as of August 21, 2015. (a) Details of Purchase from April 01, 2015 to August 21, 2015; (b) Details of sale from April 01, 2015 to August 21, 2015. (viii) Copy of the ledger from stock broker, Finquest Securities Private Limited from April 01, 2015 to August 21, 2015 reflecting her share transaction done with the stock exchanges. (ix) Copy of the bank statements of IndusInd Bank Limited bearing A/c No. 606003156181 and 100003155902 for January 1, 2014 to August 31, 2015. (x) Ledger account Mr. Bharat Patel along with the particulars of his accounts. (xi) Certificate from Chartered Accountant certifying details of various sources as reflected in her Income Tax Returns. 13. From the documents submitted by Ms. Minal Patel, I note that. (i) Ms. Minal Patel is the first holder of the beneficiary account no. 10564804 maintained with DP IndusInd Bank Ltd. (DP Id: IN300159).

Order in the matter of Illiquid Stock Options (ii) The funds have been transferred to the trading account of Ms. Minal Patel from the bank account jointly held by her with Mr. Bharat Patel. (iii) There have been instances of fund transfers between the accounts of Ms. Minal Patel and Mr. Bharat Patel. However it is noted that the bank account of Ms. Minal Patel had sufficient balance even in the absence of such fund transfers. (iv) Certain securities lying in the demat account no. “10564804”, maintained with the DP IndusInd Bank (DP Id – IN300159), appear in the statement of investments made by Ms. Minal Patel for the AY 2013-2014, AY 2014-2015 and AY 2015-2016. 14. From the above it is noted that the investments in the securities held in the jointly held beneficiary account no. 10564804 maintained with DP IndusInd Bank Ltd. (DP Id: IN300159) prima facie belong to Ms. Minal Patel. 15. Considering the aforesaid submissions and evidences brought on record, I am of the view that the balance of convenience in in favour of Ms. Minal Patel. Accordingly, I allow Ms. Minal Patel to transfer the securities from the beneficiary account no. 10564804 maintained with DP IndusInd Bank Ltd. (DP Id: IN300159) held jointly with Mr. Bharat Patel to another demat account exclusively held by her in her individual name.

16. The aforesaid shall be subject to the supervision of exchanges and depositories and shall be without prejudice to the findings of pending investigation in the matter.

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

Order in the matter of Illiquid Stock Options