Order in the matter of IPO Irregularities - Request From Ms. Bela K. Jhaveri, Ms. Sumangala P. Jhaveri And Shri Kamal P. Jhaveri To Sell 8,000 Shares Of HSBC Investdirect India Ltd
- Order No.WTM/SEBI/ISD/403/2011
Ratio decidendi
The rule this decision rests on
The Board may, under Sections 11 and 11B of the SEBI Act, 1992, vary an earlier interim direction restraining a debarred person's joint holders from dealing in securities, to the limited extent of permitting sale of delisted shares to the acquirer within the period of the statutory tender window, where the holders could not otherwise sell during that window, and the sale proceeds are held in escrow. Release of escrowed sale proceeds on expiry of the debarment period is conditional on confirmation from the depository that no attachment order has been issued by any law enforcement agency over deposits classified as proceeds of cr
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
1. SEBI, vide ex-parte interim order dated April 27, 2006, had directed certain persons, including Kamal P. Jhaveri not to buy, sell or deal in the securities market, including the IPOs, directly or indirectly, till further directions. While the proceedings were in progress, Kamal Jhaveri applied under consent scheme. After following due process of law, consent order was passed on February 10, 2009. As per one of the terms of consent, Kamal Jhaveri had agreed for voluntary debarment from dealing in securities in whatsoever manner for a period of 3 years i.e. February 28, 2012. As a result, operation of demat accounts wherein Kamal Jhaveri appears as sole or joint holder have been placed under suspension till February 28, 2012.
2. In the meanwhile, Bela K. Jhaveri and Sumangala P. Jhaveri who held demat accounts jointly with Kamal Jhaveri requested SEBI to allow them to sell 4,500 shares and 3,500 shares of HSBC InvestDirect India Ltd (erstwhile IL&FS InvestDirect) as these shares are delisted with effect from July 15, 2010 and shareholders who could not participate in book building process could sell their shares to the acquirers namely, HSBC Securities and Capital Markets (India) Pvt. Ltd. and HSBC Violet Investments (Mauritius) Ltd., during the period of one year starting from the date of delisting. They further submitted that if sale proceeds are not released in favour of account holders, then same may be retained by SEBI and released alongwith interest, if any, after the 3 year voluntary debarment is over. SEBI passed an Order on October 25, 2010 directing various Market Intermediaries to facilitate the sale of delisted shares of HSBC InvestDirect India Ltd. within a period of 15 days of the issue of the Order and retain the proceeds thereon in an escrow account till February 28, 2012. However these entities did not comply with the directions stated in the said Order. Bela K Jhaveri and Sumangala P Jhaveri vide their letters dated January 20, 2011 made a request to amend the directions issued at para 4(e) of captioned Order and to keep the proceeds in a fixed deposit with Nationalized PSU Bank.
3. Directorate of Enforcement, Ahmedabad, vide its letters dated July 5, 2011 informed SEBI that investigation against Jhaveri family are in progress and clarified that in case the shares of HSBC InvestDirect India Ltd.are found to be having a nexus with proceeds of crime, the said shares or its value shall be liable to be attached and confiscated under the prevention of Money Laundering Act, 2002. Further, vide its letter dated July 8, 2011, it stated that it has no objection so far as participation in the buy back offer and clarified that proceeds shall not be parted till further advice from it.
4. In view of above, it has been decided to amend the Order dated October 25, 2010 to the limited extent of permitting the sale of delisted shares to the acquirer till July 15, 2011 with all other directions remaining the same. Further, Karvy is directed that upon completion of the debarment period on February 28, 2012, the amount held with them in escrow account shall be released to the entities only after confirming from NSDL that there is no Order of attachment issued by any law enforcement agencies on deposits in such escrow account classified as proceeds of crime, lying to the credit of Bela K. Jhaveri or Sumangala P. Jhaveri.
5. A copy of this order shall be served on Ms. Bela K. Jhaveri, Ms. Sumangala P. Jhaveri, Shri Kamal P. Jhaveri, NSDL, Karvy Stock Broking Ltd., SBI Capital Markets Ltd., HSBC Securities and Capital Markets (India) Pvt. Ltd. and HSBC Violet Investments (Mauritius) Ltd, to ensure implementation of directions contained herein. Further, copy of this Order may also be sent to Directorate of Enforcement for information.
Prashant Saran Date: July 12, 2011 Whole Time Member Place: Mumbai Securities and Exchange Board of India
Dr. K.M. Abraham Whole Time Member Securities and Exchange Board of India
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