Order in the matter of representation filed by dushyant dalal and puloma dalal[SAT Appeal No.:340/2014]

WTM/PS/17/ISD/JUNE/2014 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM : PRASHANT SARAN, WHOLE TIME MEMBER ORDER In compliance with the directions of the Hon'ble Securities Appellate Tribunal made vide Order dated April 29, 2014 in Appeal No. 71 of 2014 - Mr. Dushyant N. Dalal and Mrs Puloma D. Dalal vs. Securities and Exchange Board of India

In respect of the representation dated February 12, 2014 filed by Mr. Dushyant N. Dalal and Mrs Puloma D. Dalal

Date of hearing : June 10, 2014 Appearances: For Mr. Dushyant N. Dalal and Mrs Puloma D. Dalal : 1. Mr. Ravichandra S. Hegde, Advocate 2. Ms. Aashni Dalal, Authorised Representative 3. Ms. Yuti Jhaveri, Authorised Representative For the Securities and Exchange Board of India : 1. Mr. K. Saravanan, Deputy General Manager 2. Ms. Anitha Anoop, Deputy Legal Adviser 3. Mr. T. Vinay Rajneesh, Assistant Legal Adviser 4. Mr. Sachin Ashok Sonawane, Assistant Legal Adviser

1. The Hon'ble Securities Appellate Tribunal ("Hon'ble SAT") had vide Order dated April 29, 2014 directed the Securities and Exchange Board of India ("SEBI") to dispose of the representation dated February 12, 2014 ("the representation") filed by Mr. Dushyant N. Dalal and Mrs Puloma D. Dalal (hereinafter collectively referred to as "the applicants") by passing a final order within a period of eight weeks. The relevant portions of the Order of Hon'ble SAT is reproduced below :

"2. It appears that the appellant filed application on February 12, 2014 which was delayed by nine days. By a communication dated March 21, 2014 the application made by the appellant has been rejected on the ground that the same is filed beyond the time prescribed in our order dated January 17, 2014. Challenging the communication dated March 21, 2014 present appeal is filed.

3. Although, no fault can be found with the decision of SEBI in rejecting the application which was filed beyond the time specified in our order dated January 17, 2014, in our opinion in the interest of justice, it would be just and proper to condone the delay in filing the application. 4. In this view of the matter, impugned order dated March 21, 2014 is quashed and set aside and concerned officer of SEBI is directed to dispose of application dated February 12, 2014 by passing a final order as expeditiously as possible and in any event within a period of 8 weeks from today. …….." [Emphasis supplied]

2. Before proceeding to deal with the representation, it is necessary to refer to the background of the matter. Pending investigations into the irregularities in the dealing in the shares issued in Initial Public Offers ("IPO") during the period 2003-2005, SEBI had, vide an ad interim ex-parte Order dated April 27, 2006 ("the interim order"), which was also a show cause notice, inter alia directed the applicants not to buy, sell or deal in the securities market, including in IPOs, directly or indirectly, till further directions. The interim order was confirmed by SEBI against the applicants vide Order dated September 09, 2008. After completion of investigation, SEBI issued a show cause notice dated November 28, 2008 to the applicants, which was disposed off vide an Order dated July 21, 2009 ("the SEBI Order"). The SEBI Order found that the applicants had employed fraudulent, deceptive and manipulative practices to corner the shares meant for retail individual investors in the IPOs (as detailed therein) and made unlawful gains by selling the cornered shares, in violation of section 12A(a), (b) and (c) of the SEBI Act, 1992 and regulations 3 and 4(1) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ("the PFUTP Regulations"). The SEBI Order also estimated that the applicants made an unlawful gain of ₹4,05,61,579/-. In view of such findings, the SEBI Order directed the applicants as follows :

"…………………. Accordingly, in exercise of the powers conferred upon me under Section 19, read with Sections 11, 11 (4) and 11B of the SEBI Act, 1992, and after taking into account the period of prohibition already undergone by the noticees pursuant to the interim order, I hereby issue the following directions:

a) The noticees [Mr. Dushyant Natwarlal Dalal (PAN AAAPD 5859Q) and Mrs. Puloma Dushyant Dalal (PAN AAEPD 2909B)] shall not buy, sell or deal in the securities market in any manner whatsoever or access the securities market, directly or indirectly, for a period 45 days from the date of this order; and b) The noticees shall disgorge the unlawful gain of Rs.4.05 crore (rounded off from Rs.4,05,61,579). c) The noticees shall also pay Rs.1.95 crore (rounded off from Rs.1,94,69,558), being the simple interest at the rate of 12% per annum for 4 years (2005-09) on the unlawful gain Rs.4,05,61,579. d) The noticees shall pay the above amount of Rs.6 crore (Rupees six crore) within 45 (forty five) days from the date of this order by way of crossed demand draft drawn in favour of “Securities and Exchange Board of India”, payable at Mumbai. e) In case the aforesaid amount Rs.6 crore is not paid within the specified time, the noticees shall be restrained from buying, selling or dealing in securities market in any manner whatsoever or accessing the securities market, directly or indirectly, for a further period of seven years, without prejudice to SEBI’s right to enforce disgorgement.

17. This order shall be served on all recognized stock exchanges and depositories to ensure that the noticees are not allowed to undertake transactions as prohibited in Para 16 above.

18. This order shall come into force with immediate effect." [Emphasis supplied]

3. The applicants challenged the SEBI Order in an appeal (Appeal No. 182 of 2009) before the Hon'ble SAT. The Hon'ble SAT, vide its Order dated November 12, 2010, while dismissing the appeal of the applicants, affirmed the findings of SEBI with respect to the violations committed by the applicants. The Hon'ble SAT also upheld the exercise of powers by SEBI for issuing directions for disgorging the illegitimate gains made by the applicants and the interest rate (of 12%) levied on the unlawful gain of ₹4.05 crore. The applicants preferred a further appeal (in Civil Appeal No. 1448 of 2011) to the Hon'ble Supreme Court, which was also dismissed vide Order dated February 21, 2011. A connected review petition (No. 1191 of 2011) filed by the applicants was also dismissed vide Order dated August 24, 2011by the Hon'ble Supreme Court.

4. The findings contained in the SEBI Order along with the directions passed therein have been confirmed without any modification by the Hon'ble SAT and also by the Hon'ble Supreme Court. Despite their appeals being dismissed in the year 2011, the applicants failed to pay the disgorgement amount of ₹6 crore as directed vide the SEBI Order. In the meanwhile, as the applicants failed to disgorge the said amount within 45 days as directed vide the SEBI Order, they were restrained from buying, selling or dealing in securities market in any manner whatsoever or accessing the securities market, directly or indirectly, for a further period of seven years.

5. Thereafter, SEBI, in exercise of the powers conferred under the SEBI Act, as amended vide the Securities Laws (Amendment) Second Ordinance, 2013, initiated proceedings for recovery of the ₹6 crore due to be disgorged by the applicants as directed vide the SEBI Order. A Certificate (no. 1 of 2013) dated September 25, 2013, under section 28A of the SEBI Act read with section 222 of the Income Tax Act, 1961, was drawn by the Recovery Officer, SEBI, directing the applicants to pay the sum of ₹6 crore within 15 days. The applicants were given notice that on their failure to comply with the payment, recovery would be effected in accordance with the provisions of section 28A of the SEBI Act as amended vide the Securities Laws (Amendment) Second Ordinance, 2013 read with sections 222 to 232 of the Income Tax Act, 1961 and the Second Schedule to the said Act and the rules made thereunder. This certificate also informed the applicants that they would also be liable for interest, all costs, charges and expenses incurred in respect of the services of the notice and of warrants and other processes and all other proceedings taken for realizing the said sum. In view of the applicants failure to make the payment, SEBI vide Orders dated October 18, 2013 attached various bank accounts held by the applicants in various banks, either held singly or in joint names, any amounts due to be received by the applicants, lockers registered in their names, singly or in joint names. It was also directed that no debits shall be allowed in the bank accounts.

6. In continuation of the proceedings connected with Recovery Certificate No.1 of 2013, SEBI vide notice dated December 12, 2013, directed the applicants to pay a sum of ₹2,13,30,000/-as interest on ₹4,05,00,000/- at the rate of 12% p.a. from July 21, 2009 till December 12, 2013.

7. In the meanwhile, the applicants challenged the SEBI letter dated October 29, 2013 whereby various bank accounts of the applicants were attached to recover the disgorgement amount order in the SEBI Order, by preferring an appeal (in Appeal No. 199 of 2013) before the Hon'ble SAT. While disposing off the appeal, the Hon'ble SAT directed / observed (in its Order dated January 17, 2014) that : (a) By an interim order dated December 06, 2013, the Tribunal had lifted attachment on three bank accounts of the applicants subject to conditions. During the pendency of the appeal, the applicants have paid ₹6 crore to SEBI. (b) The shares in the joint demat account no. 40333429 of the applicants shall stand attached forthwith (to cover the SEBI demand for payment of interest of ₹2,13,30,000/- on ₹6 crore), and in lieu thereof attachment levied on all other bank accounts of the applicants shall stand raised forthwith;

(c) As applicants desired to file appeal against SEBI communication dated January 16, 2014 (which confirmed the demand for payment of interest of ₹2,13,30,000/-), SEBI shall not take coercive steps to enforce the demand from the attached demat account for a period of four weeks; and (d) SEBI to consider the application, if filed by the applicants within a period of two weeks, for lifting the additional debarment imposed on the applicants, and pass appropriate order within a period of six weeks thereafter.

8. SEBI had, in execution of the Recovery Certificate and in terms of the Order dated December 06, 2013 of the Hon'ble SAT, recovered the disgorgement amount of ₹6 crore from the applicants, finally during January 2014.

9. It is noted that the applicants filed an application dated February 12, 2014. However, as the same was not filed within the time period directed by the Hon'ble SAT, it was not processed by SEBI. The applicants were accordingly informed vide SEBI letter dated March 21, 2014. The applicants challenged the aforesaid SEBI communication before the Hon'ble SAT. It was while disposing off this appeal that the Hon'ble SAT, vide order dated April 29, 2014 in Appeal No. 71 of 2014, directed SEBI to dispose off the representation dated February 12, 2014 ("the application" or "the representation") of the applicants by passing a final order within a period of 8 weeks. The relevant contents of the order have been reproduced under paragraph 1 above.

10. The applicants have filed the representation inter alia stating the following :

(a) The restraint imposed on the applicants vide the SEBI Order was intended to be operative only so long as the order for disgorgement was not complied with. The changed circumstance resulting from the compliance of the disgorgement order necessitates consideration as to whether SEBI can continue to enforce conditional restraints.

(b) SEBI is not precluded from visiting facts and circumstances of the matter and may consider the same with a hindsight that there existed serious hardships which precluded them from making the payment as directed in the SEBI Order. SEBI does not have the right to continue to enforce the restraint when enforcement proceedings culminated in a successful enforcement and compliance with the disgorgement order.

(c) The present request for vacating the conditional restraints imposed on them was not the subject matter of challenge before the Hon'ble Supreme Court and therefore the dismissal of the appeal and the review petition by the Hon'ble Supreme Court does not in any manner preclude SEBI from examining the request.

(d) The SEBI Order was not penal in nature as the Order itself states so. If the proceedings are admittedly not penal in nature and the purpose of the disgorgement order was to ensure that the applicants are not allowed to retain any unlawful gain, then continuing the conditional restraints despite having complied with the order of disgorgement is grossly unfair, disproportionate to the violations and is punitive in nature.

(e) The applicants have already been restrained from accessing the securities market for over 7 ½ years, which was never the object or purpose of the SEBI Order as it only sought to prevent any alleged unlawful gain from being retained.

(f) In order to prevent further losses being sustained from an inability to sell and liquidate existing shares as well as in view of the change in circumstances, the debarment from dealing in securities market ought to be lifted forthwith.

(g) The SEBI Order granted 45 days to deposit ₹6 crore. However, they were unable to do so with the specified time frame owing to various circumstances beyond their control including (1) multiple proceedings initiated by various other agencies including Directorate of Enforcement and (2) securities worth more than ten times the amount directed to be disgorged were lying in their demat account which was frozen by the ex-parte order since 2006. Had SEBI permitted them to dispose of the securities contained in the demat account, they could have complied with the SEBI Order in a timely manner. It was only upon their filing of appeal and intervention of Hon'ble SAT that they were allowed to sell shares lying in the demat account equivalent to ₹6 crore and comply with the order of disgorgement.

(h) In the process of preferring an appeal to the Hon'ble Supreme Court against the SEBI Order and the subsequent order of the Hon'ble Supreme Court, the period of 45 days had elapsed and thus it would have in any event been impossible for them to comply with the SEBI Order within the said time frame. It is a well settled principle of law that an act of a court shall prejudice no man and that law does not compel a man to do that which he cannot possibly perform. The applicants cited the cases of Raj Kumar Dey and others vs. Tarapada Dey [AIR 1987 SC 2195] and State of Rajasthan vs. Shamsher Singh [AIR 1985 SC 1082]. The adherence to the 45 day time frame or any further period for payment of the disgorgement amount prescribed in the SEBI Order would have been an impossibility in view of (1) appeal mechanisms and process stipulated by statute and (2) the continuing restraints on the applicants from accessing or liquidating their shares and securities. Hence, to strictly enforce the 45 day timeline when SEBI sought to initiate proceedings for enforcement of the disgorgement amount over four years after the SEBI Order or even after the Orders of Hon'ble SAT or Hon'ble Supreme Court, is neither fair nor reasonable.

(i) The applicants have been investors in the securities market since a long time and have also been in trading of securities since two generations and entitled to the protection of SEBI. These submissions may be considered in the right perspective considering that the disgorgement amount has already been paid and they have been restrained from trading in securities market for around 8 years.

(j) The applicants have cited the cases of State of Madras vs. V.G. Row [1952 Crl LJ 966], Ramana Dayaram Shetty vs. International Airport Authority of India [(1979) IILLJ 217 SC] and Tata Cellular vs. Union of India [AIR 1996 SC 11] to submit that SEBI being a quasi-judicial authority is expected to act with reasonableness and to consciously take note of the facts and circumstances of the case.

The applicants have therefore requested SEBI to vacate the restraints imposed on them.

11. The applicants were afforded an opportunity of personal hearing on June 10, 2014, when they were represented by Mr. Ravichandra S. Hegde, Advocate, who reiterated the submissions made in their application. He also referred to the SEBI orders dated August 12, 2013 (in respect of Jayesh P. Khandwala), February 25, 2011 (in respect of Roopalben Panchal and others), May 19, 2014 (in respect of Idol Infrastructures Limited) and January 25, 2012 (in respect of Mr. Shailesh Jhaveri and another) to inter alia submit that the period of restraint may need to continue only till payment of disgorgement is made and the period of debarment directed against a person should be set-off against the period already undergone. The learned advocate requested that the restraint imposed on the applicants vide the SEBI Order be vacated. In the alternative, he proposed that as the violations were in respect of IPOs, SEBI could consider restraining the applicants from participating in IPOs for the remaining period. The learned advocate also requested liberty to file additional submissions and to submit a proposal at the earliest. On such liberty being granted, the written submissions with the proposal were forwarded vide e-mail dated June 16, 2014 by Ms. Aashni Dalal, the representative of the applicants. It was stated therein that the submissions are the key submissions of the applicants made during the personal hearing and supplements some of the submissions of the applicants made at various points in time to SEBI.

12. The following inter alia are the submissions and proposal made in the written submissions dated June 16, 2014 :

(a) Multiple proceedings have been initiated by various regulators against the applicants during the period when the SEBI Order was passed, which proceedings are still ongoing. In each of those proceedings where assets of the applicants have been impugned by the respective regulator, the subject assets have either already been seized/attached or sufficient security for the subject amount has been furnished to the regulator by the applicants. Lifting of restraints and debarment imposed on the applicants would not have any bearing on the other ongoing proceedings.

(b) Debarment was never contemplated or intended in the SEBI Order: (i) The SEBI Order was passed only with a view to ensure that the alleged ill-gotten gains are taken from the applicants. Simultaneously, SEBI also initiated adjudication proceedings against the applicants in connection with the allegations contained in the SEBI ex-parte order dated April 27, 2006, which fact is expressly recorded in paragraph 13(a) of the SEBI Order. The disgorgement order was passed neither in aid of any investigation nor as a penalty against the noticees but merely to recover the alleged ill-gotten gains from the applicants. (ii) While referring to paragraph 13(c) [reference to Bank of Baroda case wherein it was held that powers under section 11B to issue directions are wide enough to include any measures in the interest of securities market including disgorgement] and 16 [reference to clauses "this case which is not a penal proceeding", "such entities are not allowed to participate in the market and unjustly enrich themselves at the cost of the investors" and "after taking into account the period of prohibition already undergone by the noticees pursuant to the interim order"] of the SEBI Order, the applicants have stated that the same had clarified the purpose of the SEBI Order. (iii) Reference was also made to paragraphs 3, 8 and 9 [reference to the observation "…Since disgorgement is not a punishment but only a monetary equitable remedy meant to prevent a wrong doer from unjustly enriching himself as a result of his illegal conduct.."] of the Order dated November 12, 2010 of the Hon'ble SAT to emphasise the underlying intent of disgorgement. (iv) The Whole Time Member had considered the fact that the applicants had already undergone more than three years of debarment, while directing a debarment of 45 days in the SEBI Order.

(v) From the two extracts provided above (i.e., reference to the portions of the SEBI Order and SAT Order), the following legal issues and position require to be adjudicated and addressed by SEBI along with cogent reasons in the instant proceedings : (a) That the SEBI Order was not a penal proceeding but merely an equitable relief which was directed to ensure that the alleged ill-gotten gains are taken back from the applicants which fact is also corroborated from SEBI's statement in the Order that there were indeed no separate proceedings under section 11B. (b) If the issue above is answered in affirmative, then the additional ongoing debarment even after payment of disgorgement amount, is not warranted and therefore the learned Whole Time Member needs to revoke the ongoing debarment. (c) If SEBI disagrees with the position at point (a), then it can be inferred that SEBI did initiate proceedings to pass an order of disgorgement and also debarment against the applicants and that both the purposes are solved and the directions are complied with by the applicants. Not only is the disgorgement amount paid, but also the applicants have undergone debarment for more than eight years, which period was never contemplated in the SEBI Order. (d) If the issue at (c) above, is answered in affirmative, even then the additional debarment has to be vacated in view of the fact that the SEBI Order itself considers around three and a half years as adequate period of debarment in the present case. Accordingly, there arises no need for additional period of debarment even after payment of disgorgement amount by the applicants, merely for the fact that the order directed additional debarment for non-payment of disgorgement amount within a period of 45 days. (e) As stated by SEBI and the Hon'ble SAT, if the SEBI Order is in the nature of an equitable relief, such equity demands that the applicants be entitled to a relief as claimed in the representation letter. Further, the relaxation of additional debarment which the applicants are now claiming after payment of disgorgement amount was never an issue raised before any Court or Tribunal earlier.

(c) Neither the Hon'ble SAT nor the Hon'ble Supreme Court was called upon to determine whether SEBI could enforce the conditional seven year restraint on the applicants absolutely despite successful enforcement of the disgorgement order. What was impugned in the appeals were the findings on fact and law in the SEBI Order including the SEBI's powers to direct disgorgement.

(d) The changed circumstances resulting from the compliance of the disgorgement order, therefore necessitates reconsideration of the direction which imposes additional restraint on the applicants.

(e) Impossibility of complying with the 45 days time frame: (i) During the course of hearing, the applicants were asked whether any steps had been taken by the applicants to pay the disgorgement amount. As explained during the personal hearing, the SEBI Order granted 45 days to deposit the amount of ₹6 crores. However, the applicants were unable to do so in the specified time owing to various circumstances beyond their control including multiple proceedings initiated by various other agencies and the fact that all the securities of the applicants as well as other family members worth more than ten times the amount directed to be disgorged, were lying in the frozen demat account of the applicants. (ii) SEBI did not initiate any steps to recover the disgorgement amount although the shares were lying in the demat account of the applicants at the behest of SEBI. SEBI could have as well sold the shares and recovered the disgorgement amount from the sale of shares, either by way of execution of the SEBI Order or the Orders of Hon'ble SAT or the Hon'ble Supreme Court. Hence, to strictly enforce the 45 day timeline when SEBI initiated proceedings for attachment over 4 years after the SEBI Order is neither fair nor just or reasonable. (iii) Only when the Securities Laws (Amendment) Second Ordinance, 2013 was promulgated, which introduced the concept of a Recovery Officer, that recovery proceedings were initiated by SEBI. Had the Ordinance not come into force, then there may not have been any recovery proceedings against the applicants. (iv) It can be said that neither party undertook any measures for payment/recovery of the disgorgement amount. On the other hand, SEBI has accomplished its object of getting the disgorgement amount recovered from the applicants.

(f) Loss incurred by the applicants: (i) The SEBI ex-parte order dated April 27, 2006 resulted in complete freeze of all the demat accounts of the applicants and other persons unconnected with the proceedings. As a result, all the shares in the demat accounts were frozen and till date they have been lying un-attended although many companies have been delisted and presently not being traded. During the pendency of the restraints and freezing of the demat accounts, the parents of the applicants have passed away and the applicants have not been able to complete administration and dissolution of the estate of the deceased. Additionally, various companies to whose shares the applicants and/or the family members had subscribed, issued additional securities, which right the applicants were unable to avail of due to the ongoing restraints and freezing of demat accounts. A copy of the list of shares lying in the demat accounts and the estimate of notional losses incurred by the applicants were tendered during the personal hearing. (ii) Despite repeated requests to release the attachments and freezing of the demat accounts of the family members of the applicants, SEBI replied that it did not issue any directions against the family members of the applicants. Further, despite requests from the National Securities Depository Limited ("NSDL") seeking advice and clarification from SEBI on whether the demat accounts of the applicant's family members were required to be suspended merely on account of the applicants being joint account holders, no clarification or action has been forthcoming from SEBI. (iii) During the personal hearing, SEBI had informed that the aforesaid issue had been clarified. However, the applicants are not aware of any such clarification. It appears that the misrepresentation of SEBI Orders have resulted in the debarment and freezing of demat accounts of the applicants' family members, who are entirely unconnected with the subject proceedings.

(g) Harsh restrictions and directions issued against the applicants: (i) Orders of SEBI dated February 25, 2011 (in respect of Roopalben N. Panchal and others), August 12, 2013 (in respect of Jayesh P. Khandwala and others), April 07, 2011 (in respect of Ashmi Financial Consultancy Private Limited), May 23, 2011 (in respect of Purushottam G. Budhwani) [issued in the matter of IPO irregularities] were referred to submit that the said decisions shows that the intent and direction to accomplish that purpose is expressly clarified and no other case has such a severe directions as is suggested to have been imposed in the case against the applicants. Even if similar directions are contained in the orders, there is a respite provided to some of them after payment of the disgorgement amount. The directions issued against the applicants are at variance with the directions in the aforesaid directions contained in the aforesaid orders. All the above mentioned order granted relief to the entities once the underlying intent of passing the orders are accomplished either by way of de-freezing the demat accounts or setting off the debarment period underwent by such entities. There cannot be any differential treatment given to the applicants. (ii) In the Order dated May 19, 2014 in the matter of Idol India Infrastructures Limited, there is a direction to repay the amount to the investors within a specified timeframe along with interest at the rate of 15% p.a. In addition to this, there was a direction of debarment which was to continue for a period of two years from the date of completion of repayment as directed.

(h) Proposal :

1. SEBI had issued ex-parte orders on December 28, 2011 in the matter of IPOs of various companies, wherein for alleged irregularities in exercise of due diligence by merchant bankers, SEBI had directed such merchant bankers to not take up any new/fresh assignments in IPOs and further fund raising activities. No restraints were imposed on the ongoing affairs or assets of the intermediaries. SEBI has also issued orders against broking entities whereby there is a restraint on taking up new assignments. The idea under such decisions is that the entities against whom the directions are issued ought to be distanced from carrying out the affairs which have been the subject of regulatory intervention.

2. Although the facts in the present case are different, the applicants are willing to give an undertaking to the effect that if the additional period of debarment is lifted and the demat accounts are released, the applicants would not participate in any initial public offering until the seven year debarment period expires (i.e., till July 20, 2016). This proposal is made as the irregularities recorded against the noticees were only confined to the applicants' dealing in IPOs. This submission is made only with a view to ensure that SEBI has no reservation to the equitable relief as requested and deserved by the applicants.

3. In the circumstances and keeping in mind that SEBI's regulatory objectives have already been met, to continue the restraints against the applicants would be grossly disproportionate to the alleged wrong and contrary to SEBI's own objectives in passing the SEBI Order. Therefore, the applicants humbly request SEBI to vacate the restraints imposed on the applicants and the demat accounts of the family members of the applicants, which have been frozen for more than eight years as on date.

13. I have considered the application filed by the applicants, the submissions made during the personal hearing, the written submissions also containing the proposal and other material available on record. Primarily, the request of the applicants before SEBI is that the restraint imposed on them vide the SEBI Order be vacated in view of the fact that the disgorgement amount of ₹6 crore, as directed vide the SEBI Order, is paid. In the alternative, the applicants have proposed that if the additional period of debarment is lifted and the demat accounts are released, they would undertake not to participate in any initial public offering until the seven year debarment period expires (i.e., till July 20, 2016).

14. Before proceeding, I would deal with the submission of the applicants that the demat accounts of the family members were also frozen despite no directions having been issued against the family members. The applicants have also submitted that despite requests from NSDL to SEBI seeking clarification on whether the demat accounts of the applicant's family members were required to be suspended merely on account of the applicants being joint account holders, no clarification was forthcoming from SEBI. With respect to these submissions, I note that NSDL has informed SEBI that it did not seek any such clarification.

In terms of the interim order (dated April 27, 2006), the applicants were directed not to buy, sell or deal in the securities market, including in IPOs, directly or indirectly, till further directions. Wherever the Permanent Account Numbers of Mr. Dushyant Dalal and Mrs. Puloma Dalal were present in the demat accounts, such accounts were frozen. This included the demat accounts jointly held by others with the applicants. The SEBI Order had also directed that the applicants shall be restrained from buying, selling or dealing in securities market in any manner whatsoever or accessing the securities market, directly or indirectly, for a further period of seven years. Therefore, the freeze on their demat accounts including those joint accounts were continued. It is noted that though the other joint holder may be unconnected with the case, still by virtue of the applicants being able to indirectly or in any manner deal in securities or access the securities market, those accounts have also been frozen. With respect to the request for de-freezing the joint demat accounts held with the applicants, SEBI vide letter dated August 31, 2010 addressed to Ms. Yuti Dalal, while referring to the directions issued vide the SEBI Order against the applicants, clarified that the request for de-freezing the demat accounts of Yuti Dalal, Aashni Dalal, Gita Shishir Rokadia, Smita Ajit Shah and Impact Growth Fund Pvt. Ltd. jointly held with Mr. Dushyant Dalal and Ms. Puloma Dalal cannot be acceded to.

15. I now proceed to deal with the request of the applicants made to SEBI for vacating the restraint imposed on them on the ground that the disgorgement amount is already paid. In terms of clause (a) in paragraph 16 of the SEBI Order, the applicants were directed not to buy, sell or deal in the securities market in any manner whatsoever or access the securities market, directly or indirectly for a period of 45 days from the date of that Order. As per clauses (b) and (c), the applicants were directed to disgorge unlawful gain of ₹4.05 crore along with interest of ₹1.95 crore (calculated at interest rate of 12% p.a. from 2005 to 2009 on the unlawful gain of ₹4.05 crore). In terms of clause (d), the total disgorgement amount of ₹6 crore was directed to be paid by the applicants within 45 days from the date (i.e., July 21, 2009) of the SEBI Order. Further, as per clause (e), it was directed that "In case the aforesaid amount Rs.6 crore is not paid within the specified time, the noticees shall be restrained from buying, selling or dealing in securities market in any manner whatsoever or accessing the securities market, directly or indirectly, for a further period of seven years, without prejudice to SEBI’s right to enforce disgorgement." The direction states that if the applicants fail to disgorge ₹6 crore within 45 days from the date of the SEBI Order, they shall be restrained from dealing in the securities market for a further period of seven years. The applicants are themselves conscious and have clearly understood the import of the direction contained in paragraph 16(e) of the SEBI Order and is apparent even in their application, where they have in paragraph 9 stated "…. In other words, the restraint would have never arisen had the disgorgement amount been paid within a period of 45 days of the date of the SEBI Order, or within a period of 45 days from the date of the SAT Order or Supreme Court Orders, which ……". It should also be noted that this direction was without prejudice to the right of SEBI to enforce disgorgement. This direction is therefore not ambiguous and is as clear as it could be. Therefore, the continuance of the further restraint and the recovery of disgorgement have no relation.

16. Admittedly, the applicants failed to pay the disgorgement amount of ₹6 crore within 45 days, thereby not complying with the condition imposed vide the SEBI Order dated July 21, 2009. Accordingly, the further seven years period of debarment, as directed in paragraph 16(e) of the said SEBI Order, came into effect. The applicants filed an appeal challenging the SEBI Order before the Hon'ble SAT. The Hon'ble SAT had upheld the SEBI Order without any modification to the directions and dismissed the appeal filed by the applicants. Further appeal to the Hon'ble Supreme Court and the subsequent review application filed before the Hon'ble Supreme Court were also dismissed. Therefore, the SEBI Order along with all its findings and directions have attained finality.

17. The applicants have contended that neither the Hon'ble SAT nor the Hon'ble Supreme Court was called upon to determine whether SEBI could enforce the seven years restraint on the applicants. I note that the applicants had preferred an appeal against the SEBI Order and therefore any submission or prayer for relief with respect to any portion of the SEBI Order including the directions should have been raised before the Hon'ble SAT or before the Hon'ble Supreme Court. It is also important to note here that the applicants were already undergoing debarment for the further period when their appeals were under consideration by the Hon'ble SAT as well as by the Hon'ble Supreme Court and also when Orders were passed on such appeals. However, there is no direction issued either by the Hon'ble SAT or by the Hon'ble Supreme Court with respect to the further restraint imposed vide the SEBI Order. Accordingly, I find the above contention of the applicants to be without merit.

18. As the SEBI Order has already been affirmed in toto by the Apex Court in India, SEBI has no authority or power to review or reconsider the same. Therefore, the submission of the applicants that the SEBI Order is at variance with the other orders as cited by them, becomes irrelevant. The proposal to voluntarily abstain from participating in IPOs for the remaining period, made by the applicants is not acceptable for the above reasons.

19. The applicants have also referred to case laws to submit that an act of court shall not prejudice and that law does not compel a man to do which he cannot possibly perform. This submission is sans merit as the applicants did not take any steps towards payment of disgorgement amount even within a period of 45 days after their appeals and review petition were dismissed by the Hon'ble SAT and the Hon'ble Supreme Court.

20. The applicants have submitted that they were not able to comply with the disgorgement order as there were multiple proceedings and that their securities (claimed to be more than ten times the amount directed to be disgorged) were frozen in their demat accounts. Admittedly, the disgorgement was made in the recovery proceedings, after selling shares from their demat accounts, recovery from attached bank accounts and payment by the applicants. If the applicants had no other means to pay the disgorgement except by sale of shares in their demat account and use the proceeds to satisfy the disgorgement order and wished to comply with the disgorgement order, they could have approached SEBI for suitable relief, without waiting for a notice for recovery from SEBI. Further, when their appeal was pending consideration by the Hon'ble SAT and thereafter by the Hon'ble Supreme Court, they did not seek permission for selling shares lying in their frozen demat accounts in order to comply with the disgorgement order. It was only after the attachment of their bank accounts/lockers held by them in various banks, that the applicants approached the Hon'ble SAT, undertaking to sell shares and pay the balance (as ₹11,39,902.64/- was already recovered by then) disgorgement amount and requesting the Tribunal to lift the attachment on three of their bank accounts. I also find it important to reiterate here that the disgorgement of ₹6 crore from the applicants was recovered by SEBI through attachment of bank accounts and recovery of funds therein and also sale of securities in the frozen demat accounts of the applicants. Therefore, it would not at all be appropriate for the applicants to state or claim that they have made the payments to the satisfaction of the SEBI Order on their own volition.

21. The applicants have also cited case laws as mentioned in paragraph 10(j) above to submit that SEBI should act reasonably and take into consideration the facts and circumstances of the case. This is not a proceeding where SEBI is adjudicating the case against the applicants. The proceedings (against the applicants under sections 11 and 11B of the SEBI Act) have already culminated in the SEBI Order. The findings and directions made therein have been affirmed by the Hon'ble SAT and the Hon'ble Supreme Court. A view on the quantum of penalty to be levied on the applicants have already been taken in the SEBI Order. The applicants are undergoing the restraint only because of their non-compliance with the disgorgement order and as directed vide the SEBI Order. Therefore, the above submission of the applicants is misplaced.

22. In view of the reasons mentioned in paragraphs 15 to 18 above, the request made by the applicants for vacating the restraint imposed on them for non-compliance with the disgorgement order within the time stipulated vide the SEBI Order, cannot be acceded to. The other submissions of the applicants have also been considered and observations made in the foregoing paragraphs. Therefore, nothing remains of these submissions. Accordingly, the representation dated February 12, 2014 filed by Mr. Dushyant N. Dalal and Mrs Puloma D. Dalal is disposed off.

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA Date : June 27, 2014 Place : Mumbai