P.V.R. Murthy vs Sebi
- CitationAppeal No.412 of 2023
Ratio decidendi
The rule this decision rests on
A delay in issuing a show cause notice is not undue where the complexity of the matter, including the need to obtain information from multiple jurisdictions and overseas regulators, and a pending question of SEBI's jurisdiction to investigate an overseas-issued instrument, justifies the time taken, the proceedings having remained in abeyance until that question was decided by the Supreme Court. A director who is involved in the day-to-day running and management of a company, and who has been authorised by the Board to sign documents relating to an issue, is answerable for the execution of such documents, including a pledge agreement not disclosed to the stock exchanges in breach of the LODR Regulations, and there is evidence of his involvement sufficient to sustain a penalty against him. Where the same controversy has already been decided by the Tribunal against the company and its directors on the same issue, the appeal raising that controversy is covered by that decision and stands dismissed for the same reasons.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Date of Decision: 2.5.2023
Misc. Application No.450 of 2023 And Appeal No.412 of 2023
P.V.R. Murthy C/402, Fortune Tower, Madhpur, Hyderabad - 82. ...Appellant
Versus
Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. ...Respondent Mr. Abhiraj Arora, Advocate with Mr. Deepanshu Agarwal, Ms. Misbah Dada and Mr. Shourya Tanay, Advocates i/b. ELP for the Respondent. With Misc. Application No.451 of 2023 And Appeal No.413 of 2023
P.V.R. Murthy C/402, Fortune Tower, Madhpur, Hyderabad - 82. ...Appellant
Versus
Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G Block, Bandra Kurla Complex, 2
Bandra (E), Mumbai - 400 051. ...Respondent
Mr. Abhiraj Arora, Advocate with Mr. Deepanshu Agarwal, Ms. Misbah Dada and Mr. Shourya Tanay, Advocates i/b. ELP for the Respondent.
CORAM: Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member
Per: Justice Tarun Agarwala, Presiding Officer (Oral)
1.
For the reasons stated aforesaid, the delay in the filing
of the appeal is condoned. The application is allowed.
2. The present appeal has been filed by the appellant
challenging the order dated 31 st January, 2023 passed by
the Adjudicating Officer (hereinafter referred to as 'AO')
in the matter of Global Depository Receipt ('GDR' for
short) issue relating to Zenith Steel Pipes and Industries
Limited wherein a penalty of Rs.10 lakhs has been
imposed.
3. We have heard the learned counsel for the parties.
The only contention raised was there was an undue delay
in the issuance of the show cause notice. The GDR
related to the year 2010 whereas the show cause notice 3
was issued on 18th April, 2019 and, thus, there was an
undue delay. It was also urged that there is no evidence
against the appellant to show that he had committed a
fraud or violated the Regulations in the matter of issuance
of GDR. It was contended that he was not involved in the
day to day affairs and the management of the Company.
4. Having heard the learned counsel for the parties, we
find that the complexity involved in the manipulative
GDR issue is vast and that SEBI was required to obtain
information from multiple jurisdictions and from overseas
regulators. Further, at some stage a question arose
whether SEBI could investigate the GDR matter which
was issued abroad and since the matter was pending
consideration on this issue the proceedings remained in
abeyance till the matter was decided by the Supreme
Court in Pan Asia Advisors Ltd. vs. SEBI. Considering
the aforesaid, we are of the opinion that there is no undue
delay in the issuance of the show cause notice.
5. The contention that there is no evidence against the
appellant is patently misconceived in as much as the 4
appellant was a Director and was involved in the day to
day running and managing the affairs of the Company.
Further, the Board of Directors had authorised the
appellant to sign various documents on behalf of the
Company in relation to the GDR issue, pursuant to which
the appellant had signed the pledge agreement which was
not disclosed to the stock exchanges and, consequently,
violated the LODR Regulations. Thus, the appellant's
involvement in the GDR issue was writ large.
6. We also find that the controversy involved in the
present appeal is squarely covered by a decision of this
Tribunal M/s. Zenith Steel Pipes and Industries Limited
v. SEBI dated 21st February, 2023 wherein against the
same issue the order of the WTM dated 30th March, 2021
and Adjudicating Officer's order dated 16 th June, 2022
was affirmed and the appeal filed by the Company Zenith
Steel Pipes and Industries Limited And its Directors were
dismissed. The penalty of Rs.10 lakhs was found to be
just and proper.
5
7. In view of the aforesaid, the appeal lacks merit and is
dismissed.
8. This order will be digitally signed by the Private
Secretary on behalf of the bench and all concerned parties
are directed to act on the digitally signed copy of this
order. Certified copy of this order is also available from
the Registry on payment of usual charges.
Justice Tarun Agarwala Presiding Officer
Ms. Meera Swarup Technical Member
RAJALA Digitally by signed
KSHMI RAJALAKSHMI HARISH NAIR
2.5.2023 HARISH Date:
2023.05.10 NAIR 14:47:03 +05'30' RHN
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