Pat Financial Consultants Pvt. Ltd. & ... vs Sebi
- CitationReview Application No.3 of 2018
Ratio decidendi
The rule this decision rests on
The Tribunal will not review its earlier order merely because the regulator contends the adverse observations went beyond the issues raised in the appeals, where the regulator had repeatedly been called upon during the hearing to explain its inaction and had offered no reasons, and it had admitted as much. Where a regulator has recorded or accepted a finding that a party made false declarations in its offer document, it cannot simultaneously contend that there is insufficient evidence to proceed against that party and its directors, unless the underlying finding is itself challenged as erroneous; such contradictory positions are not a sustainable basis for inaction. A regulator that, having found a party guilty of misconduct, takes no action against it and gives no reasons for declining to do so, unless there are compelling reasons to the contrary, does not act impartially; the absence of recorded reasons for such inaction may properly be commented upon by the appellate forum.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Date of Decision: 09/07/2018
Review Application No.3 of 2018 In Appeal No.222 of 2016
Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ... Applicant (Org. Respondent)
Versus
1.
PAT Financial Consultants Pvt. Ltd.
3-3A, Churchgate House, 1st Floor, 32/34, Veer Nariman Road, Fort, Mumbai - 400 001.
2. Superior Financial Consultancy Services Private Limited, 201/B, Dev Neo Vikram, Sahakar Nagar, CHS , New Link Road, Andheri (West), Mumbai - 400 053. ... Respondents (Org. Appellants)
Mr. Shyam Mehta, Senior Advocate a/w Mr. Mihir Mody and Mr. Nishant Upadhyay, Advocates i/b K. Ashar & Co. for the Applicant.
Mr. P.N. Modi, Senior Advocate a/w Mr. Neville P. Lashkari, Advocate i/b M&M Legal for Respondents.
2
WITH Review Application No.4 of 2018 In Appeal No.281 of 2016
Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ... Applicant (Org. Respondent)
Versus
Avadhoot L. Shilotri Ex-President & CEO, Niskalp Investments and Trading Co. Ltd., Varun CHS, 1st Floor, J.P. Road, Versova, Andheri (East), Mumbai - 400 058. ... Respondent (Org. Appellant)
Mr. Shyam Mehta, Senior Advocate a/w Mr. Mihir Mody and Mr. Nishant Upadhyay, Advocates i/b K. Ashar & Co. for the Applicant.
Mr. Atul S. Tungare, Advocate for the Respondent.
CORAM : Justice J.P. Devadhar, Presiding Officer Dr. C.K.G. Nair, Member
Per : Justice J.P. Devadhar (Oral)
1. Not on board. Mentioned by Counsel for the Applicant and taken
up for hearing by consent of parties.
2. By these two Review Applications, Applicants request this
Tribunal to review the order passed in the aforesaid appeals on 30th
May, 2018 and expunge the adverse remarks made against SEBI in para
10, 14, 25 and 28(a) of order dated 30th May, 2018. 3
3. Basic grievance made in the Review Applications is that the
appellants in their appeals had not raised any issue regarding the
conduct of SEBI and therefore, this Tribunal could not make any
adverse comment on the conduct of SEBI that too, without issuing any
show-cause notice to SEBI in that behalf. Accordingly, it is submitted
that this Tribunal has exceeded its jurisdiction in passing adverse
remarks against SEBI.
4. There is no merit in the above contentions, because, during the
course of arguments and even after conclusion of arguments by placing
the appeals on Board for directions, we had repeatedly called upon
Counsel for SEBI to explain as to why no action was taken against
Niskalp Investment and Trading Company ("Niskalp" for short) and
Tata Finance Limited ("TFL" for short) even after recording a finding
that TFL was guilty of making false declarations in its letter of offer.
However, consistently we were informed by Counsel for SEBI that
decision at the high level was taken not to proceed against Niskalp and
TFL, but no reasons were given for not initiating action against Niskalp
and TFL.
5. Mr. Shyam Mehta, learned Senior Advocate appearing on behalf
of SEBI fairly admitted before us today that during the course of
hearing the appeals, we had repeatedly called upon SEBI to explain the
reasons for not taking action against Niskalp and TFL, however, he had
no reasons to offer.
4
6. In the Review Applications, it is merely stated that initially in
April, 2007 a Manager of SEBI had recommended that action be taken
against TFL and Niskalp and their entire Board of Directors, however,
the Committee of Division Chiefs on consideration of the said
recommendation were of the opinion that sufficient evidence is not
there to proceed against Niskalp/TFL/their Board of Directors and the
same was approved by the Whole Time Member (WTM) of SEBI. It is
further stated in the Review Applications that sometimes in 2010, at the
instance of WTM, the matter was reconsidered by several officers of
SEBI and all of them arrived at a conclusion that no action need be
taken against Niskalp, TFL and their Board of Directors. Thus, the only
reason furnished by SEBI till date is that there is insufficient evidence to
proceed against Niskalp, TFL and their Board of Directors.
7. Specific finding recorded in the impugned order is that TFL is
guilty of making false declarations in its letter of offer. It is not the case
of SEBI that the aforesaid finding recorded by the WTM is erroneous.
In such a case, it is not open to SEBI to contend on one hand that TFL is
guilty of making false statements in its letter of offer and on the other
hand to contend that there is insufficient evidence to proceed against
Niskalp, TFL and its Board of Directors. Thus, the stand taken by SEBI
is mutually contradictory. In these circumstances, we see no reason to
entertain the Review Applications.
5
8. However, in view of the fairness shown by Counsel for SEBI, we
substitute the words 'for the reasons best known to SEBI' for the words
"for extraneous reasons" appearing in para 10, 14 and 25 of our order
dated 30th May, 2018. Registry is directed to carry out the above
modification in our order dated 30th May, 2018 immediately.
9. We see no reason to delete the observation made in our order
that in the present case SEBI has not acted impartially, because once it
was found that TFL has made false declaration in its letter of offer, then,
unless there were compelling reasons to the contrary, SEBI was bound
and liable to take action against TFL. In the absence of any reason
recorded in the impugned order, it cannot be said that SEBI has acted
impartially in the present case. We will be failing in our duty if these
serious anomalies are not brought to the notice of SEBI with a view to
ensure that such lapses do not occur again in the future.
10. For the very same reason, observation made in para 28(a) of our
order does not deserve to be modified, because, holding TFL guilty of
making false declarations in its letter of offer but not taking any action
against TFL that too without assigning any reason, is bound to send
wrong signal to the securities market.
6
11. Accordingly, subject to the modifications set out in para 8
hereinabove, both Review Applications are disposed of with no order
as to costs.
Sd/-
Justice J.P. Devadhar Presiding Officer
Sd/-
Dr. C.K.G. Nair Member 09/07/2018 prepared & compared by-dg
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