Rikhav Brokers Pvt. Ltd.(Now Known As 4G ... vs Sebi

Date of decision: 10/08/2016

Appeal No.240 of 2014

Rikhav Brokers Pvt. Ltd. (Now known as 4G IT Solutions (India) Pvt. Ltd., 36, Matru Chhaya, S.N. Road, Mulund (West), Mumbai - 400 080. ... Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ... Respondent

Mr. P.N. Modi, Senior Advocate a/w Mr. Prakash Shah and Ms. Kalpana Desai, Advocates for Appellants.

Mr. Kumar Desai a/w Mr. Saurabh Bachhawat and Mr. Harekrishna Ashar, Advocates i/b K. Ashar & Co. for the Respondent.

WITH Appeal No.241 of 2014

AHL Investment Consultants Pvt. Ltd. 307/208, Parshwanath Apt., Sarvodaya Nagar, Mulund (West), Mumbai - 400 080. ... Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ... Respondent

Mr. Prakash Shah, Advocate for Appellants.

Mr. Kumar Desai a/w Mr. Saurabh Bachhawat and Mr. Harekrishna Ashar, Advocates i/b K. Ashar & Co. for the Respondent. -2-

CORAM : Justice J.P. Devadhar, Presiding Officer Dr. C.K.G. Nair, Member

Per : Justice J.P. Devadhar(Oral)

1.

In these two appeals, the appellants are aggrieved by the common

order passed by the Adjudicating Officer ("AO" for short) of the Securities

and Exchange Board of India (for short "SEBI") on 25th April 2014. Since

common order is challenged in these two appeals, both these appeals are

heard together and disposed of by this common decision.

2. By the impugned order, the AO of SEBI has imposed penalty of Rs.75

lacs and penalty of Rs.25 lacs on the respective appellant under Section 15 HA

of the SEBI Act, 1992 for contravening Section 12A(a),(b) & (c) of the SEBI Act,

Regulation 3(b) &(d), 4(1) and 4(2)(a)&(b) of the SEBI (Prohibition of

Fraudulent and Unfair Trade Practices relating to Securities Market)

Regulations, 2003 (for short "PFUTP Regulations").

3. Facts relevant for these two appeals are that each appellant had

participated in the bid for subscribing to the shares in the IPO of Vaswani

Industries Limited ("VIL" for short), however, the appellants withdrew the

bid on 5th May, 2011 by informing its bankers to stop payment of the cheque

issued for subscribing to the shares of VIL.

4. As large number of bidders had withdrawn from the bid, SEBI

investigated the matter and issued show-cause notice to various entities

including the appellants herein, calling upon them to show cause as to why

action should not be taken against them, inter alia, on the ground that the

bidding for shares in the IPO of VIL by the appellants were not bona fide in -3-

nature and the bidding were done with a motive to artificially inflate the bid

book and to create misleading appearance of bidding.

5. During the course of hearing the appellants had contended that they

had sufficient funds to subscribe to the shares of VIL. As there was no

documentary evidence to substantive that claim, AO of SEBI called upon the

appellants to furnish requisite proof in that behalf within a period of one

week.

6. Admittedly, the appellants failed to furnish the requisite information

and accordingly failed to establish that the appellants had sufficient funds to

subscribe to the shares of VIL. In the absence of any proof to establish that

the appellants had sufficient funds available with them during the bidding

process, AO inferred that making bids without having sufficient funds was

with a view to artificially inflate the bid book at the highest price and to

create misleading interest for other investors/public to subscribe to the issue.

Accordingly, it is held that the appellants have violated the provisions

contained in the SEBI Act and the PFUTP Regulations and by the impugned

order penalty of Rs.75 lacs and Rs.25 lacs is imposed on each appellant.

7. Relying on a bank statement annexed to the memo of appeal and a

bank certificate annexed to the affidavit in rejoinder, Counsel for the

appellants submitted that due to bona fide reasons, the above documents

could not be furnished to the AO and therefore, on the basis of above

documents it must be held that the appellants had sufficient funds to

subscribe to the shares of VIL and the inference drawn by the AO is

erroneous.

-4-

8. Admittedly, the AO of SEBI had no occasion to consider the aforesaid

documents which are sought to be furnished for the first time before this

Tribunal. Apart from the above, in para 18 of the impugned order, the AO

has recorded the plea of the appellants in relation to the adjudication order

passed in case of Bajaj Group (consisting of 10 entities and Bachawat Group

(consisting of 7 entities). Admittedly, those two groups were the major

applicants who had participated in the bid and had withdrawn their

application like the appellants. It is the case of the appellants that as those

group entities are exonerated, the appellants also ought to have been

exonerated, because the case of the appellants is similar to the case of the

above two group entities. On perusal of the impugned order, it is seen that

the AO has not recorded any finding as to how the case of the appellant is

different from those two group entities.

9. In these circumstances, we set aside the impugned order qua the

appellants herein and restore the matter to the file of AO of SEBI to pass fresh

order on merits and in accordance with law. Appellants are at liberty to file

additional documents before the AO within two weeks from today. The AO

would then consider those documents and pass appropriate order after

giving an opportunity of hearing to the appellants.

10. Both the appeals are disposed of in the aforesaid terms with no order

as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer Sd/-

Dr. C.K.G. Nair Member 10/08/2016 Prepared & compared by-ddg