Sahara Asset Management Company ... vs Sebi

Date of Decision : 31.10.2017

Appeal No. 72 of 2016

Sahara Asset Management Company Private Limited 97-98, 9th Floor, Atlanta, Nariman Point, Mumbai - 400 021. .....Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ......Respondent

Mr. Gaurav Joshi, Senior Advocate with Mr. Piyush Raheja, Mr. Sahil Gandhi and Mr. Feroze Patel, Advocates i/b Markand Gandhi & Co. for the Appellant.

Mr. Kevic Setalvad, Senior Advocate with Mr. Nishant Upadhyay, Advocate i/b K Ashar & Co. for Respondents.

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

Per : Dr. C.K.G. Nair, Member (Oral)

1.

This appeal is preferred by the appellant aggrieved by the order of the

Whole Time Member ('WTM' for short) of Securities and Exchange Board

of India ('SEBI' for short) dated December 30, 2015. By the said order, an

application filed by the appellant for reconsideration of an earlier order of

the WTM of SEBI dated February 27, 2015 cancelling the license of the

appellant for being not fit and proper to act as a Portfolio Manager was

rejected.

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2. Facts relevant to the matter are the following:-

(a) The appellant has been functioning as a Mutual Fund Manager

and a Portfolio Manager having received certificates of

registration from SEBI under the SEBI (Mutual Funds)

Regulations, 1996 and SEBI (Portfolio Managers)

Regulations, 1993 ('PMS Regulations' for short) respectively

since 2006 (details prior to this that this business was carried

out in the name of First India Mutual Fund since 1996 which

was later on acquired by Sahara India Financial Corporation

Ltd. in 2003 etc. are not relevant to the matter).

(b) Since the certificate of registration of Portfolio Manager is to

be renewed in every three years, an application for renewal

was submitted in 2009 by the appellant and the certificate was

renewed by SEBI from 16.10.2009 to 15.10.2012.

(c) The appellant submitted the next application to SEBI on

06.07.2012 for renewal of the certificate of registration as

Portfolio Manager for beyond the period October 15, 2012.

(d) Instead of renewing the certificate of registration, SEBI raised

certain queries as to why actions taken against the applicant /

its promoters / its directors etc. were not disclosed in the

application for renewal submitted on July 6, 2012.

(e) In this context, it is relevant to note that on November 24,

2010 ex-parte ad-interim orders had been passed by SEBI

against two Sahara Group Companies namely, Sahara India

Real Estate Corporation Ltd. (SIRECL) and Sahara Housing 3

Investment Corporation Ltd. (SHICL) and its Directors

restraining them from issuing any prospectus and to raise

money from the public, etc.

(f) SEBI issued final orders on these matters i.e. SIRECL and

SHICL on June 23, 2011 which was upheld by this Appellate

Tribunal on October 18, 2011 and by the Hon'ble Supreme

Court on August 31, 2012.

(g) In the order of the Apex Court it has been stated that Shri

Subrata Roy Sahara is the only person that matters in the

affairs of the Sahara Group. Shri Sahara holds substantial

stake in the appellant herein as well as in the other promoter

companies of the appellant.

(h) The appellant was found to be not fit and proper under

Regulation 10 of the PMS Regulations read with Schedule II

of SEBI (Intermediaries) Regulations, 2008. Since Regulation

10(3) of PMS Regulations provides for an application to the

Board for reconsideration, the appellant applied for the same

and that application was rejected by the impugned order dated

December 30, 2015.

3. This Appellate Tribunal had considered all the relevant facts relating

to the ownership and control of the appellant company by Shri Subrata Roy

Sahara, other promoter holding in the appellant company etc. while deciding

Appeal No. 428 of 2015 on July 28, 2017. In that order, on examination of

complete details, we came to the conclusion that Shri Sahara, irrespective of

whether he continues to be a Director or not in the appellant company,

continues to hold substantial stake in the appellant company as well as in

other promoter group companies of the appellant and exerts absolute control 4

over these entities by virtue of his ownership and hence the appellant

company (who was the appellant in Appeal No. 428 of 2015 as well) is not a

fit and proper person to hold a mutual fund license. The said decision of this

Appellate Tribunal has been upheld by the Hon'ble Supreme Court on

October 23, 2017 in the matter of Sahara Asset Management Company P.

Ltd. & Ors. vs. Securities and Exchange Board of India & Ors. (Civil

Appeal No. 12854 of 2017).

4. The question now is whether an entity which was not found fit and

proper under SEBI (Mutual Funds) Regulations because of its promoters

being not fit and proper can be extended to PMS Regulations as well.

Shri Gaurav Joshi, Learned Senior Counsel appearing on behalf of the

appellant also raised the question as to whether the same WTM could

adjudicate on the reconsideration application particularly when the appellant

requested SEBI to place the matter before another WTM to adjudicate on

the reconsideration application. According to the Learned Senior Counsel of

the appellant the reconsideration application should have been adjudicated

by another WTM to avoid any bias.

5. Question as to whether the application for reconsideration ought to

have been considered by another WTM becomes academic in the facts of

present case, because, the issue of the appellant being not fit and proper

person to act as a Portfolio Manager has attained finality by the decision of

the Apex Court dated October 23, 2017. In other words, in view of the

decision of the Apex Court dated October 23, 2017, the decision of SEBI

that the appellant is not a fit and proper person to act as a Portfolio Manager

stands affirmed and in such a case, reconsideration of the question by any

officer of SEBI does not arise at all.

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6. In the result, we see no merit in this appeal and the same is hereby

dismissed with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member

31.10.2017 Prepared and compared by: msb