Sanjeev Bansal vs Sebi

DATE : 28.12.2016

Misc. Application No. 380 of 2016 And Appeal No. 293 of 2016

Sanjeev Bansal R/O 337, Greater Kailash Part -I, New Delhi - 110048. ..... 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. Sanjeev Bansal, Appellant in person. Mr. Aditya Chitle, Advocate with Mr. Rohan Agarwal, Ms. Khushboo Shah, Advocates i/b MDP & Partners for the Respondent.

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

Per : Justice J. P. Devadhar (Oral)

Misc. Application No. 380 of 2016

1.

By this misc. application the appellant seeks restoration of Appeal

No. 293 of 2016 which was dismissed by this Tribunal on December 9,

2016 for want of prosecution. For the reasons stated in the misc.

application, the order dated December 9, 2016 is recalled and the appeal is

restored to the file and taken up for hearing.

2. The misc. application is, accordingly, disposed of with no order as to

costs.

2 Appeal No. 293 of 2016

1. Appellant is aggrieved by the order passed by the adjudicating officer

('A. O.' for short) of the Securities and Exchange Board of India ('SEBI'

for short) on April 29, 2016. By the said order penalty of ` 1 lac is

imposed on the appellant for violating Section 11C(3) and the 11C(5) of

SEBI Act.

2. Facts relevant for the present appeal are as follows :-

(a) Appellant was a director of Arihant Equity Fund Ltd.

('Arihant' for short) and New Age Shares & Stockbrokers

Pvt. Ltd. ('New Age' for short).

(b) Arihant and New Age are the promoters of SRG Infotech Ltd.

('Infotech' for short).

(c) In the year 1995, Infotech came out with the rights issue

wherein it was stated that the business activities of Infotech

were, interalia, software development and Exports, Computer

Education, Multimedia and Registrar and Share Transfer

Agent etc.

(d) On noticing that the Infotech scrip during the no delivery

period rose from ` 9 to ` 20, an increase of 122%, SEBI

conducted investigation. Investigation conducted by SEBI

revealed that Arihant and New Age had entered order in large

quantities and subsequently deleted them either after

uploading the particulars or after part execution of the order.

(e) On issuance of summons to the appellant who was the director

in Arihant and also a director in New Age, Shri Ashok

Agarwal, brother of the appellant appeared as an authorized

representative of the appellant and gave statement. In the said 3

statement recorded on July 9, 2004 question No. 10 and the

answer given thereto reads as under :-

"10. Please explain as to why M/S integrated have specifically taken the name of Shri Sanjeev Bansal as having placed orders for Arihant and New Age?

Ans. How can I comment on the submissions of another individual. Sanjeev Bansal has never dealt for Arihant Equity Fund."

(f) SEBI considered the aforesaid statement to be an incorrect

statement. Accordingly, a show cause notice was issued to

the appellant to show cause as to why action should not be

taken against the appellant for violating Section 11C(3), (5)

and (6) of SEBI Act.

(g) In reply to the above show cause notice, the appellant

interealia, submitted that all decisions were taken by his

brother Mr. Ashok Agarwal, who forced the appellant to sign

on the dotted lines. The appellant further submitted that

Mr. Ashok Agarwal in his statement had never stated that the

appellant had never dealt in the scrip of Infotech on behalf of

Arihant.

(h) Thereupon repeated opportunity of personal hearing was

offered to the appellant. However, the appellant failed to avail

the opportunity of personal hearing. Hence the impugned

order was passed on April 29, 2016 imposing penalty of ` 1

lac for violating Section 11C(3) and 11C(5) of the SEBI Act.

Challenging the said order, present appeal is filed.

3. Mr. Sanjeev Bansal appellant appeared in person and submitted as

follows :-

4

a) The statement made by the authorized representative of the

appellant (i.e. statement of Ashok Agarwal, brother of the

appellant) was an ambiguous statement and for the said

ambiguous statement made by the authorized representative,

appellant cannot be said to have made incorrect statement.

b) In reply to the another show cause notice issued to the

appellant on February 11, 2004, the appellant had clearly

stated that he was acting as per the instructions of the

promoter / director of Arihant (later on known as Universal

Media Network Ltd.). From the above reply, it is clear that

the appellant did not hide any facts from the investigating

authority and, therefore, the A. O. is not justified in

erroneously interpreting the statement made by the authorized

representative and holding that the appellant is guilty of

making incorrect statement.

c) In the order passed by the Whole Time Member ('WTM' for

short) of SEBI on September 23, 2008, it is recorded that the

appellant had placed order on behalf of the management of

Arihant (later on known as Universal Media Network Ltd.)

and in the said order, the WTM of SEBI has not recorded any

finding regarding the incorrect statement allegedly made by

the authorized representative of the appellant. Since the

WTM of SEBI has not found the appellant guilty of making

any incorrect statement, the A. O. is not justified in holding

that the appellant has made incorrect statement before the

Investigating authority. .

4. We see no merit in the above contentions.

5

5. Admittedly, the summons was issued to the appellant who was the

directors of Arihant and New Age, however, the appellant chose to send his

authorized representative for the purpose of recording statement. Question

No. 10 put to the authorized representative was in the context of the

appellant placing orders on behalf of Arihant & New Age in the scrip of

Infotech. The authorized representative answered the said question by

stating that 'Sanjeev Bansal never dealt for Arihant Equity Fund'. In the

reply to the show cause notice, the appellant instead of admitting the

incorrect statement made by the authorized representative, sought to defend

the statement made by the authorized representative. When the answer

given by the authorized representative was clear and unambiguous, the

appellant is not justified in contending that the statement made by the

authorized representative was ambiguous.

6. On the basis of the facts on record, the A. O. in para 14 of the

impugned order has recorded thus :-

"14. I find from the material available on record that the Depository account opening form dated 28.05.1999, executed with Integrated Master Securities (IMS) for the purpose of opening of trading account in the name of Arihant Equity Fund Ltd. bears the name of Shri Sanjeev Bansal as the sole authorized signatory for operating the DP account and he also signed the application form, signature card and DP agreement as the Director of Arihant Equity Fund Ltd. I also find from the records available that the Bank A/c No. 325052 was opened in the name of Arihant Equity Fund Ltd. on 20.01.1999 with the Bank of America with Sanjeev Bansal and Pramod Jain as authorized signatories. It is also not in dispute that the said Bank account was used for the trading activity in the scrip of SRG by Arihant Equity Fund Ltd. I find from the letter dated 10.05.1999 signed by Shri Sanjeev Bansal on behalf of Arihant Equity Fund Ltd. authorizing IMS to transfer credit balance in Settlement No. 9917 of NSE towards Debit balance in Settlement No. 7 of BSE. Further, it is important to note that Bill No. Group A/07/0007/ dated 17.05.1999 in Settlement period from 03.05.1999 to

07.05.1999 was acknowledged by Shri Sanjeev Bansal in token of various transactions done with IMS in the scrip of SRG. Hence, the contention of the Noticee is not correct." 6

Aforesaid findings recorded in the impugned order which is not disputed by

the appellant, clearly establish that the appellant had in fact dealt in the

scrip of Infotech on behalf of Arihant and the statement made to the

contrary by the authorized representative on July 9, 2004 was totally

incorrect.

7. Fact that the appellant in reply to another show cause notice issued

on November 2, 2004, had admitted to have dealt in the scrip of Infotech on

behalf of Arihant does not make the incorrect statement made on July 9,

2004 to be a correct statement. Admittedly, all the decisions were taken by

Mr. Ashok Agarwal and that Mr. Ashok Agarwal had forced the appellant

to sign on the dotted lines for dealing in the scrip of Infotech. Since Ashok

Agarwal has taken all the decisions for dealing in the scrip of Infotech,

appellant deemed it fit to send Ashok Agarwal as his authorized

representative for recording statement on behalf of the appellant. It appears

that on realizing that Mr. Ashok Agarwal had made incorrect statement

recorded on July 9, 2004, the appellant in his reply to the show cause notice

placed correct facts on record. Fact that the appellant in the subsequent

proceedings had placed the correct facts on record cannot be a ground to

hold incorrect statement was not made on July 9, 2004.

8. Arguments of the appellant that the WTM of SEBI has not found any

incorrect statement does not support the case of the appellant, because in

the proceedings before the WTM of SEBI, correctness of the statement

made on July 9, 2004 was not at all an issue. In such a case, reliance placed

on the decision of the WTM of SEBI is totally misplaced.

9. In fact, the WTM of SEBI in his order dated September 23, 2008 has

considered the question as to whether the appellant has violated the

Securities and Exchange Board of India (Prohibition of Fraudulent and 7

Unfair Trade Practices relating to Securities Market) Regulations, 2003

('PFUTP Regulations' for short). In the said decision violation committed

under Section 11C(3) and 11C(5) of the SEBI Act was not at all an issue.

10. Fact that the appellant has undergone debarment of one year for

violating the PFUTP Regulations cannot be a ground for the appellant for

escape penalty for violating Section 11C(3) and 11C(5) of SEBI Act.

11. The penalty imposable under Section 15HB of SEBI Act for

violating Section 11C of the SEBI Act is upto ` 1 crore. However, after

considering all mitigating factors, the A. O. has imposed penalty of ` 1 lac

as against the penalty of ` 1 crore imposable under the SEBI Act. In the

circumstances, the penalty imposed on the appellant cannot be said to be

harsh or excessive.

12. For all the aforesaid reasons, we see no merit in the 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 28.12.2016 Prepared & Compared by PTM