Shah Group Builders Limited & Ors. vs Sebi

Date of Decision: 10.03.2017

Misc. Application No. 81 of 2017 And Appeal No. 75 of 2017

1.

Shah Group Builders Limited 323-329 Anreja Corner, Plot No. 71, Sector 17, Vashi, Navi Mumbai- 400 705

2. Nalin Virji Shah B/507, Gangangiri CHS, Sector 17, Vashi, Navi Mumbai-400 705

3. Ms. Neelam Nalin Shah B/507, Gangangiri CHS, Sector 17, Vashi, Navi Mumbai-400 705

4. Mr. Nirav Nalin Shah B/507, Gangangiri CHS, Sector 17, Vashi, Navi Mumbai-400 705 ...Appellants

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 Ms. Rishika Harish, Mr. Amit Bikram Dey, Advocates with Nirali Mehta, Company Secretary, i/b Mindspright Legal for Appellants.

Mr. Rajesh Nagory, Advocate with Mr. Durgesh Khanapurkar, Advocate i/b Juris Corp for the Respondent.

CORAM: Jog Singh, Member Dr. C.K.G. Nair, Member

Per: Jog Singh (Oral) 2

Misc. Application No. 81 of 2017

There is delay of 95 days in filing the appeal. Heard at length. For

the reasons stated in the application, delay is condoned and the

Miscellaneous Application is allowed.

Appeal No. 75 of 2017

1. The appellants were directed by the Whole Time Member

("WTM" for short) of the Securities and Exchange Board of India

("SEBI" for short) by order dated July 01, 2015 to refund/repay monies

to the tune of ` 6,15,88,300 collected pursuant to allotment of certain

shares by the appellant between 28 July, 2008 & 15 November, 2008.

Learned WTM of SEBI found that the allotment of equity shares during

the said period was a deemed IPO and hence in violation of various

provisions of Companies Act, 1956 as enumerated in the said order read

with provisions of Securities and Exchange Board of India (Disclosure

and Investor Protection) Guidelines, 2000 under Regulation 107 & 111 of

SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

In implementation of the said order dated July 1, 2015, the appellants are

stated to have refunded an amount to the tune of ` 12.30 crore inclusive

of interest. Thereafter, the appellants have failed to refund the investors

remaining principal amount of ` 3,62,00,000 within the stipulated time of

one year and interest thereon. SEBI issued notice of demand dated

October 13, 2016 under Rule 2 of the Second Schedule to the Income

Tax Act, 1961 as incorporated in the SEBI Act, 1992. It further seeks to

partially attach the demat and certain bank accounts maintained by the

appellants. Further, vide order dated February 23, 2017 SEBI attached 3

various immovable properties as well as one car belonging to the

appellants.

2. Heard both the learned counsel for the parties. Shri Gaurav Joshi,

learned Senior Counsel for the appellants, submits that the appellants

have paid about ` 12.30 crore to the investors in compliance of the order

of SEBI. However, because of certain factors beyond the control of the

appellants he has not been able to dispose of the properties to pay an

amount of about ` 3.62 crore (principal amount) along with interest.

However, the very fact that the appellants had already complied with the

order of SEBI substantially by paying an amount of more than ` 12 crore

to the investors shows that the appellants have due regard and concern for

the order passed by SEBI.

3. In addition to the above, it is brought to notice by the learned

counsel for the appellants that an amount of ` 60 lac, which has been

attached by the respondent, has since been recovered. This is not

disputed by the learned counsel for the SEBI, Shri Rajesh Nagory.

Therefore, this has to be accordingly credited by SEBI. In the

meanwhile, another amount of ` 11 lac has also been paid by the

appellants to the investors between June and November 2016. This is also

to be credited accordingly by SEBI. It is also brought to our notice that

an amount of ` 50 lac due to the directors is to be refunded to the

appellants. This amount is also liable to be adjusted by SEBI accordingly

from the remaining amount due as on date. In this backdrop, learned

counsel for the appellants seeks further time of one year to repay the

remaining amount to the investors.

4

4. On the other hand, Shri Nagory, learned counsel for SEBI submits

that the respondent had already been considerate and liberal in granting

time of one year to the appellants to do the needful. However, if the

appellants furnish an affidavit detailing therein certain unencumbered

properties, which could be disposed of to pay the remaining amount to

the investors, a further time of 6 months may be granted to the appellants

to do the needful, failing which SEBI be allowed to proceed against the

appellants in accordance with law. Accordingly, we have called upon

the appellants to provide details of such properties as required by SEBI

for repayment purposes. Leaned counsel has produced a list of properties

which are claimed to be worth ` 18.46 crore as against the amount of

about ` 9 crore to be paid to the investors by the appellants. It is fairly

submitted by Shri Gaurav Joshi, that although the land on which the

properties in question are being constructed has been mortgaged with the

bank but the appellants are at liberty to dispose of the said properties as

there are no other encumbrance thereon. Be that as it may, the appellants

shall file an affidavit before SEBI within a period of 10 days to the

satisfaction of the SEBI and thereafter the ban/attachment order shall

stand vacated. At this stage, Shri Nagory has brought to our notice an

order dated March 07, 2017 passed in Appeal No. 32 of 2017 preferred

by Canara Bank against SEBI as well as the present appellants before us.

By the said order, this Tribunal has permitted Canara Bank to approach

SEBI with a representation regarding an approximate amount of

` 2,36,00,000 lying in an ESCROW account with Canara Bank and

Central Bank. We make it clear that the said issue raised by Canara Bank

is an independent issue and SEBI is at liberty to decide it as per law and 5

in accordance with this Tribunal's directions contained in its order dated

March 07, 2017 in Appeal No. 32 of 2017 after affording an opportunity

of hearing to the concerned parties. The pendency of the issue raised by

Canara Bank before SEBI shall not come in the way of the appellants in

disposing of the unencumbered properties mentioned herein above for the

purpose of repaying the investors as per SEBI's directions dated July 01,

2015 the details of which are as under:-

Sr. Unit Carpet Value (Rs. in Details No. No. Area (Sq. crs. Approx.) Ft. in approx) 1. 801 510 + 7.72 Project Name:- Shah Signature (Terrace) Company:- Shah Group Builders 2. 802 552 + 5.16 & Infra Projects Ltd. (Terrace) Address:- Plot No. 7, Sector 17, 3. 1001 510 2.83 Vashi, Navi Mumbai- 400 705 4. 1004 494 2.75

18.46 Cr.

5. In view of the above said, we direct the appellants to furnish an

appropriate affidavit as discussed herein above to SEBI by March 17,

2017 and on submission of such an affidavit the appellants are granted

time to refund/pay the remaining amount in question to the concerned

investors. Ordered accordingly. The appeal, thus, stands disposed of with

the abovesaid directions with no order as to costs.

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member 10.03.2017 Prepared & Compared By: PK