Shailesh Mulraj Ved vs Sebi

Date of Decision: 11.06.2018

Misc. Application No. 124 of 2018 And Appeal No. 167 of 2018

Amit Shantilal Mehta Shree Krishna Kunj, 13/3, Nivedita Nagar, Behind Telephone Exchange, Raiya Road, Rajkot, Gujarat- 360 007 ...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. J.J. Bhatt, Advocate with Ms. Hiral Shah and Ms. Rinku Valanju, Advocates i/b R.V. Legal for the Appellant.

Mr. Vishal Kanade, Advocate with Mr. Chirag Bhavsar, Advocate i/b MDP & Partners for the Respondent.

WITH Misc. Application No. 166 of 2018 And Appeal No. 196 of 2018

Shailesh Mulraj Ved 45, G.K. Bhatia Building, Room No. 17, 2nd Floor, Vithaldas Road, Mumbai- 400 002 ...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 2

Mr. J.J. Bhatt, Advocate with Ms. Hiral Shah and Ms. Rinku Valanju, Advocates i/b R.V. Legal for the Appellant.

Mr. Vishal Kanade, Advocate with Mr. Chirag Bhavsar, Advocate i/b MDP & Partners for the Respondent.

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

Per: Justice J.P. Devadhar (Oral)

Misc. Application Nos. 124 & 166 of 2018

There is delay of 7 & 18 days respectively in filing the above two

appeals. By these Miscellaneous Applications, applicants seek

condonation of the said delay. For the reasons stated in the respective

applications, the delay is condoned.

Miscellaneous Applications are disposed of accordingly.

Appeal Nos. 167 of 2018 & 196 of 2018

1.

These two appeals are filed to challenge the common order passed

by the Adjudicating Officer ('AO' for short) of Securities and Exchange

Board of India ('SEBI' for short) on 26.03. 2018. By that order penalty

of ` 20 lac is imposed on Shailesh Mulraj Ved (Appellant in Appeal No.

196 of 2018) and penalty of ` 10 lac is imposed on Amit Shantilal Mehta

(Appellant in Appeal No. 167of 2018) under section 15 A(a) of SEBI

Act, 1992 for violating section 11(C)(2) and 11C(3) of SEBI Act, 1992.

Since facts are common both these appeals are heard together and

disposed of by this common decision.

2. Facts relevant for disposal of these two appeals are as follows:- 3

a) Pursuant to an order passed by this Tribunal on

06.07.2011 it was obligatory on part of SEBI to

reinvestigate the issue relating to the source of funds

received in the bank account of Shailesh Mulraj Ved

('Shailesh' for short) which were used by him for

trading in the scrip of Nandan Exim Limited. The said

direction was issued with a view to ensure that

tainted/ unaccounted money does not come into the

securities market. As per that order, after getting full

information from Shailesh, SEBI was at liberty to

proceed further in the matter.

b) Accordingly, by a letter dated 25.07.2011 Shailesh

was called upon to furnish particulars contained in the

summons which was earlier issued to him on

5.11.2009.

c) By a letter dated 26.09. 2011 Shailesh submitted that

during the period from 5.10.2006 to 15.12.2006 he

had received ` 332.8 lakh from the sources set out

there in which reads thus:-

Sr. Amount in Purpose / Source of money (Name & Address) No. lakh (Rs.) Reason 1 125.5 Amit S. Mehta, Shree Krishna Kunj, Sale of land at Nivedita Nagar CHS, Near Tulsi Baug, Viramgaum, Rajkot. Ahmedabad

2 74.8 Krishna Capshares Pvt. Ltd. 7A/B, Loan Panchratna, Raiya Road, Rajkot - 360001. 3 75 Avani Biotech Ltd. Shop No. 3, Loan Bandhutwa CHS, Vakola Bridge, Santacruz (E), Mumbai - 400055. 4 30 Sincere Equity Services Pvt. Ltd. Loan 5 13 Amrut Securities Ltd. 822, Star Loan Chambers, Harihar Chawk, Rajkot. 6 14.5 K.D. Jewellers (Rs. 8.5 Lakh) and Sale of Nilesh Pandya (Rs. 6 Lakh) Jewellery Total 332.8 4

d) According to Shailesh, out of ` 332.8 lakh, ` 269.8

lakh was received through banking channels and

balance amount of ` 63 lakh was deposited in cash.

Out of ` 63 lakh deposited in cash, Shailesh claimed

that he had received ` 48.5 lakh from Amit Shantilal

Mehta ('Amit' for short), who is appellant in Appeal

No. 167 of 2018, for sale of land at Viramgaum,

Ahmedabad and ` 14.5 lakh was received from Nilesh

Pandya and K.D. Jewellers on account of jewellery

sold to them. According to Shailesh, the Viramgaum

land was sold by him to Amit on November 16, 2006

for a consideration of ` 125.5 lakh.

e) By a letter dated 27.07.2011 Shailesh and by

summons dated 18.01. 2016 and reminder letter dated

01.02.2016 Amit were called upon to produce

documentary evidence in support of the purported sale

of land at Viramgaum by Shailesh to Amit. However,

both of them failed to furnish documentary evidence

in that behalf.

f) Investigation carried out by SEBI at the office of Sub

Registrar, Viramgaum revealed that no such land at

Viramgaum was sold by Shailesh to Amit.

g) Investigation carried out by SEBI revealed that the

total income of Shailesh as per the Income Tax return

for Assessment Year 2005-2006 was ` 1.08 lakh, 5

whereas during that period Shailesh had traded in the

securities market with cash deposited in his bank

account to the tune of ` 63 lakh which was beyond his

known source of income. Similarly, during the said

period annual income of Amit was in the range of

` 60,000 to ` 1,20,000, whereas, he had given cheque

amount of ` 77 lakh and cash amount of ` 48.5 lakh to

Shailesh to but failed to disclose the source from

where he got the said amounts.

3. In view of the fact that both appellants inspite of repeated

reminders failed to furnish requisite information called for, penalty

proceedings were initiated and by the impugned order penalty of ` 20

lakh has been imposed on Shailesh and penalty of `10 lakh has imposed

on Amit under Section 15A(a) of SEBI Act for violating Section 11C (2)

& (3) of SEBI Act.

4. Penalty of ` 20 lakh is imposed on Shailesh for the following

reasons:-

a) Shailesh had falsely stated that he had received

` 125.5 lakh from Amit on account of sale of land at

Viramgaum, Ahmedabad to Amit, when in fact the

records maintained in the office of Sub-Registrar at

Viramgaum does not show sale of any land by

Shailesh to Amit.

b) Shailesh claimed to have taken loan of ` 75 lakh from

Avani Biotech Limited but failed to produce any loan 6

document from Avani Biotech Limited. However,

from the bank account details it was seen Shailesh

received ` 45 lakh from Laxmi Udyog Limited on

22.11.2006 and ` 30 lakh from Tarang Suppliers Pvt.

Ltd. on 01.12.2006. Thus, the particulars furnished

by Shailesh were falsified by his bank account details.

c) By summonses dated 09.03.2015 and 12.03.2015

Shailesh was called upon to give details of the interest

paid and the mode and the manner in which the above

loan was repaid. However, Shailesh failed to provide

any information in that behalf.

d) Shailesh claimed to have received ` 14.5 lakh from

Nilesh Pandya and K.D. Jewellers on account of

jewellery sold to them. To ascertain the authenticity

of the bills submitted which appeared to be fictitious,

summons dated 27.11.2015 and reminder dated

03.12.2015 was issued to Shailesh calling upon him to

produce complete mailing address, phone/mobile

number/ PAN and Bank Account details of Nilesh

Pandya and K.D. Jewellers. Even after taking one

month time to furnish the said particulars, Shailesh

has not furnished any such particulars. In these

circumstances, decision of the AO that Shailesh not

only failed to furnish requisite particulars but also

furnished false particulars in violation of Section 11C

(2) & (3) of SEBI Act cannot be faulted.

7

5. Similarly, Amit by his letter dated 10.02.2016 had confirmed that

he had made cash payment of ` 48.5 lakh to Shailesh. In the Memo of

Appeal, Amit has stated on oath that he had paid ` 77 lakh by cheque and

` 48 lakh by cash to Shailesh for acquiring the land at Viramgaum from

Shailesh. As noted earlier, records maintained by the office of Sub-

Registrar at Viramgaum does not show any sale of land by Shailesh to

Amit. Thus, it is apparent that Amit has falsely stated that he had made

payments to Shailesh for acquiring the land. Apart from the above, Amit

has not disclosed the source from where he got ` 125 lakh when his

annual income was between ` 60,000/- to 1,20,000/-. In these

circumstances, decision of the AO that Amit not only made false

statement but only failed to requisite particulars in gross violation of

Section 11C (2) & (3) of SEBI Act cannot be faulted.

6. Argument that in view of inordinate delay in initiating

proceedings, Amit is unable to recollect the source from where he got

` 125 lakh for purchasing the land from Shailesh, clearly shows that even

now he is not willing to come clean and disclose the truth. It is

impossible to believe that Amit whose annual income was between

` 60,000/- to ` 1,20,000/- is unable to recollect from where he got

` 125 lakh and gave that amount to Shailesh for acquiring land at

Viramgaum, when in fact no such land is acquired by him. Although,

Amit has not actually traded in the scrip of Nandan Exim Limited, very

fact that he is not disclosing the source from where he got ` 125 lakh and

the very fact that he had falsely stated that the said amounts were given

by him to Shailesh for acquiring land at Viramgaum is sufficient to hold

that Amit is guilty of violating Section 11C (2) & (3) of SEBI Act. In 8

these circumstances, imposing penalty of ` 10 lakh on Amit for such

violations cannot be faulted.

7. Strong reliance was placed by counsel for the appellants on the

decision of this Tribunal in case of Indivar Traders Pvt. Ltd. V/s SEBI

(Appeal No. 378 of 2015 decided on 09.09.2015), decision in the case of

Mr. Ashwin Bhandari V/s SEBI (Appeal No. 61 of 2018 decided on

21.03.2018) and an order passed by the AO of SEBI on 08.09.2011 in

case of Ramesh Bhai Parmar in support of the contention that in the

present case, imposition of penalty is either unwarranted or deserves to

be reduced substantially.

8. In our opinion, none of the aforesaid decisions are comparable to

the facts of present case. As noted earlier, apart from failing to furnish

various particulars including the source of receipt of funds inspite of

repeated reminders, appellants have made false statements, which clearly

shows the mindset of the appellants in subverting the efforts made by

SEBI to find out the truth.

9. Penalty imposable under Section 15A(a) of SEBI Act for violating

Section 11C (2) & (3) of SEBI Act is not less than ` 1 lakh but which

may extend to ` 1 lakh each day during such failure continue subject to

maximum to ` 1 crore. As the appellants have failed to furnish

particulars till date, penalty imposable would be up to ` 1 crore against

each appellant. However, after considering all mitigating factors the AO

of SEBI has imposed penalty of ` 20 lakh on Shailesh and ` 10 lakh on

Amit which cannot be said to be excessive of unreasonable. 9

10. In view of the fact that the appellants even now are not willing to

furnish requisite particulars including the source of the money received

by them and are not willing to disclose the circumstances under which

they made the false statements, we dismiss both appeals with costs

quantified at ` 1 lakh to be paid by each appellant to SEBI within four

weeks from today.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Dr. C.K.G. Nair Member 11.06.2018 Prepared & Compared By: PK