Urja Global Ltd. & Ors. vs Sebi

Order Reserved On: 15.11.2022 Date of Decision : 04.01.2023

Appeal No. 730 of 2022

1.

Urja Global Ltd.

2. Sh. Yogesh Kumar Goyay

3. Sunil Kumar Mittal

4. Priya Bhalla

5. Avinash Kumar Agarwal

Office at:-

487/63, 1st Floor, National Market, Peeragarthi, Delhi- 110 087 ...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 Singh, Advocate for Appellants.

Mr. Vishal Kanade, Advocate with Mr. Manish Chhangani, and Ms. Samreen Fatima, Advocates i/b The Law Point for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member

Per: Justice Tarun Agarwala, Presiding Officer 2

1. The present appeal has been filed by the appellants

challenging the order dated May 13, 2022 passed by the Whole

Time Member ("WTM" for convenience) of the Securities and

Exchange Board of India ("SEBI" for convenience) restraining

the appellants from buying, selling or otherwise dealing in

securities market either directly or indirectly, for a period of 2

years and further directing that before making any corporate

announcement under Regulation 30 of the SEBI (Listing

Obligations and Disclosure Requirements) Regulations, 2015

("LODR Regulations" for convenience) for the next 3 years the

Company would obtained a certificate of authenticity of such

corporate announcement from a practicing Company Secretary.

2. The facts leading to the filing of the present appeal is, that

the show cause notice was issued alleging that the corporate

announcement dated July 13, 2019 made by the Company was

false, misleading and fictitious and was made without any

intention to execute or fulfill the same as it was only made to

influence the decision of the investors to deal in the securities of

the Company and consequently violated Regulation 4(1)(c) &

(e) of the LODR Regulations and Regulation 3 & 4 of the SEBI

(Prohibition of Fraudulent and Unfair Trade Practices relating to

Securities Market) Regulations, 2003 ("PFUTP Regulations" for 3

convenience). Further, the appellants have violated Regulation

4(1)(e) of the LODR Regulations for not updating material

developments on a regular basis regarding corporate

announcements and failed to provide adequate and accurate

disseminations and also failed to timely update material

developments on a regular basis, till such time as the event was

resolved and consequently violated Regulation 4(1)(e) and

Regulation 30(7) & 30(8) of the LODR Regulations. The show

cause notice also alleged non-cooperation by the Company to

the Stock Exchange.

3. The WTM after considering the material evidence on

record and after considering the replies found truth in the

allegations and held that the corporate announcement of July 13,

2019 was not only false and misleading but was made without

any intention to execute or fulfill the same and that the said

announcement was made only to influence the decision of the

investors to deal in the securities of the Company. The WTM

further found that the Company failed to ensure adequate timely

dissemination under the LODR Regulations and failed to update

material developments on a regular basis. The WTM further

found that the Directors of the Company failed to oversee the

process of disclosure and communications and consequently 4

violated Regulation 4(1) & 4(2) and 30(7) and 30(8) of the

LODR Regulations. The WTM accordingly passed the

directions as stated aforesaid.

4. We have heard Shri Gaurav Singh, the learned counsel for

the appellants and Shri Vishal Kanade, the learned counsel for

the respondent.

5. We find that the Company had made an announcement on

July 13, 2019 that it had entered into an agreement with Nippon

Shinyaku Company for supply of a product known as Zacobite

for a period of five years. This agreement which was in the

form of the Memorandum of Understanding ("MoU") was

purportedly signed by one Prof. Yukio Sugiura, who was

alleged to be an External Director of Nippon Shinyaku. As per

the MoU the appellant-Company would represent Nippon

Shinyaku in the procurement of Zacobite at a cost of

6,55,00,000 US$ with a total of 10% commission/ profit margin.

As a result of this announcement on the BSE Platform there was

significant increase in the volume of the scrip.

6. Subsequently, it was found that no such MoU was

executed by Nippon Shinyaku and was intimated to the 5

Company vide email on September 16, 2019. Inspite of coming

to know about the fraudulent dealing the appellants took no step

to rectify the error. A complaint as late on January 09, 2020

was filed with the Economic Offences Wing ("EOW") and First

Information Report ("FIR") was filed on June 06, 2020.

7. We find that the defense of the appellants cannot be

accepted that they were a victim of a fraud and that they had

entered into the said agreement in good faith and were duped by

unscrupulous persons who were representing themselves as

representative of Nippon Shinyaku. We find that the contention

of the appellants is clearly an afterthought. The Company had

failed to carry out due diligence to find out whether the product

Zacobite was in existence or not and what was the use and

efficacy of Zacobite or who were the suppliers of Zacobite. The

WTM came to the conclusion that the Company had failed to

show that it had obtained the aforesaid information prior to

entering into a purported MoU and making the corporate

announcement. Nothing has been shown before us that the

appellants had carried out due diligence in the matter.

8. We are also of the opinion that it is normal for a Company

to make queries about the product before entering into a MoU 6

and before paying money in advance. In the instant case, we are

of the confirmed opinion that there was lack of due diligence on

the part of the appellants while entering into a contract. In fact,

the entire exercise was nothing but to mislead the investors into

dealing in the securities of the Company by making misleading

corporate announcements knowing fully well that no such

product known as Zacobite exist. In this regard, we also find

that payment of 3,000$ was made by the Company on April 24,

2019 prior to the issuance of the invoice which was raised on

May 09, 2019.

9. We also find that the Company became aware of the

purported fraud on September 05, 2019 when it received an

email from Nippon Shinyaku but only filed a complaint before

EOW on January 09, 2020 and FIR in June 2020. We are of the

opinion that the Company failed to display any serious efforts to

recover the money and initiate appropriate legal proceedings in

this regard.

10. We also find that the Company had connived with such

persons to create an artificial situation or making a corporate

announcement on July 13, 2019 which was false, misleading

and inaccurate and which misled the investors into dealing with 7

the securities with the Company. Apart from the above, the

Company also failed to disclose material facts while making

disclosure in respect of withdrawal of the purported MoU with

Nippon Shinyaku. The reason for which the announcement was

withdrawn was not disclosed. The Company did not disclose

that it had not raised any request for advance payment to

Nippon Shinyaku for the supply of product. Other reasons have

been indicated by the WTM which we find them to be correct

and is does not suffer from any error.

11. Consequently, we are of the opinion that the Company

failed to disclose material facts that Nippon Shinyaku vide

email dated September 05, 2019 had explicitly indicated to the

appellants that no dealing of the kind described by the Company

had been undertaken by Nippon Shinyaku and any of its

Directors.

12. In view of the aforesaid, we find that a listed entity is

required to make disclosures updating material developments on

a regular basis till such time the event is closed or resolved as

per Regulation 30(7) of the LODR Regulations which in the

instant case was not done. Requisite information was not made

available to the investors.

8

13. We also find that the Company had not updated material

development on a regular basis regarding other corporate

announcements made during March 29, 2018 to March 01, 2019

the details of which has been given in the impugned order.

14. In view of the aforesaid, we do not find any manifest error

in the impugned order requiring interference by this Tribunal.

The appeal fails and is dismissed summarily.

15. This order will be digitally signed by the Private Secretary

on behalf of the bench and all concerned parties are directed to

act on the digitally signed copy of this order. Certified copy of

this order is also available from the Registry on payment of

usual charges.

Justice Tarun Agarwala Presiding Officer

Ms. Meera Swarup Technical Member PRERNA Digitally by PRERNA signed

04.01.2023 MANISH Date:

MANISH KHARE

PK KHARE 2023.01.09 16:29:24 +05'30'