Vashi Constructions Pvt. Ltd. & Ors. vs Sebi

Order Reserved on: 24.04.2018

Date of Decision : 28.06.2018

Appeal No. 303 of 2016

Pratik Minerals Pvt. Ltd. 3/A, Laxmi Colony, Nava Vas Rakhiyal Road, Ahmedabad - 380 002. .....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

Mr. J. J. Bhatt, Advocate with Ms. Rinku Valanju and Ms. Hiral Shah, Advocate for Appellants.

Mr. Pradeep Sancheti, Senior Advocate with Mr. Pulkit Sukhramani, Ms. Vidhi Jhawar and Mr. Nikhil Ratti Kapoor, Advocates i/b The Law Point for the Respondent.

With Appeal No. 306 of 2016

1.

Shri Hiralal Popatlal Shah Since deceased through Sarla Hiralal Shah, Wd/o. Hiralal Popatlal Shah

2. Sarlaben Hiralal Shah

3. Meenaben A Shah

Tower-2, 2nd Floor, Flat No. B, Centre Point flats, Panchvati, Ambawadi, Ellisbridge, Ahmedabad - 380 006. .....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 2

Mr. J. P. Sen, Senior Advocate with Mr. Shyam Shelat, Advocate i/b Shelat Associates for Appellants.

Mr. Pradeep Sancheti, Senior Advocate with Mr. Pulkit Sukhramani, Ms. Vidhi Jhawar and Mr. Nikhil Ratti Kapoor, Advocates i/b The Law Point for the Respondent.

With Misc. Application No. 345 of 2017 And Appeal No. 374 of 2017

1 Rudra Securities & Capital Ltd.

2/2B, Centre Point Flats, Panchwati, Ambawadi, Ellisbridge, Ahmedabad - 380 006.

2 Mr. Ketan D. Sorathiya Library Chowk, Una, Junagadh - 362 560

3 Mr. Nileshkumar T. Kava Luhar Chowk, Una Junagadh - 362 560

4 Mr. Vipul Shantilal Trivedi Kolivado, Una Junagadh - 362 560

5 Mr. Manish Muchhala Opp. Javahar Colony, Anjar Road, Una Junagadh - 362 560 .....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. J.J. Bhatt, Advocate with Ms. Rinku Valanju and Ms. Hiral Shah, Advocate for Appellants.

Mr. Pradeep Sancheti, Senior Advocate with Mr. Pulkit Sukhramani, Ms. Vidhi Jhawar and Mr. Nikhil Ratti Kapoor, Advocates i/b The Law Point for the Respondent.

3

With Misc. Application No. 346 of 2017 And Appeal No. 375 of 2017

1. Vashi Constructions Pvt. Ltd.

2/2B, Centre Point Flats, Panchwati, Ambawadi, Ellisbridge, Ahmedabad - 380 006.

2. Ms. Bhavana Rajesh Shah C-201, Silver Leaf Society, Near Big Bazar, Akurli Road, Kandivali (East), Mumbai - 400 101.

3. Mr. Rajesh Chandrakant Shah C-201, Silver Leaf Society, Near Big Bazar, Akurli Road, Kandivali (East), Mumbai - 400 101. .....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. J.J. Bhatt, Advocate with Ms. Rinku Valanju and Ms. Hiral Shah, Advocate for Appellants.

Mr. Pradeep Sancheti, Senior Advocate with Mr. Pulkit Sukhramani, Ms. Vidhi Jhawar and Mr. Nikhil Ratti Kapoor, Advocates i/b The Law Point for the Respondent.

With Misc. Application No. 347 of 2017 And Appeal No. 376 of 2017

1. Dhanlaxmi Lease Finance Ltd.

3/A, Laxmi Colony, Navo Vas, Rakhiyal Road, Ahmedabad - 380 006. .....Appellants

2. Mr. Bharat Ratilal Shah 5th Floor, Nupur Apt., Uttamnagar, Maninagar, Ahmedabad - 380 006.

4

3. Mr. Bipin Ratilal Shah 3/A, Laxmi Colony, Navo Vas, Rakhiyal Road, Ahmedabad - 380 006.

4. Mr. Girish Gaturbhai Doshi 945-Bhatni Pole, Near Ramkrishna Mill, Gomtipur, Ahmedabad - 380 021.

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. Rinku Valanju and Ms. Hiral Shah, Advocate for Appellants.

Mr. Pradeep Sancheti, Senior Advocate with Mr. Pulkit Sukhramani, Ms. Vidhi Jhawar and Mr. Nikhil Ratti Kapoor, Advocates i/b The Law Point for the Respondent.

With Misc. Application No. 58 of 2018 And Appeal No. 62 of 2018

Robinson Worldwide Trade Ltd.

(now known as Sun and Shine Worldwide Ltd.) 403, Sanjay Tower, Opp. C.N. Vidyalaya, Ambavadi, Ahmedabad - 380 015. .....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. Pakash Shah, Advocate with Ms. Rinku Valanju and Ms. Hiral Shah, Advocates i/b R.V. Legal for Appellants.

Mr. Pradeep Sancheti, Senior Advocate with Mr. Pulkit Sukhramani, Ms. Vidhi Jhawar and Mr. Nikhil Ratti Kapoor, Advocates i/b The Law Point for the Respondent.

5

With Misc. Application No. 76 of 2018 And Appeal No. 79 of 2018

Exdon Trading Company Ltd.

C-10, Sahar Roy Apt. CHS Ltd.

Opp. Sahar Cargo Complex, Andheri (E), Mumbai - 400 099. .....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. Pakash Shah, Advocate with Ms. Rinku Valanju and Ms. Hiral Shah, Advocates i/b R.V. Legal for Appellants.

Mr. Pradeep Sancheti, Senior Advocate with Mr. Pulkit Sukhramani, Ms. Vidhi Jhawar and Mr. Nikhil Ratti Kapoor, Advocates i/b The Law Point for the Respondent.

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

Per : Dr. C.K.G. Nair, Member

1. These seven appeals have been filed challenging the order passed by

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

Board of India ('SEBI' for short) on August 12, 2016. By the said order

several entities, including the appellants herein, have been held to have

violated certain provisions of SEBI Act, 1992, Securities and Exchange

Board of India (Prohibition of Fraudulent and Unfair Trade Practices

Relating to Securities Market) Regulations, 2003 and / or Securities and

Exchange Board of India (Substantial Acquisition of Shares and Takeovers)

Regulations, 1997. Accordingly, various directions such as restraint from

dealing in the securities market directly or indirectly / disgorgement of the 6

unlawful gains made / direction to make an open offer as detailed therein

have been issued.

2. Facts relevant to the appeals are as follows:-

3. Appellants are charged with aiding and abetting a fraudulent scheme

launched by a company by the name Platinum Corporation Ltd. ('PCL' for

short) and its directors / promoters. Impugned order has been passed against

several entities based on an investigation conducted by SEBI relating to

buying, selling and dealing in the scrip of PCL. PCL was incorporated on

July 17, 1992 in the name of Kanugo Lease and Investment Ltd. Its shares

were listed on BSE on January 9, 1997. Between July 20, 2005 and

September 15, 2006 PCL made a number of misleading corporate

announcements which led to increase in its share price and substantial

increase in the volume of trading in its shares. Promoters of PCL had

transferred shares in off-market to related entities who in-turn sold the

shares in the market after these corporate announcements and made

unlawful gains to the extent of Rs. 12 crore at the cost of innocent investors.

4. Investigation also revealed that the company and its directors misled

investing public by providing incorrect information on promoters'

shareholding for 11 quarters (i.e. from March 2005 till September 2007) to

BSE. Further, the company failed to make relevant disclosures regarding

changes in shareholding pattern as required by the relevant provisions of

SAST Regulations, 1997. It was also observed that Pratik Rameshchandra

Shah, one of the directors, who was managing the affairs of PCL received 1

crore shares from Mr. Anand Ramanlal Trivedi on June 28, 2005, which

constituted 9.34% of the equity capital of the company. However, Pratik

Rameshchandra Shah did not disclose his acquisition of shares to the

company and to the stock exchange.

7

5. Investigation further revealed that PCL made fraudulent preferential

allotment of 290 lakh shares to seven connected entities /persons without

real inflow of funds from the preferential allottees. The allottees of the

aforesaid preferential issue, four of whom were Directors of the company,

were connected to one another and were acting in concert, acquired 21.32%

of the post issue paid up capital of the company. However, they failed to

make open offer as prescribed by SAST Regulations, 1997.

6. In view of the aforesaid findings in the investigation, SEBI initiated

proceedings under Section 11 and 11B of the SEBI Act, 1992 against PCL

and 39 entities including its directors / promoters and other entities

connected / related to the directors / promoters of the PCL for violation of

Section 12A(a), (b) and (c) of SEBI Act, 1992 read with Regulations 3(a) to

3(d), 4(1), 4(2)(e), (f), (k) and (r) of PFUTP Regulations, 2003 and

Regulation 8(3), and Regulation 10 of SAST Regulations, 1997.

7. The details of the 40 entities to whom SCN was issued by SEBI are as

under:-

Sr. Name of the Noticees Relationship Details No. 1 Platinum Corporation Company (PCL) Director of PCL (Noticee no. 1) and 2 Mr. Pratik R. Shah Hirak Biotech (Noticee no. 24) Director (also listed as a promoter of Mr. Dhrumal Kishor 3 PCL as per the last shareholding Vaidya pattern reported to BSE) Director (also listed as a promoter of Mr. Anindo Achinto 4 PCL as per the last shareholding Banerjee pattern reported to BSE) 5 Mr. Jignesh D. Shah Director of PCL 6 Mr. Jayesh D. Shah Director of PCL 7 Ms. Nikita B. Dave Director of PCL Ashok Shah (Noticee no. 9), Hiralal Vashi Constructions Pvt. Shah (Noticee no. 28), Bhavana Shah 8 Ltd. (Noticee no. 10), and Rajesh Shah (Noticee no. 11) are directors.

Signed the tripartite agreement on 9 Mr. Ashok H. Shah behalf of PCL (as its director) with NSDL. He is also a director of Vashi 8

Constructions (Noticee no. 8), Induram Developers (Noticee no. 29) and Corporate Allianz (Noticee no. 27). In addition, he managed Exdon Trading Company Ltd. (Noticee no. 26) as its Director Director, Vashi Constructions and 10 Ms. Bhavana Rajesh Shah Sister of Ashok Shah (Noticee no. 9) Director, Vashi Constructions (Noticee 11 Mr. Rajesh C. Shah no. 8) and husband of Bhavana Shah (Noticee no. 10) Authorized signatory for Vashi Constructions (Noticee no. 8), Rudra Ms. Neha Ravindrakumar 12 Securities (Noticee no. 13) and Shethwala Dhanlaxmi Lease Finance (Noticee no.

17) Ketan Sorathiya (Noticee no. 14), Rudra Securities & Capital Nileshkumar Kava (Noticee no. 15) 13 Ltd. and Vipul Trivedi (Noticee no. 16) are directors.

Mr. Ketan Dineshchandra Director of Rudra Securities (Noticee 14 Sorathiya no. 13) Mr. Nileshkumar Director of Rudra Securities (Noticee 15 Tribhovandas Kava no. 13) Mr. Vipul Shantilal Director of Rudra Securities (Noticee 16 Trivedi no. 13) Bharat Shah (Noticee no. 18), Bipin Dhanlaxmi Lease Finance 17 Shah (Noticee no. 19) and Girish Ltd.

Doshi (Noticee no. 20) are directors.

Director of Dhanlaxmi Lease Finance 18 Mr. Bharat Ratilal Shah (Noticee no. 17) Director of Dhanlaxmi Lease Finance 19 Mr. Bipin Ratilal Shah (Noticee no. 17) Mr. Girish Gaturbhai Director of Dhanlaxmi Lease Finance 20 Doshi (Noticee no. 17) Lalitkumar Rathod (Noticee No. 22) and Dinkar Shreemali (Noticee no. 23 and one of the directors of PCL 21 Sarang Chemicals Ltd.

(Noticee no. 1) and Hirak Biotech (Noticee no. 24) are directors of Sarang Chemicals (Noticee no. 21) Mr. Lalitkumar Kantilal Director of Sarang Chemicals (Noticee 22 Rathod no. 21) Director of PCL, Hirak Biotech Mr. Dinkar Bhanuprasad 23 (Noticee no. 24) and Sarang Chemicals Shreemali (Noticee no. 21) Dinkar Shreemali (Noticee no. 23 and 24 Hirak Biotech Ltd. director of PCL (Noticee no. 1) is a director Son of Ramanlal Trivedi (Noticee no. 39 - promoter of PCL (Noticee no.1)) and also Director of Shalibhadra Steel 25 Mr. Anand R. Trivedi (Noticee no. 36), Shankeshwar Metals (Noticee no. 37) and Siddhivinayak Tradelink (Noticee no. 38) 9

Managed by Director, Ashok Shah Exdon Trading Company (Noticee no. 9-who signed the tripartite 26 Ltd. agreement on behalf of PCL (Noticee no. 1) (as its director) Ashok Shah (Noticee no. 9) and Corporate Strategic 27 Hiralal Shah (Noticee no. 28) are Allianz Pvt. Ltd. directors. Director of Vashi Constructions (noticee no. 8), Induram Developers (Noticee no. 29) and Corporate Allianz Mr. Hiralal Popatlal Shah 28 (Noticee no. 27). Father of Ashok (Deceased) Shah (Noticee no. 9, who signed tripartite agreement on behalf of PCL (Noticee no. 1) Ashok Shah (Noticee no. 9) and Induram Developers Pvt. 29 Hiralal Shah (Noticee no. 28) are Ltd. directors. Ms. Meena Ashok Kumar 30 Wife of Ashok Shah (Noticee no. 9) Shah Wife of Bipin Shah (Noticee no. 19), Ms. Meeta Bipin Kumar Director of Parvati Minerals (Noticee 31 Shah no. 32 and Pratik Minerals (Noticee No. 33) Managed by Bharat Shah (Noticee no. 32 Parvati Minerals Pvt. Ltd. 18), Bipin Shah (Noticee no. 19) and Meeta Shah (Noticee no. 31) Managed by Bharat Shah (Noticee no. 33 Pratik Minerals Pvt. Ltd. 18), Bipin Shah (Noticee no. 19) and Meeta Shah (Noticee no. 31) Robinson Worldwide Managed by Ramanlal Trivedi Trade Ltd. (presently 34 (Noticee no. 39) and promoter of PCL known as Sun and Shine (Noticee no. 1) Worldwide Ltd.) Mother of Ashok Shah (Noticee no. 9, 35 Ms. Sarlaben Hiralal Shah who signed tripartite agreement on behalf of PCL (Noticee no. 1) Anand Trivedi (Noticee no. 25 and son of Ramanlal Trivedi (Noticee no. 39)- 36 Shalibhadra Steel Pvt. Ltd. promoter of PCLs (Noticee no. 1) is a director. Anand Trivedi (Noticee no. 25) (son of Shankeshwar Metals Pvt. 37 Ramanlal Trivedi -promoter of PCL) Ltd. (Noticee no. 1) is a director. Anand Trivedi (Noticee no. 25) (son of Siddhivinayak Tradelink 38 Ramanlal Trivedi - (Noticee no. 39 Pvt. Ltd. and promoter of PCL is a director. Promoter of PCL (Noticee no. 1), 39 Mr. Ramanlal N. Trivedi Director of Robinson Worldwide (Noticee no. 34) Director of Rudra Securities (Noticee 40 Mr. Manish Muchhala no. 13) 10

8. A common show cause notice dated September 23, 2013 was issued

separately to PCL and the other 39 aforementioned Noticees to show cause

as to why directions under Section 11, 11(4) and 11B of the SEBI Act

should not be issued against them for the alleged violations of provisions of

Section 12A(a), (b) and (c) of SEBI Act read with Regulation 3(a), 3(b),

3(c), 3(d), 4(1), 4(2)(e), (k) and (r) of the PFUTP Regulations, 2003 and

provisions of Regulation 8(3) and Regulation 10 of SAST Regulations,

1997.

9. After following due process like replies, personal hearing etc.

impugned order was passed on August 12, 2016. Apart from giving a reply

to the show cause notice by one of the directors of PCL i.e. noticee no. 4,

Anindo Achinto Banerjee, neither the company PCL nor any of its directors

participated in the proceedings before WTM. Further neither the company

nor any of their six directors are on appeal before us.

10. There are 18 appellants before us belonging to two categories;

1) those who have been charged with aiding and abetting the promoters of

PCL in transferring promoter shareholding off market and thereafter

offloading large number of shares in the market which they received mainly

thorough off-market dealings from the promoters/directors of PCL and

thereby making unlawful gains, 2) some of them also got preferential

allotment of shares from PCL, along with 4 of its Directors. Those in

category 1 are restrained from the securities market for the period of three

years and have been directed to disgorge their unlawful gains. In addition to

the above directions, those in the second category have been restrained for a

further period of five years and directed to make an open offer for violation

of SAST Regulations, 1997.

11

11. Accordingly, appellants in appeal Nos. 374, 375 and 376 of 2017

have been debarred from the securities market for three years and

disgorgement of specified amount alongwith interest for PFUTP violations

and debarment of five years and direction to make a public announcement to

acquire the shares of PCL in terms of Regulation 10 of SAST Regulations

for fraudulent preferential allotment of shares of PCL. In other appeals

(appeal nos. 303 and 306 of 2016 and 62 and 79 of 2018) only three years

restraint from securities market and disgorgement of unlawful gains have

been ordered for PFUTP violations. In case of appellants where both 3 years

and 5 years restraint have been imposed that period would run concurrently.

12. The specific facts relating to each appellant are as follows:-

(i) Appeal No. 303 of 2016:-

(a) The basic charge against the appellant is that they have

connived and conspired with PCL and its promotes /

directors in hoisting the scheme of making the scrip

liquid and thereafter selling them in the market and

thereby made unlawful gains. The connection of the

appellant to PCL is established through cross-

connection between different entities. The appellant is

managed by Bharat Shah, Bipin Shah and Meeta Shah.

Bharat Shah and Bipin Shah are brothers and are

directors of Dhanlaxmi Lease Finance (Appellant in

Appeal No. 376 of 2017) and Meeta Shah is the wife of

Bipin Shah. The Mobile No. 09824019596 given in the

KYC details of Bharat Shah with the depository

participant was that of Ashok Shah, one of the past 12

promoter / director of PCL. This same mobile number

is mentioned in the KYC details of Bipin Shah also.

Ashok Shah was a director of PCL who is also director

of Vashi Construction Pvt. Ltd., Induram Developers,

Corporate Strategic Allianz Ltd. and Exdon Trading all

of whom have been found guilty in this impugned

order. The appeal of Corporate Strategic Allianz Ltd.

has been dismissed by this Appellate Tribunal vide

order dated February 1, 2018.

(b) Pratik Minerals Ltd. received large quantity of shares

from promoters and promoter related entities of PCL

including 20 lakh shares from Parag Shah, 10 lakh

shares from Preeti Bharat Ratilal, 15 lakh shares from

Shanti Tradelink Pvt. Ltd. All these entities were found

guilty in adjudication orders passed by SEBI which was

upheld by this Appellate Tribunal.

(c) Accordingly, there is sufficient documentary

connection to show the appellants' connection to the

promoters and promoter group entities of PCL and by

receiving shares from such connected entities off

market and thereafter, after the share price was raised

through misleading corporate announcements by PCL

and its directors, the appellants off loaded the entire 35

lakh shares and made a net profit of Rs. 46,74,344/-. 13

(ii) Appeal No. 306 of 2016:-

(a) There are 3 appellants in this appeal. Appellant No. 1 is

the father of Ashok Shah and is also a director of Vashi

Construction, Induram Developers and Corporate

Strategic Allianz. Sarlaben Shah and Meenaben Shah,

Appellant Nos. 2 and 3 respectively are the wife and

daughter-in-law of Appellant No. 1.

(b) Appellant No. 1 received 10,500 shares from Parag

Shah (promoter of PCL) on October 18, 2005. He also

received 1,31,368 shares from Galaxy Broking. He also

received 2,48,082 shares from Anand Trivedi. Along

with the shares he was holding prior to October 2005,

he off loaded 18,34,450 shares and made an unlawful

gain of Rs. 25,11,364/-. Appellant No. 2 sold 15 lakh

shares in the market and made a profit of Rs.

29,03,638/- and Appellant No. 3 also off loaded 15 lakh

shares and made a profit fo Rs. 26,86,610/-.

(iii) Appeal No. 374 of 2017:-

(a) Through off market transactions Appellant No. 1

received 25 lakh shares from Jayesh Shah, promoter of

PCL. The address of Appellant No. 1 prior to

November 11, 2008 was the residential address of

Ashok Shah a former director of PCL and director of a

few entities that have been found to be connected to

PCL in this impugned order. Appellant No. 2 to 4 were 14

the directors of Rudra Securities and Capital Ltd. and

were in-charge of its day-to-day affairs. Appellant No.

5 was the director of Rudra Securities & Capital Ltd.

during the period of off loading all shares in the market

i.e. between November 30, 2006 and February 14, 2007

and was responsible for its day-to-day affairs.

(b) Except Appellant No. 5 all others were beneficiaries of

the preferential allotment made by PCL. The Appellant

No. 1 off loaded 25 lakh shares it received from Jayesh

Shah and made a profit to the tune of Rs. 21,59,971/-.

Appellant No. 1 was allotted 50 lakh shares of PCL as

preferential allotment at the rate of Rs. 1.25 per share.

These shares were pledged with banks as collateral

securities for loan taken by PCL and its group entities.

Accordingly, the Appellant No. 1 have been debarred

for 3 years for conniving and conspiring with PCL and

concurrent debarment of another 5 years for its role in

the fraudulent preferential allotment; disgorgement for

the unlawful profit made of Rs. 21,59,971/- with 12%

interest till payment and a combined public

announcement, along with PACs to acquire the shares

of PCL under Regulation 10 of SAST Regulations.

Appellant Nos. 2, 3 and 4 have been debarred from the

market for 5 years for their role in the preferential

allotment and Appellant No. 5 have been debarred for 3

years for his role in conniving and conspiring with

PCL.

15

(iv) Appeal No. 375 of 2017:-

(a) The 3 appellants in this appeal are the Company Vashi

Construction Pvt. Ltd., Bhavana Rajesh Shah and

Rajesh Chandrakant Shah, both directors of Appellant

No. 1. Vashi Construction Pvt. Ltd. received 10 lakh

shares off market from Tushar Shah, promoter of PCL

and 10 lakh shares from Sonika Granites Pvt. Ltd., one

of the connected entities. Bhavana Rajesh Shah is the

sister of Ashok Shah (former director of PCL) and wife

of Rajesh C. Shah. Neha Shethwala is the authorized

signatory for Vashi Construction Pvt. Ltd., Rudra

Securities & Capital Ltd. and Dhanlaxmi Lease

Finance. Ashok Shah was a former director of PCL and

Vashi Construction Pvt. Ltd., along with his father

Hiralal Shah.

(b) Vashi Construction Pvt. Ltd off loaded in the market

entire 20 lakh shares and made a profit of Rs.

23,89,873/-. They got 50 lakh shares of PCL under the

preferential allotment and pledged the same with the

bank as collateral for loans taken by PCL and its group

entities. Accordingly, Appellant No. 1 has been

debarred for 3 years for conniving and conspiring with

PCL and for a concurrent 5 years for the fraudulent

preferential allotment and disgorgement of Rs.

23,89,871/- with 12% interest and public

announcement to acquire shares along with PACs. 16

Appellant No. 2 and 3 have been debarred for 5 years

for their role in the preferential allotment.

(v) Appeal No. 376 of 2017:-

(a) There are 4 appellants in this appeal wherein Appellant

No. 1 is the company and Appellant Nos. 2 to 4 are its

directors. The directors have been imposed with 3 and

5 years debarment from the securities market for

conniving and conspiring with PCL and for the

fraudulent allotment of shares of PCL respectively and

disgorgement of the unlawful gains made in off loading

the shares in the market acquired through off market

dealings from the promoters of PCL. Appellant No. 1

has been punished for its role in the fraudulent

preferential allotment with 5 years debarment from the

securities market and the direction to make public

announcement for open offer.

(b) The directors of the company are Bharat Shah, Bipin

Shah and Girish Joshi and are connected to PCL. The

mobile number 09824019596 belonging to Ashok Shah

are the contact number given in their KYC details for

DP account. Ashok Shah, in turn, was a former director

of PCL and director of Vashi Construction Pvt. Ltd.,

Induram Developers and Corporate Strategic Allianz

Ltd. and manages Exdon Trading Company Ltd., all

related entities in the impugned order. Bharat Shah

(Appellant No. 2) received 20 lakh shares from

Sbhuadraben Ramalal Patel and 15.40 lakh shares from 17

Anand Trivedi (son of Ramanlal Trivedi who was the

former director of PCL and also a director of Robinson

Worldwide and CMD of Cartesian Computers). Bharat

Shah also received 20 lakh shares from Tushar Shah

(promoter of PCL) and 8 lakh shares from Bipin Shah.

Appellant No. 4 Girish Joshi received 20 lakh shares

from Jayesh Shah (promoter of PCL) and 4 lakh shares

from Bipin Shah. Dhanlaxmi Lease Finance Ltd. is one

of the beneficiaries of the preferential allotment. Bharat

Shah off loaded 75,72,338 shares in the market and

made a gain of Rs. 86,92,786/-. Bipin Shah off loaded

23,15,476 shares and made a gain of Rs. 31,88,802/-.

Girish Joshi off loaded 11,41,516 and made a profit fo

R.s 4,71,897/-. Dhanlaxmi Lease Finance Ltd. received

40 lakh shares of PCL as part of the preferential

allotment and these shares were pledged with bank as

collateral in respect of loan taken by PCL and its group

companies.

(vi) Appeal No. 62 of 2018:-

(a) Ramanlal Trivedi, former director of PCL was the

director of appellant company at the relevant time. He

was also the CMD of Cartesian Computers with whom

PCL had announced tie-ups and related misleading

corporate announcements and Cartesian Computers is

the wholly owned subsidiary of Alps BPO with whom

also PCL announced tie-ups which is also a misleading

corporate announcement. As per the KYC details, 18

address of the appellant company is the same address of

Induram Developers which is managed by Ashok Shah.

(b) During 2001-05 appellant received 42,52,220 shares of

PCL from Lakshya Securities and Credit Holding, one

of the connected entities. On August 17, 2005 appellant

received 75 lakh shares from Ashok Shah. On

September 2, 2005 appellant received 5 lakh shares

from Jayesh Shah (promoter of PCL). On the same date

appellant received 80 lakh shares from Anand Trivedi

and 40 lakh shares from Manish Ashokbhai and on

September 13, 2005 appellant received 40 lakh shares

from Meena Shah. On September 19, 2005 appellant

received 34.5 lakh shares from Meeta Bipin. All the

above stated shares appellant received are off market

and they are connected / related entities as explained in

the impugned order. Appellant off loaded 27,86,075

shares and made an unlawful gain of Rs. 4,30,93,147/-.

(vii) Appeal No. 79 of 2018:-

(a) Ashok Shah was the director of Exdon Trading at the

relevant time. Appellant received 40 lakh shares of

PCL from Meena Ambani on August 29, 2005, 40 lakh

shares from Preeti Bharatkumar Shah on September 6,

2005 and 20.5 lakh shares from Parag Shah on

November 17, 2005 and 9,43,502/- shares from an

unspecified account. They sold total 96,90,000 shares

and made a total unlawful gain of Rs. 1,76,76,340/-.

19 (b) The connection between the various entities related to

the appellants is clearly explained in the table in para 7

of this order.

13. Shri J. J. Bhatt, Learned Counsel representing appellants in Appeal

no. 303 of 2016, 374, 375 and 376 of 2017 submitted that the restraint order

under Section 11/11B of SEBI Act, 1992 has been used as a punishment

which is not the intention of these Sections and as such the impugned order

is in violation of the SEBI Act; same legal provisions (both the Section

12A(a), (b), (c) of SEBI Act and Regulation 3(b), (c), (d) of PFUTP

Regulations) have been used in amplifying the violations; those who have

transferred shares in off-market have been subjected to only monetary

penalty through adjudication orders while those who have sold shares in the

market have been subjected to Section 11/11B proceedings, debarment and

disgorgement thereby the impugned order suffers from inequitable and

unfair approach in imposition of penalties; undue delay (more than 9 years)

in the proceedings has caused irreparable damage to the appellants; the role

and involvement of the appellants in the alleged conspiracy has not been

proved; the appellants have no role in the corporate announcements made by

the company and moreover, announcements have only a short shelf life and,

therefore, sales beyond a few days of the corporate announcements are not

affected by the corporate announcements; sales on several dates had no

connection with announcements, treatment of unlawful gains is vitiated

since off-market sales/purchases are not illegal, market prices were not

taken into consideration in deciding profits and appellants connection/role

vis-à-vis the alleged manipulation with other parties is not proved; there was

no provision for imposing interest and no show cause notice was issued for

the same.

20

14. Regarding Appeal nos. 374, 375 and 376 of 2017, the Learned

Counsel Shri J. J. Bhatt further submitted that in these appeals the appellants

in addition to the 3 year restraint and disgorgement, have been also directed

to make an open offer on the basis of the findings that the appellants were

beneficiaries of the preferential allotment, alongwith the four directors of the

PCL. However, since the preferential allotment has not been effected i.e.

neither the shares have been received by the appellants, nor it is listed on the

stock exchange, it was a vitiated issue. Therefore, directing the appellants to

jointly and severally with the four directors of PCL go for a public

announcement for open offer on the basis of a vitiated / illegal preferential

allotment made by PCL is without any legal basis. Rather it is like

sanctifying an illegal issue of shares made by PCL. Further, the company

was delisted by BSE on November 29, 2017. Therefore, it is now impossible

to implement an open offer even if it is held that the direction for open offer

is legally valid. Moreover, on the same matter, a monetary penalty of Rs. 20

lakh on the same allottees (three appellants herein and the four directors of

PCL) had been imposed by the adjudicating officer of SEBI vide order dated

January 19, 2012 on joint and several basis, which was upheld by this

Appellate Tribunal by its order dated April 8, 2013 and the penalty has been

paid.

15. Shri Bhatt, further submitted that appellants in Appeal no. 374 of

2017 and in Appeal no. 376 of 2017 did not receive 25 lakh shares and 20

lakh shares respectively from Jayesh Dineshbhai Shah, one of the directors

of PCL, as held in the impugned order. The appellants received the shares

off-market from one Jayesh Sumesh Shah, an investor who is neither a

director nor a promoter of PCL. The appellants received the shares from

Jayesh Sumesh Shah, from his demat account no. 30308092. Therefore, the 21

entire premise in the impugned order that the appellants in these appeals

were connected to the promoters of PCL because of their off-market dealing

with promoters of PCL and also in preferential allotment are untrue and

hence the very basis of the finding in the impugned order is invalid.

16. Relying on two judgments of this Appellate Tribunal in the matter of

M/s. Opee Stock Link Ltd. & Anr. vs. SEBI (Appeal no. 20 of 2009) dated

December 30, 2009 and in the matter of Libord Finance Ltd. vs. SEBI

(Appeal no. 37 of 2008) dated March 31, 2008 he emphasized that the

impugned order is vitiated because of undue delay and by using Sections

11/11B of the SEBI Act as a punishment which is held in the cited orders as

illegal and unsustainable.

17. Shri J. P. Sen Learned Senior Counsel for the appellants in appeal no.

306 of 2016 submitted that appellant no. 1 in this appeal namely; Hiralal

Popatlal Shah expired on October 8, 2012. Appellant no. 1 had no

connection with PCL except that his son Ashok Shah was a past Director of

PCL. Even Ashok Shah left PCL as a Director in the year 2002. The

appellant Nos. 1, 2 and 3 received 1, 45,000, 1,50,000 and 1,50,000 shares

each from one Shri Mahendra Daulatrai Ganatra as consideration/refund for

the shares of Renco Gears Ltd. which the appellants had given to Shri

Ganatra in September 1993. Instead of paying in money/cash, the above

stated quantities of shares of PCL were given to these three appellants in

1999. This is stated in the appeal memo as well as in terms of two similar

affidavits submitted by Shri Ganatra signed on October 4, 2016 and

November 11, 2017. It is clearly stated in these affidavits that the specified

quantity of shares of PCL were transferred to the appellants in lieu of the

shares given to Shri Ganatra in 1993 by these 3 appellants and the shares of

PCL was given to the appellants at the rate of Rs. 40/- per share. Therefore, 22

the appellants were holding these shares received from an undisputed

transaction for several years since 1999. As such the entire order is vitiated

in the absence of any connection with PCL. All these three appellants have

been debarred from the securities market for 3 years. Appellant no. 2,

Sarlaben Hiralal Shah is wife of Hiralal Shah and appellant no. 3 is daughter

in law of appellant no. 1. They have no connection whatsoever with PCL or

its promoters / directors except that they are related to Ashok Shah, a past

director of PCL. All sales made by the appellants are several years after the

Ashok Shah left PCL and only in January- February 2007 months after the

alleged false corporate announcements; receiving shares from some parties

allegedly connected to the PCL is not a ground for linking the appellants to

the company or its promoters since shares were received in normal course of

business and its consideration paid and as such there is nothing illegal or

fraudulent.

18. Regarding appellants no. 2 and 3 in appeal no. 306 of 2016 Shri Sen

further submitted that apart from being connected to Hiralal Shah as wife

and daughter-in-law or to Ashok Shah as mother and wife respectively these

appellants have no connection with either PCL or with any other companies.

As such, it is inexplicable in what way these appellants are liable for the

conspiracy allegedly hatched by PCL and some other entities and why they

should be disgorged their normal gains earned through normal business

transactions of selling shares which they have been holding for several years

(since 1999).

19. Shri Prakash Shah, Learned Counsel appearing on behalf of

appellants in appeal no. 62 and 79 of 2018, submitted as follows:

Appellants in both these appeals have been charged with aiding and abetting

the fraudulent scheme and, therefore, three years debarment from the 23

securities market and disgorgement of the illegal gains made by means of

offloading the shares received off-market after various corporate

announcements. There has been inordinate delay in issuing this order;

disgorgement is done arbitrarily since all the shares sold during the

investigation period is not treated as illegal and the effect of corporate

announcement is for a few days only and illegal gain should have been

calculated only for trades done during those few days; shares bought

between corporate announcements should not have been included for

calculating illegal gains; while categorizing some sales as not illegal the

correct position relating to appellants sales dates was not taken; the inability

to produce purchase price etc. was due to passage of time since documents

need to be preserved only for 8 years under Companies Act; and as such

average market price should have been taken as purchase price instead of

arbitrarily taking Rs. 1 per share; connection of Ramalal Trivedi (director

of the appellant) to PCL because of his past association during March 2001

- September 2003 cannot be a ground for establishing association with PCL

during 2005-2007. He also added that in respect of appeal no. 62 of 2018

that the finding that the appellants received 5 lakh shares from Jayesh

Dinesh Shah is incorrect, instead the appellant received the shares from

Jayesh Sumesh Shah who was neither a director nor a promoter of PCL and

as such connection of the appellant established to PCL has no basis.

20. In conclusion, counsel for the appellants in these two appeals (62 and

79 of 2018) submitted that there is no connection established between PCL

and the appellants, disgorgement has been ordered illegally and without

doing correct calculations either with respect to price or quantity or period

of sales and as such the impugned order qua the appellants is unsustainable. 24

21. Shri Pradeep Sancheti, Learned Senior Counsel appearing on behalf

of SEBI walked us through the detailed facts relating to the impugned order

dated August 12, 2016. PCL has changed its name multiple times since its

incorporation as Kanugo Lease and Investment Ltd. in July 17, 1992. The

name was finally changed to Platinum Corporation Ltd. on June 8, 2007.

Based on a complaint received by SEBI on May 12, 2008 an investigation

was conducted into buying, selling or dealing in the scrip of PCL.

Thereafter, show cause notice was issued on September 23, 2013 to PCL

and 39 other entities including the appellants herein. It is on record that PCL

made a number of corporate announcements during 2005-07 and withdrew

those announcements subsequently. As a result of these misleading

corporate announcements the price of the scrip of PCL increased from

Rs. 1.19 to a high of Rs. 3.15. Similarly, volume of trading increased

substantially from a daily average of 1.31 lakh shares to daily average of

37.07 lakh shares. Two of the corporate announcements made by PCL have

been relating to tie-up with parties who were found to be related to each

other namely Cartesian Computers and Alps BPO wherein the former was a

wholly owned subsidiary of the latter and both these companies were found

to have no business in the matter where tie-ups have been announced by

PCL. Further, during the period of these corporate announcements the

promoters of PCL offloaded 4 crore shares of PCL to various entities mainly

off market who together made a profit of about Rs. 12 crore. Except one

director neither PCL nor any other director gave any response to SEBI to the

show cause notice nor appeared before SEBI, nor are on appeal herein.

22. Learned senior counsel further submitted that the impugned order

establishes the connection between noticees, including the appellants herein

very clearly and a chart showing the connection is also part of the impugned

order. It was Ashok Shah as director of PCL who signed a tripartite 25

agreement with NSDL etc. in March 30, 2000. Ashok Shah was a director

of Vashi Construction, Corporate Strategic Allianz Limited, Induram

Developers and Exdon Trading. Registered address of Rudra Securities was

the same as that of Ashok Shah's residence. Registered address of Robinson

Worldwide is the same address of Induram Developers which is managed by

Ashok Shah, as a Director. The mobile number being used by Ashok Shah is

given in the KYC details for depository account with Stock Holding

Corporation by several appellants herein. Girish Doshi, is director of

Dhanlaxmi Finance, alongwith Bharat Shah and Bipin Shah who were

directly connected with Ashok Shah. Learned senior counsel further

submitted that this connection plays out in multiple ways i.e. by means of

transfer of shares off-market, transfer of money between some of them,

cross directorship in companies some of which are on appeal, common

telephone no. and office address, and through preferential allotment.

Therefore, the arguments of the appellants that they had no connections with

PCLand its promoters/directors have no merit. He further emphasized the

fact that none of the directors of PCL nor PCL itself (together constituting 7

entities) against whom directions are issued in the impugned order has come

on appeal nor they cooperated with SEBI in these proceedings. Similarly,

none of the appellants has shared the details relating to how they obtained

huge quantities of shares of PCL off-market and the price at which they

have obtained those shares etc. These factors, apart from meriting adverse

inference, underline the involvement of all these entities in the fraudulent

scheme.

23. Learned Senior Counsel for SEBI further submitted that several

entities connected / related to Ashok Shah received shares of PCL off-

market from its promoters / directors during the same period. Accordingly,

Corporate Strategic Alliance received 10 lakh shares from Tushar Shah, one 26

of the promoters of PCL on August 4, 2006. On the same day Vashi

Construction also received 10 lakh shares from Tushar Shah through off-

market transaction. Ashok Shah and Hiralal Shah were directors of Vashi

Construction. Further, Rudra Securities received a total of 25 lakh shares

through off-market transfer from Jayesh Shah, another promoter of PCL

during August 30, 2006 - September 4, 2006. The registered address of

Rudra Securities was the residence of Ashok Shah. Similarly, Hiralal Shah

(father of Ashok Shah), Meena Shah (wife of Ashok Shah), Sarlaben H.

Shah (mother of Ashok Shah), Induram Developers Pvt. Ltd. (wherein

Ashok Shah and Hiralal Shah were directors) and Exdon Trading managed

by Ashok Shah are all part of the noticees in the present matter, all of them

on separate appeals before us. The impugned order itself has given some the

benefit of doubt to the appellants in appeal nos. 62 and 79 of 2018 by not

including some of the sales between the corporate announcements.

However, their arguments that the calculations are incorrect does not have

any merit because the numbers indicated by them may be as per the date of

trading, but the impugned order takes the correct position as reflected in

their demat accounts.

24. On a specific question by the Bench as to whether open offer can be

implemented after the company has been delisted, learned senior counsel

Shri Sancheti submitted that though this issue has come up for first time it is

not impossible to operationalize an announcement for an open offer even

after delisting a company. In the instant matter PCL has been delisted on

November 29, 2017 by BSE. Only difference between a normal open offer

and in matters like the one under consideration is that the PAC buying the

shares consequent to the open offer cannot sell it in the market. So in short,

the direction to make an open offer can be implemented without any

difficulties even though the company has been delisted. 27

25. We have perused the documents placed before us and heard the

detailed submissions made by learned counsel appearing on behalf of the

various appellants; Shri J. J. Bhat in Appeal nos. 303 of 2016 and 374, 375

and 376 of 2017, Shri J. P. Sen, in appeal no. 306 of 2016 and Shri Prakash

Shah in Appeal nos. 62 and 79 of 2018. We also heard Shri Pradeep

Sancheti, learned senior counsel appearing on behalf of SEBI in all these

appeals. We also note the following position in law for ready reference:

SEBI Act, 1992

Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control.

"12A. No person shall directly or indirectly--

(a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder;

(b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed to be listed on a recognized stock exchange;

(c) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognized stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder;

(d) engage in insider trading;

(e) deal in securities while in possession of material or nonpublic information or communicate such material or nonpublic information to any other person, in a manner which is in contravention of the provisions of this Act or the rules or the regulations made thereunder;

(f) acquire control of any company or securities more than the percentage of equity share capital of a company whose securities are listed or proposed to be listed on a 11 recognised stock exchange in contravention of the regulations made under this Act."

PFUTP REGULATIONS, 2003

"2(1)(b). "dealing in securities" includes an act of buying, selling or subscribing pursuant to any issue of any security or agreeing to buy, sell or subscribe to any issue of any security or otherwise 28

transacting in any way in any security by any person as principal, agent or intermediary referred to in section 12 of the Act."

Prohibition of certain dealings in securities

"3. No person shall directly or indirectly--

(a) buy, sell or otherwise deal in securities in a fraudulent manner;

(b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under;

(c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange;

(d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under."

"4. Prohibition of manipulative, fraudulent and unfair trade practices

(1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities.

(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:--

(a) to (d) ............................................................;

(e) any act or omission amounting to manipulation of the price of a security;

(f) to (j) ....................................................................;

(k) an advertisement that is misleading or that contains information in a distorted manner and which may influence the decision of the investors;

(l) to (q) ...........................................................;

(r) planting false or misleading news which may induce sale or purchase of securities." 29

SAST Regulations, 1997

"8(3). Every company whose shares are listed on a stock exchange, shall within 30 days from the financial year ending March 31, as well as the record date of the company for the purposes of declaration of dividend, make yearly disclosures to all the stock exchanges on which the shares of the company are listed, the changes, if any, in respect of the holdings of the persons referred to under subregulation (1) and also holdings of promoters or person(s) having control over the company as on 31st March."

"10. No acquirer shall acquire shares or voting rights which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him), entitle such acquirer to exercise 2 [fifteen] per cent or more of the voting rights in a company, unless such acquirer makes a public announcement to acquire shares of such company in accordance with the regulations."

26. Given the detailed position explained in the impugned order, the

documents we perused and based on the submissions made by both the

parties, we do not find any merit in the arguments of the appellants except in

appeal no. 306 of 2016. Fact that there is delay in completing the

proceedings cannot be a ground to set aside the impugned orders, especially

when several entities were involved in the market manipulation in the scrip

of PCL. In any case, as on date of issue of SCN, i.e. September 23, 2013, 8

years time frame for preserving documents provided for in Companies Act,

as argued by the appellants, was not over since the charges relate to the

period 2005-07 (upto September 2007). Further, we also note that some

other appellants in related appeals on PCL matter had taken the same stand

of time bar even during 2011-12 when the "age" of this matter was only five

years.

27. Appellants in Appeal no. 374 of 2017, 376 of 2017 and 62 of 2018

have submitted that part of their acquisition of shares is not from Jayesh D.

Shah as alleged in the impugned order but from Jayesh Sumesh Shah who

was neither a promoter nor director of PCL. He was only an ordinary

investor. While the DP account number given in the order matches the 30

middle name is not matching. However, the appellants are not able to

furnish any other information relating to this ordinary investor Jayesh

Sumesh Shah but their emphatic argument is that he is not a promoter or

director of PCL. Since Jayesh Shah is not in appeal herein, we perused the

records relating to his Appeal No. 94 of 2014 against an adjudication order

of SEBI dated October 1, 2012 which was set aside by this Appellate

Tribunal on the ground that SCNs were not received by the appellants and it

was remanded for fresh orders. SEBI subsequently issued the order dated

November 30, 2015 which is also challenged before this Appellate Tribunal

but by only three of the original appellants except Jayesh Shah. While

perusing the documents we note that Jayesh Shah, appellant therein, has

never given his middle name or his father's name in any of the documents

and gave only a care of address. Moreover, the DP account number stated

by the appellants herein and given against Jayesh D. Shah in the impugned

order are the same. On a specific query by SEBI to Central Depository

Services (India) Ltd. (CDSL) SEBI was told that CDSL could not find any

account relating to Jayesh Sumesh Shah in PCL share accounts. Appellants

also take shelter under the findings in the impugned order that the

shareholding pattern declared by PCL during 2005-07 was not correct.

Therefore, Jayesh Shah is a different Jayesh Shah who is charged in the

impugned order. We find that this argument is quite devious taken by the

appellants since WTM of SEBI committed a small mistake of putting the

middle name while no documents relating to Jayesh Shah has a middle

name. Further, it is noted that WTM of SEBI did not state that Jayesh Shah

was not a promoter but has only stated that there was either over reporting

or under reporting of the shareholding of the promoters namely Jayesh Shah,

Tushar Shah and Parag Shah etc as reported to BSE by PCL during 2005-07.

When no document relating to Jayesh Sumesh Shah, giving his middle name 31

as evidence is available before us, the appellants herein who claim to have

no connection with PCL or its directors / promoters (past or present) or any

entity held to be connected to PCL taking the stand that the Jayesh Shah

from whom they got shares of PCL off market is different from Jayesh Shah

in the impugned order is an audacious stand. We find this is a totally

devious argument coming from a group of appellants who failed to furnish

any details relating to their holding of millions of shares of PCL despite the

best efforts made by SEBI as well as this Appellate Tribunal.

28. We find it quite inexplicable on the reluctance of all the appellants to

share details regarding their obtaining the shares of PCL. Given this

reluctance, we find no fault in the decision of the WTM of SEBI in taking a

notional value of Rs. 1 per share as acquisition cost while calculating

disgorgement. Given the connection between erstwhile promoters or

directors of PCL, the preferential allotment, cross directorship of various

entities, usages of same address and telephone nos. etc. by some of the

entities, the financial transactions between some of the entities, the off-

market transactions of shares of PCL between some of the promoters and

directors of PCL connection between these entities have been conclusively

established.

29. However, in the case of two appellants in Appeal no. 306 of 2016 i.e.

Mrs. Sarlaben Hiralal Shah and Mrs. Meenaben A. Shah no such connection

has been established except that they were related to Shri Hiralal Shah and

Ashok Shah, the latter in turn related to PCL in the past. However, Hiralal

Shah and Ashok Shah's continued connection to PCL is established through

their Directorship in other entities in the group such as Vashi Construction,

Induram Developers (where both were directors); Corporate Strategic

Allianz Limited and Exdon Trading. We have also upheld the impugned 32

order against Corporate Strategic Allianz vide our order dated February 1,

2018.

30. The affidavits submitted by Shri Ganatra (supra) belatedly before this

Appellate Tribunal (not before WTM of SEBI) cannot be fully relied upon

in the absence of supplementary evidences. What is stated in his affidavits

is that in order to compensate for the shares of Renco Gears given by

appellants in September 1993, shares of PCL was given to the appellants in

December 1999 vis-à-vis the promise of paying cash within a few months of

the original transactions in 1993. The total value of 4,45,000 shares of PCL

transferred to the appellants at the rate of Rs. 40/- would be to Rs. 1.78

crore. In the absence of any details relating to the price of the shares of

Renco Gears, we have to assume that value of the Renco Gears shares also

would be more or less equal to Rs. 1.78 crore. In the years 1993, Rs. 1.78

crore was a substantial amount of money which is given off-hand without

any agreement or any documentary evidence. Moreover, Hiralal Shah,

(appellant no. 1) transferred 58,000 shares of Renco Gears in September

1993 and got 1,45,000 shares of PCL in December 1999. On the other hand

both Sarlaben Shah and Meenaben Shah (Appellant Nos. 2 and 3

respectively) transferred 57,100 shares each of Renco Gears in September

1993 but each of them got 1,50,000 shares of PCL in December 1999. When

the affidavit states that the shares were valued at Rs. 40/-, appellant nos. 2

and 3 should have got less number of shares than appellant no. 1 while the

reverse is stated in the affidavit. For these reasons, we are not able to give

credence to the affidavit beyond the point that some shares of PCL were

transferred to the appellants by Shri Ganatra in 1999 because it is not

disputed in the impugned order also. However, in respect of Appellant no. 2

and 3 in Appeal no. 306 of 2016 other than these transfers there is no other

transactions involved, apart from their demating and selling those shares, 33

these affidavits become a supporting document in their matter. But for

Hiralal Shah, because of his several off-market acquisitions subsequently

and his connections with other entities in the group, these documents do not

provide any relief. However, the acquisition of shares by Sarlaben Shah and

Meenaben Shah, admittedly, acquired in 1999 is not, in any way, disputed as

illegal unlike in the case of other appellants where the off-market

transactions wherein the details were not ready to be given and held to be

received from connected entities.

31. We do not agree with the arguments advanced by the appellants that

because the preferential allotment was vitiated, appellants cannot be directed

to make public offer. It is conclusively on record that 2.9 crore shares of

PCL was given as preferential allotments to the 3 appellants and 4 directors

of PCL. These 4 directors of PCL are not even on appeal and rather they let

PCL to be compulsorily delisted rather than making the necessary

correctives. It is also on record that the appellants had pledged these shares

with bank as collateral for the loans taken by PCL and related entities.

Accordingly, we find that the preferential allotment was not a vitiated issue

but the appellants and others made it a vitiated one. Accordingly, there is no

fault in the findings in the impugned order that the appellants are

beneficiaries of a fraudulent preferential allotment and they need to make

the public offer as per SAST Regulations, 1997.

32. Given the above facts and finding in the impugned order that

appellants in all appeals, except Appellant nos. 2 and 3 in Appeal no. 306 of

2016, have violated Regulation 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(e), (k) and

(r) of the PFUTP Regulations, 2003 cannot be faulted. Similarly, finding in

the impugned order that the beneficiaries of the preferential allotment have

violated Regulation 8(3) and Regulation 10 of SAST Regulations, 1997 also 34

cannot be faulted. The appellants in Appeal No. 374, 375 and 376 of 2017

are therefore liable for the violations of SAST Regulations, 1997 in addition

to the violation of the PFUTP Regulations, 2003, common to all appellants,

except Appellant nos. 2 and 3 in Appeal no. 306 of 2016.

33. We do not agree with the arguments of the appellants that a public

announcement for open offer is now impossible in view of the fact that PCL

has been compulsorily delisted by the BSE on November 29, 2017. We note

that while issuing the order on compulsory delisting by BSE on November

29, 2017, inter-alia-, the following directions were given: "Promoters of

these delisted companies will be required to purchase the shares from the

public shareholders as per the fair value determined by the independent

valuer appointed by the Exchange, as mentioned in the Public Notice to be

issued shortly." Accordingly, there is no difficulty in buying back the shares

by the promoters and PACs, including the appellants in three appeals here

who have been directed to do so under SAST Regulations, 1997.

34. In conclusion we pass the following order:-

(i) Appeal Nos. 303 of 2016, 374 of 2017, 375 of 2017, 376 of

2017, 62 of 2018 and 79 of 2018 are dismissed.

(ii) In Appeal No. 306 of 2016 we give benefit of doubt to

Appellant Nos. 2 and 3, namely, Sarlaben Hiralal Shah and

Meenaben A. Shah and uphold the findings relating to

Shri Hiralal Popatlal Shah, Appellant No. 1. The liability of

Shri Hiralal Popatlal Shah shall be discharged by his legal

heirs.

35

35. All appeals are disposed of on above terms with no order as to costs.

In view of the disposal of the appeals, Misc. Applications do not survive and

are also disposed of accordingly with no order on costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

28.06.2018 Prepared and compared by:PTM/msb