Yogesh K. Kaji vs Sebi

DATE : 25.01.2019

Appeal No. 247 of 2018

Yogesh K. Kaji 901, Natraj, Near Madhu Park, 11th Road, Khar West, Mumbai - 400 052. ..... 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. Advait Sethna, Advocate with Ms. Ruju R. Thakker, Advocate for the Appellant. Mr. Anubhav Ghosh, Advocate i/b Desai & Diwanji for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C. K. G. Nair, Member

Per : Justice Tarun Agarwala, Presiding Officer (Oral)

1.

This appeal has been filed challenging the order of the Whole Time

Member ('WTM' for short) of Securities and Exchange Board of India

('SEBI' for short) dated May 15, 2018. By the said order the appellant has

been prohibited from buying, selling or dealing in securities, either directly

or indirectly or being associated with the securities market in any manner

whatsoever, for a period of one year from the date of the order.

2. The order impugned in this appeal arises in the matter of Classic

Diamonds (India) Ltd. ('the company' for short). An investigation by SEBI

revealed violation of some provisions of Securities and Exchange Board of

India (Substantial Acquisition of Shares and Takeovers) Regulations

('Takeover Regulations' for short). It is held in the impugned order that 2

several entities, including the appellant herein, who were part of the

promoters and promoter group entities of the company and who were

holding shares of the company in the range of 55% to 75% during

September 30, 2005 to December 31, 2009 had acquired additional shares /

voting rights in the company on several occasions without making the

required public announcement in terms of Regulation 11(2) of Takeover

Regulations. It is also stated in the impugned order that since the company

in question is in the process of winding up, instead of a direction for open

offer, the appellant has been restrained from accessing the securities market

directly or indirectly for a period of one year. Accordingly, under the

Regulation 44 of the Takeover Regulations, 1997 read with Regulation 35

of the Takeover Regulations, 2011, the impugned order has been passed

restraining the appellant for a period of one year.

3. Shri Advait Sethna, the learned counsel for the appellant submits

that vide an earlier order of SEBI dated September 22, 2017 in the same

matter the appellant was restrained from the securities market for a period

of one year from the date of that order. Thereafter, from September 23,

2017 the demat account of the appellant as well as that of his wife were

frozen. On November 15, 2017, this Appellate Tribunal quashed the said

order of SEBI dated September 22, 2017 qua the appellant on the ground

that the appellant was not provided an opportunity of being heard before

passing the Order. After issuing a fresh show cause notice and providing

an opportunity of being heard, the order impugned in this appeal was

passed by SEBI on May 15, 2018.

4. The basic contention of the learned counsel for the appellant is that

since the freezing of his demat account as well as the demat account jointly

with his wife, he did not deal in the securities market from September 23, 3

2017. Initially, for a period of two months from September 23, 2017 till

November 15, 2017, the restraint order was in operation. Even after,

quashing the said order by this Appellate Tribunal on November 15, 2017,

the appellant restrained from dealing in the securities market till May 15,

2018 and from May 15, 2018 the impugned Order became operational and

till date he did not dealt in the securities market. Accordingly, taking all

these three periods into account, he has already undergone a total ban of

one year and four months upto January 25, 2019. He further pleaded that if

the ban is not removed forthwith he would be restrained for a total period of

18 months instead of 12 months as held in the impugned Order. He also

submits that the appellant was only an independent director of the company

and was not a promoter though he was wrongly disclosed as a promoter in

some of the documents filed by the company.

5. In order to substantiate the submission that the appellant did not deal

in the securities market since September 23, 2017, the appellant filed an

affidavit attaching copies of the statements received from the Central

Depository Services Ltd. ('CDSL') regarding the appellant and his wife for

the period April 1, 2017 to December 11, 2018 and from September 25,

2017 to December 6, 2018 respectively. These statements are not disputed

by the counsel for Respondent, SEBI, on instructions.

6. Given the above facts, while upholding the impugned order on merit

we are of the view that the period of prohibition of 8½ months that the

appellant has already undergone subsequent to the impugned Order is

sufficient to meet the ends of justice.

7. In the light of the aforesaid the appeal is partly allowed. The restraint

order prohibiting the appellant from buying, selling or dealing in securities

either directly or indirectly or being associated with the securities market in 4

any manner whatsoever, for a period of one year from the date of the

impugned order is modified and reduced till January 31, 2019.

8. In the circumstances of the case, parties shall bear their own costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member 25.01.2019 Prepared & Compared by PTM