Zafar Younus Sareshwala & Anr. vs Sebi

Date of Decision: 10.1.2023

Misc. Application No.1425 of 2021 And Appeal No.818 of 2021

1.

Zafar Younus Sareshwala

2. Uves Younus Sareshwala B Wing, 4th Floor, Shalimar Complex, Mahalaxmi Five Roads, Paldi, Ahmedabad-380 007. ...Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 'G' Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. ...Respondent

Mr. B. M. Chatterji, Senior Advocate with Mr. Ranit Basu, Ms. Maitri Malde and Mr. Udayan Mukherjee, Advocates i/b. Mr. Ranit Basu for the Appellant.

Mr. Vishal Kanade, Advocate with Mr. Ravishekhar Pandey and Mr. Nishit Dhruva, Advocates i/b. MDP & Partners for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member 2

Per: Justice Tarun Agarwala, Presiding Officer (Oral)

1. The present appeal has been filed by the appellants

questioning the legality and validity of the order dated

13th December, 2021 passed by the Whole Time Member

(hereinafter referred to as 'WTM').

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

that the appellants were Directors and Promoters of M/s.

Parsoli Corporation Ltd. which was in the business of

non-banking finance Company and also a stock broker

on the National Stock Exchange of India (hereinafter

referred to as 'NSE') and BSE Ltd. (hereinafter referred

to as 'BSE').

3. Pursuant to an investigation conducted by Securities

and Exchange Board of India (hereinafter referred to as

'SEBI') it was found that the appellants were engaged in

fraudulent activities by way of issue of 80,800 false share

certificates, forging signatures of genuine investors on

the transfer documents and verifying fake share 3

certificate and forging signatures and approving

fraudulent transfer etc.

4. Accordingly, a show cause notice was issued and,

after considering the material evidence on record, passed

an order dated 27th July, 2010 restraining the appellants

from accessing the securities market and from buying,

selling or dealing in securities market in any manner for

a period of seven years. Further, the appellants were

directed to make a public offer through a merchant

banker to acquire the shares from the public shareholders

by paying them the value determined as per Regulation

23 of Securities and Exchange Board of India (Delisting

of Equity Shares) Regulations, 2009 (hereinafter referred

to as 'Delisting Regulations').

5. The order of SEBI was challenged by the appellants

which was dismissed vide order dated 12th January, 2011

against which a civil appeal was preferred before the

Supreme Court of India which was allowed by an order 4

dated 2nd May, 2011 and the matter was remitted to the

Tribunal to pass separate orders in each of the appeals.

6. Accordingly, this Tribunal after hearing the parties

dismissed the appeal of the appellants vide order dated

12th August, 2011 against which the appellant's filed

Civil Appeal no.9785 of 2011 which was dismissed by

the Supreme Court vide order dated 2nd December, 2011.

7. As a result of the dismissal of the appeal by the

Supreme Court the appellants were required to make the

open offer as directed by the WTM by its order dated 27th

July, 2010.

8. Since the said directions was not complied by the

appellants, the WTM passed the impugned order dated

13th December, 2021 directing the appellants to take

steps and complete the process of public offer in terms of

the order dated 27th July, 2010 and pending completion

of the open offer directed the appellants to deposit a sum

of Rs.38,65,21,669/- along with interest @15% p.a. By

the said interim order the WTM further directed the 5

appellant to show cause as to why a direction to disgorge

an amount equivalent to the gains made by them for not

complying with the impugned order and why suitable

directions should not be issued against them under

Section 11 and 11B of the Securities and Exchange

Board of India Act, 1992 (hereinafter referred to as the

'SEBI Act').

9. We have heard Mr. B. M. Chatterji, Advocate assisted

by Mr. Ranit Basu, Ms. Maitri Malde and Mr. Udayan

Mukherjee, Advocates for the appellant and Mr. Vishal

Kanade, Advocate assisted by Mr. Ravishekhar Pandey

and Mr. Nishit Dhruva, Advocates for the respondent.

10. The contention raised by the learned senior counsel

for the appellant is, that the impugned order was passed

ex-parte without giving an opportunity of hearing. It was

also urged that a same order was passed by the WTM

dated 27th July, 2010 and, therefore, it was no longer

open to the respondent to pass another order. It was

further urged that the basis of calculation of 6

Rs.38,65,21,669/- is not known and the computation is

patently erroneous. On this ground it was urged that the

order should be set aside and the appeal should be

allowed.

11. Having heard the learned senior counsel for the

parties, we find that the impugned order is an ex-parte

ad-interim order which has been passed in terms of

Section 11 in the interest of the investors. We find that

admittedly the order directing the appellant to make an

open offer as per the order dated 27th July, 2010 has not

been complied with for more than ten years and,

therefore, direction was given to the appellants to

complete the process of the open offer within 60 days.

Such direction so issued does not suffer from any error of

law nor does the order amounts to penalising the

appellant again for the same cause of action.

12. As per paragraph 27 of the impugned order, we find

that the WTM has calculated the value of the open offer

and the amount which is to be paid to the 7

shareholders/investors in terms of Regulation 15(2) of

the Delisting Regulations. This amount was directed to

be deposited as a safeguard which could eventually be

utilised accordingly as and when the appellants makes

the open offer. The amount so calculated is a tentative

figure and if objected by the appellant can be rectified

and revised on the basis of evidence that would be

furnished by the appellant while passing a final order. It

is for the aforesaid purpose that the appellant was given

an opportunity to show cause as to why appropriate

directions should not be issued under Section 11 and

11B.

13. In our opinion, in the peculiar facts and

circumstances of the present case, the WTM was justified

in passing an ex-parte ad-interim order which can be

modified provided an application is filed by the appellant

objecting to the calculation.

14. Thus, we do not find any manifest error in the order

passed by the WTM. The appeal fails and is dismissed 8

with no order as to costs. Misc. application no.1425 of

2022 is also disposed of accordingly.

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

RAJALAKS Digitally signed by HMI RAJALAKSHMI HARISH HARISH NAIR 10.1.2023 NAIR Date: 2023.01.16 12:27:21 +05'30' RHN