BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 101 of 2011
Date of decision: 26.9.2011 Axis Bank Ltd.
(Debenture Trustee)
3rd Floor, “Trishul”,
Opp. Samartheshwar Temple,
Law Garden, Ellis Bridge,
Ahmedabad – 380 006.
……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. R. S. Loona, Advocate with Mr. Abhishek Borgikar, Advocate for the
Appellant.
Mr. Shiraz Rustomjee, Senior Advocate with Mr. Omprakash Jha, Advocate for
the Respondent.
CORAM : Justice N. K. Sodhi, Presiding Officer
P. K. Malhotra, Member
S. S. N. Moorthy, Member
Per : Justice N. K. Sodhi, Presiding Officer (Oral)
Challenge in this appeal is to the order dated March 10, 2011 passed by
the adjudicating officer imposing a monetary penalty of ` 2 lacs on the appellant
for violating, among others, Regulation 13A of the Securities and Exchange
Board of India (Debenture Trustees) Regulations, 1993 (hereinafter called the
regulations).
- The appellant is a private sector bank which quite often acts as a debenture
trustee in the securities market. It is re gistered with the Securities and Exchange
Board of India (for short the Board) as a debenture trustee under the regulations.
The Board carried out inspection of the books of accounts, documents and other 2
records maintained by the appellant as a registered intermediary. The inspection
team found a large number of irregular ities including violation of several
provisions of the regulations. Adjudication proceedings were initiated against the
appellant and a show cause notice da ted December 6, 2010 was issued pointing
out the alleged violations of regulations. It was alleged that the appellant as a
debenture trustee had comm on directors with the body co rporates with whom it
had entered into agreements to act as de benture trustees. It was further alleged
that the appellant had financial dealings with such body corporates and that it
violated, among others, Regulation 13A of the regulations. The appellant filed its
detailed reply denying some of the allegations levelled in the show cause notice.
On a consideration of the material colle cted during the course of the inspection
and the enquiry conducted by the adjudi cating officer, he c oncluded that the
appellant was guilty of several irregularities and violations as alleged in the show
cause notice. Some of the allegations ma de in the show cause notice have also
been dropped and the appellant exonerate d. As regards the violation regarding
Regulation 13A, it has been found that one Shardul Shroff was a common director
on the boards of the appellant and Noida Toll Bridge Co. Ltd. with whom the
former had an agreement to act as a debenture trustee in May 2002. Similarly,
one Rama Bijapurkar was a common direct or on the board of the appellant and
Mahindra & Mahindra Financial Services Limited on whose behalf the appellant
acted as a debenture trustee. The appella nt had also acted as a debenture trustee
on the basis of agreements executed with Hindustan Construction Company
Limited and Jindal Stainless Limited a lthough it had lent monies to these body
corporates. In other words, the appellant while acting as a debenture trustee had
financial dealings with these two companies. In the reply filed by the appellant,
this factual position has not been disputed and it is stated that the lapse on the part
of the appellant was not intentional a nd that the common directors were soon
made to resign. 3
We have gone through the impugned order and the record and it appears to
us that the lapse committed by the appellant does not appear to be intentional and
it is for this reason that the adjudicating officer has taken a lenient view and
imposed a nominal penalty of ` 2 lacs. In view of these lapses, the impugned
order deserves to be upheld. Without going into the other allegations levelled
against the appellant, we dismiss th e appeal and uphold the impugned order.
There is no order as to costs.
Sd/-
Justice N. K. Sodhi
Presiding Officer
Sd/-
P. K. Malhotra
Member
Sd/-
S. S. N. Moorthy
Member
26.9.2011
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