BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 103 of 2012
Date of Decision : 25.06.2012
- Onelife Capital Advisors Limited
96-98, Mint Road,
Mumbai, Maharashtra. - Mr. Thiruvidaimarudur Krishna
Prabhakar Naig
96-98, Mint Road,
Mumbai, Maharashtra. - Mr. Pandoo Naig
96-98, Mint Road,
Mumbai, Maharashtra. - Mr. A.P. Shukla
96-98, Mint Road,
Mumbai, Maharashtra. - Mr. Dhananjay Parikh
96-98, Mint Road,
Mumbai, Maharashtra. - Mr. T.S. Raghavan
96-98, Mint Road,
Mumbai, Maharashtra. …Appell
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. P.N. Modi, Advocate with Mr. Ranjit Bhosale, Mr. Joby Mathew and
Mr. Deepak Dhane, Advocates for Appellants.
Mr. Kumar Desai, Advocate with Mr. Mihir Mody and Mr. Mobin Shaikh, Advocates
for the Respondent.
CORAM : P.K. Malhotra, Member & Presiding Officer ( Offg.)
S.S.N. Moorthy, Member
Per : P.K. Malhotra (Oral)
The appellants have preferred this appeal against the order dated February 15,
2012 read with order dated December 28, 2011 passed by the whole time member of
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the ecuritand change ard India r ‘the rd’) uce
directions against the appellants under Sections 11, 11A and 11B of the Securities and
Exchange Board of India Act, 1992 (the Act).
- Onelife Capital Advisors Ltd. Appellant no. 1 in this appeal is a company
registered under the Companies Act, 1956. The Appellants no. 2 to 6 are the directors
of the company. The appellant company is a merchant banker and a stock broker
registered with the Board. The shares of the company are listed on the Bombay Stock
Exchange and National Stock Exchange. The company came out with a public issue
in September/October, 2011. The Board conducted an investigation in respect of the
public issue and subsequent trading of the shares of the company and prima facie
came to the conclusion that the company had failed to disclose to the public, by way
of advertisement, the developments that have taken place during the period between
the date of registration of red herring prospectus and date of allotment of shares. It
also came to the prima-facie conclusion that the proceeds of the public issue were
utilized for the objects other than the objects mentioned in the red herring prospectus
and thereby the appellants violated provisions of regulation 60(4) of the Securities
and Exchange Board of India (Issue of Capital and Disclosure Requirements)
Regulations, 2009 (for short the Regulations) and Section 60B of the Companies Act,
- Certain other violations of the regulations issued by the Board were also
noticed on the part of the company, its promoters/directors and other entities.
Therefore, the Board passed an ex-parte ad-interim order dated December 28, 2011
under Sections 11, 11A and 11B of the Act issuing the following directions:
“14.3 Onelife Capital Advisors Ltd (OCAL-PAN No.
AAACO9540L) is directed that it shall not issue any equity
shares or any other instrument convertible into equity
shares, in any manner, or shall not alter its capital structure
in any manner, till further directions in this regard.
14.4 Onelife Capital Advisors Ltd (OCAL PAN No.
AAACO9540L) is directed not to undertake any fresh
business in its capacity as Merchant Banker, Portfolio
Manager, Stock Broker and Trading Member till further
directions in this regard.
14.5 Onelife Capital Advisors Ltd (OCAL PAN No.
AAACO9540L) is further also directed not to buy, sell or
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deal in securities directly or indirectly, till further directions
in this regard.
14.6 The directions of the OCAL viz, MR. T.K.P. NAIG (PAN
No. ABIPN2653D), MR. PANDOO NAIG (PAN No.
ACNPN2800J), MR. A.P. SHUKLA (PAN No.
AECPS3296Q), MR. TUSHAR SHIRDHARANI (PAN
No. AAIPS0065M), MR. DHANANJAY PARIKH (PAN
No. ACTPP2402L), MR. T.S. RAGHAVAN (PAN
No.AAFPR1521A) are hereby directed not to buy, sell or
deal in securities directly or indirectly, till further directions
in this regard.
14.7 OCAL is further directed to call back funds (IPO proceeds
and short term loan taken from Prudential group)
transferred to Fincare Financial and Consultancy Services
Pvt Ltd. (PAN No. AAACF6005D) and Precise Consulting
& Engineering Pvt Ltd. (PAN No. AAECP8434E). These
amounts together with all of the IPO proceeds that are still
lying unutilized with the company across all its bank /
deposit accounts or any investments including in mutual
funds, shall be deposited in an interest bearing escrow
account with a scheduled commercial bank, till further
orders. A confirmation on compliance of this direction shall
be sent by the promoters of OCAL to the stock exchanges
where it is listed, within 7 days from the date of this order.
14.8 Fincare Financial and Consultancy Services Pvt Ltd. (PAN
No. AAACF6005D) and Precise Consulting & Engineering
Pvt Ltd. (PAN No. AAECP8434E) are hereby directed not
to buy, sell or deal in securities directly or indirectly, till
further directions in this regard.
14.9 BRLM to the issue viz. Atherstone Capital Markets Ltd
(ACML) (SEBI Registration No: INM 000011245), Shri
Gurunath Mudlapur (Managing Director of ACML) and
Shri Ranjan Agarwal (compliance officer of ACML) are
hereby are prohibited from taking up any new assignment
as Merchant Banker or involvement in any new issue of
capital including IPO, follow-on issue etc. from the
securities market in any manner whatsoever, from the date
of this order till further directions.
14.10 The above order is without prejudice to any other action
that may be initiated against the above entities for the said
violations.
14.11 The stock exchanges are advised to enable squaring off, at
the earliest, existing open positions in the Futures and
Options Segment, if any, for the persons / entities
mentioned above at paras. Further, the concerned stock
exchanges should also ensure that said persons / entities do
not take fresh positions or increase their open positions in
any manner.
14.12 All stock exchanges and depositories are directed to ensure
that all the above directions are strictly enforced within the
powers available to them.
14.13 Further the entities/persons against whom this direction is
issued may file their objection, if any, to this order within
21 days from the date of this order and, if they so desire,
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avail themselves of an opportunity of personal hearing at
the Securities and Exchange Board of India, SEBI Bhavan,
G-Block, Plot No. C-4-A, Bandra Kurla Complex, Bandra
East, Mumbai 400 051 on a date and at a time to be fixed
on a specific request to be received in this behalf form the
enties/persons witys he date ohis order.”
Aggrieved by the aforesaid order the appellants preferred an appeal before this
Tribunal (Appeal no. 17 of 2012) alleging that there were inherent contradictions in
the order passed by the Board and it was prayed that the impugned order may be set
aside. After hearing counsel for the parties, the said appeal was disposed of by this
Tribunal on January 20, 2012. The relevant part of the said order reads as under:
“This r seof als 17and
which arise out of a common order passed by the Securities and
Exchange Board of India (for short the Board). Appellant no.1 in
Appeal no. 17 of 2012 is a company registered under the
Companies Act, 1956. Appellants no. 2 to 6 in Appeal no. 17 of
2012 and the appellant in Appeal no. 18 of 2012 are directors of
the company. The appellant-company is a merchant banker and a
stock broker registered with the Board. The shares of the company
are listed on the Bombay Stock Exchange and National Stock
Exchange. The company came out with a public issue in
September/October, 2011. The Board conducted investigations in
respect of the public issue and subsequent trading of the shares of
the company and prima facie came to the conclusion that the
company had failed to disclose to the public by way of
advertisement the developments that have taken place during the
period between the date of registration of red herring prospectus
and date of allotment of shares thereby violating the provisions of
regulation 60(4) of the Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements) Regulations, 2009
(for short the Regulations) and Section 60B of the Companies Act,
- Certain other violations of the regulations issued by the
Board were also noticed on the part of the company, its
promoters/directors and other entities. Therefore, the Board passed
an ex-parte ad-interim order dated December 28, 2011 under
Sections 11, 11A and 11B of Securities and Exchange Board of
India Act, 1992 restraining the company, inter alia, from issuing
any equity shares or any other instrument convertible into equity
shares in any manner and also restraining it from altering its capital
structure in any manner till further directions in this regard. The
ex-parte ad-interim order is also a show cause notice giving an
opportunity to the appellants to file their objections, if any, within
21 days from the date of the order. - The grievance of the appellants is that there are inherent
contradictions in the impugned order passed by the Board. To
illustrate, it is stated that in paragraph 14.4 of the impugned order,
the company is restrained from undertaking any fresh business in
its capacity as merchant banker, portfolio manager, stock broker
and trading member till further directions in this regard. However,
in paragraph 14.5, it has been directed not to buy, sell or deal in
securities directly or indirectly till further directions in this regard. 5
According to the appellants, the direction contained in paragraph
14.5 of the impugned order restrains it from carrying on even its
existing business which does not appear to be the intention of the
Board in the impugned order.
- We have heard the learned counsel for the parties for
sometime. The appellants have not yet filed any reply to the show
cause notice. During the course of hearing, it was admitted that
there may be contradictions in the order that need to be clarified,
but the purpose can be achieved by making a proper representation
before the whole time member who has passed the impugned
order. - Keeping in view the facts and circumstances of this case,
we are not inclined to intervene in the matter at this stage. Since
the appellants have not yet filed any reply to the show cause
notice, the purpose can well be served by treating these appeals as
reply to the show cause notice which should be considered by the
Board as expeditiously as possible. In so far as contradictions
pointed out by the appellants in the appeal, more particularly with
regard to paragraphs 14.4, 14.5 and 14.7 of the impugned order are
concerned, the Board shall pass an order within a period of 15 days
from today. Before passing the order, in case, the Board wants any
further information, the appellants should furnish the same. We
make it clear that we are not expressing any view on the merits of
the case.
In the result, appeals stand disposed of as above with no
order as to costs”
In compliance with the aforesaid order, the whole time member of the Board
reconsidered the matter and passed the impugned order. The grievance of the
appellant is that while passing the impugned order which is an order clarifying the
earlier order dated February 15, 2012, the Board has not modified or withdrawn the
direction as contained in paragraph 14.7 of the said ex-parte ad-interim order and the
appellant has been once again directed to comply with the same. According to the
appellant the directions contained in paragraph 14.7 of the ex-parte ad-interim order
are completely untenable, unsustainable and liable to be set aside inter alia on the
ground that such a direction cannot be given while passing an interim order. It is
further submitted by the learned counsel for the appellant that the whole time
member, while passing the impugned order, has not even looked at the merits or
veracity of the submissions made by the appellant and the documentary evidence
produced and relied upon by the appellant. Learned counsel for the appellant,
therefore, prays for setting aside the ex-parte ad-interim order dated December 28,
2011 and the impugned order dated February 15, 2012. Pending final disposal of the
appeal, it is further prayed that the operation of the two orders in question be stayed
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qua the appellant or in the alternative stay the operation and implementation of the
direction contained in paragraph 14.7 of the ex-parte ad-interim order dated
December 28, 2011.
- Learned counsel for the respondent Board supported the orders passed by the
whole time member of the Board and stated that the matter is still at the investigation
stage and does not call for any interference. He also supported the interim order
passed by the whole time member and submitted that the order has been passed in the
interest of the investors to ensure that the money collected through the IPO proceeds
is not utilized for the purposes other than those stated in the red herring prospectus.
Therefore, he submitted that the directions issued to the appellant in paragraph 14.7
of the order dated December 28, 2011 are justified.
- After hearing learned counsel for the parties and perusing the record and
having considered the fact that the matter is still under investigation involving a large
number of parties, it may not be appropriate for us to intervene in the matter at this
stage on merits. The appellants have already filed reply which is yet to be examined
by the Board. In so far as directions issued to the appellant by the ex-parte ad-interim
order dated December 28, 2011 are concerned, we find that by the impugned order
dated February 15, 2012, the Board has already clarified the directions as contained in
paragraph 14.5 stating that the appellants can deal in shares for the purpose of
fulfilling their existing obligations of underwriting for minimum subscription as per
requirements under the relevant regulations and do such other incidental acts in
respect of those issues. However, the whole time member has not considered it
necessary to modify the direction contained in paragraph 14.7 of the ex-parte ad-
interim order. The said direction is reproduced again for ease of reference:
“14.7 OCAL is further directed to call back funds (IPO proceeds
and short term loan taken from Prudential group)
transferred to Fincare Financial and Consultancy Services
Pvt Ltd. (PAN No. AAACF6005D) and Precise Consulting
& Engineering Pvt Ltd. (PAN No. AAECP8434E). These
amounts together with all of the IPO proceeds that are still
lying unutilized with the company across all its bank /
deposit accounts or any investments including in mutual
funds, shall be deposited in an interest bearing escrow
7
account with a scheduled commercial bank, till further
orders. A confirmation on compliance of this direction shall
be sent by the promoters of OCAL to the stock exchanges
where itistn 7 dafrom tf t
- The impugned order has been passed in exercise of the powers under Sections
11, 11A and 11B of the Act. It has been observed by this Tribunal in a catena of cases
that when the Board finds that any person associated with the securities market has
committed such serious wrongs he should be kept out of the market to prevent him
from committing that wrong again and to preserve its integrity. The Board can also
issue such directions to any person associated with the securities market as it may
think proper either for protecting the interest of investors or for regulating the
securities market. The directions that are issued under the Act are necessarily
preventive or regulatory in nature. However, by directing the appellant, at the stage of
interim order, to call back funds transferred to Finecare Financial and Consultancy
Services Pvt Ltd. and Precise Consulting & Engineering Pvt Ltd., what the Board is
purporting to do is directing the appellant to undo something when the matter is still
at the investigating stage. The case of the appellant is that the payments to these two
companies have made in respect of the services rendered by them. While the Board
may be fully justified in giving such a direction at the time of passing a final order if
the appellant is found guilty, we do not find any justification in giving such a
direction to the appellant at the stage of passing ex-parte ad-interim order. In
paragraph 14.8 of the ex-parte ad-interim order dated December 28, 2011, the Board
has also issued a direction to the above noted two companies not to buy, sell or deal
in securities directly or indirectly till further direction in this regard. If the Board was
really concerned about freezing the funds which have been paid by the appellant, the
direction could have been issued to these two companies. The Board could have also
considered issuing directions to these companies not to deal with the funds received
from the appellant. In our considered view, the appellant cannot be asked, by way of
an ex-parte ad-interim order, to call back the funds which have already been paid to
the above noted two companies for the services rendered by them. In the facts and
circumstances of the present case, we are inclined to modify the direction contained
in paragraph 14.7 to the extent it directs the appellant to call back funds transferred to
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Finecare Financial and Consultancy Services Pvt Ltd and Precise Consulting &
Engineering Pvt Ltd. and we hereby do so. Except for the said modification we are
not inclined to intervene in the matter at this stage. However, keeping in view the fact
that six months have already passed since passing of the ex-parte ad-interim order
and the appellants have also furnished their reply, the Board is directed to complete
the investigations as expeditiously as possible and, in any case, before
October 31, 2012.
The appeal stands disposed of as above with no order as to costs.
Sd/-
P.K. Malhotra
Member & Presiding Officer ( Offg.)
Sd/-
S.S.N. Moorthy
Member 25.06.2012
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