BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI

Appeal No.22 of 2013

Date of Decision: 7.2.2013

1. D & A Financial Services P. Limited
2. Mr. Dinesh R. Kaushik
   13, Community Center,
   Second Floor, East of Kailash,
   New Delhi- 110 065. …… Appell s Versus Securities and Exchange Board of India
   SEBI Bhawan, Plot No. C-4A, G Block,
   Bandra Kurla Complex, Bandra (East),
   Mumbai – 400 051. …… R

Ms. Leene Toty, Advocate for the Appellants.

Mr. Shiraz Rustomjee, Senior Advocate with Mr. Mihir Mody, Advocate for the
Respondent.

CORAM : P. K. Malhotra, Member & Presiding Officer ( Offg.)

Per : P. K. Malhotra

With the consent of the learned counsel for the parties, the appeal is taken up for  

final hearing.

2. At the outset learned counsel for the appellant submitted that the appeal may be

confined only to prayer in paragraph 6(ii) of the appeal and she is not pressing for other

prayers. Prayer in paragraph 6(ii) reads as under:-

“(ii) pan rdersettaside r 2.2012 nAppa
not resume its Merchant banking Operations and declaring that as per Order
dated 5.10.2012 the interim order stands vacated and consequently allow the
Appello cary on itBankinctiies;”

3. The facts of the case, in brief, are that Appellant no.1 is a merchant banker and it

acted as a broker of Brooks Laboratories Limited (the company). Appellant no.2 is one

of the promoters of the appellant company. The Securities and Exchange Board of India

(for short the Board) carried out investigation into the IPO issue of the company and

2

found certain irregularities committed by the appellants. The Board passed an ad-interim

ex-parte order dated December 28, 2011 prohibiting, beside others, the appellant from

taking up any new assignment 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

the order till further directions. This direction to the appellant is part of paragraph 28 of

the order which, in the opening portion, states that the ad-interim ex-parte order is being

passed pending investigations. The said ad-interim ex-parte order was also a show cause

notice and the appellant was required to file a reply. After granting personal hearing to

the appellant, the Board passed an interim order on September 5, 2012 in which it

specifically said that the direction issued by order dated December 28, 2011 should

continue till the completion of investigation in the matter. As per affidavit dated

February 5, 2012, filed by the Board, the investigation qua the appellant was completed

on November 27, 2012 and a show cause notice was issued on December 21, 2012. The

Assistant General Manager of the Board issued another letter dated December 27, 2012 to

the appellant observing that the Board has completed investigation in compliance with

the directions issued by this Tribunal earlier on October 5, 2012 and consequently

proceedings are underway. It advised the appellant to refrain from resuming the

merchant banking acti vitand said anviolon the ’s dated

December 28, 2011 and September 5, 2012 would attract separate regulatory

action/prosecution under the relevant regulations. The appellant is aggrieved by this

direction issued by the Assistant General Manager of the Board stating that the interim

order dated September 5, 2012 was to operate only during the investigation and not

beyond that. The Assistant General Manager is not authorized to issue directions or order

in continuation of the direction issued under section 11 of 11B of the Securities and

Exchange Board of India Act, 1992 (the Act).

4. After hearing learned counsel for the parties and having perused the record, I am

inclined to agree with the argument of learned counsel for the appellant. There is no

ambiguity in the order passed by the whole time member of the Board under section 11

and 11B of the Act. The interim order was to continue only during the investigation and

as Boown mion investion was complete on November 27, 2012.

Therefore, the direction given by the Assistant General Manager in his letter dated

3

December 27, 2012 is without authority of law. A direction issued under sections 11 and

11B of the Act by the Whole Time Member of the Board could have been modified or

continued by the Whole Time Member only and not by an authority subordinate to him

which has not been delegated any such power under the Act. Therefore, I set aside the

direction contained in the letter dated December 27, 2012 issued by the Assistant General

Manager of the Board. However, if the Board is of the view that some appropriate

direction needs to be issued to the appellant till passing of the final order in the matter,

the Board is free to do so in accordance with law.

5. The matter is now pending with the Board for more than a year. Since the

investigations are over and a show cause notice has also been issued, the Board is

directed to complete the proceedings as expeditiously as possible. Learned counsel for

the appellant states that the appellant will extend full co-operation and provide all

information required by the Board till completion of the enquiry.

The appeal stands disposed of as above. No costs.

                     Sd/-  
                      P.K. Malhotra  
                   Member &  
  Presiding Officer ( Off g.)  

7.2.2013
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