BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI

            Appeal No. 211 of 2011 

    Date of decision: 26.4.2012     

1. M/s Murli Industries Limited
   101, Jai Bhawani Society, C.A. Road,
   Wardhaman Nagar, Nagpur
2. Bajrang B. Maloo
   101, Jai Bhawani Society, C.A. Road,
   Wardhaman Nagar, Nagpur
3. Nandlal B. Maloo
   101, Jai Bhawani Society, C.A. Road,
   Wardhaman Nagar, Nagpur
4. Lalchand B. Maloo
   101, Jai Bhawani Society, C.A. Road,
   Wardhaman Nagar, Nagpur
5. Sunilkumar Maloo
   101, Jai Bhawani Society, C.A. Road,
   Wardhaman Nagar, Nagpur
   Versus ..…Appellants Securities and Exchange Board of India
   SEBI Bhavan, Plot No. C-4A, G-Block,
   Bandra Kurla Complex, Bandra (E)
   Mumbai- 400 051 …… Respondent Mr. V. Sridharan, Senior Advocate with Mr. Asish Philip Abraham, Advocate for
   Appellants.
   Mr. Shiraz Rustomjee, Senior Advocate with Ms. Daya Gupta, Advocate for the
   Respondent.
   CORAM : P.K. Malhotra, Member & Officiating Presiding Officer
   S.S.N. Moorthy, Member
   Per : P.K. Malhotra
   The present appeal has been filed by the appellants against the order dated
   November 8, 2011 of the Securities and Exchange Board of India (the Board) declining
   request of Murli Industries Limited (the co mpany) for permission to pledge shares of
   the promoters in favour of Bank of Baroda for rehabilitation and restructuring of the
   debt of the company.

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2. The facts of the case, in brief, are that the Board, while conducting investigation
   in the alleged manipulation in the shares of the company, passed an ex parte ad-interim
   order dated December 2, 2010, inter alia, rest raining the promoters of the appellant
   company from dealing in the securities of the company in any manner whatsoever till
   further directions. Subsequently, these dire ctions were confirmed by the Board by its
   order dated March 23, 2011. On an appeal preferred by the company before this
   Tribunal, we declined to interfere in the matter and vide our order dated July 11, 2011
   directed the Board to complete the investig ation qua the appellant expeditiously. After
   passing of the said order, the company appr oached the Board requesting for permission
   to the promoters to pledge their shares fo r the implementation of the corporate debt
   restructuring of the company. By the impugned order dated November 8, 2011, the
   Board declined the request of the appellant. Hence this appeal.
3. We have heard learned counsel on bot h sides who have taken us through the
   records. We are of the considered view that no interference is called for by this Tribunal
   at this stage. The direction given to the a ppellant and its promoters in the interim order
   is, inter alia, to ensure that the sharehol ding of the promoters/promoter group in the
   company is not altered in any manner till fu rther orders. We are in clined to agree with
   the Board that permission to pledge shar es by the promoters will be against the
   directions issued by the Board. We are not in clined to agree with the appellant that no
   prejudice would be caused if permission to pledge the shares is given. No doubt, by
   mere pledge, the shareholding of the promoters may not cha nge but, in case of default
   by the appellant, if pledge is invoked by the pledgee, which it has every right to do, the
   shareholding pattern of promoter group will change thereby frustrating the interim order
   passed by the Board. What cannot be done di rectly cannot be done indirectly. We are
   given to understand that investigation in th e matter is already ove r and the Board vide
   its order dated March 16, 2012 has decided to initiate adjudication proceedings against
   the appellant and has also confirmed direct ion to the promoters of the company to
   ensure that their shareholding in the comp any is not altered in any manner till the
   enforcement proceedings are completed.

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4. Learned senior counsel for the appellant also referred to an earlier order passed
   by this Tribunal on October 10, 2007 in the case of Karuna Cables Limited vs Securities
   and Exchange Board of India (Appeal no. 128 of 2006) where, under somewhat similar
   circumstances, the Tribunal modified th e order passed by the Board allowing the
   promoters of the company to pledge promoter s’ shares with financ ial institutions to
   enable the company to raise loans. We ha ve perused the said order. The Tribunal
   modified the order passed by th e Board to the limited extent of allowing the promoters
   of the company to pledge their shares with financial institutions only because the
   promoters undertook that if the Board at any stage of the proceedings or on conclusion
   of the enquiry that may be initiated agai nst the appellants require the shares, the
   promoters shall redeem those shares and make them available to the Board. The
   appellant in the present case is not willing to furnish any such undertaking. Therefore,
   the order of this Tribunal in the case of Karuna Cables is of no assistance to the
   appellant before us.
   We, therefore, decline to interfere in the matter. The appeal is dismissed with no
   order as to costs. Sd/- P.K.Malhotra Member & Officiating Presiding Officer Sd/-
   S.S.N. Moorthy
   Member
   26.4.2012
   Prepared & Compared By: Pk