BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 4 of 2013
Date of decision: 24.01.2013 - 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.……Appellants
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, Senior Advocate with Mr. Ranjit Bhosale, Mr. Joby Mathew,
Mr. Deepak Dhane, Advocates for Appellants.
Mr. Kumar Desai, Advocate with Mr. Mihir Mody, Advocate for the Respondent.
CORAM : P. K. Malhotra, Member & Presiding Officer (Offg. )
Per : P. K. Malhotra (Oral)
Appellant no. 1, namely, Onelife Capital Advisors Limited is a company
registered under the Companies Act, 1956. Appellant no. 2 to 6 are its directors. The
2
appellant company is a merchant banker and a stockbroker registered with the
Securities and Exchange Board of India (the Board). The company came out with a
public issue in September/October 2011. On receipt of certain complaints with
regard to non disclosure of important information and utilizing the money for
purposes other than the purposes disclosed in the IPO, the Board carried out
investigations and passed restraint order against the company and its directors vide
order dated December 28, 2011 which, on an order passed by this Tribunal on
January 20, 2012, was modified by an order dated February 15, 2012 passed by the
whole time member of the Board.
- The appellants have approached this Tribunal relating to this investigation on
three earlier occasions, firstly, against the ex-parte ad-interim order dated December
28, 2011; again, against order dated February 15, 2012 and thirdly by way of
miscellaneous application filed on December 26, 2012 which was withdrawn and the
present appeal has been filed. The thrust of the appeal is that by the restraint order
passed by the Board on December 28, 2011, the appellants are prohibited from doing
any business which is adversely affecting interest of the company as well as the
shareholders. Inspite of the fact that the appellants have provided necessary
information to the Board, the Board has not passed any further order. It is, therefore,
prayed that the impugned order dated December 28, 2011 be set aside and pending
disposal of the appeal, its operation, qua the appellants, be stayed. - During the pendency of this appeal, the respondent Board has passed an order
on January 16, 2013 after considering the representations made by the appellants. In
the said order, it is stated that the Board has completed investigations in the matter
and would initiate appropriate action in accordance with law against the entities
involved in the matter. It is further observed by the whole time member of the Board
that no intervention is called for at this stage for either vacating the interim directions
or modifying it. Therefore, he has confirmed the directions issued to the appellants in
paragraph 14.3, 14.4, 14.5, 14.6, 14.8 and 14.9 of the ex-parte ad-interim order dated 3
December 28, 2011. With the consent of learned counsel of both the parties the order
dated January 16, 2013, passed by the Board confirming the ex-parte ad-interim order
dated December 28, 2011, is also taken on record and the appeal is taken up for final
disposal. - Learned counsel for the appellants strenuously argued that the Board has
taken more than a year in passing order confirming the ex-parte ad-interim order
dated December 28, 2011 without considering the submissions made by the
appellants in response to the show cause notice. During all this period, the appellants
have been deprived of carrying on their business which is adversely affecting
finances of the appellant company. While the proceedings may continue for alleged
violations relating to IPO of the appellant company, there is no justification in
continuing the restraint order against the appellants during the pendency of enquiry.
The allegations relate to non disclosure of some information and diverting the
proceeds of IPO for purposes other than those specified in the offer document. This
has nothing to do with the business of the appellant company as a merchant banker.
It was also contended that respondent no. 4 and 5, who are independent director and
executive director respectively, are not holding any shares of the appellant company
in their demat accounts and the shares held by them in their demat accounts are not
subject matter of investigation. Therefore, they should be permitted to sell their
holdings in the demat accounts so that value of their shares may not get depleted.
It was further prayed that the total share holding of the promoter directors in the
company is about 75 per cent out of which 20 per cent shares are locked up to
October 18, 2014. Appellant no. 2 and 3, who are the promoter directors, may also
be permitted to sell the shares held by them in their personal demat accounts on the
condition that the net sale price of such shares will be given by them to the appellant
company by way of an interest free unsecured loan. It is, therefore, prayed that the
ex-parte ad-interim order dated December 28, 2011 as confirmed by the order dated
January 16, 2013 of the whole time member of the Board against the appellants may
be modified accordingly. Learned counsel for the Board opposed this prayer of the 4
appellants on the ground that the whole time member has passed the order dated
January 16, 2013 confirming the ex-parte ad-interim order dated December 28, 2011
after considering the submissions made by the appellants. Learned counsel for the
Board specifically referred to paragraphs 10 to 15 of the order dated January 16, 2013
to emphasize that the violations alleged are of serious nature and the appellants
cannot be permitted to carry on their activities as a merchant banker during pendency
of the enquiry. - I have heard learned counsel for the parties who have taken me through the
record of the case. Learned counsel for the Board, on instructions, very fairly stated
that the Board will be in a position to issue show cause notice to the concerned
entities within a period of five weeks and pass final order within a period of four
months from today. In view of the fact that the investigation in the matter is
complete and the Board proposes to initiate action, as deemed appropriate, against the
concerned entities, I am not inclined to go into the merit of the case at this stage. On
the issue of interim relief, I find that the appellants are restrained from carrying out
their business activity for more than a year. The Board has completed the
investigations in October 2012 but has yet to issue a show cause notice. It needs to
be appreciated that if Board feels that the charges are serious enough to keep a market
player out of the market, it should complete the proceedings expeditiously.
Admittedly, Board completed the investigations in October, 2012 and has yet to issue
the show cause notice. This only shows the lackadaisical approach of the Board in
holding inquiry against the appellants. However, keeping in view the nature of the
allegations, I am not inclined to agree to the prayer made by learned counsel for the
appellants that appellant no. 2 and 3, who are the promoter directors, be allowed to
sell shares held by them in their demat accounts thereby permitting conversion of
their equity into debt. In so far as, appellant no. 4 and 5, independent and executive
director of the company are concerned, since they are not holding any shares of the
appellant company and their other holdings are not subject matter of investigation, I
am inclined to accede to the prayer of learned counsel for the appellants that appellant 5
no. 4 and 5 may be permitted to sell the shares in their respective demat accounts and
the sale proceeds be kept in fixed deposit with a nationalized bank and shall not be
utilized without prior permission of the Board. - In brief, the appeal stands disposed of with the following directions:
(a) Appellant no. 4 and 5 are permitted to sell the shares in their respective
demat accounts. The sale proceeds shall be kept in fixed deposit with a
nationalized bank. Any withdrawal from the bank should be with the
prior permission of the Board.
(b) The Board shall issue show cause notice to the appellants within five
weeks and pass final order within a period of four months from today. If
the Board fails to pass final order within the stipulated period, the interim
order passed against the appellants by the Board shall stand vacated
without prejudice to the continuation of proceedings.
(c) The appellants should extend full cooperation to the Board. It is made
clear that I am not expressing any view on the merits of the case and the
Board may complete the inquiry proceedings in accordance with the law
without being influenced by any observations made in this order.
No costs.
Sd/-
P. K. Malhotra
Member &
Presiding Officer ( Offg. )
24.01.2013
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