Sanjeev Bansal vs Securities and Exchange Board of India on 28 December 2016

1. By this misc. application the appellant seeks restoration of Appeal No. 293 of 2016 which was dismissed by this Tribunal on December 9, 2016 for want of prosecution. For the reasons stated in the misc. application, the order dated December 9, 2016 is recalled and the appeal is restored to the file and taken up for hearing.

2. The misc. application is, accordingly, disposed of with no order as to costs.

Appeal No. 293 of 2016

1. Appellant is aggrieved by the order passed by the adjudicating officer (‘A. O.’ for short) of the Securities and Exchange Board of India (‘SEBI’ for short) on April 29, 2016. By the said order penalty of ` 1 lac is imposed on the appellant for violating Section 11C(3) and the 11C(5) of SEBI Act.

2. Facts relevant for the present appeal are as follows :- (a) Appellant was a director of Arihant Equity Fund Ltd. (‘Arihant’ for short) and New Age Shares & Stockbrokers Pvt. Ltd. (‘New Age’ for short).

(b) Arihant and New Age are the promoters of SRG Infotech Ltd. (‘Infotech’ for short).

(c) In the year 1995, Infotech came out with the rights issue wherein it was stated that the business activities of Infotech were, interalia, software development and Exports, Computer Education, Multimedia and Registrar and Share Transfer Agent etc.

(d) On noticing that the Infotech scrip during the no delivery period rose from ` 9 to ` 20, an increase of 122%, SEBI conducted investigation. Investigation conducted by SEBI revealed that Arihant and New Age had entered order in large quantities and subsequently deleted them either after uploading the particulars or after part execution of the order.

(e) On issuance of summons to the appellant who was the director in Arihant and also a director in New Age, Shri Ashok Agarwal, brother of the appellant appeared as an authorized representative of the appellant and gave statement. In the said

statement recorded on July 9, 2004 question No. 10 and the answer given thereto reads as under :- “10. Please explain as to why M/S integrated have specifically taken the name of Shri Sanjeev Bansal as having placed orders for Arihant and New Age?

Ans. How can I comment on the submissions of another individual. Sanjeev Bansal has never dealt for Arihant Equity Fund.”

(f) SEBI considered the aforesaid statement to be an incorrect statement. Accordingly, a show cause notice was issued to the appellant to show cause as to why action should not be taken against the appellant for violating Section 11C(3), (5) and (6) of SEBI Act.

(g) In reply to the above show cause notice, the appellant interealia, submitted that all decisions were taken by his brother Mr. Ashok Agarwal, who forced the appellant to sign on the dotted lines. The appellant further submitted that Mr. Ashok Agarwal in his statement had never stated that the appellant had never dealt in the scrip of Infotech on behalf of Arihant.

(h) Thereupon repeated opportunity of personal hearing was offered to the appellant. However, the appellant failed to avail the opportunity of personal hearing. Hence the impugned order was passed on April 29, 2016 imposing penalty of ` 1 lac for violating Section 11C(3) and 11C(5) of the SEBI Act. Challenging the said order, present appeal is filed.

3. Mr. Sanjeev Bansal appellant appeared in person and submitted as follows :-

a) The statement made by the authorized representative of the appellant (i.e. statement of Ashok Agarwal, brother of the appellant) was an ambiguous statement and for the said ambiguous statement made by the authorized representative, appellant cannot be said to have made incorrect statement.

b) In reply to the another show cause notice issued to the appellant on February 11, 2004, the appellant had clearly stated that he was acting as per the instructions of the promoter / director of Arihant (later on known as Universal Media Network Ltd.). From the above reply, it is clear that the appellant did not hide any facts from the investigating authority and, therefore, the A. O. is not justified in erroneously interpreting the statement made by the authorized representative and holding that the appellant is guilty of making incorrect statement.

c) In the order passed by the Whole Time Member (‘WTM’ for short) of SEBI on September 23, 2008, it is recorded that the appellant had placed order on behalf of the management of Arihant (later on known as Universal Media Network Ltd.) and in the said order, the WTM of SEBI has not recorded any finding regarding the incorrect statement allegedly made by the authorized representative of the appellant. Since the WTM of SEBI has not found the appellant guilty of making any incorrect statement, the A. O. is not justified in holding that the appellant has made incorrect statement before the Investigating authority. .

4. We see no merit in the above contentions.

5. Admittedly, the summons was issued to the appellant who was the directors of Arihant and New Age, however, the appellant chose to send his authorized representative for the purpose of recording statement. Question No. 10 put to the authorized representative was in the context of the appellant placing orders on behalf of Arihant & New Age in the scrip of Infotech. The authorized representative answered the said question by stating that ‘Sanjeev Bansal never dealt for Arihant Equity Fund’. In the reply to the show cause notice, the appellant instead of admitting the incorrect statement made by the authorized representative, sought to defend the statement made by the authorized representative. When the answer given by the authorized representative was clear and unambiguous, the appellant is not justified in contending that the statement made by the authorized representative was ambiguous.

6. On the basis of the facts on record, the A. O. in para 14 of the impugned order has recorded thus :- “14. I find from the material available on record that the Depository account opening form dated 28.05.1999, executed with Integrated Master Securities (IMS) for the purpose of opening of trading account in the name of Arihant Equity Fund Ltd. bears the name of Shri Sanjeev Bansal as the sole authorized signatory for operating the DP account and he also signed the application form, signature card and DP agreement as the Director of Arihant Equity Fund Ltd. I also find from the records available that the Bank A/c No. 325052 was opened in the name of Arihant Equity Fund Ltd. on 20.01.1999 with the Bank of America with Sanjeev Bansal and Pramod Jain as authorized signatories. It is also not in dispute that the said Bank account was used for the trading activity in the scrip of SRG by Arihant Equity Fund Ltd. I find from the letter dated 10.05.1999 signed by Shri Sanjeev Bansal on behalf of Arihant Equity Fund Ltd. authorizing IMS to transfer credit balance in Settlement No. 9917 of NSE towards Debit balance in Settlement No. 7 of BSE. Further, it is important to note that Bill No. Group A/07/0007/ dated 17.05.1999 in Settlement period from 03.05.1999 to 07.05.1999 was acknowledged by Shri Sanjeev Bansal in token of various transactions done with IMS in the scrip of SRG. Hence, the contention of the Noticee is not correct.”

Aforesaid findings recorded in the impugned order which is not disputed by the appellant, clearly establish that the appellant had in fact dealt in the scrip of Infotech on behalf of Arihant and the statement made to the contrary by the authorized representative on July 9, 2004 was totally incorrect.

7. Fact that the appellant in reply to another show cause notice issued on November 2, 2004, had admitted to have dealt in the scrip of Infotech on behalf of Arihant does not make the incorrect statement made on July 9, 2004 to be a correct statement. Admittedly, all the decisions were taken by Mr. Ashok Agarwal and that Mr. Ashok Agarwal had forced the appellant to sign on the dotted lines for dealing in the scrip of Infotech. Since Ashok Agarwal has taken all the decisions for dealing in the scrip of Infotech, appellant deemed it fit to send Ashok Agarwal as his authorized representative for recording statement on behalf of the appellant. It appears that on realizing that Mr. Ashok Agarwal had made incorrect statement recorded on July 9, 2004, the appellant in his reply to the show cause notice placed correct facts on record. Fact that the appellant in the subsequent proceedings had placed the correct facts on record cannot be a ground to hold incorrect statement was not made on July 9, 2004.

8. Arguments of the appellant that the WTM of SEBI has not found any incorrect statement does not support the case of the appellant, because in the proceedings before the WTM of SEBI, correctness of the statement made on July 9, 2004 was not at all an issue. In such a case, reliance placed on the decision of the WTM of SEBI is totally misplaced.

9. In fact, the WTM of SEBI in his order dated September 23, 2008 has considered the question as to whether the appellant has violated the Securities and Exchange Board of India (Prohibition of Fraudulent and

Unfair Trade Practices relating to Securities Market) Regulations, 2003 (‘PFUTP Regulations’ for short). In the said decision violation committed under Section 11C(3) and 11C(5) of the SEBI Act was not at all an issue.

10. Fact that the appellant has undergone debarment of one year for violating the PFUTP Regulations cannot be a ground for the appellant for escape penalty for violating Section 11C(3) and 11C(5) of SEBI Act.

11. The penalty imposable under Section 15HB of SEBI Act for violating Section 11C of the SEBI Act is upto ` 1 crore. However, after considering all mitigating factors, the A. O. has imposed penalty of ` 1 lac as against the penalty of ` 1 crore imposable under the SEBI Act. In the circumstances, the penalty imposed on the appellant cannot be said to be harsh or excessive.

12. For all the aforesaid reasons, we see no merit in the appeal and the same is hereby dismissed with no order as to costs.

Sd/- Justice J. P. Devadhar Presiding Officer

Sd/- Jog Singh Member

Sd/- Dr. C. K. G. Nair Member 28.12.2016 Prepared & Compared by PTM