Case: 1. SEBI, 2. In Re: Pyramid Saimira Theatre Limited Vs Mrs. Veena Kotecha. Securities and Exchange Board of India
| Judges | K.M. Abraham, Member |
| Issue | Company Laws |
| Judgement Date | July 15, 2009 |
| Court | Securities and Exchange Board of India |
Order:
K.M. Abraham, Member
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The Securities and Exchange Board of India (hereinafter referred to as SEBI), vide an ex-parte ad interim order dated April 23, 2009, in the matter of Pyramid Saimira Theatre Limited (hereinafter referred to as PSTL), inter alia directed Mrs. Veena Kotecha not to buy, sell or deal in the securities market including in Initial Public Offerings (IPOs) directly or indirectly, till further directions as she was prima facie found to have played a key role in facilitating Mr. Nirmal Kotecha in carrying out suspicious banking transactions, carrying out and disguising his manipulative intent and gaining advantage from the forgery. The entities/persons against whom the said order was passed were advised that they may file their objections, if any, within thirty days from the date of the said order and, if they so desire, avail of an opportunity of personal hearing.
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Thereafter, Mrs. Veena Kotecha, vide letter dated May 15, 2009, had filed her objections to the said order and inter alia submitted as follows:
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That the directions issued by the said order had resulted in deprivation of her rights to carry on legitimate investment activities in the securities market;
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That not even a prima facie case has been made out to warrant the issuance of such an ex-parte order of serious consequence against her and that the imminent urgency has not been explained to support the order; There is no emergent situation warranting such an ex-parte order, that simply stating that the order is issued as an emergent measure is not adequate, that the order should demonstrate that the situation was emergent warranting an ad interim order in her case;
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That funds withdrawn by her from the bank have been linked to the actions of Mr. Nirmal Kotecha, without appreciating the possibility of alternate use of these funds and without providing any evidence to show that the funds were directly or indirectly used for transactions/ abnormal designs in the securities market;
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That the order issued at this juncture is neither preventive, remedial or curative, since she has never dealt in the securities market for even a single share and that she does not have a trading or a demat account;
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That the provisions of Sections 11B and 11 (4) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the Act) do not give power or authority to SEBI to pass the said order;
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That the said order is in total disregard to the mandatory provision in Section 11 (4) of the Act, wherein SEBI shall either before or after passing such orders give opportunity of hearing to such intermediaries or persons concerned;
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That she is neither a SEBI registered intermediary nor a person associated with the securities market in terms of Section 12 of the Act and hence do not come within any of the category of persons specified therein;
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That the trade practices in respect of bank transactions are outside the purview of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as the PFUTP Regulations) and therefore the directions based on the prima facie view that she has violated the provisions of the PFUTP Regulations is untenable;
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That she is necessarily a housewife and that she has no connection either directly or indirectly with the securities market;
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That the order has not made a single finding showing what the suspicious banking transactions were and no details regarding the same have been furnished in the order. No allegation/averment/observation/finding or whisper thereof has been made by SEBI that the money withdrawn by her has been directly or indirectly been put in the securities market;
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That it has not been shown in the order as to what loss would have been caused to the securities market, if she was allowed to continue trading in the market or how the interest of the investor would be affected if she was not debarred with immediate effect;
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That an order of this nature which is based merely on surmise and conjectures, would adversely affect her and would besmirch her impeccable reputation and would also result in irreparable damage to her and to her standing in the society circles.
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In view of her submissions/objections, Mrs. Veena Kotecha requested that the said order to the extent it applied to her, be reconsidered and the directions against her be withdrawn. She had also requested that an opportunity of personal hearing be given to her. Accordingly, an opportunity of personal hearing was given to her on July 01, 2009. In the meanwhile, Mrs. Veena Kotecha filed an appeal against the ad interim ex-parte order dated April 23, 2009 in Appeal No. 88 of 2009 before the Honble Securities Appellate Tribunal. The Honble Tribunal, vide order dated June 17, 2009 disposed of the said appeal after taking into consideration the submission made by the Learned Counsel for SEBI that the whole time member shall consider the entire matter qua the appellants on July 1, 2009 on which day he shall afford them a personal hearing as well and thereafter pass an order on or before July 15, 2009. Mr. Shyam Mehta, Advocate represented Mrs. Veena Kotecha and made submissions on her behalf before me on July 01, 2009. The learned counsel reiterated the objections/submissions made by Mrs. Veena Kotecha (vide letter dated May 15, 2009) and requested that the directions passed by SEBI against her be vacated at the earliest.
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I have considered the objections filed by Mrs. Veena Kotecha, the oral submissions made by Mr. Shyam Mehta, learned Counsel on her behalf and other material available on record. In the facts and circumstances, the limited issue for consideration at this juncture is, whether based on the available materials on record and after considering the submissions made by Mrs. Veena Kotecha, the directions issued by SEBI vide ad interim ex parte order dated April 23, 2009 need to be continued, revoked or modified in any manner, in so far as it relates to Mrs. Veena Kotecha.
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Before, considering the issue, I would like to mention in brief, the circumstances which led to the passing of the ex parte order dated April 23, 2009 against various persons/entities including Mrs. Veena Kotecha -
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SEBI, while investigating the case of forged letters dated December 19, 2008 purported to be issued by SEBI to Mr. P.S. Saminathan (Chairman and Managing Director, PSTL) and Mr. Nirmal Kotecha (who was a person acting in concert with the promoters of PSTL and was a major shareholder in the said company), found that Mr. Nirmal Kotecha had offloaded substantial number of shares of PSTL on December 22, 2008 at artificially inflated prices. It was found that one of the forged letters (purported to be issued by SEBI) dated December 19, 2008 was sent to Mr. P.S. Saminathan, directing him to make an open offer under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as SAST Regulations) for acquiring additional stake of 20% at a price not less than Rs. 250/-within 14 days. Another forged letter (also purported to be issued by SEBI) dated December 19, 2008 was addressed to Mr. Nirmal Kotecha, seeking certain details about his acquisitions in PSTL, his relationship with Mr. P.S. Saminathan and Mr. N.C.Ravichandran (promoter/shareholder of PSTL), the agreement entered into with Mr. P.S. Saminathan, if any, for the interse transfer of shares, copies of his bank accounts and demat statements for the period January 2007 till December 2008, advances made to PSTL, if any and the details of his networth certificate and Income Tax Returns for the period 2006-97 and 2007-08, which were to be furnished within a period of fourteen days.
ii. The contents of the forged letter issued to Mr. P.S. Saminathan were given wide publicity by media reports on December 21, 2008 (Sunday) and December 22, 2008 (Monday) stating that SEBI had ordered Mr. P.S. Saminathan, one of the promoters of PSTL to make an open offer (as stated above), for allegedly violating creeping acquisition norms. The closing share price of PSTL on December 19, 2008 was Rs. 75.45/- at National Stock Exchange of India Limited (hereinafter referred to as NSE). The share price of PSTL shot up to Rs. 83/- at NSE and Rs. 82.90/- at Bombay Stock Exchange Limited (hereinafter referred to as BSE), on December 22, 2008, when the markets opened up. In the meanwhile, PSTL informed (in the morning on December 22, 2008) BSE and NSE, that it had not received any communication from SEBI as published in the media with respect to the open offer (as mentioned in the forged letter). Subsequently, PSTL claimed to have received the said letter (forged letter purported to be issued by SEBI) at around 10.30 a.m. on December 22, 2008. Thereafter, Mr. P.S. Saminathan informed BSE and NSE about the receipt of the letter from SEBI. It was revealed by the courier company (Blue Dart) that they were instructed by the sender to deliver the forged letter (though dated December 19, 2008) to PSTL only on December 22, 2008 (Monday). With respect to the letter issued to Mr. Nirmal Kotecha, it was claimed by Mr. Nirmal Kotecha that the purported letter was received at his residence by his wife on Saturday (December 20, 2008) through courier and that his wife was unable to recollect the name of the courier service. The preliminary analysis of the case by SEBI inter alia...
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