WTM/SR/SEBI/MRD/DSA/03/01/2017. Case: In Re: Verinder Mehta Vs. Securities and Exchange Board of India

Case NumberWTM/SR/SEBI/MRD/DSA/03/01/2017
Party NameIn Re: Verinder Mehta Vs
JudgesS. Raman, Whole Time Member
IssueSecurities And Exchange Board Of India Act, 1992 - Sections 11, 15G(ii), 15HA; 12A, 4A, 4B(8)
Judgement DateJanuary 20, 2017
CourtSecurities and Exchange Board of India

Order:

S. Raman, Whole Time Member

  1. Securities and Exchange Board of India ("SEBI") received a complaint dated October 28, 2010 from Mr. Verinder Mehta ("Complainant") against Delhi Stock Exchange Limited (hereafter referred to as ''DSE'') alleging certain irregularities in the functioning of DSE at the time of demutualization.

  2. SEBI conducted an investigation into the alleged irregularities and based on the findings of the investigation, a show cause notice ("SCN") dated May 10, 2013 was issued to DSEL under the provisions of Section 12A of the Securities Contracts (Regulation) Act, 1956 read with Section 11 of the Securities and Exchange Board of India Act, 1992. After granting an opportunity of personal hearing on December 30, 2013 and considering the material available on record, SEBI withdrew the recognition granted to Delhi Stock Exchange Limited vide order dated November 19, 2014

  3. Being aggrieved, DSE filed appeal (Appeal No. 85 of 2015) before the Hon'ble Securities Appellate Tribunal ("SAT"). Since DSE''s application dated May 24, 2014 for voluntary exit was under consideration of SEBI, Hon'ble SAT vide Order dated June 24, 2016 directed "SEBI to complete the voluntary de-recognition process within a period of five months from today by determining the quantum amount payable and the time within which the said payment is to be made. "If DSE fails to pay the consequential payments then SEBI would be entitled to complete de-recognition under the order dated November 19, 2014.

  4. Thereafter, the Complainant vide letter dated December 17, 2014 stated "SEBI has concluded that frauds have been committed as well as misappropriation and siphoning of funds of DSE have taken place, however the order having said so has not gone any further to pronounce punishments for the crimes/violations committed."

    4.1 The Complainant further stated "Now, when it has been clearly established by SEBI and stated in its order of 19th Nov, 2014 that violations were committed under various sections of SEBI Act, some of which are given below for your ready reference:

    a) Section 15HA: Penalty for Fraudulent and Unfair Trade Practices

    b) Section 15G(ii): Penalty for Insider Trading

    c) Section 628: Penalty for False Statements

    d) Violation of SEBI''s Code of Conduct for Merchant Bankers

    e) Violation of SEBI''s Code of Conduct for Brokers.".......

    4.2 Vide the said letter, the Complainant requested the following from SEBI:

    a) "Declare all the offenders, as "Not Fit and Proper Persons" because of their criminal acts, so as to disallow them from participating or conducting any activity in the money market.

    b) Cancel licenses of the Merchant Bankers.

    c) Cancel their membership of all stock exchanges, if any, held by them.

    d) Direct Delhi Stock Exchange Ltd. to initiate necessary legal proceedings for recovery of all amounts misappropriated/siphoned off from DSE by the offenders.

    e) Till such time the funds are not recovered, all the beneficial interest of such offenders in the Delhi Stock Exchange Ltd. and/or other known assets/beneficial interest in other stock exchanges and/or anywhere in the money market be confiscated and deposited with SEBI against amounts due and recoverable from them.

    f) For such above recoveries, it is very essential that the police/CBI should be asked to immediately register FIRs against all the persons involved so as to ensure that their properties and other assets are seized for recovery of the amounts returnable to DSE Ltd."

  5. The Complainant filed an appeal (Appeal No. 332 of 2015) before the Hon'ble SAT seeking an order directing SEBI to consider and pass an order on his letter dated December 17, 2014 and thereby modify the order passed by SEBI on November 19, 2014 against DSE.

  6. The Hon'ble SAT vide order dated January 29, 2016 held "By this appeal, the appellant seeks an order directing SEBI to consider and pass an order on the Appellant''s letter dated December 17, 2014 and thereby modify the order passed by SEBI on 19th November, 2014 against the Delhi Stock Exchange. Whether SEBI can pass such an order or not is a question for SEBI to consider. In any event, since the Appellant by the said letter dated December 17, 2014 apart from seeking withdrawal of de-recognition granted to the Delhi Stock Exchange, has sought several other reliefs, SEBI may consider the said letter dated December 17, 2014 and pass appropriate order thereon as expeditiously as possible and preferably within a period of two months from today"

  7. After due consideration of the issues raised in the complaint filed by the Complainant, SEBI vide letter dated May 25, 2016 communicated to the Complainant "pursuant to the order of the Hon'ble SAT, SEBI examined afresh your letter dated December 17, 2014. All relevant issues raised in the above referred letter have already been dealt with by SEBI in its order dated November 19, 2014. There are no new issues warranting any fresh considering or passing of any further or modified order."

  8. Thereafter, SEBI received another letter dated June 20, 2016 from the Complainant requesting SEBI to initiate action against the Directors of DSE. The Complainant submitted that derecognition of DSE cannot be the punishment awarded to the Directors of DSE for their siphoning off/misappropriation of funds of DSE and also for various other serious offences as pointed out by his earlier letter dated December 17, 2014. The Complainant has requested that fines/penalties be awarded to the Directors of DSE and matter be referred to CBI/Police (EOW) for their action under the Indian Penal Code.

  9. Considering the various representations made by the complainant, an opportunity of personal hearing was granted to the Complainant on November 29, 2016. The Complainant appeared in person before me and made submissions. Considering the submissions of the Complainant that he had complained to various authorities regarding the irregularities in the functioning of DSE, the Complainant was advised to file additional written submissions if any, along with the following documents:-

    i. Copy of the F.I.R. registered by the Economic Offences Wing of the Delhi Police, against DSE and others for the various offences, illegalities committed by them.

    ii. Copies of communications, if any sent by the Complainant to SEBI prior...

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