Appeal No. 154 of 2012. Case: Vashi Construction Pvt. Ltd., Rajesh C. Shah and Ms. Bhavana Rajesh Shah as Director of Vashi Construction Pvt. Ltd. Vs Securities and Exchange Board of India, [Alongwith Appeal Nos. 155 and 156 of 2012]. Securities and Exchange Board of India

Case NumberAppeal No. 154 of 2012
CounselFor Appellant: Mr. Killol V. Shelat, Advocate and For Respondents: Mr. Shiraz Rustomjee, Senior Advocate with Mr. Mihir Mody, Advocate
JudgesP.K. Malhotra, Member (Presiding Officer (Offg.)) and Jog Singh, Member
IssueConstitution of India - Articles 14, 21; Securities And Exchange Board of India Act, 1992 - Section 15H(ii)
Judgement DateApril 08, 2013
CourtSecurities and Exchange Board of India


Jog Singh, Member

  1. Since these three appeals involve common questions of law and fact, with the consent of the learned counsel for all the parties, we have heard the same together and are being disposed of by this common order. For the sake of convenience, the facts of Appeal No. 154 of 2012 (Vashi Constructions Pvt. Ltd. and ors. vs. Securities and Exchange Board of India) have been taken as the leading case. The three appeals are preferred by 11 appellants against the impugned order dated 19th January, 2012 seeking to impose a penalty of ` 20 lacs under the provisions of Section 15H(ii) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'the SEBI Act') on them. Two persons namely, Shri Ashok H. Shah and Ms. Neha R. Shethwala have, however, been exonerated as no violation could be established against them before the adjudicating officer.

  2. Brief facts leading to the passing of the above said impugned order are that the Securities and Exchange Board of India (for short SEBI) conducted investigations relating to the preferential allotment of 2,90,00,000 shares @ Rs. 1 each at a premium of Rs. 0.25 per share by the Platinum Corporation limited (hereinafter referred to as 'PCL Comp). These preferential shares were allotted to the following 7 persons on 13th January, 2009:-

  3. Dhrumal Vaidya-25,00,000 shares

  4. Anindo Achinto Banerji-25,00,000 shares

  5. Pratik R. Shah-50,00,000 shares

  6. Nikita B. Dave-50,00,000 shares

  7. Vashi Constructions Pvt. Ltd.-50,00,000 shares

  8. Dhanlaxmi Lease Finance Ltd.-40,00,000 shares

  9. Rudra Securities and Capital Ltd.-50,00,000 shares

  10. The case of SEBI is that all the above 7 allottees acted in concert with each other for the purpose of acquiring a huge number of shares of PCL Comp through preferential allotment but failed to come out with a public announcement to acquire the said shares as per the requirement of Regulation 10 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as 'SAST Regulations, 1997'). Accordingly, adjudication proceedings were initiated against the following 19 noticees:-

  11. For the sake of convenience, Regulation 10 of the SAST Regulations, 1997 is reproduced hereinbelow:

  12. No acquirer shall acquire shares or voting rights which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him), entitle such acquirer to exercise fifteen per cent or more of the voting rights in a company, unless such acquirer makes a public announcement to acquire shares of such company in accordance with the regulations.

  13. Shri P.K. Bindlish, was appointed as the adjudicating officer by the competent authority vide its order dated 4th July, 2011 to enquire into and adjudicate under section 15H(ii) of the SEBI Act for the above said allegations. The learned adjudicating officer issued show-cause notices to all the above 19 incumbents as per the requirement of Rule 4(1) of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995. From the pleadings, it is noted that Pratik R. Shah, Dhrumal Vaidya, Anindo A. Banerjee, and Nikita B. Dave duly received notices issued by the learned adjudicating officer on several occasions but did not respond to him in any manner. However, the following persons appeared in person and filed their replies:-

  14. Vashi Constructions Pvt. Ltd.,

  15. Rajesh C. Shah.

  16. Bhavana R. Shah,

  17. Ashok H. Shah,

  18. Rudra Securities and Capital Ltd.,

  19. Nileshkumar T. Kava,

  20. Ketan D. Sorathiya

  21. Vipul S. Trivedi,

  22. Dhanlaxmi Lease Finance Ltd.,

  23. Bipin R. Shah,

  24. Bharat R. Shah

  25. Girish G. Doshi,

  26. Neha R. Shethwala

  27. The replies submitted by the appellants, all in more or less the same vein, before the learned adjudicating officer broadly mention the following points:

    ï We hereby state that entities as mentioned in SCN No. 24510 dated 28th July, 2011 are not known to us.

    ï Further, we state that we don't have any relations directly or indirectly with the directors and other persons as mentioned in such notice.

    ï Ms. Neha Shethwala, mentioned in your SCN as noticee no. 9 was authorized signatory for day to day accounting purpose.

    ï The company has raised debt for acquisition of shares of Platinum Corporation Limited.

    ï The company has acted in good faith.

    ï We strongly state that we were not involved in this matter at all.

    ï This reply is to be treated as a reply from company and its all directors.

    ï We plead you to resolve this matter.

    ï Some appellants have also suggested, without any evidence, that the money received from M/s. Hirak was due to them.

  28. However, Shri Ashok H. Shah submitted in his reply dated 14th October, 2011, that:-

    ï Firstly, at that time he was not a director in Vashi Construction Pvt. Ltd. because he had resigned from the director post since back.

    ï And because of the resignation from that co. he was...

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