Case BriefsTribunals/Commissions/Regulatory Bodies

Securities Appellate Tribunal (SAT): A Two-Member Bench of Justice Tarun Agarwala (Presiding Officer) and Justice M.T. Joshi (Judicial Member) quashed the order passed by the Adjudicating Officer which restrained the appellant from accessing the securities market for three years.

In the present case, the appeal has been filed against the order passed by the Adjudicating Officer which imposed fine and restriction for violation of Regulations 3(a), (b), (c), (d) and 4(2)(d) and (e) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. It was alleged that the appellant had indulged in fraudulent dealings in the shares of Shreekrishna Biotech Limited. Proceedings under Section 11B were initiated in pursuance of the stated fraudulent dealings by the Whole Time Member (WTM) and a restraining order was passed. For the same fraudulent dealings and for the same investigation period the Adjudication proceedings were also initiated under Section 15I and on the same charges the impugned order was passed. The appellate had filed an appeal before the present tribunal. The tribunal had set aside the order of the WTM and the appeal was allowed. 

The Tribunal, upon perusal of the issues involved in the present appeal, stated that since it had already allowed the appeal of the appellant against the order of the WTM and the issue involved being the same as admitted by the respondents as well, it does not see any reason for the continuation of the impugned order. It also stated that as no factual controversy is involved, the appeal is being decided at the admission stage itself and the impugned order of WTM is quashed. [Vipul Mohan Joshi v. SEBI, 2019 SCC OnLine SAT 251, decided on 30-12-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Securities and Exchange Board of India (SEBI): V.S. Sundaresan, Adjudicating Officer, quashed the adjudicating proceedings initiated against ABG Shipyard Limited, holding them to be infructuous. 

SEBI examined the status of compliance with the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, by ABG Shipyard (“Noticee”), whose equity shares are listed on BSE and NSE. During the examination, SEBI observed that the Noticee did not make requisite disclosure under Regulation 40(10) read with 40(9), Regulation 7(3) and 13(3) of LODR Regulations. 

On 8-8-2019, V.S. Sundaresan was appointed as Adjudicating Officer to inquire into and adjudge in the manner specified under Rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 read with Section 15-I (1) and (2) of SEBI Act, and if satisfied, impose a penalty. Accordingly, Notice was issued ABG Shipyard. 

During enquiry, it was observed that the National Company Law Tribunal, vide its order dated 25-4-2019, had ordered the commencement of liquidation of Noticee and also appointed a liquidator therefor under Section 34(2) of the Insolvency and Bankruptcy Code, 2016; whereas, the instant adjudication proceedings were initiated vide order dated 8-8-2019. 

In order to examine the maintainability of the instant adjudication proceedings against the Noticee, the Board referred to Section 446 of the Companies Act, 1956, and its corresponding Section 279 of the Companies Act, 2013, whose provisions are in pari materia, insofar as the commencement or continuation of any “other legal proceedings”, after appointment of liquidator, are concerned.

Referring also to the decision of the Bombay High Court in Deutsche Bank v. S.P. Kala, (1990) 67 Com Cases, the Board observed: “… it is mandatory and a pre-condition to obtain the leave of NCLT for commencing the instant proceedings against the Noticee, which is under liquidation in terms of order dated April 25, 2019 passed by NCLT. It is pertinent to note that there is no material on record to suggest that leave of NCLT has been taken in the instant proceedings.”. It was concluded that instant adjudication proceedings against the Noticee had been initiated after the order of commencement of liquidation and, that too, without the leave of the NCLT.

In view of the foregoing, the Board held that the adjudication proceedings initiated against ABG Shipyard Limited, vide order dated 8-8-2019, and show cause notice dated 18-10-2019 are infructuous and, therefore, cannot be proceeded with. [ABG Shipyard Ltd., In re, 2019 SCC OnLine SEBI 248, decided on 11-11-2019]     

Case Briefs

Securities and Exchange Board of India (SEBI): A single member bench comprising of Satya Ranjan Prasad, Adjudicating Officer ordered to abate the adjudication proceedings initiated against the noticee, since deceased.

The SEBI had initiated adjudication proceedings against the noticee – Prabir Chakravarti, Member of Board of Directors of Bhoruka Aluminum Limited (BAL). The adjudication was in pursuance of alleged violations of provisions of Section 12-A of the SEBI Act, 1992 read with Regulations 3 and 4(1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003; the violation alleged being in the matter of issue of Global Depository Receipts (GDR) issued by BAL. The investigations conducted revealed that BAL issued certain GDRs all of which were subscribed by Vintage FZE. The subscription amount was paid by Vintage FZE by a loan taken from European American Investment Bank AG. As a security towards the said loan, BAL pledged the GDR proceeds received from Vintage FZE. The resolution for the same was approved by the Board of Directors of BAL, and the noticee was a part of the said Board. It was alleged that the Board including the noticee herein who approved the resolution were parties to the alleged fraudulent scheme.

The Adjudicating Officer appointed under Section 15-HA of the Act issued a show cause notice to the noticee in terms of Rule 4 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officers) Rules, 1995 read with Section 15-I of the Act. However, the notice returned undelivered and it was informed that the noticee had passed away, a copy of his death certificate was also filed. The Adjudicating Officer noted that the noticee had expired even before the initiation of instanct proceedings against him. It was observed that actions where the relief sought is personal to the deceased, the right to sue does not survive to or against the representatives and in such cases the maxim actio personalis moritor cum persona (personal action dies with death of the person) would apply. Accordingly, the proceedings against the noticee, since deceased, were ordered to stand abated. The proceedings were, thus, disposed of without going into merits of the case. [Global Depository Receipts Issue of Bhoruka Aluminum Ltd., In re, Adjudication Order No. ORDER/SRP/HKS/2018-19/1188, dated 23-08-2018]