BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI
Appeal No. 61 of 2008
Date of decision: 28.8.2008
Smt. Subha Jhindal ….. Appellant
Versus
Securities and Exchange Board of India …… Respondent
Mr. P.N. Modi Advocate with Mr. N. Las hkari and Mr. Prakash Shah Advocates for the Appellant.
Mr. Kumar Desai Advocate with Mr. Mihir Mody Advocate for the Respondent.
Coram: Justice N.K. Sodhi, Presiding Officer
Arun Bhargava, Member
Utpal Bhattacharya, Member
Per: Justice N.K. Sodhi, Presiding Officer (Oral)
This order will dispose of three Appeals no.61, 65 and 81 of 2008 all of which are directed against th e common order dated February 20, 2008 passed by the wholetime member of the Securities and Ex change Board of India (for short the Board) restraining, among others, the appellants from accessing the securities market and prohibiting them from buying, selling an d dealing in securities in any manner whatsoever. Smt. Subha Jhindal – the Appe llant in Appeal no.61 ha s been restrained for a period of six months whereas the other two appellants have been restrained for a period of two years.
2.We have heard the learned counsel for the parties. Since we are remanding the case back to the Board for a fresh decision in accordance with law, it is not necessary to state the facts in detail. Vital Communi cation Ltd. (hereinafter called the company) is a public limited company whose shares are listed, among others, on the Bombay Stock Exchange, National Stock Exchange a nd Delhi Stock Exchange. Investigations carried out by the Board revealed that advertisements appeared in various news papers during the months of May and June 2002 st ating that a meeting of the board of directors of the company was to be held shortly to consider, inter-alia, buy-back of its shares, issue of bonus shares and preferential issue of shares. The advertisements appeared in the Economic Times on Ma y 27 and May 28, 2002 and in Business Standard on May 29, 2002. They again appeared in the Business Standard on May 28, 2002 and Economic Times of May 29, 2002. The last advertisement appeared in Economic Times on June 24, 2002. It is alle ged that these advertisements were misleading and fraudulent in nature and th at the proposed corporate actions were contradictory in themselves. It is further alleged by the Board that these were issued by the company and its director s and promoters with a view to affect the price of the scrip in the market and thereby induce the la y investors to invest in it. Show cause notices were issued to the appellants to which some of them are said to have filed their
replies and by the impugned order they were found guilty of the alleged violations. Hence these appeals.
3.We have perused the show cause notice which was common to all the noticees and also the impugned order and are of the vi ew that the allegations contained in the notice are vague and some of the findings recorded in the impugned order go beyond the allegations contained in the show cause notice. We have also noticed that the findings recorded in different paragraphs of the impugned order are contradictory and we are unable to make out how the whol etime member has concluded that the appellants are guilty of the alleged violations. The advertisements undoubtedly purport to have been issued under the orders of the board of directors of the company. Two of the appellants claim that they were not the directors at the relevant time and the appellant in appeal no.81 squarely puts the blame on the promoters of the company. It is also the case of the appellants that the advertisements are neither misleading nor fraudulent. The contents of the advertisements pertain to price sens itive issues and if they are false and misleading as alleged by the Board, it shall be in the interest of the securities market and the investors to fi nd out as to who is responsible for the advertisements and those responsible need to be dealt with appropriately. We are not happy with the impugned order particularly w ith the manner in which the issues have been discussed. The appeals are accordingl y allowed and the impugned order qua the appellants set aside and the cases remanded to the Board with a direction to issue fresh show cause notice(s) to the appellants herein who will file their replies, if necessary. The Board will then afford an opportunity of hearing to them and pass a fresh order in accordance with law. In case the Board comes to the conclusion that the advertisements are not misleading or fraudulent as contended by the appellants, then in that event, it shall be open to it to pass appropriate orders against the other entities as well including the recalling of the order ag ainst them. We make it clear that all contentions raised by the appellants before us are kept open and will be decided afresh by the Board. The appellants are directed to appear before the Board either personally or through an authorized representativ e on September 29, 2008 at 11.00 a.m. for further proceedings. No order as to costs.
Sd/-
Justice N.K. Sodhi
Presiding Officer
Sd/-
Arun Bhargava
Member
Sd/-
Utpal Bhattacharya
Member
28.8.2008
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