BEFORE THE
SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved on: 16.07.2019
Date of Decision
: 02.08.2019
Appeal No. 44 of 2019
1. Mrs. Ram Kishori Gupta,
Aged about 69 years,
W/o Shri Harish Chandra Gupta
2. Mr. Harish Chandra Gupta
Aged about 74 years,
S/o Late R.P. Gupta,
Both Resident of 142/38,
Ka Amaniganj, Aminabad,
Lucknow – 226 018.
At present address for
correspondence:
Flat No. 17, Ground Floor,
Sujata Niwas, “C” Wing,
Opp. Siddharth Hotel, S.V. Road,
Bandra (W), Mumbai – 400 050.

….. Appellants
Versus
Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai – 400 051.

.…Respondent
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Mr. Harish Chandra Gupta, Appellant-in-person.
Mr. Mustafa Doctor, Senior Advocate with Mr. Mihir Mody
and Mr. Sushant Yadav, Advocates i/b K. Ashar & Co. for the
Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer
Dr. C.K.G. Nair, Member
Justice M.T. Joshi, Judicial Member
Per : Dr. C.K.G. Nair, Member
1.

This appeal has been filed to challenge the order of the
Whole Time Member (‘WTM’ for short) of the Securities and
Exchange Board of India (‘SEBI’ for short) dated September
28, 2018. By the said order M/s. Vital Communications
Limited (‘VCL’ for short) and certain other entities specified
therein have been directed to disgorge the unlawful gain of
Rs. 4,55,91,232/-, with interest at the rate of 10% per annum
from August 1, 2002 till the date of payment for violation of
various provisions of the SEBI (Prohibition of Fraudulent and
Unfair Trade Practices Relating to Securities Markets)
Regulations, 1995 (‘PFUTP Regulations, 1995’ for short) and
SEBI (Prohibition of Fraudulent and Unfair Trade Practices
Relating to Securities Markets) Regulations, 2003 (‘PFUTP
Regulations, 2003’ for short).

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2.

This appeal has been filed by the two investors who are
husband and wife, and who invested Rs. 18,25,041/- in
buying the shares of VCL in 2002. These appellants are
aggrieved by the impugned order as they contend that the said
order violates the directions given by this Tribunal by its
order dated April 30, 2013 as well as the mandate given to
SEBI by the SEBI Act, 1992 in protecting the investors.

3.

For facility, we reproduce the directions contained in
this Tribunal’s order dated April 30, 2013 below:“In the fitness of things, we, therefore, direct
SEBI to look into the part of the complaint of the
Appellants which relates to the alleged misleading
and fraudulent advertisements issued by VCL,
along with the investigation, understandably,
being carried on in respect of VCL or separately,
as it may be advised and considered fit and
proper in the circumstances of this case as per
law. The outcome of such investigation should
also be conveyed to the Appellants on completion
of the investigation proceedings which are stated
to be at an advanced stage by the Respondents.
Needless to say that in case SEBI finds VCL guilty
of playing fraud on the investors, it may consider
directing the concerned entity or VCL to refund
the actual amount spent by the Appellants on
purchasing the shares in question and with
appropriate interest and as per law.”
4.

The contentions of the appellants are that despite a clear
direction of this Tribunal as above directing SEBI to refund
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the amount spent by the appellants on purchasing the shares
of VCL with appropriate interest as per law, the WTM of
SEBI has passed only a disgorgement order against the
Company and the connected entities. There is no direction to
pay any amount to the appellants despite such a clear
direction from this Tribunal. Accordingly, it is contended that
SEBI is in breach of not following the directions of this
Tribunal, apart from not fulfilling its mandate of protecting
the investors. This is particularly relevant in the context that
the appellants have been pursuing this matter since 2002 by
running from pillar to post. Apart from informing SEBI about
the violations committed by the Company VCL in 2003, by
means of misleading announcements they approached the
National
Consumer
Disputes
Redressal
Commission
(NCDRC), SEBI and SAT multiple times at very high
personal cost. On account of these complaints SEBI has now
confirmed that the Company VCL has committed several
violations and passed the disgorgement order, (impugned
order). However, still the appellants are left in the lurch
without any compensation despite the fact that they are
genuine investors in the shares of VCL and despite the
explicit direction for compensation by this Tribunal.

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5.

We have heard Shri Harish Chandra Gupta, Appellant-
in-person and Shri Mustafa Doctor, leaned senior counsel for
the respondent SEBI. The learned senior counsel for
respondent SEBI submitted that the direction contained in this
Tribunal’s order dated April 30, 2013 was further modified by
this Tribunal’s order dated December 19, 2013. While the
first order stated that SEBI may consider compensating the
appellants, the second order of this Tribunal modified it by
stating that such consideration, if any, has to be as per the
provisions of the law and if the circumstances so require.
Further, citing paragraph 32 of the impugned order the
learned senior counsel for the respondent SEBI submitted that
it is virtually impossible for SEBI to provide for restitution to
a large number of investors who have invested in the
secondary
market
and
incurred
losses
and
giving
compensation on a selective basis would be discriminatory as
there may be a large number of affected investors and
restitution to investors as a class is a complex task beyond the
capacity of SEBI.

6.

While we sympathise with the submission of the learned
senior counsel for the respondent SEBI, we do not agree with
the helplessness of SEBI in the context like in this appeal. It is
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on the relentless efforts of the appellants before us that the
violations made by VCL and other entities have been brought
to the fore. Such efforts have been going on since the year
2002. The direction contained in our order dated April 30,
2013 though amended in December 2013 was that if violation
by the VCL was proved the appellants’ claim may be
considered as per law. This direction has to be placed in the
context of the disgorgement order issued by SEBI (impugned
order) whereby Rs. 4.5 crore (approximately) along with
interest has been ordered to be paid by VCL and other entities
jointly and severally. The basic idea behind disgorgement is
restitution. In the given context, we are of the view that as an
investor protection measure the appellants needs to be
compensated, since disgorgement without restitution does not
serve any purpose.

7.

The spirit of the April 2013 order of this Tribunal is that
in the facts and circumstances of this matter, appellants
deserve to be compensated in case VCL was found violating
securities laws. Violation by VCL has been now conclusively
proved by the impugned order and, as such, the impugned
order should have contained provision for compensating the
appellants. Accordingly, in the light of this Tribunal’s earlier
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orders, and purely in the given facts and circumstances of this
matter, we direct SEBI to compensate the appellants by
Rs. 18,25,041/-, the amount they invested in the shares of
VCL in 2002. No interest thereon shall be paid, since the
appellants should also bear part of the risk of investing in the
securities market following the principle of caveat emptor.
SEBI shall pay the said amount to the appellants either from
the amount being disgorged from VCL and connected entities
as given in the impugned order or from SEBI’s Investor
Protection and Education Fund within a period of three
months from the date of this order.

8.

Appeal is partly allowed without any order on costs.

Sd/Justice Tarun Agarwala
Presiding Officer
Sd/Dr. C.K.G. Nair
Member
Sd/Justice M.T. Joshi
Judicial Member
02.08.2019
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