BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date: 26.11.2019 Appeal No.180 of 2019

1. Vivek Bajoria 24/5, Alipore Road, Kolkata-700027.

2. Vivek Bajoria, Karta of Vivek Bajoria & others McLeod House, 3, Netaji Subhas Road, Kolkata – 700 001.

3. Smitha Bajoria 24/5, Alipore Road, Kolkata-700027.

4. Raghav Bajoria 24/5, Alipore Road, Kolkata-700027.

5. Shivanghi Bajoria 4, Turf Road, Flat No.2A/B, ….. Appellants Kolkata-700025.

Versus The General Manager & Adjudicating Officer Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051. … Respondent Mr. Amit Nikam, Advocate i/b. Gopal Pahari for the Appellant. Mr. Karan Bhosale, Advocate with Ms. Eram Quraishi, Advocate i/b. MDP & Partners for the Respondent. CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member Per : Justice M.T. Joshi (Oral)

1. Aggrieved by the order of the Adjudicating Officer

dated 19th December, 2018 directing the present appellant to jointly and severally pay a penalty of Rs.2,00,000/- for violation of sub-Regulation 16 of Regulation 22 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as ‘SAST Regulations’) the present appeal is preferred.

2. The submission from both the sides would show that

the present appellants were earlier promoter of Tirrihannah Company Limited (hereinafter referred to as the ‘Company’). On 7th November, 2007 a Share Purchase Agreement (hereinafter referred to as ‘Agreement’) was executed by the appellant in favour of one Mr. Ghanshyam Das Kankani and his associates to sell 3,68,740 shares of the Company. Those shares comprises of 26.42% of the share capital of the Company. In this agreement there is no clause to the effect that in case of non compliance of any of the provisions of the SAST Regulations the agreement shall not be acted upon by the seller or the acquirer. There is no denial that the transfer of 26.42% of the share capital required compliance of the provisions of the SAST Regulations. In such situation, it is necessary to advert to the sub-regulation 16 of the SAST Regulations. SAST Regulations General Obligation of the acquirer

22. (16) If the acquirer, in pursuance of an agreement, acquires shares which along with his existing holding, if any, increases his shareholding beyond 15 per cent, then such agreement for sale of shares shall contain a clause to the effect that in case of non-compliance of any provisions of this Regulation, the agreement for such sale shall not be acted upon by the seller or the acquirer.

3. Finding that the clause as stipulated in the sub-

regulation is not incorporated in the agreement the proceedings were launched against the present appellant. The appellant before SEBI explained as under:- That the present appellants who are the members of Bajoria family were the promoters of the Company. In the Terai region of West Bengal the Company owns two tea gardens. Prior to 2007 due to adverse market condition in the tea trade all over India, the said Company suffered acute financial crunch and incurred heavy losses for the years 2006-07. In the circumstances, Mr. Ghanshyamdas Kanakani was introduced to Bajoria family and more particularly appellant Vivek Bajoria. Mr. Kankani assured to organize funds to overcome the financial crisis. The appellant’s shares were pledged with the Allahabad Bank. Mr. Kankani showed interest in acquiring the shares of the Company. Thereafter however Memorandum of Understanding was executed on 19th February, 2007 and merely some paltry sum was paid. A limited Company of Mr. Kankani became partnership in equal share. The appellants came under the fiduciary obligation of Mr. Kankani. Mr. Kankani and his group made certain investment in the tea garden. The appellants were in a financial crisis and were unable to take any decision with regard to the business. Mr. Kankani however took unfair advantage of the same. In the circumstances, on 7th November, 2007 Mr. Kankani along with his henchmen visited appellant Vivek Bajoria at his house. They had already prepared certain agreements. Vivek Bajoria was compelled to sign the documents by putting the date as 7th November, 2019 under threat and coercion. In view of the aforesaid fact a civil suit bearing no.115 of 2010 is filed by the appellant in the High Court of Calcutta seeking various reliefs for declaration of MOU as well as the agreements as null and void. The suit is pending. The appellant had no control in execution of the agreement in the situation as detailed supra therefore they wanted that the proceedings be dropped.

4. During hearing the appellants also sent one email dated

10th August, 2018 wherein inter alia they adverted the attention of the Adjudicating Officer to take action against Mr. Kankani and his group who admitted non compliance with the requisite SEBI rules and norms. The Adjudicating Officer reasoned that the Share Purchase Agreement admittedly did not contain the clause as mandated by sub- regulation 16 of Regulation 22 as detailed above. He further observed in para no.14 that the present appellants should not have acted upon the agreement as they were aware that the acquisition of the Company calls for certain compliance under SAST Regulations. It was further found by the Adjudicating Officer that in a separate proceeding against Mr. Kankani and his associates separate order dated 8th February, 2018 is passed. It was further observed that the violation of the provisions is not disputed and hence the penalty as imposed.

5. As regards the quantum of penalty the Adjudicating

Officer observed that once there is contravention of the statutory obligation is established then the penalty has to follow and only the quantum of penalty is discretionary. In the circumstances, a penalty of Rs.2 lakhs as detailed supra was imposed.

6. Heard Mr. Amit Nikam, learned counsel for the

appellant and Mr. Karan Bhosale, learned counsel for the respondent. Upon hearing both the sides in our view the order of the Adjudicating Officer cannot be sustained. It is to be noted that according to the appellant that they had not entered into an agreement but the appellants were forced to put signature over the agreement. They themselves did not transfer the shares. However, as the shares were pledged with the bank the custody of the same was taken by Bajoria and group directors. Sub-regulation 16 of Regulation 22 provides that the agreement shall contain a clause to the effect that in case of non compliance of any provisions of any regulations the agreement shall not be acted upon by the seller or the acquirer. The appellants did not intend to act upon the said agreement as detailed supra. The Adjudicating Officer wrongly in para 14 of the order observed that “the Noticees should not have acted upon SPA (the agreement) as they were aware that the acquisition of Target Company calls for certain compliance under SAST Regulations.”

7. It is to be noted that the shares were directly transferred

from the Bank. Mr. Kankani and his group is already penalized by SEBI for the act. The sub regulation merely provides that the agreement shall contain the clause. As the purchaser Mr. Kankani is already penalized for not incorporating the sub clause, taking into consideration the overall facts as detailed supra the order of the Adjudicating Officer cannot be sustained.

8. The impugned order passed by the Adjudicating Officer

of SEBI is quashed and set aside. Appeal is allowed with no order as to costs. Sd/- Justice Tarun Agarwala Presiding Officer Sd/- Dr. C. K. G. Nair Member Sd/- Justice M.T. Joshi Judicial Member 26.11.2019 Prepared and compared by RHN