BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Order Reserved On: 03.07.2019 Date of Decision : 26.09.2019 Misc. Application No. 01 of 2019 And Appeal No. 371 of 2017 Mr. Siddharth Shankar 5 Pine Drive, DLF Farms, Chattarpur, Mehrauli, New Delhi110 030 …Appellant Versus Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai – 400 051 …Respondent Mr. Pradeep Sancheti, Senior Advocate with Mr. Shrey Sancheti, Ms. Akanksha Agarwal, Mr. Neerav B. Merchant and Mr. P. N. Mehta, Advocates i/b PNM Legal for the Appellant. Mr. Gaurav Joshi, Senior Advocate with Mr. Mihir Mody and Mr. Sushant Yadav, Advocates i/b K. Ashar & Co. for the Respondent. WITH Misc. Application No. 2 of 2019 And Appeal No. 37 of 2018 Mrs. Nikita Shankar 5 Pine Drive, DLF Farms, Chattarpur, Mehrauli, New Delhi110 030 …Appellant Versus Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai – 400 051 …Respondent Mr. Zal Andhyarujina, Advocate with Mr. Shrey Sancheti, Ms. Akanksha Agarwal, Mr. Neerav B. Merchant and Mr. P. N. Mehta, Advocates i/b PNM Legal for the Appellant. Mr. Gaurav Joshi, Senior Advocate with Mr. Mihir Mody and Mr. Sushant Yadav, Advocates i/b K. Ashar & Co. for the Respondent. WITH Appeal No. 346 of 2017 Mr. Manoj Kumar Agrawal BA/ 48-C, Ashok Vihar-I, Delhi110 052 …Appellant Versus Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai – 400 051 …Respondent Mr. Rajesh Khandelwal, Advocate with Ms. Mugdha Modi, Advocate i/b Juris Link for the Appellant. Mr. Gaurav Joshi, Senior Advocate with Mr. Mihir Mody and Mr. Sushant Yadav, Advocates i/b K. Ashar & Co. for the Respondent. WITH Appeal No. 38 of 2018 Mrs. Anjna Kumar 5 Pine Drive, DLF Farms, Chattarpur, Mehrauli, New Delhi110 030 …Appellant Versus Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai – 400 051 …Respondent Mr. Zal Andhyarujina, Advocate with Ms. Akanksha Agarwal, Mr. Shrey Sancheti, Mr. Neerav B. Merchant and Mr. P. N. Mehta, Advocates i/b PNM Legal for the Appellant. Mr. Gaurav Joshi, Senior Advocate with Mr. Mihir Mody and Mr. Sushant Yadav, Advocates i/b K. Ashar & Co. for the Respondent. AND Misc. Application No. 426 of 2018 And Appeal No. 197 of 2018 Ashok Kumar 5, Pine Drive, DLF Chattarpur, Mehrauli, New Delhi110 030 …Appellant Versus Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai – 400 051 …Respondent Mr. Ankit Lohia, Advocate i/b Yasmin Bhansali & Co. for the Appellant. Mr. Gaurav Joshi, 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

1. These 5 appeals have been filed challenging the order of

the Whole Time Member (“WTM” for short) of the Securities and Exchange Board of India dated September 5, 2017. By the said order all the appellants, among others, have been restrained from accessing the securities market directly or indirectly for a period of 10 years. Further four of them, excluding Manoj Kumar Agarwal, have been directed to refund the investors/clients money with interest at the rate of 15% per annum from the date when the repayment became due till the date of actual payment.

2. The relevant background of the matter is the following.

During 2014 SEBI received a number of complaints relating to investor grievances and mobilisation of funds etc. by M/s Kassa Finvest Private Limited (“Kassa” for convenience), a trading member of the National Stock Exchange of India Limited (“NSE” for convenience) and BSE Ltd. (“BSE” for convenience). SEBI initiated an investigation relating to the dealings of Kassa on February 23, 2015. Pending investigation, SEBI vide ad interim ex parte order dated March 19, 2015 restrained Kassa and its directors from accessing the securities market till further orders. During the investigation a number of violations of securities laws had been noticed by SEBI. Accordingly, a show cause notice was issued on February 29, 2016 to Kassa, its directors/promoters, group persons/entities and some of the employees directing to show cause as to why action should not be taken against them for violating various provisions of SEBI Act, 1992, Securities Contract Regulation Rules, 1957, SEBI (Prohibition of Fraudulent and Unfair Trade Practice relating to Securities Market) Regulations, 2003 (“PFUTP Regulations” for short), SEBI Portfolio Managers Regulations, 1993 and various Clauses of the Circulars issued by SEBI in respect of stockbrokers. After providing an opportunity of hearing, replies etc. the order impugned in all these appeal was issued on September 05, 2017. Subsequently, a Recovery/demand notice dated December 18, 2018 was received by four of the appellants (except Manoj Kumar Agrawal) directing them ( and others who are not in appeal) to pay jointly and severally a sum of ` 80,97,62,785 along with returns due to investors etc. within 15 days of the receipt of the said notice.

3. Though the show cause notice was issued to 19 noticees

and directions are passed against 17 of them only 5 of them have preferred appeal. It is important to note that Kassa has not preferred an appeal. Since all the appeals relate to the same impugned order, they are heard together and are disposed by this common decision.

4. Investigations revealed a number of violations of

securities laws by Kassa and other appellants as follows:- i) Diverted funds of the investors to group entities of the company who derived economic benefits out of siphoning off funds. ii) Engaged in activities other than stock broking business such as collecting money from clients/ investors promising assured returns to them. iii) Failed to segregate proprietary funds and clients’ funds and misutilized/ diverted funds/ securities of clients/investors and siphoning off the funds/securities of clients to group persons/ entities. iv) Failed to comply with the requirement of periodical settlement of client accounts. v) Non-redressal of investors’ grievances within a month of the date of receipt of complaints. vi) By the above stated commissions the company and its directors/ promoters management have violated various provisions of SEBI Act, 1992, SEBI (Stock Brokers and Sub-brokers) Regulations, 1992, SEBI (Portfolio Managers) Regulations, 1993 (“PMS Regulations” for short), Securities Contract (Regulations) Rules, 1957 (“SCRR” for short) and various provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market), Regulations, 2003 and various Circulars issued by SEBI.

5. It is also noted by SEBI that funds to the tune of ` 55

crores (approximately) was collected by the company in the form of loans from various investors and by promising high returns. Returns promised were in the range of 9%-13% when deposits were in the form of shares and 18% – 27% when deposits were in the form of funds. Such activity is violative of Rule 8(f) of the SCRR. Further, such activities have also violated Rule 3 of PMS Regulations because Kassa carried out operations as a portfolio manager without obtaining a certificate/ registration from SEBI. Similarly, funds to the tune of ` 46.83 crores have been transferred from clients’ bank accounts maintained by Kassa which HDFC Bank and Canara Bank to the business bank account of Kassa maintained with HDFC Bank and Canara Bank during the period 2008-2015. Further, funds to the tune of approximately 26.45 crores have been transferred from business accounts/ clients’ accounts maintained with various banks to related/group /associate persons/ entities (against whom the impugned order has been passed). Similar siphoning off clients’ securities /mutual fund units have also been noticed by SEBI. Hence, the finding that a total amount of ` 80.97 crores have been diverted/ siphoned off from the account of Kassa to the group entities against which the impugned order has been passed. Because of such transferring/ siphoning off of the clients/ investors funds for the benefit of group entities of the Directors/ Promoters the WTM of SEBI has considered all these entities as one single economic entity by relying on the order in the matter of Delhi Development Authority vs. Skipper Construction Company (P) Ltd. & Anr. 1996 SCC (4) 622.

6. The relationship/connection between the appellants as

given in the impugned order are as below. Name of the Appellants Relationship/Connection Ex-Director of Kassa Finvest (1995-2005) and son of Ashok Kumar (M.D. of Kassa Mr. Siddharth Shankar Finvest). He was also a director of Kassa Holdings (1990-2013) and Kassa Financials (19902013). Mrs. Nikita Shankar Wife of Siddharth Shankar and director of group companies of Kassa Finvest. Mr. Manoj Kumar Agrawal Manoj Agrawal is the CFO and (Manoj Agrawal) Compliance Head of Kassa Finvest. Mrs. Anjana Kumar Promoter of Kassa Finvest, Ex-director of Kassa (1995 to 2003) and wife of Ashok Kumar (M.D. of Kassa Finvest).  Managing Director of Kassa Finvest  Holds 5% of Kassa Finvest. Mr. Ashok Kumar  He and Umashankar Sharan Shrivastav together hold 10%. Though, the factual aspects as above are not fully refuted by the appellants each of the appellants tried to distinguish their respective roles and responsibilities. The crux of the submissions of each appellant is as follows: Appeal No. 371 of 2017

7. This appeal is filed by Siddharth Shankar who is the son

of Ashok Kumar, the Managing Director of Kassa at the relevant time. Further, Siddharth Shankar was a Director of Kassa during 1994 till 2005. He was also the Director of group Companies namely Kassa Holdings and Kassa Financials during 1990 till 2013.

8. Learned senior counsel Shri Pradeep Sancheti, appearing

on behalf of Siddharth Shankar submits that the appellant is neither a shareholder of Kassa nor a Director of Kassa at the relevant time. He ceased to be a Director long back in 2005. At the relevant time he has no other connection with Kassa except that he was a consultant drawing an annual salary/consultancy fee of ` 6 lakhs. The only allegation against the appellant is that an amount of ` 2.06 crores was lent/paid to the appellant by Kassa over a period of 8 years. There is no finding that the appellant was in any way connected with Kassa in its day-to- day management.

9. It was further contended by the learned senior counsel for

the appellant that all the records relating to his consultancy fee, TDS and reimbursement of other expenses from time to time are available. These details are also reflected in the audited balance sheets of Kassa for various financial years. In addition to certificates from a chartered accountant the appellant has produced his income tax returns, which also show consultancy income on a year to year basis. The learned WTM also records the fact that the appellant received consultancy fee and reimbursement for a period of 7 years during April 2008 to March 2015. It was further contended that there is a serious error in the impugned order while calculating the alleged benefits accrued to the appellant. In one place it is stated that the amount in question is ` 2.06 crores while in another place stated that it is ` 2.60 crores.

10. The learned senior counsel for the appellant further

submitted that there has been a number of mistakes in the impugned order relating to the payments and refund between the appellant and Kassa. Further documents relating to a tripartite agreement/settlement between the appellant and one Kamla Narain has not been considered relevant by the WTM though such arrangements are permitted in law. In any case, the demand notice for ` 80.97 crores could not have been issued by SEBI as many of the so called investors were not genuine clients and these investments were for assured returns. Appeal No. 37 of 2018

11. The appellant in this appeal was proprietor of AARB

Capital (“AARB” for convenience), proprietor of GUGU Trading, GVC Capital and G&G Impex (“Group Firms” for convenience) which are trading clients of Kassa. These entities were allegedly managed by Ashok Kumar, appellant in Appeal No. 197 of 2018 who is also the father in law of the appellant. The appellant is also the wife of Siddharth Shankar, son of Ashok Kumar and former Director of Kassa, Kassa Holding and Kassa Financials.

12. Learned counsel for the appellant Shri Zal Andhyarujina,

submitted that the appellant was not a party to the ex-parte ad- interim order dated March 19, 2015. Only in April 2015 SEBI asked her statements on investigations relating to Kassa and she submitted the trading ledgers of the firms with which she is associated as well as her Income Tax Returns for five years. On February 29, 2016 SEBI issued a show cause notice to the appellant on which the attorneys of the appellant appeared before the WTM of SEBI in addition to filing written submissions on June 21, 2017. Subsequently, vide the impugned order dated September 05, 2017 the appellant, along with others, has been debarred from accessing the securities market for a period of 10 years and has been jointly and severally made responsible for refund to the investors/ clients. This is pursuant to the alleged findings that the appellant has violated various provisions of the PFUTP Regulations.

13. The learned counsel for the appellant contended that the

appellant was never a promoter/ director of Kassa. Though she was the proprietor of certain group firms it was only in name as all the decisions of these entities had been taken by Ashok Kumar, appellants’ father in law. These aspects are very clear from the various observations of the WTM himself in the impugned order. Further, it was contended that the appellant was incorrectly included in the group of Kassa but failed to either conduct any investigation or to provide any proof relating to the appellant’s association with either Kassa or with its alleged wrongdoing. This fact is also emphasized in the statement made by Anil Dhawan, President of Kassa and Vivek Agarwal, Deputy General Manager (‘DGM’) Finance of Kassa that the client codes relating to group entities with which the appellant is associated as a proprietor were in fact handled directly by Ashok Kumar and the payments to be made to all the companies belonging to Ashok Kumar were decided by Manoj Kumar Agarwal, Anil Dhawan and Ashok Kumar. All these show that Ashok Kumar was the real Proprietor of the entities and all the activities of these entities were managed by Ashok Kumar and appellant’s name was only used.

14. The learned counsel further contended that whatever

payments are received by AARB from Kassa is only by means of trading profits due to this entity and even here the trading was done by Ashok Kumar and not by the appellant. Further all the monies paid to Kassa by AARB was also not taken into account in the impugned order and evidences in the form of bank statement in HDFC Bank produced were not fully considered. If all these aspects were in fact considered by the WTM it would have been evident that Kassa owed a net amount of ` 3,98,000 to AARB rather than AARB owing anything to Kassa. Therefore, the entire allegation that money belonging to Kassa was diverted to AARB and thereby bringing the appellant into wrongdoing of Kassa gets nullified.

15. In the light of the above, it was contended that the demand

notice dated December 18, 2018 could not have been issued to the appellant as the Recovery Officer had no jurisdiction to issue such a demand notice. Moreover, the impugned order does not quantify any penalty to be paid as such there was no failure to pay a penalty or to comply with the directions of the Board within the meaning of Section 28A of the SEBI Act. Even otherwise the joint and several liability of ` 80.97 crore (approximately) does not give the details or particulars and as such cannot be implemented.

16. In short, the appellant’s contention is that she is not

directly connected with Kassa; though she was associated with certain group entities as a Proprietor those entities were managed by Ashok Kumar; all the payments made by AARB to Kassa were not considered in calculating the liability in the impugned order; and since the impugned order does not quantify the penalty/refunds the Recovery Officer could not have issued the demand notice that too without clearly quantifying the obligations. Appeal No. 346 of 2017

17. The appellant was the CFO/ Vice President/ Senior Vice

President and Compliance Officer of Kassa during the relevant time and has been debarred from the securities market for a period of 10 years by the impugned order.

18. Learned counsel for the appellant Shri Rajesh Khandelwal,

submitted that the appellant was not the Chief Finance Officer (“CFO”) as is claimed in the impugned order but was only Vice President/ Senior Vice President of accounts. The WTM failed to appreciate the fact that his role was only maintaining the books of accounts and he had no occasion to comprehend and dissent with the directions given by the Managing Director of Kassa. Mr. Ashok Kumar and Mr. Siddharth Shankar were the de facto final authority; he was only vaguely aware of the facts relating to loans in the form of funds and securities and was not in a strategic position to conclude the management’s involvement in such malafide activities. He was not a Key Managerial Personnel (‘KMP’) and had no role in day-to-day management of Kassa. He has not made any illegal gain. Given these facts the appellant had no role in the illegal activities of Kassa and, therefore, the impugned order is liable to be quashed qua the appellant.

19. Learned counsel further submitted that without prejudice

to the above submissions, restraint of 10 years imposed on the appellant is too harsh particularly since he was an employee only and not a Director or KMP and grouping him with the Managing Director and other Director etc. and handing over the same punishment is both beyond law and too harsh. It was also submitted that he may be allowed to liquidate the existing portfolio as he has no other source of income. Appeal No. 38 of 2018

20. The appellant is the single largest shareholder of Kassa,

holding 51.65% of shares. She is the wife of Ashok Kumar, MD of Kassa and was a former Director of Kassa for 8 years during 1995 to 2003. She was one of the entities debarred from accessing the securities market vide ex-parte ad interim order dated March 19, 2015. She has been restrained for a period of 10 years as well as made jointly and severally liable to make refund of the monies collected from clients/ investors. Further, she has also been directed to pay a sum of ` 80.97 crores (approximately) with returns due to investors along with the interest etc. jointly and severally with other noticees by the Recovery/ Demand Notice dated December 18, 2018.

21. Learned counsel Mr. Zal Andhyarujina, appearing on

behalf of the appellant submitted that the appellant is a 69 years housewife; has no experience of either company matters or share market; is a shareholder only in name; no role in day-to- day management and hence not in-charge of the company and not even a promoter as defined under Section 2(69) of the Companies Act, 2013. Hence the impugned order is completely arbitrary solely on the basis that she holds 51.65% of the share capital of Kassa and her husband Ashok Kumar is the Managing Director of Kassa. For facility, Section 2(69) of the Companies Act, 2013 is extracted hereunder: “Section 2(69)- "promoter" means a person— (a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or (b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or (c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act: Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity; It was submitted that she was not a promoter also in terms of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. For facility, Regulation 2(za) of ICDR Regulations, 2009 is extracted hereunder:- Regulation 2(za)- “promoter” includes: (i) the person or persons who are in control of the issuer; (ii) the person or persons who are instrumental in the formulation of a plan or programme pursuant to which specified securities are offered to public; (iii) the person or persons named in the offer document as promoters: Provided that a director or officer of the issuer or a person, if acting as such merely in his professional capacity, shall not be deemed as a promoter: Provided further that a financial institution, scheduled bank, foreign institutional investor and mutual fund shall not be deemed to be a promoter merely by virtue of the fact that ten per cent or more of the equity share capital of the issuer is held by such person; Provided further that such financial institution, scheduled bank and foreign institutional investor shall be treated as promoter for the subsidiaries or companies promoted by them or for the mutual fund sponsored by them;

22. Further, the learned counsel for the appellant also relied on

a number of judgements to prove his contentions. Relying on the order of M/s. Subhkam Ventures (I) Pvt. Ltd. vs. SEBI (Appeal No. 8 of 2009 decided on 15.01.2010) it was contended that since the appellant was not in control or in-charge of Kassa the appellant is not liable for any violation committed by Kassa.

23. Further, it was contended that even if the appellant is held

to be a promoter she is not liable to be charged because she was not in-charge of the day-to-day management of the company as defined under Section 141 of the Negotiable Instruments Act, 1881, which is substantially similar to Section 27 of the SEBI Act, as follows:- “141. Offences by companies.- (1) If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence: Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter. (2) Notwithstanding anything contained in sub- section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.—For the purposes of this section, (a) “company” means anybody corporate and includes a firm or other association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm.”

24. Relying on the order of SMS Pharmaceutical Ltd. vs.

Neeta Bhalla & Anr. 2005 8 SCC 89, KK Ahuja vs. VK Vora & Anr. 2009 10 SCC 48 it was contended that similarly placed entities namely; Millie Roses Ltd. and Doyen Vyapar Pvt. Ltd. holding 26% and 12.44% of shares of Kassa respectively have not been held liable under the impugned order and hence the appellant also deserves to have the same dispensation and cannot be held vicariously liable when there is a Managing Director or other Directors. Therefore, the WTM vide the impugned order has made the appellant a victim of discriminatory and unequal treatment merely on the ground of being the wife of the Managing Director of Kassa. As regards the demand notice dated December 18, 2018 the appellant has not been even served with the notice; the fact that the demand notice is served on other persons in the same address is not a service upon the appellant; there was no direction in the impugned order to make any payment as no amount was specified in the impugned order and the Recovery Officer has no right to specify the amount which is not part of the impugned order.

25. Further, it was submitted that the corporate veil of Kassa

could not have been pierced since neither the show cause notice nor the impugned order itself has proved the necessity of doing so and hence it is a breach of natural justice.

26. Learned counsel for the appellant also sought to

distinguish the orders relied on by the respondent SEBI in the impugned order namely Delhi Development Authority vs. Skipper Construction 1996 (4) SCC 622. Appeal No. 197 of 2018

27. The appellant was the Managing Director of Kassa at the

relevant time holding 5% of the shares of Kassa. In addition he owned associated companies’ Kassa Holdings & Consultants Private Limited (“Kassa Holding”), M/s Mystic Cures Pvt. Ltd. (“Mystic Cures”) and managed the group entities M/s. Guru Trading, M/s. GVC Capital, M/s. AARB Capital and M/s. G&G Impex.

28. The learned counsel for the appellant Shri Ankit Lohia,

took a preliminary objection on the ground that the impugned order was passed without giving sufficient opportunity for the appellant to represent his case before the WTM. It is a matter of record, it was urged, that the show cause notice issued on February 29, 2016 was returned undelivered; the appellant was in the custody of EOW; the show cause notice was ultimately served only on February 27, 2017 and received by the appellant on March 03, 2017; the appellant’s request for various documents were not fully adhered to and only one personal hearing was granted to the appellant on April 18, 2017 in which the appellant could not defend himself fully because of the non- availability of many documents.

29. Learned counsel for the appellant further contended that

though by designation the appellant was the Managing Director of Kassa, in actual practice the schemes which were found to be violative of the securities laws was run by two employees namely; Anil Dhawan and Manoj Agrawal, at the back of the appellant. The salary structure and the job profile of these employees also show that they were taking decisions on such matters. Therefore, it was a conspiracy hatched by some clients/ complainants and a few key officials of Kassa to malign the appellant and his family.

30. In any case, the so called clients were actually not

investors in the securities market and they were high networth individuals including qualified chartered accountants who understood all intricacies of securities market/ financial market and they were fully aware of the nature of transactions and any alleged illegality involved. On this ground, this Appellate Tribunal also had set aside the appeals filed by a few of such investors. Moreover, when they were indulging in the transactions which were in the nature of loan which are illegal according to SEBI and when these investors were party to such illegality they cannot be granted any reliefs by SEBI because such parties are in pari delicto.

31. It was further contended that the appellant had provided

all details relating to the alleged siphoning off an amount of ` 3,35,22,009/- from the account of Kassa stating that most of these payments were in the form of salary etc. and there were apparent error in including the payments made to one Ashok Kumar, who is not the appellant, and therefore there was grave mistakes in the calculations.

32. It was further contended that the Recovery Certificate

dated December 18, 2018 provided no basis for arriving at the amount of ` 80,97,62,785/-. It also does not factor in the details provided by the appellant to SEBI of 10 groups of investors whose loans amounted to approximately ` 64 crores. As urged earlier since these parties were in pari delicto as held in a number of judgements they cannot be granted any reliefs. Such judgements include: Sanjay R. Shirke vs. State of Maharashtra (dated September 27, 2018 passed by Bombay High Court), Suman Lata Sharma vs. Vinod Kumar Sharma reported in 2017 SCC OnLine Del 11395 and Kuju Collieries Ltd. vs. Jharkhand Mines Ltd. & Ors. reported in 1974 AIR 1892.

33. Similarly, it was further contended that this Tribunal itself

held in the appeals filed by some of these investors that they were not entitled to get any benefit out of the Investors Protection Fund because their investments were not genuine and not in the securities market. Such judgements include: Sudha Gupta (Appeal No. 355 of 2017 dated March 15, 2018) and Kabir Oberoi (Appeal No. 153 of 2017 dated May 17, 2018). Further, the Recovery Certificate has been issued without considering the profits realised by the appellant. Even if, it is held that the appellant was involved in siphoning off ` 3,35,22,009/- a joint and several liability of about ` 81 crores could not have been imposed on the appellant. In short, the learned counsel for the appellant urged that the Recovery Certificate is unimplementable, overstated liability of each appellant is not proved, payments already made not taken into account and in any case issued on the basis of the impugned order which was in a sense an ex-parte order so far as the appellant is concerned since he was given only limited opportunity of responding to the various allegations and all documents were not made available to him.

34. We have heard the learned senior counsel for the

respondent SEBI, who took us through the background of the matter as to how Kassa defaulted which let to considerable loss to a large number of investors also undermining the faith of the investors in the securities market. Kassa itself is not even an appellant so are many of the other entities against whom directions have been passed in the impugned order. Relying on Skipper Construction (supra) he emphasised that all the entities who have been beneficiaries of diversion of funds are treated as one ‘economic unit’ and hence a joint and several liability for refund has been rightly imposed upon them by the impugned order. He further reiterated the role of each of the appellant in the matter and how in isolation each of them claims to be innocent or having limited or no role in the entire episode. Given their clearly articulated roles the directions in the impugned order are just and fair. We have also perused the documents produced before us.

35. We do not find merit in most of the arguments put forth by

the counsel for various appellants.

36. At the outset, we would like to deal with one submission

made by most of the appellants that since the investors were in pari delicto they are not entitled to any reliefs through SEBI. This is a devious argument adopted by the appellants; some of whom were Directors/ Promoters of Kassa and some who were connected entities who are beneficiaries of diversion of funds from Kassa. In fact, even while claiming no connection with Kassa and its Managing Director these appellants are taking this devious argument that the clients of the broker were not investors in the securities market but were engaged in illegal loan type transactions. We find this argument not only devious but one which has to be rejected outright because this argument can vitiate the very legal foundation of the securities market. Here is a broker who is under a two-tier regulatory structure, by SEBI and the stock exchanges, and operating under tight regulatory restraints (Broker Regulations and Code of Conduct) in conducting the business of brokerage under the securities laws and the exchange by laws etc. Their claim that the investors are guilty in equal measure is tantamount to stating that some of the so called investors would barge into their office and forcefully make deposit for which the broker has no responsibility or accountability. This is not how a broker’s business is to be run despite the principle of caveat emptor notwithstanding. If a broker is accepting such transactions in the nature of loans the broker is squarely responsible for this illegality as it has been told by various securities laws how and what type of transactions a broker is supposed to enter into with investors/ clients and what type of due diligence and care it has to take and how the books/ documents have to be maintained etc. in great detail. All these Regulations and Circulars are explained in detail in the impugned order. In any case, the principle of in pari delicto may be applicable in individual cases but not against the statutory authority like SEBI as in the present case performing its statutory functions.

37. The appellants’ reliance on orders of this Tribunal in

Sudha Gupta (Supra) and Kabir Oberoi (Supra) does not come to the aid of the appellants because what is held in these orders is only the inapplicability of support from Investors Protection Fund to those parties. There was no finding that those parties were in pari delicto and as such were not entitled for any reliefs. Rather these orders held that they are entitled for relief from the broker itself but are not entitled for relief from the Investor Protection Fund. As far as SEBI’s powers regarding directions to the brokers in matters where some of the investors/ clients were knowingly committing illegality we hold that all such powers of SEBI are well established. When SEBI has the powers to direct even unlisted Companies and their Directors who had mobilised funds from public (deemed public issue) by issuance of securities of various types or where entities have mobilised funds through Collective Investment Schemes and when these entities themselves were otherwise outside the purview of SEBI it would be perverse even to state that SEBI does not have such powers over brokers which are highly regulated entities both by the Exchanges and SEBI. Therefore, this argument is totally untenable and we accordingly reject it both from the angle of the so called illegality of the action of the investors/ clients as well as from the view point of explicit powers of SEBI.

38. We do not find any merit in the submissions made by

Siddharth Shankar (Appellant in Appeal No. 371 of 2017) that his entire connection with Kassa was that of being only a consultant nor we agree with his contention that whatever money was lent/ paid to the appellant beyond the consultancy fee was returned to a third party. If he was only a consultant of Kassa it is not clear to us how he was entitled to receive such a huge amount of ` 1.75 crores as a loan through an unregistered purported loan agreement in the first place and how a tripartite agreement with Kamla Narain, a client of Kassa and Kassa could be entered into and why the liability of Kassa was neutralized through this purported tripartite agreement. Moreover, when the appellant informed Kassa that he settled an amount of ` 14360578/- due to Kassa by paying to Kamla Narain on April 05, 2015 the acceptance letter by Kamla Narain is dated September 26, 2016. Accordingly, these documents are clearly afterthoughts and devoid of veracity. Therefore we find no reason to fault the finding in the impugned order that these are afterthoughts and the evidence now produced has no substance. We agree with the submission that two different figures ` 2.06 crores and ` 2.6 crores are given at different places in the impugned order, which the learned senior counsel for the respondent clarified that one is with the consultancy fee and the other is net of it which appears logical. In any case such typographical error does not undermine the substantive finding in the impugned order.

39. Similarly, we find no merit in the contentions of Nikita

Shankar (Appellant in Appeal No. 37 of 2018) wife of Siddharth Shankar and daughter in law of Ashok Kumar. The submission that she was Proprietor of the Group entities only in name and all decisions were taken and the group entities were managed by her father in law, Ashok Kumar, does not have any merit as the Director/ Proprietor is equally liable for the action of the Companies/ entities. We are also not convinced by the calculations produced by the appellant stating that instead of the appellant’s proprietary concern AARB owing anything to Kassa it is Kassa which owed ` 3,98,000 to AARB. Moreover no submissions are forthcoming with respect to other three group entities.

40. We do not agree with the submissions made by the learned

counsel for the appellant Manoj Kumar Agrawal (Appellant in Appeal No. 346 of 2017). His submission that he was neither the CFO nor discharging the function of CFO cannot be accepted in the absence of any record to show that there was another CFO in Kassa. On the contrary all other appellants have contended that he was discharging the functions of CFO in Kassa. Moreover, we note that he has been Vice President/ Senior Vice President of Finance for a long period in the company and his involvement in mobilising funds from various clients is quite clear from the impugned order and other documents including copies of agreements signed with clients where the appellant is signatory for Kassa as Senior Vice President, Finance produced before us. As Compliance Officer he was, according to law expected to be in-charge of all the provisions relating to regulatory compliance. However, since he was not found to have made any illegal gain the impugned order does hold him liable for refund of the funds mobilised from various clients/ investors. Therefore, we find some merit in the submission that a uniform period of 10 years of debarment from the securities market imposed on the appellant appears disproportionate, given the fact that he was only an employee, though a senior one, and was working under the overall direction of the Managing Director who is considered the key person in the entire episode.

41. We find no merit in the submissions made by Mrs. Anjna

Kumar, (Appellant in Appeal No. 38 of 2018) that just because she is holding majority stake of Kassa she is not liable to be punished for any violation because effectively she had no role in the functioning of Kassa or its day-to-day management. Moreover, her contention that she is only a house wife and ill- informed on matters relating to companies or securities market has no merit because we note that she was a former Director of Kassa for a long period of 8 years during 1995 to 2003. Moreover, she is not just a promoter but holds 51.65% of shares of Kassa by virtue of which she is in absolute control of the company. Whether she has appointed any Director by virtue of this position is immaterial as it is a choice open to her. In any case her husband is the Managing Director of Kassa by holding just 5% of the equity shares of the Company. Therefore, effectively by virtue of being the promoter in control of the company she is allowing the Managing Director who is her husband to run the Company. By no stretch of imagination the appellant can claim shelter under either ignorance or lack of any role/ function in the company. Section 2(69) of the Companies Act clearly states that a “promoter” inter alia means a person: (a) …… (b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; Further, according to Regulation 2(za) of ICDR Regulations, 2009 “promoter” includes: (i) the person or persons who are in control of the issuer; Both the above provisions clearly show that the appellant is a promoter and therefore by virtue of holding majority stake of more than 51% she is in control of Kassa. Therefore, we find no lacuna in the impugned order in holding the appellant guilty of the various provisions specified therein and the consequent directions issued thereunder.

42. We find no merit in the submissions made by learned

counsel for the appellant (in Appeal No. 197 of 2018) Ashok Kumar. The substantive argument of the appellant in terms of in pari delicto has been dealt in previous paragraphs of this order and we completely rejected that argument. Further the appellant’s efforts to hoist the blame fully on to two employees namely; Anil Dhawan and Manoj Agrawal, who were working under him stating that he had no role is completely unbelievable on the face of records to the contrary. A letter written by this appellant to various clients/ prospective clients, promising assured returns on investment is on record. We also do not agree with the submissions that sufficient opportunity was not given to him though, only one personal hearing was given. There is nothing on record to show that he had sought any further personal hearing. In any case he could have given written submissions since there was a gap of 5 months between his personal hearing and the date of the impugned order. Moreover, we note the submission made by his own daughter in law (appellant in Appeal No. 37 of 2018 Nikita Shankar) who states that not only on matters of Kassa but even in the matters of the group entities the appellant herein was fully in-charge of their day-to-day affairs. Therefore, his submission that the entire issue was a conspiracy between certain clients, complainants and key officials of Kassa does not have any merit at all. Given these facts and records we find no merit in the submissions of the appellant.

43. A common submission made by four of the appellants

(excluding Manoj Kumar Agrawal) is that the impugned order does not crystallize the amount to be repaid/ refunded to investors/ clients and when the principal amount itself is not determined interest liability also becomes inconclusive and hence the order is unimplementable. It is also contended by them that the Demand Notice/ Recovery Certificate dated December 18, 2018 has travelled beyond the impugned order. When the impugned order itself does not crystallize the amount due the Recovery Certificate for ` 80,97,62,785/- could not be issued by the Recovery Officer who is not an Adjudicating Authority. Further the Recovery Officer does not tell what is the amount to be adjusted in coordination with the NSE and BSE as directed in the impugned order. We find some merit in these submissions; it is not clear from the Recovery Certificate how the amount has been arrived at; what is the interest liability; whether payments made to various parties by NSE and BSE have been taken into account etc.

44. In the light of the above, while upholding the impugned

order on merit we remit the matter to SEBI to specifically decide the following issues: i) The Recovery Officer shall crystallize the exact amount of liability for refund/ repayment to investors/ clients and issue a revised certificate. ii) The WTM shall reconsider the period of restraint imposed on Manoj Kumar Agrawal, (appellant in Appeal No. 346 of 2017). iii) The WTM shall consider the request of Manoj Kumar Agrawal for liquidation of his mutual funds units.

45. The appropriate authority shall pass fresh order(s) on the

above issues within a period of three months from the date of the receipt of this order after giving an opportunity of hearing to the appellant(s). All the Appeals are disposed of on above terms with no orders on costs. Consequent to disposal of the appeals Misc. Applications for stay of the impugned order have become infructuous and are dismissed as such. Sd/- Justice Tarun Agarwala Presiding Officer Sd/- Dr. C.K.G. Nair Member Sd/- Justice M. T. Joshi Judicial Member 26.09.2019 Prepared & Compared By: PK