On Monday, the Securities Appellate Tribunal upheld a decision made by the Securities Exchange Board of India’s whole-time member. While upholding the decision, the tribunal noted that the ex parte ad interim order was passed based on urgency. No evidence is filed by the appellants, we do not find any illegality or irregularity in the impugned order.
This appeal was listed before a coram consisting of Justice Tarun Agarwala, the presiding officer and Ms Meera Swarup, the technical member. Mr Janak Dwarkadas and Mr. Pesi Modi were appearing for the appellants, while Mr. Darius Khambata and Mr. Aditya Mehta were appearing for the Respondents.
Facts of the case
The present case arose from the ex parte ad interim order passed by the Whole-Time member of the SEBI. This order passed the directions that “the notices (Punit Goenka and Subhash Chandra) shall cease to hold the position of director or Key Managerial personnel in any listed company or its subsidiaries until further orders” and “ZEEL shall place this order before the Board of directors within 7 days from the date of receipt of the order”.
This order was passed due to the appropriation of a fixed deposit of ZEEL by the Yes Bank for squaring off loans of related parties. Simultaneously, to this effect, an investigation was conducted where it was found that the promoters are engaging in an illegal activity.
The appellant, in this case, contended that the SEBI does not hold the power to cease the hold of the director position. Further, the order made by SEBI does not satisfy the test of urgent provisional action which is a necessity before passing of Ex parte ad interim order. It was also contended that the investigation is related to a matter which is 3 years old, and no explanation is tendered concerning such delay.
While the respondents contended that the charges are serious. The transaction is related to a previous date, but the information related to the same was provided recently which led to further investigation. In this investigation, it was found that there was siphoning off the funds of the company for the personal gain of promoters.
Judgment
After hearing the contentions of the parties, the tribunal noted that there exists no reason to interfere with the order of the SEBI.
The tribunal further noted that the argument that the conclusion of siphoning of the funds cannot be reached based on the bank statements is persuasive, but such an argument cannot be taken into consideration given that a prima facie opinion was reached based on objective facts indicating diversion of funds from a listed company, which was not in the interest of its shareholders and investors, as well as the fact that no evidence of any kind has been presented to us to support the prima facie opinion.
Ultimately, the tribunal dismissed the appeals because there was no reason to interfere with the contested decision at this time and instructed the appellants to respond to or oppose the ex parte ad interim order dated June 12, 2024, and requested a stay of that order within two weeks of this day. Following the appellants’ filing of their reply, the WTM will set a hearing date within a week and, after providing them with an opportunity to be heard, will issue the necessary orders within two weeks.
