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Alfa Fiscal Services Private Limited & Others v/s Securities and Exchange Board of India

    Appeal No. 173 of 2012

    Decided On, 29 August 2012

    At, SEBI Securities Exchange Board of India Securities Appellate Tribunal

    By, P. K. MALHOTRA
    By, MEMBER

    For the Appellants: D. J. Khambatta, Senior Counsel along with Ravi Hegde, Paras Parekh, Advocates. For the Respondent: Shiraz Rustomjee, Senior Advocate along with Mihir Mody, Mobin Shaikh, Advocates.

Judgment Text

P. K. Malhotra (Oral)

1. PG Electroplast Limited, a company registered under the Companies Act, 1956 came out with an initial public offer (IPO) in September, 2011. The scrip of the company was listed on the National Stock Exchange of India Limited and Bombay Stock Exchange on September 26, 2011.

2. Securities and Exchange Board of India carried out investigations into the alleged irregularities in the IPO and trading of the scrip of the company. During the course of investigations, the Board prima facie came to the conclusion that the appellants, which is an investment company and carrying on the business of dealing in securities, and its directors have traded in the scrip of the company and it placed buy order at a price higher than the available sell order price in the system with the intention to increase the price of the scrip. Pending further investigations, the Board passed an ex-parte ad-interim order on December 28, 2011 against various entities including the appellants. By the impugned order, the appellants were prohibited from buying, selling or dealing in the securities market in any manner, whatsoever, till further directions. The said ex-parte ad-interim order is also a show-cause notice to the concerned entities, including the appellants, asking them to file objection, if any, against the said order.

3. The grievance of the appellants is that they filed their reply to the said showcause notice on January 16, 2012 denying the allegations. They also attended a personal hearing on May 3, 2012 and sent another letter dated July 24, 2012 requesting the Board to vacate the said ex-parte ad-interim order. However, the Board has not taken any action so far and under the said ex-parte ad-interim order, the appellants are being denied the right to trade in the market. According to the appellants, they have amply demonstrated that there is no merit in the allegations and the directions against the appellants are not required and the respondent’s action of not having passed a final order pursuant to the submissions of the appellants despite lapse of more than 7 months, is a major irregularity on the part of the respondent and call for impugned order to be set aside.

4. Shri Darius Khambatta, learned senior counsel appearing for appellants, has further drawn our attention to the letter dated March 14, 2012 addressed by Mr. Bhavesh N. Sheth, director of the appellant company and one of the appellants in the appeal where a request has been made to the Board that he may be allowed to operate his demat account purely on ad-interim basis to enable him to pay off his liabilities on which no action has been taken by the Board so far.

5. Shri Shiraz Rustomjee, Senior Counsel for the respondent Board submitted before us that there are 100 parties involved in the investigation and the Board is still looking into the matter. However, in so far as the appellants are concerned, the Board will pass final order within a period of two weeks. Therefore, interference by the Tribunal is not called for at this stage.

6. After hearing learned counsel for the parties, we are of the considered view that the matter is still at the investigation stage and it does not call for any interference by us at this stage. In so far as the appellants are concerned, since they have already filed their reply and a personal hearing was also granted way back on May 3, 2012, we see no reason why the Board cannot pass a final order after considering the reply filed by the appellants.

We dispose of the appeal with a direction to the Board to pass a final order qua the appellants within two weeks fro

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m today. While doing so, the prayer made by Mr. Bhavesh N. Sheth in his letter dated March 14, 2012 may also be considered. In case the Board is not able to pass appropriate order within the stipulated time, the exparte ad-interim order qua the appellants shall stand vacated. We make it clear that we are not expressing any opinion on the merits of the case. The appeal stands disposed of with above directions.