SIDDHARTH SHRIVASTAVA Vs. SECURITIES AND
SECURITIES APPELLATE TRIBUNAL
Click here to view full judgement.
N.K.Sodhi, Presiding Officer (Oral) -
(1.) THIS order will dispose of two Appeals no. 248 of 2009 and 20 of 2010
both of which are directed against the common order dated October 1, 2009
passed by the whole time member of the Securities and Exchange Board of
India restraining, among others, the appellants from accessing the
securities market for a period of two years from the date of the order.
These appeals have been heard together as they raise identical questions
of law and fact.
(2.) IT is unfortunate that both the appellants have not approached this Tribunal with clean hands and have made statements of fact in the
memoranda of appeal which are false to their knowledge. Both the
appellants are seeking to challenge the impugned order primarily on the
ground that they had never been served with the show cause notice dated
December 2, 2004 which was issued to them and several other entities
allegedly involved in the manipulation of the price of the scrip of
Universal Media Network Ltd. (for short the company) which was the result
of false and misleading corporate announcements made by the company. This
is what Siddharth Srivastava, the appellant in Appeal no. 248 of 2009 has
stated in para 5.2 of his memorandum of appeal. SEBI claims to have
issued a show cause notice to dated 2.12.2004 to various entities
allegedly involved in manipulation of the price of the scrip of UMNL,
including the Appellant herein
So far as the Appellant is concerned, the notice, purported to be Show
Cause Notice dated 2.12.2004 which is claimed to have been served upon
the Appellant at his Ahmedabad address in the State of Gujarat and at
Colaba, Mumbai was never served upon the appellant. The Appellant has
left both these places long ago and prior to the date of the impugned
notice dated 2.12.2004 and therefore the Appellant was not put to notice
of the purported show cause notice dated 2.12.2004, nor any attempt seems
to have been made by the Respondent to ensure that the Appellant is put
to notice about the purported show cause notice dated 2.12.2004. Hereto
annexed and marked Exhibit -B is the copy of the said show cause notice
Again, in para 5.4 this appellant states as under:
Be that as it may, the Respondent without putting the Appellant to any
notice of hearing being held before the Whole -time Member or without
ensuring that the Appellant is given a fair and reasonable opportunity of
making representation thereby depriving him of a valuable right of being
heard in the matter proceeded to pass the impugned order thereby
debarring the appellant for a period of two years from accessing the
securities market. Identical plea has been taken by the other appellant
as well in his memorandum of appeal.
(3.) FROM the record that has been placed before us by the learned counsel appearing for the respondent, we are satisfied that the aforesaid
statements of fact made by the appellants are not true and that they had
full knowledge of the show cause notice which had been served on them.
The show cause notice which was served on all the delinquent entities
including the appellants herein is dated December 2, 2004. The appellants
did not appear before the whole time member. Admittedly, on November 20,
2007 (almost two years prior to the passing of the impugned order) both the appellants filed identical applications before the respondent,
Securities and Exchange Board of India (hereinafter called the Board) for
a consent order in terms of the circular dated April 20, 2007. The
application for consent reads as under:
Kindly refer to our letter vide which we had intimated you that we
wish to avail consent scheme proposed by SEBI vide circular
No.EFD/ED/Cir -1/2007 dated April 20, 2007.
In this context it is submitted that we want to submit to a consent order
with respect to Show Cause Notice No. IES/ISD2/RR/SP/UMNL/27105/2004
dated December 2, 2004.
The consent proposal in prescribed Form A is enclosed herewith. We are
enclosing the requisite undertaking/waiver in the prescribed format.
Form -A was also filed duly signed by each of the appellants. The details
of the show cause notice were mentioned in this Form including its number
and date and also the details of the charges levelled against the
appellants. Para 17 in Form -A was filled by the appellants in identical
terms and this is what they say:
Before the Securities and Exchange Board of India In the matter of Show
Cause Notice No. IES / ISD2 / RR / SPUMNL / 27105 / 2004 dated December
2, 2004 under Section 11, 11(4) read with Section 11(B) of the SEBI Act read with Regulation 11 of SEBI (Prohibition of fraudulent and Unfair
Trade practices relating to securities market) Regulations, 2003.
1. Name/Trade Name of the Entity : Shri Siddhartha Srivastava 2 to 16. ..
17. Facts of the Case in Brief I. SEBI conducted investigation into the advertisements issued by the
company Universal Media Network Ltd. (UMNL). Shri Siddhartha Srivastava
is one of the directors of UMNL. It was found that there was sharp
increase in the volumes traded prior to the issuance of advertisements
and sharp increase in traded volumes subsequent to issuance of the
advertisements. The advertisements presented a misleading picture of the
true state of affairs of the company. II. Based on the findings of
Investigation SEBI issued show cause notice No. IES / ISD2 / RR / SP /
UMNL / 27105 / 2004 dated December 2, 2004 to Shri Siddhartha Srivastava.
III. Vide the said Show cause Notice Shri Siddhartha Srivastava was
called upon to show cause as to why suitable directions including
directions of debarring him from dealing in securities for a specific
period should not be passed under section 11, 11(4), 11B of the SEBI Act
1992 read with regulation 11 and 13 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to
Securities Market) Regulations, 2003 (FUTP).
Interestingly, the appellants enclosed a copy of the show cause notice
along with Form -A. The terms for a consent order as proposed by the
appellants in para 19 of the Form were rejected by the Board which
rejection was communicated to the appellants. They then filed the revised
consent terms as per their letters dated October 10, 2008 which were
identical except that the amounts offered were different. The revised
terms were also rejected by the Board and the whole time member proceeded
to decide the matter on merits.
In the light of the aforesaid material, can it be said that the appellants had not been served with a show cause notice or were never put
to notice in regard to the charges levelled against them. The answer to
this question has to be in the negative. When the appellants filed the
consent applications on November 20, 2007 enclosing a copy of the show
cause notice with Form -A, they had obviously been served with that notice
and, in any case, were in possession thereof. In para 17 of Form -A the
appellants have clearly admitted that a show cause notice had been issued
to them. They do not say that it had not been served on them. In this
view of the matter, it is clear that what has been stated in the
memorandum of appeal is false. Not a word has been said as to how they
came in possession of the show cause notice. When they were in possession
of the show cause notice in November, 2007 much prior to the passing of
the impugned order, they should have approached the whole time member and
participated in the proceedings. They chose not to adopt this course of
action and when they file their appeals after two years they say they
were not put to notice in regard to the charges in the show cause notice.
This is most unfair and their conduct cannot but be deprecated. What is
really amazing is that knowing what the record is, even the counsel
appearing for them continued emphasizing in an aggressive tone that they
were not aware of the show cause notice though they filed copies of the
same along with their applications for a consent order. Obviously, he has
been paid to say all this. He knows his ethics better but he should
remember that he is an officer of the Court and has a duty towards it.;
Copyright © Regent Computronics Pvt.Ltd.