Decided on July 14,2010



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 dated 2.12.2004. 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. Thanking you, Yours truly, Sd/ - Siddhartha Srivastava 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: FORM -A 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.;

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