SUPREME COURT STRIKES DOWN AND SETS ASIDE SAT’S ORDERS

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The Honorable Supreme Court of India struck down and set aside the orders passed by the Honorable Securities Appellate Tribunal. After two brief hearings the Honorable Chief Justice of India, Shri S. H. Kapadia along with Honorable Justice K.S. Panicker Radhakrishnan and Honorable Justice Swatanter Kumar passed its judgment wherein it observed that the points and arguments raised by the Company were not considered by SAT and therefore in the interest of justice, the Honorable Supreme Court struck down and set aside the orders passed by the Honorable SAT and asked it to issue fresh orders.

The judgment passed by the Honorable Supreme Court of India clearly upheld the arguments and points raised by the Company against the Orders passed by SAT which the Honorable SAT chose to completely disregard and ignore while passing its Orders against the Company and its Promoters. SEBI’s original orders and the consequent Orders by SAT upholding SEBI’s orders therefore clearly demonstrate a severe bias towards the Company and the Promoters and show a motive to intentionally harm the Company and its Promoters by trying to completely obliterate the presence of the Company and its Promoters from the capital markets.
SEBI had mainly alleged that Parsoli Corporation Ltd. and its promoters had fraudulently transferred 80,800 shares of investors to themselves and other alleged front entities in 2005. It has also alleged that PCL gave out false and misleading corporate action announcements in 2005. SEBI has further alleged that the promoters transferred shares to a group of entities who then sold the shares in the market.
Parsoli Corporation Ltd and its promoters have consistently maintained that no shares were fraudulently transferred and shares given to a group of entities were part of a share pledge agreement in 2005 when the company was in dire straits, due to the effects of the communal riots in 2002 where it was specifically targeted  due the company being promoted by members of the minority community, and was in desperate need for funds to sustain the business and had pledged these shares but the entities to whom these shares were pledged then sold the shares instead of returning them back when the money was paid back. Also PCL and its promoters have never given out any false and misleading corporate action announcements and the specific case of where an interim dividend was announced but then later withdrawn at the behest of the Board of Directors who deemed it more wise to invest the money in the business by acquiring membership of CDSL and BSE rather than giving out an interim dividend payment and the same was communicated to all regulators as required under law.
Further, even if there were inadvertent cases of shares being mistakenly transferred, all of the 252 shareholders of the 80,800 equity shares were fully compensated even before SEBI came in to the picture. Thus there were no complaints or any aggrieved parties. This clearly shows that there was no malicious intent as claimed by the Honorable SAT. Also it defied logic that the Promoters would transfer a miniscule amount of 80,800 shares which amounted to 0.6% of the total shareholding of the Company and amounting to mere `12 Lacs when the Promoters already held over 87% of the shareholding.
Moreover SEBI did not find of any profit or gain made by the promoters on these meager quantities and there was no finding of any insider trading or circular trading or market rigging or creating artificial volume or synchronized trading.
Despite all allegations by SEBI being completely unsubstantiated and all allegations being mere conjectures and inferences drawn by themselves without any proof of any wrongdoing by PCL or its promoters, SEBI had rejected all Consent Applications and thereafter passed 4 different Orders against the company under which :

1. A penalty of Rs. 25 Lacs has been levied upon PCL by the Adjudication Officer
2. A penalty of Rs. 3 crores has been levied upon the Promoters of PCL and their family members
3. PCL has been restrained from accessing or dealing in the securities market in whatsoever manner for a period of 1 year but is allowed to service its current clients as per the order passed by M.S. Sahoo, Wholetime Member of SEBI on 28 June 2010. This despite the fact that PCL had been restrained from accessing or dealing in the securities market or acquiring any new clients or business since 20 February 2009 as per the Interim Order passed by Dr. K.M. Abraham, Wholetime Member of SEBI. Therefore PCL has already served 19 months of not acquiring new clients under the interim order
4. PCL has also been restrained from accessing or dealing in the securities market in whatsoever manner for a period of six months as per the order passed by M.S. Sahoo, Wholetime Member of SEBI on 22 July 2010
5. In its final order passed by M.S. Sahoo, Wholetime Member of SEBI on 27 July 2010, he has directed that PCL be restrained from accessing or dealing in the securities market in whatsoever manner for a period of 7 years and its promoters Mr. Zafar Yunus Sareshwala and Mr. Uves Yunus Sareshwala from being the directors of any listed company for a period of 7 years.  He has also directed Mr. Zafar Sareshwala and Mr. Uves Sareshwala to make an public offer through a merchant banker to the public shareholders to acquire their shares by paying them the value determined by BSE as per the manner prescribed in Regulation 23 of SEBI (Delisting of Equity Shares) Regulation of 2009 within 3 months of the order and has directed BSE to compulsorily delist PCL if public shareholding falls below the prescribed levels after the public offer.

The Company thereafter filed Appeals against the SEBI’s Orders in the Honorable Securities Appellate Tribunal. However surprisingly at the Appeals hearing at SAT, the judge refused to even record the various observation, counterpoints and arguments and termed it as an open and shut case by himself. He then went on to pass his judgment upholding all of SEBI’s orders and termed it as a most heinous crime and as a fraud perpetrated by the Company and its Promoters. The Company thereafter filed another petition in the Honorable SAT pleading for the judge to atleast record the arguments put forward by the counsel of the Company and to hold the implementation of the Orders of SEBI in abeyance till the Company filed its Appeal against SAT’s judgment in the Honorable Supreme Court of India within the 60 days of SAT’s judgment as per the legal right the Company. Shockingly the judge of the Honorable SAT refused yet again to record the arguments put forth by the Company and refused to hold the implementation of the orders of SAT for 60 days till which time the Company could file its appeals in the Honorable Supreme Court of India.

The Company filed its Appeal against the Honorable Securities Appellate Tribunal’s Orders in the Honorable Supreme Court of India and the SC passed its judgment wherein it observed that the points and arguments raised by the Company were not considered by SAT and therefore in the interest of justice, the Honorable Supreme Court struck down and set aside the orders passed by the Honorable SAT and asked it to issue fresh orders.