SC sets aside SAT order in Parsoli share transfer case

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New Delhi, May 2 (PTI) The Supreme Court today set aside the Securities Appellate Tribunal (SAT) order, which upheld the fine imposed by market regulator Sebi on Ahmedabad-based Parsoli Corporation for fraudulent transfer of shares. It has asked SAT to issue orders afresh.

The Securities and Exchange Board of India (Sebi) had imposed Rs 4.25 crore fine on the company and its two main promoters and Joint Managing Directors, who are brothers Zafar and Uves Sareshwala for Demat fraud.

A three-judge bench headed by Chief Justice S H Kapadia set aside SAT''s order of January 12, after consenting to the facts that Sebi acted much more than the issues raised in the show cause notice issued to the Parsoli and its management.

The bench directed SAT to decide the issue afresh and pass the order accordingly.

Parsoli is listed on the Bombay Stock Exchange and is a member of the National Stock Exchange. It has also been approved by the banking sector regulator RBI to carry on business as the non-banking financial company (NBFC).

After finding Demat irregularities, in 2009 Sebi had cancelled the registration of its share transfer agent - Pinnacle''s shares registry. It found that the promoters were engaged in fraudulent transfer of shares.

According to Sebi, certain shares of Parsoli Corporation had been transferred to promoter entities and front companies by forging documents.

The board has found that Parsoli, along with the help of its Registrar and Share Transfer Agent (RTA), Pinnacle Shares Registry (PSR) had forged various specimen signatures and transferred the shares belonging to others.

Sebi slapped Rs 4.5 crore fine on the company and its promoters, which was challenged before the SAT. On January 25, dismissed the plea terming it as "fraud of the worst kind" on shareholders

SAT observed that its promoters violated provisions of the Sebi regulations, and when caught, they compensated the shareholders by crediting shares in their Demat accounts through off-market transactions.

SAT said, "We do not agree... Having regard to the heinousness of the conduct of the appellants, which has adversely affected the interest of the investors/shareholders and the integrity of the securities market, we do not think that any amount of penalty could be excessive.

"We are not inclined to reduce the amounts. For the reasons recorded above, all the appeals fail and they stand dismissed with no order as to costs."

The Sebi has already cancelled RTA license of Pinnacle Shares Registry and the matter is still pending before the apex court.