Highlight Leafins Pvt. Ltd And Others vs Securities And Exchange Board Of India

Tarun Agarwala, Presiding Officer

Two sets of Appeals have been filed against the two different orders passed by the Adjudicating Officer (“AO†for convenience) of the

Securities and Exchange Board of India (“SEBI†for convenience). Appeal No. 144 of 2019 and 145 of 2019 is against an order dated September

27, 2018 passed by the AO imposing a penalty under Section 23H of the Securities Contracts (Regulation) Act, 1956 (“SCRA†for convenience)

and 15A(b) of the SEBI Act. The second set of appeals are Appeal Nos. 146, 147, 148 and 149 of 2019 against the order dated September 26, 2018

passed by the AO imposing a penalty for violation of Section 16 of the SCRA. The issue involved in all the appeals is the same and, accordingly all the

appeals are being decided together. For facility, the facts in the first set of Appeals in Appeal No. 144 of 2019 and the second set of Appeals, namely

in Appeal No. 146 of 2019 are being taken into consideration.

In Appeal No. 144 of 2019 the charge is that off-market transfer of shares was made by the appellant without any consideration. The contention

before the AO was that the transfer of shares was made against a consideration but proof of receipt of the consideration has been misplaced and is

no longer traceable. The AO recorded a finding that since no documentary proof was filed the transfer of shares without consideration is proved and

is in violation of Section 16 of the SCRA. In Appeal No. 145 of 2019 the additional charge is, that on account of transfer of shares there was a change

in the shareholding of the appellant by two percent which was not disclosed. Admittedly, the change in the shareholding was not disclosed and,

consequently the AO found that there was a violation of Section 15A(b) of SEBI Act.

In the second set of appeals the facts in Appeal No. 146 of 2019 is, that the appellant was induced to enter into a loan transaction and accordingly

pursuant to the said loan agreement the appellant provided a loan in the form of shares. It was contended that the borrower issued a cheque which

bounced and thereafter a legal notice was given and a complaint was lodged to the police. It was thus contended that the appellant was cheated and

that it was not a case that the off-market transfer of shares was without any consideration. The AO did not accept the submission of the appellant and

found that the shares were transferred without any consideration thereby violating Section 16 of the SCRA.

We have heard Shri Ashok Singh, Advocate for the appellants and Shri Vishal Kanade, Advocate for the respondent. Having heard the learned

counsel for the parties, we find that admittedly in the first set of appeals no documentary proof has been filed to show that the off-market transfer of

shares was based on any consideration. In the absence of any documentary proof, we do not find any error in the order of the AO coming to the

conclusion that the off-market transfer of shares was based on no consideration.

In the second set of appeals we find that the contention that the appellant was induced to transfer the shares is not based on any concrete evidence

and is without any foundation. We also find that the shares were transferred and, subsequently a cheque is alleged to have been issued which

accordingly to the appellant had bounced. We, however, find that no steps were taken by the appellant for recovery of the amount by way of filing a

suit or by filing an application under Section 138 of the Negotiable Instruments Act. Thus, an irresistible inference has been drawn by the AO to the

effect that the transfer of shares were without consideration which we do not find any manifest error.

In the light of the aforesaid, all the appeals fail and are dismissed with no order as to costs.