ORDER
Kumar Rajaratnam, J. (Presiding Officer)
1. The appellant Brahaspati Financier Ltd. (hereinafter referred to as “the company”) has preferred this appeal. The company challenges the order passed by SEBI dated 27.1.2003 in debarring the company for a period of five years. The operative portion of the impugned order under Section 11B reads as follows:
“In the facts and circumstances as discussed above, I, in exercise of the powers conferred upon me under Section 4(3) of the SEBI Act 1992 read with Section 11B of the SEBI Act and Regulation 12 of the said Regulations debar Brahaspati Financiers Ltd. and its directors namely Shri S.K. Gupta, Smt. Suman Gupta, Smt. Navnidhi Garg, Shri K.N. Gupta, Shri Kapil Kumar Gupta, Shri Diwakar Gandhi, Chartered Accountant and Suraj Securities & Finance Ltd. in any capacity whatsoever, from associating with the capital market related activities, dealing in securities, accessing the capital market and associating with any of the intermediaries in the capital market for a period of five years. This order will come into force with immediate effect.”
2. The gamut of the charge is that the company committed serious irregularities in the information furnished in the prospectus. We have already stated the facts in earlier judgement rendered in the connected matter in appeal 55/2003 in Diwakar Gandhi. We also held that there has been misleading information in the prospectus and the Rs. 261.72 lakhs was never brought in by the promoters as claimed by the prospectus. Apart from this, forged certificate has been alleged to have been given by the company.
3. Mr. J.J. Bhatt, learned counsel for the appellant vehemently argued that the matter has been hanging fire since 1996 and set out the chronology of events and the dates in the following manner.
Date Particulars Page of
Appeal
Memo
May 1996 Acknowledgment card of SEBI
17.6.1996 Prospectus dated P. 27 of
Share Amount(Rs.) Prospectus
Promoters' 26,17,200 261.72 lacs
Contribution
Offered to
Public 24,00,000 240.00 lacs
25.7.1996 Issue opened P.28
5.8.1996 Issue closed P. 28
Sept/Oct 1996 Listed on DSE
8.12.1998 SEBI Chairman ordered investigation into the
affairs of buying, selling or dealing in the
shares of the company.
June 1999 Findings of Investigations put up to the
Chairman proposing that suitable directions
under Section 11B of SEBI Act read with
Regulation 12 of FUTP 1995 be issued
against BFL P. 28
16.6.1999 (instead of issuing direction as proposed
as aforesaid) SCN issued to the company P. 28
18.5.2001 Reply of the Company P. 42
27.1.2003 Impugned order P. 13
4. It was further submitted that the standard of proof required to find a person guilty under FUTP Regulations is more onerous and the respondent must prove the case with the clinching evidence. It is submitted that this was not done in this case. Mr. Bhatt relied on judgments of the Tribunal such as Sterlite, Videocon and Bang and submitted that the standard of proof required for violation of FUTP is one in the nature of a criminal offence and the respondent should prove the case beyond reasonable doubt.
5. We are not inclined to accept the submission of Mr. Bhatt since we have held that standard of proof is based on preponderance of probability and in the case of FUTP Regulations, at best it can be said it should be one notch higher and can never be as in criminal law, the proof beyond reasonable doubt.
6. It is clear that the money brought into the company as promoter quota was nothing but an illusion. It is not necessary to dwell the facts of the case in detail since we have already dealt with the facts of the case in appeal 55/2003. We have no hesitation in confirming the order of the respondent. However, taking into account the chronology of events, it would be appropriate to consider the quantum of ban. The promoters have not preferred any appeal before the Tribunal. It is only the company which is before us. It was rightly submitted by Mr. Bhatt that the non-promoters equity should not suffer on account of the alleged irregularities committed by the promoters.
7. Taking into account the facts and circumstances of the case that the matter has been pending since 1998 and the impugned order was passed only in the year 2003, it would be appropriate to reduce the ban from five years to four years.
8. Appeal disposed of accordingly. No order as to costs.