In the matter of:

Appeal No.  23/2001

Videocon  International Ltd                                                          Appellant

Vs.
1. Securities & Exchange Board of India
2. Shri  D.R.Mehta, Chairman, SEBI
3. Dr.R.K. Kakkar, Division Chief,SEBI                                         Respondents

Appeal No. 24/2001

Shri V.N.Dhoot                                                                              Appellant
Vs.
1.Securities & Exchange Board of India
2. Shri  D.R.Mehta, Chairman, SEBI
3. Dr.R.K. Kakkar, Division Chief, SEBI                                        Respondents

Appeal No.25/2001

Shri S.M.Hegde                                                                             Appellant
Vs.
1.Securities & Exchange Board of India
2. Shri  D.R.Mehta, Chairman, SEBI
3. Dr.R.K. Kakkar, Division Chief, SEBI                                        Respondents
 

Appeal No.26/2001

Shri S.K.Shelgikar                                                                           Appellant

Vs.
1.Securities & Exchange Board of India
2. Shri  D.R.Mehta, Chairman, SEBI
3. Dr.R.K. Kakkar, Division Chief, SEBI                                          Respondents
 

APPEARANCE:

Mr. C.A.Sundaram
Sr.Advocate

Ms Neeta Rajda
Advocate
I/b. DSR Associates
in Appeal No.23/2001                                                                       for Appellant

Mr.J.D.Dwarkadas
Sr. Advocate

Ms Dipti Rajda
Advocate
I/b. DSR Associates
in Appeal No 24/2001 and  25/2001                                                  for Appellants

Mr. Surendra Raja
Advocate

Mr. Zal  Andhyarujina
Advocate
in Appeal No.26/2001                                                                         for Appellant

Mr.R.A.Dada
Sr.Advocate

Mr.Kumar Desai
Advocate

Ms Uma  Dalal
Advocate
I/b. Maneksha & Sethna

Mr. S.V.Krishna Mohan
Division Chief, SEBI

Mr. Vijaykrishnan  G
Legal Officer, SEBI                                                                                 for Respondents
 

(Appeals arising out of the order dated April 19, 2001 made by Shri  D.R. Mehta,   Chairman, Securities  and Exchange Board of India)
 
 

The present appeals are directed against the order dated 19th April, 2001, made by Shri D.R.Mehta, the then Chairman, Securities & Exchange Board of India. By the said order the Appellant in appeal No.23/2001 has been directed �not to raise money from the public in  the capital market for a period of three  years in the interest of investors�.  It has  been further directed that prosecution proceedings be  launched against the Appellant �through� its directors/officers i.e. Shri V.N.Dhoot, Shri Shelgikar and Shri S.M.Hegde, the Appellants in appeals No.24/2001, 25/2001 and 26/2001 respectively, under the provisions of the Securities and  Exchange Board of India Act, 1992 ( the Act) for violation of regulation 4(a) and 4(d) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations 1995 ( 1995 the Regulations).

The Appellant in  appeal No.23/2001 (the Appellant company) is a public limited company.  It is mainly engaged in the husiness of manufacturing and selling   of consumer  electronic items and consumer durables, such as  colour  televisions, audio-video systems,   refrigerators, air-conditioners, washing machines,    computers, etc. . The   share   capital  of the Appellant as on 31.3. 2000 was  Rs.1411.89 millions . Appellant�s  shares are listed  on  the Stock Exchange, Mumbai (BSE), traded as permitted  securities on the National Stock Exchange (NSE) and also traded on the stock exchanges at Bangalore, Chennai, Delhi, Calcutta, Pune and Jaipur. 65% of the Appellant�s share capital is stated to  be held by the public and the balance 35% by the promoters.

Appellant in appeal No.24/2001 (Shri V.N.Dhoot) is the Chairman and Managing Director of the Appellant company. Appellant in Appeal No.25/2001 (Shri S.M.Hegde)  and Appellant in Appeal No. 26/2001 ( Shri S.K.Shelgikar) are stated to be  associated with the Appellant company in their professional capacity as consultant/adviser. They are also authorised signatories of �Videocon group of companies� Respondent No.1 (SEBI) is a statutory body established under section 3 of the Act. It is mandated to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market. Respondent No.2 (the Chairman) is the Chairman,  SEBI, who has passed the impugned order. Respondent No.3 is Division Chief, SEBI, who has issued the show cause notice to the Appellants.

The  Respondent SEBI, carried out an investigation into the alleged price manipulation   in the shares of  certain  companies including the Appellant company, especially during April and May, 1998. The investigation revealed that  a set of brokers and sub brokers acting in concert and on behalf of a  common set of clients identified as Damayanti Group, cornered  a large chunk of shares of the Appellant company at BSE and NSE and  thereby �built up unusually large positions in the scrips� resulting in destortion  of the market  equilibrium and  creation of artificial  market in the scrips. Based on the findings of the investigation,  Respondent No.3, on December 20, 1999 issued show cause notice to the Appellants .   The text of the show cause notice issued to the Appellants is common. The show cause notice  inter alia   contained the following allegations/observations:

� There were large volumes coupled with fluctuation in prices of the scrips  at the bourses in respect of  the Appellant company, BPL Limited (BPL) and Sterlite Industries Ltd.(  Sterlite) , especially during April and May, 1998.

� The Appellant company�s   share price  which was around Rs.100/- in April, 1998 touched a high of Rs.165/- on 04.06.1998, that the  price movement was not in conformity with the Sensex/Nifty movements, and also not in line with the price movement of the shares of other companies in the same industry segment,  that the scrip could not sustain the rise longer and fell sharply after 04.06.98  to a low of Rs.51/-.

� A set of brokers and sub-brokers acting on behalf of a common set of clients (Damayanti group) cornered a large chunk of shares of the Appellant company both at BSE and NSE. The Damayanti group, built up unusually large positions in these scrips resulting in distortion  of the market equilibrium  and creation of artificial market in these scrips. Damayanti group comprised mainly of the following entities, viz. Damayanti Finvest Pvt.Ltd, CDP Fincapand Leasing Pvt.Ltd, KRN Finvest and Leasing  Pvt.Ltd, Rijuta, Finvest Pvt.Ltd, Ikshu Finvest Pvt.Ltd, Money Television Industries Ltd. These entities had neither the financial worth nor the professional expertise to undertake the kind of dealings, but merely acted as front  for Shri Harshad Mehta, who is a notified person under the Special Court(Trial of Offences Relating to Transactions in Securities) Act, 1992(the Special Court Act)

� Damayanti group acting through a set of brokers built up large purchase positions in the carry forward segments at BSE in the Appellant�s scrip  which increased from settlement to settlement, that this increase in carry forward position was accompanied by a corresponding increase in the scrip prices, which were being manipulated,  that  the hawala rate moved from Rs.45.50 to Rs.162/- during this period (Settlement No.1 to 10), on account of these manipulations.  The profits earned by Damayanti group / Shri Harshad Mehta as a result of increase in hawala prices over successive settlements were utilised for making further purchases both at BSE and NSE in cash segment, payment of margins and building up further positions in carry forward segment.  The delivery of shares received was also utilised for raising finances by doing share badla.  Thus, through this modus operandi, substantial portion of traded stock of the Appellant company  was cornered by Damayanti group/Shri Harshad Mehta and this cornering caused creation of artificial market and price manipulation in the scrip.

� The promoters of  the Appellant company  announced, on 9.4.98, that they would acquire 2% equity  capital of the company by making an open offer at a price of Rs.140/- per share.  The prevailing market price of the scrip at that point of time was around Rs.62/-.  Thereafter, on 25.5.98, the promoters revised this offer price from Rs.140/- to Rs.165/- per share. In that context  Shri V.N.Dhoot, the Managing Director of the Appellant company   was called and advised by the Respondent that the promoters should refrain from making such announcements of intentions to buy at �higher prices� without actually initiating a formal process of offer, as such announcements lead to artificially affecting the share price.  Thereafter, a Public Announcement was made by the promoters wherein price of Rs.165/-, for   each    share   of the    Appellant company was offered. As per the provisions of the Securities and Exchange Board of India (Substantial  Acquisition of Shares and Takeovers) Regulations, 1997 (the Takeover Regulations), the promoters of a company are allowed to  acquire 2% of the equity as creeping acquisition without making a public offer. But the promoters chose to follow the public offer route for acquiring 2% equity,  that the various announcements by the promoters of the Appellant that they would be acquiring 2% shares at much higher rate than the prevailing market price had the effect of bench marking the scrip price and led to distortion of true price discovery of the share price.  Such announcements by the promoters  had a material impact in artificially increasing the price and volume of the  scrip.

� The Videocon group made funds available to Damayanti group, to enable Shri  Harshad  Mehta to build up positions and corner the floating stock in the scrip.  The funds were routed from the Appellant company  and placed at the disposal of Damayanti group through a myriad of transactions through several bank accounts of Videocon group entities at Federal Bank, Fort branch, Mumbai.  Videocon group placed an aggregate amount of around Rs.10 crores at the disposal of Shri Harshad Mehta by making purchase of illiquid shares in �spot� from Damayanti group.  These alleged spot deals were not reported by the brokers to the Exchange.  This arrangement was merely a façade to transfer funds from Videocon group to Damayanti group entities.

� Some of the brokers, dealing on behalf of Damayanti group, who had cornerned a substantial chunk of the Appellant company�s  shares faced payment problems in June, 1998 and could not discharge their commitments towards pay-in liabilities.  The outstanding carry forward positions of some of these brokers were taken up by Madhukar Seth & Co., Jaysukhlal Jagjivan, Springfield Securities Ltd. and Ventura Securities Limited, brokers of BSE,  through �all or none� or �bulk� deals at pre-determined rates and quantities by synchronizing the timing of logging in of the trades by the buyers and the sellers. The brokers connected with Damayanti group sold these shares as bail out package. The funds for the purchase of shares to the said  brokers  were given by Videocon group entites through Joy Holdings P.Ltd (JHPL), a Videocon group company . The  purchase of these shares of  the Appellant company was  made by Videocon group only, though shown in the name of other entities  to  circumvent the  prohibition contained in section 77 of the Companies Act.

� The purchase of  the Appellant�s   shares from the selected brokers who were dealing mainly on behalf of Damayanti group, through a complex web of entities controlled by Videocon group further corroborated that the Videocon group were involved in  the manipulation of the prices of the scrip in connivance with Shri. Harshad Mehta through Damayanti group.   The Appellant company provided an exit route to brokers dealing for  Damayanti group, when the artificial increase in price could not be sustained and these brokers got trapped.

� The Appellant company was asked to explain its  violation of  regulation 4(a) and (d)  of the 1995 Regulations, read with section 11(1) and 11(2) (e) of the Act, and  show cause as to  why directions including directions prohibiting it from dealing in securities & accessing the capital market,  and any other suitable directions, in the interest of investors and securities market under Section 11 read with 11 B of the Act and regulation 11 of the 1995 Regulations, should not be issued, and proceedings under section 24 of the Act should not be initiated against it through its directors/officers i.e. Shri V.N. Dhoot, Shri S.M. Hegde and Shri S.K. Shelgikar, for the above mentioned violations.

�In exercise of the powers conferred under Sec. 11 and Sec. 11B of the SEBI Act, 1992, I hereby direct that the  company, M/s.Videocon International Ltd not to raise money from the public in the capital market for a period of 3 years in the interest of investors. Further, I hereby direct that prosecution proceedings be launched against the company viz. Videocon International Ltd through its directors/officers, i.e. Mr.V.N.Dhoot,Mr. S.K.Shelgikar, and Mr. S.M. Hegde under the provisions of SEBI Act, 1992. The order shall come into force with immediate effect.�

Shri C.A.Sundaram, learned Senior Counsel appearing for the Appellant company submitted that the impugned order has been passed by the Respondent Chairman  in gross violation of the principles of natural justice and fairplay in as much as the statements of the brokers/witnesses were taken in the absence of the Appellant, that despite  repeated requests to give the Appellant  an opportunity of cross examining the witnesses/brokers, who were examined by the Respondents and whose statements have been relied on while passing the impugned order,  the request was not acceded to . He submitted that the statements of brokers namely S/Shri S.N. Nangalia, Navanit Rana and Ashok Jogani are not trustworthy and cannot be relied on, as they themselves have vested interest in the proceedings  having been investigated for contravening SEBI Regulations and having suffered penalties in the hands of the Respondent . Shri Sundaram, though contested the Respondents� decision  disallowing cross examination of the witnesses/brokers,  did not press the matter.

Learned Senior Counsel submitted that the impugned order cannot sustain legally and factually as the Respondents have failed to establish the  charge  of  market manipulation by the Appellant. Referring to the main allegation that the Appellant manipulated its   scrip price,   Shri Sundaram submitted that it is baseless as the  Appellant does not control the movements of  trading in its shares,   that it is the  market  forces that decide the prices,   that abnormality and volatility  are   common features in the stock market. He further stated that the Respondents have failed to establish,  what if any would be or was the motive or the gain to the Appellant in  manipulating its share prices as alleged in the impugned order and  the said failure is fatal  as regulation 4(a) and 4(d) being an anti fraud provision, the intention of the party concerned has to be established to bring home the charge.

Referring to the allegation that the public announcement of open offer to acquire 2% of the Appellant�s equity share capital  by the promoters had artificially increased  the price and volume of the scrip, learned Senior Counsel  submitted that such a public announcement followed  by a public offer cannot in any manner be considered as a device to manipulate the market. He  submitted that the public announcement was made, though not required by law, to benefit the investors, and  there is no bar on making a creeping acquisition in a  fair and transparent manner  to benefit the other shareholders, that the creeping acquisition   by the promoters through  public offer was in tune with the objective of the Takeover Regulations. He submitted that the very foundation of the charge of manipulation levelled against the Appellant is linked to  the public announcement of offer made on 9.4.1998 by  the  promoters to acquire 2% of the Appellant�s share capital (i.e. 14.24 lakh shares) from the public. According  to Shri Sundaram any offer to  buy shares at a price higher than the prevailing market  price would  necessarily activate the market and as long as the offer price is not an artificial one and the offerer honours the commitment, it cannot be viewed as an act of manipulation, that in the instant case  neither the offer price was an artificial one nor the commitment to buy the shares remained unfulfilled     Shri Sundaram  submitted that it is an admitted position that   on 9.4.1998 the price of the Appellant�s  share was Rs.62/-, that  the offer to acquire 14.24 lakh shares  at Rs.165 per share involving a total investment  of Rs.21 crores was for the promoter  group to consolidate its share holding  and strengthen its position as the promoters had apprehension  that  raiders would  take over the company by cornering the shares taking advantage of the low cost of  acquisition. He further  submitted that the public offer was made after intimating Respondent SEBI and upon the terms and conditions as approved by it. In this context  the learned Senior Counsel referred to the promoter�s  letter dated 9.4.1998 addressed to Respondent SEBI, copy of the text of the  public offer,  and the  press reports,  annexed to the appeal and in particular , the contents of the letter dated 9.4.1998 and stated that the promoters  had stated the reasons for making the public offer and had even sought the Respondent's �support and guidance� in the matter.

Shri Sundaram   submitted that despite the knowledge of the said public offer, at no point of  time  did Respondent SEBI raise any objection with regard to the   aforesaid   public   offer   but gave its  tacit approval as  is evident from the Respondent�s  own statement in the show cause notice issued to the Appellant, that �Managing Director of Videocon was called and advised that they should refrain from making such announcements of intentions to buy at �higher prices� without actually initiating a formal process of offer, as such announcements lead to artificially affecting the price of the scrip. Thereafter a public announcement was made wherein price of Rs.165/- for each share of Videocon was offered�. He submitted that if the promoters had any intention to defraud other shareholders, they would not have offered to pay 2 ½   times the prevailing market value of the shares by making the public offer, that if the intention was  to defraud  other share holders, rather than offering such a higher price the promoters would have preferred to depress the market price of the shares to their  advantage. Shri Sundaram  stated that the Respondents have failed to appreciate that the  promoters having committed themselves to acquire 14.24 lakh shares on 9.4.1998 from the public at the rate initially of Rs.140 and later at Rs.165 per share,  by �bench marking� the market price of the shares  no benefit would be derived, that it is but natural that when an attractive   public offer is made to acquire shares at a price higher than the market price ,  the existing shareholders and potential investors would try to acquire more and more shares by the record date (1.6.1998 in this case) resulting in increase in the volume and the price and the offer to buy shares at the rate of Rs.165 against the market rate of Rs.62/-, cannot have a different effect and be an exception. Learned Senior Counsel stated that the very fact that immediately after the  record date the share  price  dropped from  Rs.162.50 to Rs.50/- on 4.6.1998 itself demonstrates that increase in the volume and price was only on account of the investors wanting to derive benefit of the public offer made by the promoters. He stated that since the public offer did take place and the promoters acquired the  shares as promised, there has been no prejudice to any shareholder of the Appellant. Shri Sundaram stated that the allegation that the Appellant indulged in manipulating the price and volume of its own shares pursuant to the public offer made by the promoters and that it was done  for the purpose of �bench marking the price of its shares� is contrary  to and inconsistent with the facts on record and hence untenable. He also stated that the offer price was not an artificial price as could be seen from the Appellant�s Balance Sheet as on 31.3.1998 and   referred to the parameters like  Price Earning Ratio, Book value of the shares, dividend rate etc., and also  the progressive growth pattern of the Appellant year after year. He further stated that creeping acquisition itself boosts investor confidence in the company and upward share price movement is the normal effect, in such a context. He stated that the offer price was in no way manipulated, that as a result of the higher price offered,  everybody who wanted to take advantage of the offer, got benefited and that benefit was not confined to few but wide spread. He also stated that fixing a purchase price in tune with the book value cannot be considered as an artificial price. Referring to the observation in the impugned  order that �timing of the offer of the company in April and its subsequent revised offer in May 1998 has to be seen against the back ground where its share prices were showing  unusual rise and the company�s funding of the   operators in  the market  who built up long position in the scrips of the company�, Shri Sundaram stated that as per the Respondent�s version   ten crore rupees  was made available in April and  if that be so it  could  not have an  impact on trading in mid May, 1998  He  also stated that the Respondents have conveniently  ignored the fact that the promoters had only purchased the shares and did not sell the same and book any profit. He further stated that the  promoters  intending to increase their holding would normally try to depress the share value to reduce the cost of their acquisition, rather than increasing the cost. Learned Senior Counsel  submitted that in  the light of the facts and circumstances of the case,  the Appellant cannot be held  to have manipulated the  market,  to attract the provisions of regulation 4(a) and 4(d) of the  1995 Regulations.

Shri Sundaram cited the published market figures and  stated that the price rise was steady from 7.4.98 to 2.6.98 and started falling  from 3.6.98 onwards and touched Rs.56.50 per share on 30.6.98., that there was no overnight jump  or fall. He also referred to the quantum of shares  traded during the period and stated that there was no  quantum jump in the volume traded, as is being  projected by the Respondents,  that except on 11.5.1998 and 12.5.1998 on all other days the transactions were only normal in volume. He referred to the details of the price volume data of the scrip in BSE and NSE presented in the impugned order and stated that the Respondents in a very unfair manner  have chosen  selective data to suit their theory by ignoring the actual factual position. He denied the allegation in the order that � the price increase in the scrip of the company was not based on any economic fundamentals� and stated that  it is only   a casual remark without bothering to see  the strong  financial position of the Appellant  revealed in its   annual accounts.

Shri Sundaram, with reference to  the public announcement made by the promoters,  submitted that if the  Respondents� conclusion that  the open  offer  distorted the market equilibrium  is accepted that would  mean that  even if any third party makes the offer and the market responds positively that  would amount to manipulation of price warranting action!  He submitted that the Respondent�s role under the Act is of regulator and its primary function is to decide in the course of an activity as to whether that act  would affect the investor; that the regulator who did not see the need to regulate at the relevant time despite being there,  cannot find fault thereafter, that  in the instant case the Respondent SEBI was aware of the promoters plan to acquire 2%of the  Appellant�s  capital and that it had asked the Appellant to make the offer and not to stop by making public announcements.

Shri Sundaram submitted that the Appellant has not been charged for  violating the Takeover Regulations,  that if the Respondents  had felt that the creeping acquisition was not in accordance with the provisions of the Takeover Regulations they would have by now proceeded against  the Appellant, that even after 3 years of the public offer they have not done so  would  clearly indicate that there was nothing illegal  on the part of the Appellant company.  He stated that the Respondents cannot stop promoters  making  public offer for the purpose of creeping acquisition,  that making an informed public announcement   is not in contravention of the law, but is more in tune with the  spirit of the Takeover Regulations and the consequential  market response to such a legitimate action should not be a matter of concern to the Respondents.   Shri Sundaram   referring to the Respondents� version that under the Takeover Regulations, in the context of acquisition of shares public offer is required to be made only when the same attracts regulations 10 or 11, submitted that  public offer is not barred in the context of creeping acquisition is evident as the Respondents have accepted the transparent creeping acquisition by the promoters. He submitted that there is no prohibition in the regulation on  an acquirer making a public offer and making creeping acquisition. The Respondents� present  version that � you ought not to have done so � is  not correct, that the Respondent SEBI has forgotten the fact that it had asked the Appellant  to make the offer and  accordingly the public offer was made   and for obeying the Respondent�s  order, it cannot now  blame the Appellant. Shri Sundaram referring to the Respondent�s version that as a result of the public announcement made on 9.4.1998 scarcity was created in the market  and consequently the share price shot up, stated  that by the   Respondents� own version it was the public announcement  which was responsible for the market hike. He stated that  making a genuine  public announcement/ offer being not illegal, and if the price as a result of the offer moved up, the offerer  cannot be blamed, as it was only the natural effect of a legal action.  Shri Sundaram stated that in one breath the Respondents consider  the public announcement as  the cause of price  rise and in another breath they consider   Rs 10 crores  stated to have been given by the Appellant company as the cause  that they are not sure of the casue.  Shri Sundaram, referred to the effect of the public announcement on the market during 9.4.98 to 21.4.98 as perceived by the  Respondents,  that volumes on both exchanges fell drastically and the shares hit circuit  filters soon after opening on 13.4.98, 20.4.98 and 21.4.98 that as a result of the fall in the volumes, the floating stock  was reduced artificially and consequently  an  artificial demand was created resulting in rise in the price of the Appellant�s shares  from Rs.62 to Rs.105 by 21.4.98, that in the show cause notice and in the order the Respondent had stated that � this rise in price was accompanied by abnormal volumes in the scrip both at the BSE and NSE during this period�,  and submitted that thus  the Respondents themselves have taken a contradictory view. Since the offer price was  relatable to the economic fundamentals governing the share prices  the  purchase price offered by the  promoters cannot be considered as artificial, as alleged. Learned Senior  Counsel  submitted that if an offer is made within the real value of the scrip,  then the presumption is that the offer price/transaction price is not an artificial price, but   if the price is beyond the real value, the price can be considered as a manipulated price, that in the instant case the offer price was not above the real value. He further submitted that the price and volume movement is natural in the context  of a public offer  to purchase shares  which are fundamentally sound,  at a price higher than the prevailing market rate, from  the shareholders  whose name appears on the company�s register on a  prospective record date,  as  many would try to buy and  few  would like to sell,  to reap the benefit when the offer is made, resulting  in scarcity of shares in the market  and  rise in  price that  it is the law of demand and supply  that drive the market.. Shri Sundaram submitted that the yard stick of artificiality   should be one of  objective approach and not of  subjective approach. Shri Sundaram referred to the various provisions of the Takeover Regulations and the requirements  thereunder and stated  that the  Regulations is an investor friendly one as well,   and that the Appellant has not violated any of the provisions of the said Regulations while making the creeping acquisition .  He stated that the public announcement was made on 9.4.98 and public offer was also made on 29.5.98, scrupulously following the time frame provided in the Regulations.

With reference to the  allegation that the Appellant provided about Rs.10 crores to Damayanti group  to finance the transactions, Shri Sundaram submitted that  the Respondents have not cited a single transaction by the Appellant,  to support the allegation. On the contrary it has been stated  in the  order that � Damayanti group acting in concert, through a set of brokers had built up a large concerted position of around more than 50% of the total  position at the exchange in the scrip of Videocon� and �this cornering  of shares had created artificial market and price manipulation in the scrip� . He submitted that the daily market turnover in the scrip was to the tune of Rs20 crores per day and as such the allegation that just with ten crore rupees  reportedly provided  by the Appellant,   one could  hold 50% of the market position is unbelieable  and the finding  arrived at by the Respondents  in this regard is self  contradictory. He referred to the flow of funds depicted   in the  impugned order and stated that it could be seen therefrom that not even one rupee has been given by the Appellant to the Damayanti group. He submitted that JHPL to whom the Appellant is stated to have given Rs.10 crores is a pure trade transaction and the said  JHPL is not a  Videocon group company , that it  is owned and controlled by some one else and  the Appellant has no control over the business decisions of the said JHPL . He submitted that the Respondents  have  stated in the order categorically that all the brokers  (mentioned in the order) �dealt with extensively in the Videocon scrip on behalf of Damayanti group�, thereby  admitting that   it was the  brokers who had transacted in the Appellant�s  shares on behalf of Damayanti group. He submitted that the Appellant  was not connected with or  concerned in the share transactions done by brokers on behalf of Damayanti group or  any other entities. Referring to the finding in the order that GNH Global Securities Ltd and Shri Satyanarayan Nangalia �were given large amounts for purchase of shares� Shri  Sundaram  stated that by the  Respondent�s own  version these  two brokers were paid  just Rs.1.25 crores each. He stated that the Respondent has in a story telling manner stated  that the Videocon group was financing Damayanti group by sham transactions,  without bothering to substantiate such a serious charge.

Shri Sundaram stated that the Respondents had alleged that the   illiquid  shares  were purchased  in spot deliveries and by way of  an example purchase of  Global  Tele Systems� shares has been quoted, little realising that Global Tele systems share  at that point of time was not an  illiquid  scrip. He further stated  that the Respondents have not furnished the names of those companies the shares of  which  according to them   are �illiquid�, that  in any case  purchase of shares are business decisions taken by   each company,  not  the Appellant. With reference to the charge that the broker did not report the spot transactions to the exchange Shri Sundaram  stated that the proper course in that case is to take action against the   concerned broker and  in any case non reporting of the transactions  by broker to the exchange  will not change the nature of  the transactions. As regards the nature of fund flow shown by the Respondents in the order, Shri Sundaram, referred to the explanation given in the appeal memorandum and stated  that it was towards trade transactions/loan repayments, and utilisation of the  funds  was for the  recipients  to decide and not  by the Appellant.

Learned  Senior Counsel stated that the fund flow depicted  in the order indicates that the funds were transferred from 29th April 1998 till 30th July, 1998, but according to the Respondents,  prices/volumes of the Appellant�s shares  showed increase from 27th March, 1998 till June 4, 1998 on BSE and NSE, that this   would show that the fund flow had nothing to do with the market response during  the period April-May 1998, referred to in the order.  Shri Sundaram stated that as per  BSE/NSE data, Appellant�s scrip  price increased from 29thMarch, 1998 even when there was no fund flow from the Appellant as per the impugned order, that for nearly one month the price/volume on BSE/NSE increased even in the  absence of any such fund flow as  alleged. He further stated that as per the order the price increase continued  till 4th June, 1998  after which the prices started falling finally freezing at Rs.50.90 on 30th June, 1998,  that even from the  information furnished in the order showing the  flow of funds and the market behaviour, it could be seen that there was  no co.relation between the funds flow and price movement.  By  way of  illustration he stated that even though the order shows fund flow  after 4.6.1998 and even after 30.6.1998, the scrip price kept on falling. Shri Sundaram stated that the  Respondents have failed to establish the  version  that it was due to the alleged flow of funds  from the Appellant the share  price increased.

Shri Sundaram submitted that the Respondents have  failed to understand the  difference between the promoters and the companies and their rights and obligations.  The order refers to funding by Videocon group companies and ends up  in penalising the Appellant, though it is only one of the companies in the Videocon group, that on a representative basis one of the group  companies cannot be held liable for the  omissions and commissions, if any, of the other group companies, that the Respondents have not identified  any particular company in the group and its  involvement,  if any,  to proceed against . Shri Sundaram stated that in fact in  the impugned order the person responsible for the market destortion has been identified in the following words  that �the  Damayanti group built up unusually large position in the scrips of the Appellant resulting in distortion of the market  equilibrium and   creation of artificial market in their scrips�. Thus according to the Respondents it is the Damayanti group which cornered large chunk of shares  resulting  in distortion of market and not the Appellant, and there is no indication in the order of the Respondents having proceeded against the said Damayanti group, that the Appellant has been penalised  for the alleged  misconduct of  the Damayanti group though there is no material to show that the Damayanti group is connected  with the Appellant. Shri Sundaram  stated that  the Respondents have not produced  even an  iota  of evidence to show that the Appellant had provided funds to Damayanti group and  Damayanti group had transacted in  the  shares at the behest of the  Appellant. The Respondents have connected the Damayanti group with  the Appellant based on the untested and untrustworthy statement  of Shri Nangalia and GNH  Global Securities, ignoring  the denial of the Appellant of any such association.

Shri Sundaram submitted that the Respondent�s view that JHPL is a Videocon Group company   and as such funding by the said JHPL is to be considered as funding by the Appellant company is also  untenable for the simple reason that  the Appellant is neither a shareholder of JHPL  nor any of its  Director is a  Director of JHPL nor does the Appellant control the functioning  of the said company in any manner. Shri Shelgikar who is  a  shareholder and director of  JHPL , visiting the Appellant�s  premises as a consultant by itself  is not sufficient to  treat JHPL and the Appellant as one and the same entity . The fact that the said JHPL and the Appellant had trade transactions does not mean that JHPL is controlled by the Appellant and the Appellant  is liable to the actions of JHPL.

Shri Sundaram submitted that the conclusions arrived at in the impugned order by the Respondents that the Appellant provided funds through its associates, and certain brokers  rigged the share price at the behest of the Appellant  or that funds were provided to certain brokers facing- payment  difficulties  as a quid proquo measure are completely unfounded, that there is no material on  record based on which such a conclusion can be drawn. He  submitted that the Appellant has not directly or indirectly given any loan, guarantee  or any financial assistance for purchase of its own shares as alleged.

On the allegation of bailing out the  brokers,  by providing  a sum of Rs.15 crores from the Appellants� side, Shri Sundaram stated that the Appellant has not funded any particular broker to get out of the crisis as is evident from the impugned order itself. He re-iterated  the observations made  in the order that funds to the tune of Rs.15.5 crores were made available by JHPL after receiving the same from Videocon Group companies. The entire order  depicts Videocon group as the source and  JHPL as the centre of funding. Shri Sundaram submitted that the Respondents have unjustifiably linked Damayanti group with the Appellant and by linking so, the  Appellant has been held liable for the actions of the said Damayanti group. He said that for the purpose the Respondent has not adduced any evidence except stating that the bail out was meant to protect Damayanti group brokers,ignoring the Appellant�s version that funding for  the bail out  of brokers was  done at the behest  of BSE to avoid   payment crisis in the exchange. Learned Senior Counsel submitted that  unless it is established that the Appellant is a part of the Damayanti group or that the Damayanti group had cornered shares at the behest of the Appellant, the charge of manipulation against the Appellant flowing from the transactions made by the Damayanti group cannot be sustained, that the Respondent has failed to establish the said requirement. He stated that though  it has been  categorically stated in the order  that the Damayanti group acting through a set of brokers built up large  positions in the carry forward segments in the Appellant�s scrip at BSE, the Appellant has been penalised for the same though it cannot be held responsible for Damayanti group�s  transactions as it has no connection with them. He further stated that the Respondents have totally ignored the quantum  of the so called funds provided by the Appellants, vis-à-vis the cost of the shares stated to have been accumulated by Damayanti  group. He referred to the observation in the order that as a part of the bail out package 503000 shares of Videocon were purchased @ 111.60 aggregating Rs.5.62 crores by  Fedex Securities Ltd, and stated that the said Fedex is not  connected with the Appellant,  that it is absurd to hold that all those who have normal  business transactions with the Appellant  are � intimately connected� to it. As per the  Respondents� own  version the payment by Fedex for the purchase of these shares was made partly out of receipt of share application money of Rs.50 lakhs from  JHPL, loan of Rs.90 lakhs from JHPL and Rs.1.25 crores from the  Appellant towards deposit  of  lease fee, etc that these figures  add up to  Rs. 2.5 crores only and there is no indication as to who financed the balance amount of Rs.3.12 crores stated to have involved  in the transaction, that it should obviously be  by  some  one  and  the Respondents  have  suppressed   the  information, as revealing the same would have gone against their  theory, that  if the Appellant had been that interested, as alleged, Fedex would have been entirely funded for the purpose by the Appellant. He further stated that the allegation against the Appellant that the Appellant provided funds through its associates and certain brokers who dealt in the equity shares of the Appellant  and rigged the company�s share price   between  1.4.98 to 4.6.98 and provided funds to bail out  brokers in June, 1998 is totally baseless.  In this context he referred to the observations in the order that a sum of Rs.773.18  lakhs  was  given to Madhukar Seth during 13.6.98 to 27.8.98 for  the bail out operation effected on 12.6.98. The fund flow stated therein is that  from 13.6.98 to 19.6.98, was Rs.3.75 crores, 2.7.98 to 30.7.98 Rs.2.70 and 1.8.98 to 27.8.98 Rs.1.28crores!`

Shri Sundaram stated that according to the Respondents the Videocon group had made funds available to Damayanti group, that the funds were routed  from Videocon International and placed at the disposal of Damayanti group through several bank account of Videocon group companies,  that the Appellant is thus described as a financier who helped Damayanti group to purchase shares. Shri Sundaram submitted that the  order claims that this is based on the investigations conducted by the Respondent, that  the  investigation  finding as communicated to the Appellant has no such finding.  In this connection he referred  to the  various dates on which the fund flow is stated to have taken place  and the trade volume in the exchange in  those days,  that   on 29.4.98, Rs.1.5 crores (volume 7.8 crores) on 30.4.98 Rs.1.5 crore (volume 19 crores ) 2./5.98 Rs.7.5 crores (volume 11crores)19.5.98 Rs.2 crores (volume 89 crores )28.5.98 Rs1 crore (vol. 70 crores). He also pointed out that  it was spread over a period of one month and not overnight  and further to claim that by providing  just Rs.10 crores; huge transactions  could be effected is  incorrect.

Shri Sundaram referred to the Respondents� observation that the funds  moved from the Appellant  to Videocon  Petroleum Ltd  and from Videocon Petroleum Ltd  to Dombell Investment,  and stated that a contrary position emerges from the letter dated 13.4.1998  from Videocon Petroleum Ltd to Joy Holdings  P.Ltd (relied  on by the Respondents ), as the letter proves that the said Videocon Petroleum  Ltd had provided  a sum of Rs.20 crores  @ 20% interest to the JHPL as inter corporate deposit for a period of sixteen months. In this context he also referred to Shri Dhoot�s statement dated 20.7.1999 relied on by the Respondents that  �I am the Chairman of  Videocon Petroleum Ltd (VPL) and this company had surplus funds of about Rs.500 crores in 1998.  Out of this about  25  crores  were invested in listed securities. This was a normal investment of the investment division of VPL�.  In the light of the said unrebutted  statement,  the Respondents� claim that the  Appellant had funded through Videocon Petroleum  is  untenable.  Shri Sundaram submitted that the entire charge that  the Appellant  provided funds to buy its own shares,  thus falls flat in view of the uncontroverted  position that it was  Videocon Petroleum and not the Appellant who paid money to JHPL. Shri Sundaram referred to factual position explained in the appeal memorandum and stated that DIPL, VAL, VPL, JHPL, and Fedex were paid in the business  dealings. He stated that DIPL supplies Colour TV  and  washing machines to the Appellant from its manufacturing unit at Noida, that  VAL supplies consumer appliances,  VPL advances loans/ICD, JHPL also provides funds and Fedex provides hire purchase loans, that the Appellant repays/ returns the money due from it to  these entities in the manner they direct.

Shri Sundaram referred to the statement of Shri Nangalia and stated that to a question from the Respondents� investigating officer (Q.2) as to who were the clients on behalf of whom he  traded in the scrip of Videocon, BPL,  Sterlite, Seasa Goa and Pentafor Software during January 98 to  23.6.98 (date of deposition)  the said broker had admitted that in the  case of Videocon,BPL and  Sterlite his main clients were Damayanti Finvest P.Ltd, CDP Fincap and Leasing PLtd, Digital Leasing and  Finance, KRN Finvest P.Ltd and Rituja Finvest P.Ltd. Shri Sundaram stated that these are the companies shown as Damayanti group companies  by the Respondent in the show cause notice issued to the Appellant. From  Shri Nangalia�s statement it is clear that he had traded for the said clients. To another question seeking the name of the counter party broker to whom he had sold 2.4 lakh shares of the Appellant, Shri Nangalia had answered  �After the trading hours of 12.6.98 the exchange  asked us to put the sale order in Sterlite Industries in �all or none� segment. Accordingly we put the order and the same was picked up by some other brokers. Since all or none segment does not indicate the clearing number of counter party broker we are not in a position to give you the name of counter party broker. Similarly 2.4 lakh shares of Videocon International were  put in all or none segment at the instruction of the client and it was picked up by some other broker. Since in   both the cases we had a C/F position  there was no need to give the delivery�. Shri Sundaram stated that it is thus  evident  that it was not  in the knowledge of the Appellant as to who were  the brokers involved  in the bail out and  Shri Nangalia had stated that the transaction  was done  on the instructions of his client, and the Appellant has not been stated as a client by Shri Nangalia. Shri Sundaram  referred to another question put by the Respondents   to  Shri Nangalia as to whether �he had dealt for  a client  viz.M/s. Gandak Investments P.Ltd and how he was introduced to the said client and what was the nature of the transactions�, and   the answer thereto - � we were told by  Hema of 1208 Maker Chamber V that they wanted  to sell certain shares of Global Telesystems Ltd which would be purchased by M/s.Gandak Investments Ltd, we have not met any person from M/s.Gandak Investments Ltd and do not know their office�. The Respondent had asked Shri  Nangalia  to state in the light of  his large scale business with Damayanti group,  the financial credibilities of the said group, and in reply thereto he had stated  � � I received all the margins in time. There were no payment problems. Even in the beginning when the exposure was to the tune of a lakh shares of BPL, I was given around 30,000 shares of BPL as security. I did not have any doubts about their financial  credibilities.  In my view whatever I have done is correct as a normal broker�. Shri Sundaram submitted that, the one spot transaction, referred to by the Respondents cannot be considered as a channel for routing funds to  corner  shares. In this context he specifically referred to the observation in the order that the �Brokers  GNH Global Securities Ltd and Satyanarayan Nangalia in a statement to SEBI had stated that  Equity and Gandak belonged to the Videocon   Group and were introduced to them as client by Damayanti. These brokers were given large amounts for purchase of shares in spot by companies belonging to  Videocon Group and they were  inrtroduced as clients to these brokers by Damayanti Group, shows that this arrangement of purchase of shares in spot was worked out to transfer funds from Videocon Group to Shri Harshad Mehta through Damayanti Group  entities�. He  submitted that such conclusion is baseless as there is nothing  to support the same in the statement of the said two brokers placed before the Tribunal. Similar is the case; with  the Respondents� observation that �whenever the clients of these brokers i.e. Damayanti group were short of funds, Videocon group through Equity and Gandak provided the necessary funds by   sham transactions disguised as spot transactions between Damayanti  group and Videocon group.  Shri Sundaram submitted that these are all findings springing  out of  imagination and definitely not from any evidence. In this context he referred to the test of evidence required, to hold a person guilty of manipulation in terms of regulation 4(a) and 4(d),   explained by this  Tribunal in Sterlite Industries Ltd v. SEBI ([2001]34 SCL 485: [2001] 45 CLA 195 (SAT)) and stated that  the impugned order has failed to pass the test.

Shri Sundaram referred to the statement of Shri Navanit N Rana of GNH Global Securities  Ltd and pointed out that to the Respondent�s  query that �any shares other than VIL, Sterlite, BPL were purchased from his  counter for Damayanti group, Shri Rana had replied in the affirmative and  had stated that the other shares which were purchased and sold were of  SAIL, LIC Housing, Global Tele, Kreb Bio, Tata Chemical, Nagarjuna Fertiliser.  To another query  about the sale of shares of Kreb  Biotech and Global Telesystems as spot transactions to Equity Investments and Gandak Investments,  Shri Rana  had stated that  payments were  made directly to Sony and Valfin upon the instructions of Damayanti group and the payments were received upon the instructions of Damayanti group and the payments were received only after Damayanti group had given delivery of shares sold by them. Shri Sundaram stated that dealings in shares with Damayanti group is not an offence, that  the question is whether the Appellant had funded the said group  with the intention to manipulate the market,   that there is not even an iota of evidence against the Appellant in this regard. Shri Sundaram also referred to the statement by Shri Satvinderpal Singh Gulati of LKP Group  to show the non involvement of the Appellant and  that LKP group purchased shares  of its own. Shri Satvinderpal Singh  had deposed that  �LKP group had to receive a sum of approximately Rs.3 crores from M/s. Shrenik Shah and Bharat Khona, both members of the  BSE on account of payments given to them about 4 years back. For almost 4 years, the LKP group could not recover these amounts and the interest thereon. Despite our repeated insistence, the brokers expressed their inability to make over payment. We were  told by the broker that they had recoverable dues from Mr. Harshad Mehta and that we should recover our dues from him. Accordingly, we started following up with Mr.Harshad Mehta for recovery of our dues. This has been going  on for almost 4 years. Since Harshad Mehta could not pay up, he suggested that we purchase certain shares on his recommendation, make a profit on their sale and adjust the outstanding dues from the profits, . This was about a year ago. He made a recommendation in several scrips (about 30 or so) but on examining the fundamentals of the companies market report and price  behaviour we decided to purchase  shares  of BPL Ltd, Lakme, Federal Bank, SAIL, Global Trust Bank, Videocon International  Ltd and Sterlite . We did not perceive any risk in these purchases since the purchased shares were to remain in our possession. Accordingly Sea  Glimpse  Investments Pvt. Ltd  and Prasam Trading and Finance P.Ltd of the LKP Group purchased these shares on his recommendation. The total  exposure by the LKP group was in the range of 10 to 15 crores. These  purchases   were financed  out of own sources,  private  borrowings and bank finance from Standard Chartered , Bank of India and Global Trust Bank.

We purchased approximately 6, 00, 000 shares of BPL, 1, 00, 000 of Sterlite, 80, 000 shares of Videocon Ltd and others�.,  these  purchases were made by us through our inhouse broking concerns LKP  Shares and Securities  Ltd., LKP Securities Ltd and some other brokers of BSE and NSE like Satyanarayan Nangalia, Valfin Securities etc. We received deliveries in respect of all our purchases and have also got some of them transferred in our name��.�  Shri Sundaram stated that this   statement indicates   Harshad Mehta�s role,  and also explains some of the transactions of Nangalia, Valfin Securities etc., and  the non involvement of the Appellant. He also referred to the statement of Shri Nangalia to a  question  as to whether he had dealt for a client viz.  M/s.Gandak Investments P.Ltd and  how  he was  introduced to the said  client and what was  the nature of the transactions with them? that � we were told by Hema of 1208 Maker Chambers V that they wanted to sell certain shares of Global Tele Systems Ltd, which would be purchased  by Gandak Investments P.Ltd.  We  have not met any person from Gandak Investments P.Ltd and do not know their office. 1, 80, 000 shares of Global Telesystems Ltd were purchased by M/s.Gandak Investments Ltd  on spot basis which were sold by one of the concerns of Anil Doshi and Dinesh Doshi we received a payment of Rs.1.25 crores against this., The delivery of these shares were not given by us to M/s. Gandak Investment P.Ltd., we were then asked by Hema to purchase 1,20,000  shares of BPL in settlement nos. 12 in the Account of M/s.Gandak Investments P Ltd., and then sell these shares in the same settlement. A  loss of approximately Rs.1.03 crores was debited to their account. Since the payment was not  coming from M/s.Gandak Investments P.Ltd  we sold 1, 18, 000 shares of Global Telesystems Ltd in the market in settlement nos. 13, 14 and 15. We  have to recover about Rs.11 lakhs from M/s.Gandak Investments Pvt.Ltd, for which we contact Anil Doshi, and  Hema�. Shri Sundaram submitted  that  from this statement  it is clear that it was Damayanti group  which identified the broker and not the Appellant and the brokers were transacting at the behest of the said Damayanti group , that there  is no evidence to show that Damayanti group used   Appellant�s money to purchase the Appellant�s shares and  and there is no  evidence to show that the Appellant gave money and instructed Shri  Harshad Mehta to corner the shares on its behalf, that on the contrary as per the Respondents,   Harshad Mehta is the profiteer, that  to charge the Appellant  under regulation 4(a), there is no cause and link. The Respondents have wrongly come to the conclusion that the Appellants money was used to buy its own shares at its behest. Shri Sundaram stated that the bail out as such had no reaction in the market and  it is  not per se illegal. If the Respondent had made out a case that the brokers were holding large positions on the Appellant�s  account, then the Appellant is liable,  but   in the instant case the Respondent has admitted that it was Damayanti group of companies cornered the shares for Shri Harshad Mehta, that in the light of  such clear finding, the Appellant cannot be held to have manipulated the market.

Shri Sundaram submitted that the show cause notice stated that   Shri Harshad  Mehta manipulated  the market. He  read out  the portion   from the show cause notice stating that the investigations conducted by the Respondent into the suspected price manipulation revealed that there were large volumes coupled with fluctuation in prices at the  bourses in  respect  of BPL., Videocon  and Sterlite during April-May, 1998, that the  Damayanti group distorted  the market equilibrium and created artificial market in those scrips, that Shri Harshad Mehta  was identified as the driving force   behind the  Damayanti group, that in no uncertain terms  it has been stated in the notice the manner  in which the Damayanti group/Shri  Harshad Mehta transacted in securities, that substantial portion of traded stock of Videocon was cornered by Damayanti group/Shri Harshad Mehta and this cornering caused creation of artificial market and price manipulation in the scrip, that  thus the Respondents  having come to such clear conclusion as to who manipulated the market, the public announcement or the alleged fund flow from the Appellant could not  be considered as the cause of market manipulation warranting action against the Appellant.

Shri Sundaram also referred to the following submission made by the Appellant vide its letter dated 20.12.1999 before the  Respondent Chairman, in the inquiry proceedings before him explaining the circumstances of funding the bail out  that �when the officials of Bombay Stock Exchange and  National Stock Exchange made a bonafide effort to try and prevent a collapse or crash of the market and both BSE and NSE approached the promoters of VIL to overcome the crisis. Without prejudice  and without admitting, it can be said that, if at all it is the promoters who indulged into the activities to prevent the crisis and that too, at the behest of the BSE and NSE. At all times, it was projected to the promoters and they understood that the actions and assistance on their part had the endorsement and the approval not only  of BSE and NSE officials, but also of SEBI itself�. Shri Sundaram pointed out that this submission has not been rebutted in the order by the Respondent.  There has been no contravention of any provision of the Act or any rules or   regulations  in this regard by the Appellant,  and the action  to prevent a crash in the market must be seen as an effort to advance investor protection and not adverse to the interest of the investors. Shri Sundaram stated that the Respondents have not dealt with the said submission  but conveniently left out any observation thereon in the  order,  obviously for the reason that the said view  could not be disproved or disagreed to.

Shri Sundaram submitted that the  fact of BSE approaching the Appellant company and other companies seeking help to get over the payment crisis was not unknown to the Respondents  as the Appellant had stated the factual position in this regard in its  reply to the show cause notice  dated 20.12.1999;  that such knowledge is also evident  from the text of the questions  put in by the Respondent�s investigating officer  to certain brokers like Shri Satyanarayan Nangalia that  the Respondent  SEBI cannot  now take a  stand that  it was not aware of the same. He submitted that bail out  per se  does not attract regulation 4 and is not illegal in any manner. Shri  Sundaram stated that the Respondents have now picked up a  portion of Shri Dhoot�s negative answer to a question by the investigating officer  as to whether Shri Dhoot or his associate companies had received any communication from BSE governing Board members to help brokers having payment difficulties in June, 1998, and used  the same against the Appellant company. Shri Sundaram stated that the factual position was explained  to the Respondents by the Appellant in its written submission  dated 20.12.1999 and this factual submission is  corroborated by other witnesses  such as Shri Nangalia and Shri Navanit N Rana. He also stated that there is no finding contrary to the fact and that it is admitted by the Respondents also in the show cause notice that the companies involved were BPL, Videocon and Sterlite.  He stated that since it has been stated  in the order that Damayanti group cornered shares, the profit  motive behind such cornering cannot be with anybody but with Damayanti group or the persons owning  or controlling the said group  and that in any case it is not the Respondent�s  case that Damayanti group is owned or controlled by the Appellant. With reference to the memorandum of understanding arrived at between JHPL and Shriram  Investment company Ltd.,  relied on in the order, Shri Sundaram submitted that  the Appellant is  in no way connected or concerned with arrangement arrived at between the management of the said  two companies and that it  is not proper to rope in the Appellant company to every transaction,  involving its  share.  About Rs.1.25 crores payment by the Appellant to Fedex , the Respondents themselves have   admitted  the purpose for which the payment was made that it was not to buy shares but was towards deposit for lease, and in the  light of such a  factual finding, the Respondents� version that  the money  was paid to purchase the Appellant�s share cannot sustain.

Shri Sundaram referred to the show cause  notice and stated that the notice refers to manipulation in the shares of 3 companies viz. BPL, Videocon and Sterlite., He also stated that there were several reports  in the press that the shares of certain other companies were also  cornered by certain  persons leading to the market crisis in June, 1998 requiring BSE�s intervention to protect the market and bail out was designed for the purpose. Thus it is clear that it  was third parties  who played the mischief and the companies  were not the players as  it is not anybody�s  case that the said three companies  are under the same management or were acting in concert.

Shri Sundaram  to support his  line of argument did heavily rely on the  views held by this Tribunal  in the Sterlite case (Supra) on the scope of regulation 4(a) and 4(d),  test of evidence required to hold the person guilty of violating  regulation 4(a) and 4(d) and the scope of section 11 and 11B.

Shri Sundaram referring to the finding recorded in the impugned order that the Appellant has  violated the provisions of regulation 4(a)  and 4(d) of the 1995 Regulations stated that the charge is  totally baseless. He submitted that the onus is on the Respondents to establish the charge  with supporting evidence, that  since the charge  is of a serious nature and the attendant consequences being very severe, the standard of proof required is very strict and  rigid and no casual approach would suffice.

Shri Sundaram stated that he is adopting the same line of arguments which he had put forward in the Sterlite case (supra).  Shri Sundaram read out the provisions of regulation 4 and in particular clauses (a) and (d) and stated that the scope of the regulation need be clearly understood, before applying the same to the facts and drawing    conclusions. He stated that Chapter II of the 1995 Regulations, under which regulation 4 on �Prohibition against market manipulation�, regulation 5 on �Prohibition of misleading statements to induce sale or purchases of securities� and regulation 6 on  �Prohibition on unfair trade practice relating to securities� are put, is titled  �Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market�. According to him the object of the regulation, is thus clear that it is meant to prohibit fraudulent and unfair trade practices relating to securities market,  that in the absence of any  fraud or deceit the provisions of the regulation would not apply., that in the absence of any finding that the transaction was intended to defraud or  deceit  someone, there is no further scope for any investigation as to who did it and why did it. Shri Sundaram  stated that  deceit  through  market  manipulation  is what the regulation prohibits. In this context he   stated that there is not even a whisper of such a charge against the Appellant   anywhere in the order.  Learned Senior Counsel  stated that according  to clause (a)  of regulation 4,   no person shall, effect , take part in or enter into, either directly or indirectly, transactions in securities, with the intention of artificially raising or depressing the prices of securities and thereby inducing the sale or purchase of securities by any person. He stated that self profit is the motivation that attracts clause (a) of the regulation. Shri Sundaram submitted that  any price change in the scrips, as a result of genuine purchase or sale  would not attract the provision, that if    there is no artificiality in a transaction, regulation 4(a) cannot reach. He stated   that the words � intention of artificially raising  or depressing the price� are  the crux and that an  artificial price is not the genuine price.  Whether the price is genuine or artificial would depend on the attendant facts in each case. He submitted that the Respondents have not produced any evidence to show that the Appellant had transacted in securities, that the said transactions were done with intention of artificially raising or depressing the price and that thereby persons were induced to transact in securities.

Learned Senior Counsel submitted that in the context of market manipulation  charge leveled against the Appellant, it is necessary to clearly understand what is actually meant by �market manipulation�. According to him   the  Respondents have made the allegation without fully   appreciating the scope of the said  expression.  He stated that the expression �manipulation� for the purpose of  the regulation has not been defined,  but  its meaning is well understood in the market and by the regulators all over the world.

Shri Sundaram referred to the  provisions of regulation 4(a) and stated that by making a public announcement of  an offer by a person would not  amount  to �effect take part in, or enter into any transaction in securities�. As per the said regulation there must be a transaction in securities, that a pre-transaction measure does not trigger of the said regulation and only  an actual transaction is covered. He further stated that the expression "artificially� used  in the regulation is linked to the price and not relatable to  the act of raising or depressing. He further stated that �artificial� means not natural, that  since the offer price was well within the real value, it cannot be said that it was  an  artificial price . He stated that in the Appellant�s case in making the public announcement there was no  transaction, the price was real and not artificial, and there was no transaction which induced persons to purchase or sell securities and  therefore the Respondent�s charge that by making  the public announcement for the purpose of making creeping acquisition,  the Appellant  manipulated the market  and as such regulation 4(a) attracted is untenable.

Shri Sundaram submitted that Shri Dada�s  argument that penalty be read into the provision, makes it all the more  necessary to prove the said three ingredients and unless these ingredients are established no penalty can be imposed.  Shri Sundaram  submitted that regulation 4(d) is attracted only when a person  enter into a purchase or sale of any  securities, not intended  to effect transfer of  beneficial ownership, but intended to operate only as a device to distort the price and the market, the Respondents have not explained anywhere in the order as to how the said regulation is attracted to the instant case. He countered the  argument regarding  Respondent SEBI�s   powers  under section 11/11B to impose penalty, by extensively citing the observations from Sterlite case (supra) decided by this Tribunal. He  submitted that   the decisions in  Khemka (AIR 1975 SC 1549), Gulabchand (AIR 1966 SC 1734), Anand Rathi (2001)32 SCL 227 (Bom)) , M.Z.Khan (AIR 1999 Delhi 64), R.R. Bohra(1999 33 CLA 243 (Bom)) and Alka Synthetics(1999 19 SCL 460(Guj) and Bank of Baroda (2000 38 CLA 226 (SAT)) etc.,  relied on by the Respondents  have absolutely no application to the present case in view of the distinguishable features of the cases. He submitted that   no authoritative decision from any Court holding that the Respondent SEBI is empowered to issue directions which are outright  punitive in effect , has been cited by the Respondents, that on the contrary this Tribunal  in Sterlite (supra) case  had clearly viewed  with supporting authorities that  section 11B cannot be invoked to issue directions tantamounting to penalties.

Shri Sundaram, as an alternate argument submitted that regulation 12 of the 1995 Regulations  is not a punitive provision, it   is only a regulatory provision. In this context he  referred to regulation 44 of the  Takeover Regulations  and compared the same   with regulation12  and  stated that regulation 12 is restrictive unlike   regulation 44  which is inclusive. He  explained the scope of regulation 12(a)and stated that �dealing in securities�  does not include �accessing the capital market�, that the very fact that these are not one and the same   is evident from the Respondents� own version, stated in the show cause notice, wherein   it has referred to �directions prohibiting from dealing in securities and accessing the capital market� that  prohibitting  an entity from accessing the capital market is beyond the scope of regulation 12(a) and on that ground also the  direction cannot  legally sustain. Shri Sundaram submitted that neither section 11/11B nor regulation 12(a) is available to the Respondents to issue  penal orders. He further stated that every violation per se does not attract  penalties. In this context he   cited Addl.Commissioner of Income Tax,  Madhya Pradesh v. Kalyanmal Mills   Factory (1979 (116) ITR 881(MP)

Shri Janak Dwarkadas , learned Senior Counsel appearing for the Appellants in Appeal Nos. 24 and 25  adopted the line of argument putforth by Shri Sundaram and made few supplementary submissions.

Shri Dwarkadas explained in detail  the scope of regulation 4(a) and 4(d) and particularly  the significance of the words �with reference to  transactions intended to artificially raising or depressing the prices of securities� in 4(a) and �the transactions intended to operate only as a device to effect change in price of securities� in regulation 4(d). He referred to the impugned order and stated that there is nothing therein  to indicate that neither the Appellant company nor the Appellants in the other appeals had done anything to artificially  create a price  or market or that the share holders were induced to make transactions in an unreal market. He submitted that the order portrays something that is not real.

Learned Senior Counsel  stated that the instant case is a three pieces  jigsaw puzzle put in one hole, that these three pieces are (1) the  open  offer (2) the acquisition and (3) the bail out action. He stated that the time  frame involved in the case of public offer and acquisitions as per the Respondents is the period between  1.4.98 to 4.6.98. The bail out action is  outside the said  time frame.There is a commonality in the case of open offer and bail out as the factual position of the said action remains undisputed leaving the dispute  to facts concerning  acquisition of shares. Learned Senior Counsel  submitted that the Respondents� view that all the three actions are related  to each other is not correct. He  stated that by making the public offer  the promoters had only helped the investors by offering to buy their  shares at the rate of Rs.165/- when the price was languishing at Rs.51/-, that this was  not a  call for subscription  to the company�s shares independent of any investment from the promoters,  that the promoters had  stated that they are prepared to buy  14.24 lakh equity shares  representing 2% of the  paid up capital of the Appellant company  by putting their own   money of approximately Rs 21 crores. In this context he referred to the letter dated 9.4.1998 from the promoter to the Respondent SEBI,  the public announcement  and the public offer following the same  and also the fact of the promoters buying  the shares at the rate they promised. He stated that  despite the fact that the promoters had informed the Respondent SEBI about their proposed public offer,  and the Respondent having asked them to make the public offer   has taken an about turn and is finding fault with the public offer so  made  as the cause of  volatile market behaviour, which is not befitting to anybody, especially to a public authority like the Respondent.  Learned Counsel submitted that the public offer proposal was transparent and to benefit all the investors and it is untenable to view  such an action, which is  inconformity with   the goal of investor protection as  criminal act to be proceeded against. He submitted that to proceed against the Appellants, the Respondent is required to establish the motive and how the Appellants profiteered in the process and harmed the other  investors� interest. Shri Dwarkadas refuted the Respondent�s allegation that the offer price of Rs.165/- per share  was meant for �bench marking�. He pointed out the fact that the promoters had agreed to purchase the shares spending Rs.21 crores of their own money, has been ignored by  the Respondents, that there was no compulsion on any investor to purchase the shares at the  higher price offered , that the price quoted was the price at which the promoters were willing to buy the shares from others. He submitted that in the context of such a good  public offer, it is but natural that the trade volume and the price would  go up. He stated that the Respondents have missed the fact that when  14 lakhs shares were to be purchased, it was not specifically  targeted to anybody, but   left to the investors  at large and that is how the market was  driven and  that is the practice everywhere. He stated that for the increase in the trade volume and share price, the answer lies in the offer itself, that it is wrong to say that the public offer artificially raised price and volume. He reiterated that what is real is not artificial., that artificiality is the main ingredient  of regulation 4(a) and 4(d) and there was nothing artificial in the public offer made by the promoters of the Appellant company.

Shri Dwarkadas stated that the allegation  of acquisition of shares by providing Rs.10 crores to Damayanti group is based on pure conjunctures and surmises and there is not even  an iota of reliable evidence  in support of the said allegation  in the order,  that it defies all the reasoning to make one believe that when the promoters were planning to acquire a large chunk of shares at the rate of Rs.165 per share, involving a financial stake of approximately  Rs.21 crores, would spend another 10 crores to boost the price to  increase their  cost of acquisition further. He stated that neither the show cause notice nor the impugned order has explained the motive involved in raising the price  of the shares by  the Appellants at the  company�s cost. He stated that the Respondents have not given any   earthly reason  as to what gain the promoters would have made by pumping Rs.10 crores more  as  alleged. He further pointed out that,  if the Respondents are to be believed that   the price was artificial,    in that case no sensible investor would hold on the shares and buy grief,  as  he knows  that an artificial  market cannot last long and before the price crashes he would like to dispose of the shares and make profit and promoters are no exception to this. In the instant case nothing of that sort has been held against the promoters. Learned Senior Counsel stated that there is no  element of manipulation in making a genuine public offer or favourably responding  to a request from  BSE in the larger interest of the market and the investors and providing money  to avoid a   payment crisis, that   both the said  actions , are perfectly  in order and have not in any way resulted in market manipulation, but it has only  resulted in benefitting the investors.

Learned Senior Counsel  stated that  both the Appellants have been unjustifiably  roped in by the Respondents,  though  nowhere in the order, any charge  has been made out against them.  He stated that in the  whole order at two places Shri Hegde�s name appears, that at one place it has been stated that �cheques issued by all the companies in the chain were signed either by Mr.Shelgikar or by Mr. Hegde, who are directors in the investment companies of the promoters of Videocon International ltd (internal page 4of the order) , and that at another place (on internal page 14 of the order) that  �Shri S.M.Hegde authorised signatory  for the bank accounts of JHPL was working as the financial controller of the Videocon  Group�. Shri Dwarkadas stated that Shri Hegde�s name has been brought  in the context of bail out,  little realising that he had nothing to do with the bail out and that the bail out action by itself is not one attracting regulation 4(a) and 4(d). The Respondents have not established any link between  Shri Hegde and Shri Dhoot, or even with the Appellant company.  The Respondents have  also not established any link  of Shri Hegde and Shri Dhoot, with Fedex  and  JHPL and  there is no evidence of any  complicity on the part of the Appellants.

Shri Dwarkadas stated that the Appellants have been charged not for any faults on their part but for the  violation stated to have been committed by the Appellant company . According to the order � the acts of the company are in violation of regulation 4(a) and 4(d)��.� and therefore directed that �prosecution proceedings be launched against the company viz. Videocon International Ltd through its directors/officers i.e. Mr.V.N.Dhoot, Mr.S.K.Shelgikar   and Mr.S.M.Hegde  under the provisions of SEBI Act, 1992�.

Shri Dwarkadas referred to the provisions of sections 24,26 and 27 of the Act and stated that section 24 is on offences, section 26 relates to cognizance of offences by courts and  section 27 is specific  to offences by companies. He submitted that  courts are barred from taking cognizance of  complaints for offences punishable under the Act, from anyone  other than the Respondent SEBI,  that  the complaint is to be made only if  the Board have definite reason to believe that an offence has been committed. In this context he referred to regulations 10 and 11 of the 1995  Regulations and stated that the Board can issue directions under regulation 11 only on receipt of the investigation report and after giving a reasonable opportunity of hearing to the person concerned. He submitted that the impugned order to prosecute the Appellants is a direction and therefore, it was incumbent on the part of the Respondent to give them an opportunity of being heard, which the Respondents  have failed to give and as such the order is bad. He further submitted that it is evident from the  scheme  of the Regulations and the Act that the  prosecution follows an adjudication and it is not independent of adjudication. He also pointed out that prosecuting a person for an offence is not something   complementary,  it affects the  business of the person concerned and also  it is stigmatic and therefore the
Respondent cannot do away with the requirements mandated by the law required to be followed before   launching prosecution.

Referring to the provisions of section 27 Shri  Dwarkadas stated that section 27(1) comes into only  �where an offence has been committed by a company�. He said a deeming  provision cannot make an offence . He said that it is the adjudication required in the regulation which decides the offences and the guilty. Only when the guilt is established in the adjudication  the Respondent SEBI can launch the prosecution,  that in the instant case it has not been done. He stated that the provisions of   sub section (2) of section 27also refers to a positive finding that where an offence has been committed by the company, and it is proved that offence has been committed with the consent  or connivance or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company,  they shall be deemed to be guilty� Shri Dwarkadas pointed out that in the instant case  the Respondents have failed to establish commission of any offence by the Appellant and therefore there is no question of proceeding against the Appellants . He further stated that  it has also not been explained in the order as to why the Respondents have selected three persons i.e. Shri  Dhoot, Shri.Hegde and Shri Shelgikar and  what is their role  in the alleged offence, to prosecute them and on what basis it is considered that they were in charge of and was responsible to the company, for the conduct of the business of the  company. He stated that Shri Dhoot�s name does not figure  anywhere in the showcause notice or in the order and it is not known on what basis the Respondents have come to the conclusion that he is an officer described in section 27(1),  that he has not been even  given inspection of the documents relied upon by the Respondents or has  been called upon by the Respondents at any time for a personal hearing providing an  opportunity to explain his position vis-à-vis the Appellant company.

Learned Senior  Counsel  submitted that, assuming that section 27(1) is applicable,  as  per the proviso thereto  the charges against the Appellants to be �deemed guilty� have to be proved which the Respondents have failed to do,  that the Respondents have also  failed to establish any motive or gain to the Appellants or to the  Appellant company  that could arise as a result of their action,  that the Respondents have at no point of time expressly or by implication alleged mensrea or any intention on the part of the Appellants to do any act connoting guilt,  that no shares of the Appellant company were purchased/sold/and or traded through the alleged transactions. He  further submitted that as per the provisions of  the section the alleged charge has  to be proved by the Respondents after giving an opportunity of being heard to the persons concerned.

In the case of Shri Hegde, Shri Dwarkadas stated that he is not and has never been a director of the Appellant company, he  is not an officer in charge of the Appellant company or an employee  or a promoter of the said company, that he has been retained by the company as a consultant and authorised signatory and in that capacity  only  he had signed the  cheques and was not a  party to  any decision making in the  Appellant company. The impugned order does not give any reason as to how Shri Hegde  was responsible for and  how any act of his has resulted in the  alleged market manipulation. He  does not fall within the purview of section 27, by virtue of any position vis-à-vis the company,  that he is not a person deemed to be guilty of any  offence as alleged by the Respondents. Section 27 attracts only to those persons exercising such powers which are managerial and to  persons who had played a role in the manipulation, that  as  an authorised signatory by himself, his role was only ministerial, and the Respondents have unjustifiably  roped  in him and directed to be prosecuted.

Shri  Shelgikar � Appellant in appeal No.26/2001- has made written submissions. His Counsel submitted that he is adopting the submissions made for the Appellant  company,  Shri Dhoot and Shri Hegde. It has been  stated that the Appellant  is a Chartered Accountant by profession and a professional consultant to many companies including the Videocon  group companies, that  he is neither a director and/or an officer of the Appellant company, but only an authorised signatory of the said company, that he is not an officer as defined in section 2(30) of the Companies Act as far as the Appellant company is concerned. The fact that he is only an authorised signatory of the Appellant company has been accepted by the Respondents  and still the Respondents  considered that �the Appellant is acting under the direction, supervision and control of the promoters of Videocon International  Ltd and in respect of its financial dealings� and based on the said perception the Appellant  has been considered liable to be charged  under section 27. According to the Appellant,   the said section 27 deems only two categories of persons to be guilty of the offence committed by the company, that under  the first category comes those �persons incharge and responsible to the company for the conduct of the business of the company� at the relevant time when the offence was committed and the second category   deems any �director, manager, secretary or  other officer of the company� guilty of such offence if it is committed with the consent or connivance of, or is attributed to any neglect on their part�. The Appellant being merely an authorised signatory and a consultant to the Videocon group  is not a person either  �incharge of� or  �responsible to the company for the conduct of the business of the company� that he is not a �director, manager, secretary or other officer of the company�  and as such cannot be deemed to be guilty for the offence allegedly committed  by the Appellant company, to come under section 27.

With reference to the Respondents� version that JHPL is an associate of the Appellant company , it has been stated that JHPL is a completely independent corporate entity, with its  entire share capital held by the Appellant and his family; that JHPL is engaged in the business interalia of raising finance and accordingly it has from time to time accepted loans from, and advanced loans to various Videocon group companies  on a commercial arms length basis, that apart from such normal business transactions, it is not in any way connected with the Videocon group.

The Appellant has stated that the Tribunal  is adjudicating an appeal against the order made by the Respondent and one of the directions in the said order is to prosecute the Appellant and therefore the Tribunal is competent to decide whether such an order directing prosecution is sustainable or not and the Respondents� submission that an appeal does not  lie against a direction to  prosecute  does not hold good. He has stated that  prosecution is a serious matter which permanently affects the reputation of the party concerned and should be initiated only on the basis of proper material and independent application of mind/logic reasons, that the impugned order fails to show any material whatsoever which implicate the Appellant in the disputed transactions and there is no indication to show any independent application of mind/or consideration of any cogent reason to prosecute the Appellant, that the prosecution has been directed against him, on the basis that he is a director/officer of the said company, which in fact he is not, that the order displays    the complete non-application of mind by the 1st and 2nd Respondents. It   has been further  stated that a person aggrieved by an order directing prosecution,  has the right to appeal against such an  order on the basis that the order is not based on any proper material and/or that no proper application of mind/ cogent reasons for such order have been considered, that the decision to prosecute under the Act is not a mere mechanical process, but requires independent application of mind, that where adjudication, leading to the  imposition of a penalty is possible, the decision to further prosecute a party must be backed by independent application of mind and cogent reasons. According to the Appellant, the direction to prosecute him has no legal or factual support.

Shri Rafiq Dada, learned Senior Counsel,  appearing for the Respondents in the cited appeals referred to various  dates and events relevant in the matter. He stated that prior to 9.4.1998, i.e. the date on which the press announcement of the promoters� plan to acquire 2% of the Appellant company�s equity  shares was published, the shares were quoted  on BSE and NSE at about Rs.60/62, and trade volume per day on BSE was about 10 lakh shares and on NSE about  5.75 lakh shares. He stated that �Videocon� by its letter dated 9.4.1998 intimated the Respondent inter alia that Dhoot family and its associates  wished to consolidate their equity holding in the Appellant company by acquiring 2% shares in the open market by making public offer @ Rs.140/- per share and that open  offer would be made in the week following the public announcement. He stated  that the price of the scrip  was around Rs.62/- on that day, that �Videocon�  made a press announcement to the aforesaid effect which was reported on 10.4.1998 in the Economic Times. Shri Dada stated that the effect of the said announcement, during 9.4.1998 to 21.4.1998, on the market was that volumes on both the stock exchanges, -BSE and NSE � fell drastically and the share hit circuit  filters on 13th, 20th and 21st April 1998, that as a result of fall in the volume, floating stock was reduced artificially thereby creating   artificial demand for the shares resulting in rise in the share price from Rs.62 to Rs.105 by 21.4.1998. He stated that during the  period 29.4.1998 to 2.5.1998 the Appellant  company and Videocon Appliances Ltd  made funds of approximately Rs.7 crores through  myriad of  transactions through several bank accounts with Federal Bank, Fort Branch Mumbai to brokers  viz. Sony Securities, S.N. Nangalia,  GNH Global Ltd, to mope up the reduced floating stock which led to further increase in price and thereby helped in maintaining the price at high levels, that the said brokers acting on instruction from Damayanti group built up large positions, and as a result of the aforesaid, price of Appellant�s share was hiked to Rs.151/- by 25.5.1998 i.e. well above the open offer purchase price of Rs.140/-, that on 25.5.1998 another public press announcement was made  increasing the public offer price from Rs.150 to Rs.165/- and in that context the Respondent SEBI  called the Managing Director of the Appellant company and requested him to refrain from making public announcement expressing the intention of the promoters to make purchase of 2% by a public offer without actually making a public offer,  as the said press announcement had led to artificial increase in the price of the shares. Shri Dada stated that during 25.5.1998 to 4.6.1998, the Appellant made available approximately Rs.3 crores through a myriad  of transactions through several bank accounts with Federal Bank, Fort Branch to Valpin Finance to purchase shares of the Appellant company for payment of margin, carry forward etc., and as a result of which the share price shot up to Rs.167/- and volume increased ,  that 46 lakh shares were in carry forward segment. In the last week of May, 1998 the  open offer was made.  On 1.6.1998  trade volumes reached  a peak of 46, 70, 887 shares and share price jumped to Rs.168/- . The public offer was opened on 15.6.1998 and closed on 3.7.1998. By end of June 1998 the Appellant Company�s shares crashed to Rs.51/- and volume also came down to 1, 03, 558 per day as the artificial  support was no longer there. Shri Dada submitted that on 4.6.1998, BSE faced payment crisis,  that between 4.6.1998 and 30.7.1998 the Appellant company and its associate firms provided  funds of  approximately 15 crores to brokers such as Madhukar Sheth and Co, Jaisukhlal Jagjivan, Spring Field Securities Ltd and Venture Securities Ltd  to bail out brokers dealing with Damayanti group, as detailed  in the show cause notice and  in the impugned order.

Shri Dada submitted that the Appellant company made two public announcements i.e. one on 9.4.1998 and again on  25.5.1998 which affected  the market   liquidity and  artificial scarcity so created in the market resulted in the scrip price shooting up.  He pointed out that  there was some nexus between the timing of the public announcement and the  supply of funds  from the Appellant company  to the Damayanti group. In this context he read out extensively from the impugned  order to show that the Damayanti  group was just a front for Shri  Harshad Mehta, a notified person under the Special Courts Act and the transactions effected  by some of the entities in the Appellant company�s shares were part of the said Damayanti group. He also referred to the graphic information furnished in the order on internal pages  9 to 12 to show that the funds moved from the Appellant company  through group  intermediaries and reached the Damayanti group . He stated  that there was some proximity of the fund flow from the �Videocon group� to Damayanti  group and the date of public announcement  and referred to the data stated  to  in the order (internal page 13) that during the period 29.4.1998 to 28.5.1998 a sum of Rs.5.50 crores was provided to Equity Investments P.Ltd and during  2.5.98 to 19.5.98 Rs.4.50 crores was provided  to Gandak Investments P.Ltd by JHPL and the said two companies provided  rupees 10 crores  to brokers of NSE and BSE  vi z. Sony Securities Ltd Rs.4.50 crores,  Valfin Finance Ltd Rs.3.00 crores, S.N.Nangalia Rs.1.25 crores , GNH Global Securities Ltd Rs. 1.25 crores.

Learned Senior Counsel stated that the sum of Rs.10 crores provided by JHPL was not its money  but  was given by the Appellant company . He stated that JHPL is an associate of the Appellant  companyand the relationship  between the two has been clearly explained in the impugned order,  that the fund was routed thus indirectly to over come certain statutory prohibitions on acquiring  the Appellant its own shares. In this context he referred to,  in particular the fact of  office space sharing, common telephones, close association of  Mr.Shelgikar with Videocon group,etc.  to  drive home the point that the  said JHPL  is closely associated with the  Videocon group . Shri Dada stated that  JHPL served as the link between the brokers and the Appellant company  as the Appellant cannot purchase  its own shares as per  section 77 of the Companies Act  and the modus operandi  adopted was to show that  these are  arms length transactions. Shri Dada pointed out that the fund flow coincidence is remarkable and one cannot in any way come to the conclusion that it was not the Appellant company�s money which was used in the transactions.

Shri Dada submitted that all the 4 brokers referred to above had  extensively dealt  in  the Appellant company�s shares on  behalf of Damayanti group that the funds were shown to have been received by brokers  in their books as money received for spot purchases where the selling client was Damayanti group entities and the buying client was two Videocon group companies viz. Equity Investments P.Ltd and Gandak Investment Ltd., to whom the Appellant company  through JHPL had provided Rs.10 crores. He further stated that in certain cases, the payments were not received by the broker selling the shares to Equity and Gandak but were made directly to other brokers by Equity and Gandak on behalf of Damayanti group. He stated that,  to create record of transactions,   accounting entries were made in the books of the broker, that in reality these were merely financing arrangements, given a colour of purchase and sale of shares and whenever the clients of Damayanti group was short of funds Videocon group through Equity and  Gandak provided funds by transactions disguised as spot transactions between Damayanti group and Videocon group. Shri Dada referred to the  observation in the impugned order that some of the brokers dealing on behalf of Damayanti group who had cornered a substantial quantum of the  Appellant company�s shares faced payment problem in June, 1998, could not discharge their commitments towards pay in liabilities , that the outstanding carry forward position of some of these brokers were taken up by M/s. Madhukar Seth & Co., Jaisukhlal Jagjiwan, Spring Field Securities and Ventura Securities Ltd., brokers of BSE through � all or none� or �bulk� deals at pre-determined rates and  quantities by synchronising the timing of logging in of the trades by the buyers and the sellers. Shri Dada read out from the  impugned order the names of the brokers connected with Damayanti group who sold these shares in the bail out package,  and stated that the fund flow of the purchasing clients, the concerned brokers, etc.  revealed that these brokers received funds from the entities connected with Videocon group only and the prominent entities who purchased the Appellant company�s shares  from the said brokers were Mehta Integrated Finance Ltd/Mehta Securities Ltd(MIFL/MSL)  (Rs.873.18 lacs) Spring Field Securities (Rs.108.0 lacs) and Fedex Securities Ltd (Rs.562.00) lacs), that the aforesaid sum of Rs.15.5 crores was  made available by JHPL after receiving the same from Videocon group of companies . He stated that Madhukar Seth & Co., had  taken over the outstanding purchase positions of the BSE brokers in the Appellant  company�s  scrip to the extent of 5, 65, 000 shares, that  a total of  10 lakh shares were  sold by Madhukar Seth as bail out package to the entities connected with Videocon group.

He also referred to an MOU arrived at between JHPL and Shri Ram Investment Services Ltd., of Shriram group for acquiring 5, 25, 000 shares of the Appellant  company @ Rs.130 per share, wherein it was stipulated that Videocon Leasing and Industrial Finance Ltd, a company belonging to Videocon group who had to recover Rs.3.68  crores from two  other Shri Ram group companies would not insist on recovery of the said amount till the transactions between JHPL and Shriram Investment was completed, that this MOU was signed by Shri D.A.Gadgil of Shriram group  and Shri Shelgikar of JHPL. Shri Dada further stated that as a part of the bail out package 5, 03, 000 shares of the Appellant company were purchased @ Rs.111.60 aggregating Rs.5.62 crores by Fedex Securities Ltd through Ventura Securities, a member of BSE who had taken over the carry forward positions of the brokers who had payment problems , that the said Fedex  is a close  associate of the Appellant company , that the fund requirement of Fedex in these transactions  was met partly out of receipt of share application money of Rs.50 lakhs from JHPL, a loan  of Rs.90 lakhs from JHPL and Rs.1.25 crore from the Appellant company towards deposit for lease etc. In support of his  arguments Shri Dada relied on the depositions of several persons as follows:

With  reference to the closeness  of Shri  Hegde with  the Appellant company, Shri  Dada referred to the statement made by Shri S.M.Hegde before the investigating officer on 9.7.1998 and stated that he  is closely associated with the Videocon group  as could be seen therefrom that in answer to a question asking him to state his  sources of income for the preceding five  years, he had stated that it   was through consultancy charge and that it was  only from Videocon group companies. Shri Dada stated that this indicates Shri Hegde�s   whole time assignment with Videocon group.  To another question with reference to his description as �the Finance Controller of Videocon International  Ltd (VIL)� on his business card and his  �exact status in the Appellant company� Shri Hegde  had stated that he looked  after the financial matters of the company but was not  in the employment of the company. In this  context Shri Dada  referred to Shri Dhoot�s deposition wherein he had stated that Shri Hegde is a part time employee. Shri Hegde had also stated that the Managing Director Shri .V.N.Dhoot headed  the finance department and he reported to Shri .V.N.Dhoot. Shri Dada also  stated that  Shri Hegde  had admitted that a majority of the Bank accounts of the  Videocon group companies in Bombay were operated by him as an authorised signatory , that to another question Shri Hegde had  stated that � I am the authorised signatory,  since I am  the Finance Controller of VIL and consultant to the group� . About the association of Fedex with the Appellant  company  Shri Hegde had stated that Mr.K.Madhavan of Fedex  was earlier  working  with Federal Bank , Fort Branch  and the Videocon group of companies had their accounts with the said Bank. In this context Shri Dada stated that the Bank   on which the  cheques were drawn  by the Appellant for the purpose was Federal Bank, Fort  branch. To another question as to who takes the decision in respect of the private limited companies in the  group  Shri Hegde had replied that � the decisions are taken by  Dhoot Brothers in respect of the above mentioned private limited companies of the Group. Shri Dada referred to several paras in  Shri Hegde�s deposition in an attempt to show Shri Hegde�s close  association with the Videocon group . Shri Hegde  had further  stated that Equity Investments P.Ltd and Gandak Investments P.Ltd belonged to the Videocon group of companies and  he was the authorised signatory for the bank accounts of these companies also.. To another query on the logic of money flowing from VPL to Equity   Investments P.Ltd and Gandak Investments P.Ltd� he had stated that �this flow of funds of approximately Rs.10 crores from VPL to Equity Investments P.ltd and Gandak Investments P.Ltd is at the instance of my Chairman V.N.Dhoot�, that  � the decision for investment by Equity Investments P. Ltd and Gandak Investments P.Ltd was taken by my Chairman, Shri V.N.Dhoot,  that �the cheques for the investments by Equity and Gandak were issued by me on the instructions of Shri V.N.Dhoot�. To another question � Is it true that this purchase  of shares was made by M/s. S.N.Nangalia, Sony Securities, GNH Global Securities, Valfin Finance etc.  which involved purchases of VIL Shares alongwith other shares� Shri Hegde had answered � this payment was not made for buying of VIL shares but was meant for purchase of other shares� and to another question �were these payments to the above brokers meant for purchase of shares or were they in the nature of loans given to the brokers or on behalf of any third party� he  had answered that � these payments were for purchase of shares only and not as loans. To another question � did you receive contract notes and bills for the purchase of shares from these brokers�, Shri Hegde had answered �Yes,  this should be  in  office.� Shri Dada stated that these  statements clearly indicates that Shri Hegde was not a mere authorised signatory, but an integral part of the management of the Videocon group  and  also that the companies in the group are well interconnected.

Shri Dada referred to Shri V.N. Dhoot�s deposition dated 20.7.1999  and stated that  to a question  as to who used to take investment decisions in Equity Investments P.Ltd and Gandak Investments P.Ltd, Shri Dhoot  had stated that �the Board of Director of these companies took the decisions in this regard�. To  another question in the light of Shri  Hegde�s statement that the cheques to Valfin, Sony GNH and  SN Nangalia were given to them based on Shri Dhoot�s  instructions,  Shri Dhoot had replied that �I am the Chairman of Videocon Petroleum Ltd (VPL) and this company had surplus funds of about Rs.500 crores in 1998. Out of this around Rs.25 crores were invested in listed securities. This was a normal investment of the investment  decision of VPL�. About the Videocon  groups  relationship with Fedex Securities Ltd Shri Dhoot had  stated �they are a sort of financial consultants to us and they help us to invest our monies�, that this indicates the role of Fedex in the transactions  vis-à-vis the Appellants shares. Regarding JHPL he had stated that � we have regular business relationship with Joy Holdings Ltd in the nature of borrowing and lending of money as ICDs� �I do not know how Joy Holding had utilised the money borrowed by them from our associate  companies.�

Shri Dada stated that Shri Shelgikar had  also  admitted in his statement that Equity  Investment P.Ltd and  Gandak Investments P.Ltd  are Videocon group  companies, that to a question as to why JHPL  applied for  the shares in Gandak Investments and Equity Investments and who took the decision and with whom the discussion in Gandak Investments and Equity Investments took place Shri Shelgikar  had stated � Joy holding carries on business as investment company. I took decision to invest in Gandak and Equity Investments. As regards the person in Gandak and Equity Investment, I had discussion with Mr.V.N.Dhoot�. Learned Senior Counsel stated that  Shri Shelgikar  had corroborated   Shri Hegde�s statement that  cheques
for all the  group companies used to be signed by him  on advice/instructions of Shri.V.N.Dhoot, Shri. R.N.Dhoot or Shri P.N.Dhoot. Shri Dada stated that to a  question that Spring Field Securities Ltd had ostensibly  purchased 5 lakh shares of VIL as a bail out process during the payment crisis at BSE at the instance of BSE, that these shares were purchased at Rs.111.60 per share, that  it has been shown that these very shares were  sold out by  Spring Field Securities Ltd @ 90/- per share, that  the  difference of 108 lakhs has been paid by Joy Holding to Spring Field Securities as the loss incurred by JHPL., Shri Shelgikar had answered � nothing of the above is true to the best of  my remembrance�. In response to the observation that  the JHPL  was used as conduit for transfer of funds from Videocon International or Videocon Petroleum Ltd to  Damayanti group,  JHPL took loan from various group companies of Videocon group and transferred the amount on the same day to brokers dealing for Damayanti group, Shri Shelgikar had stated that  the entire set of transactions  were part of the business of JHPL as an investment company, that  the company was not functioning as  �conduit� as alleged, that all  these transactions were business transactions. Shri  Dada stated that Shri Shelgikar did not  dispute the flow of funds as shown  to him by the Investigating Officer, that there is every reason to believe that JHPL was used as a front by the  Videocon group for its share purchase transactions.

About the transactions involving  Gandak and Equity, Shri Dada referred to Shri Nngalia�s statement that it  was Ms Hema from Damayanti group who had told them that they wanted to sell certain shares of Global  Tele systems Ltd which would be purchased by Gandak Investments P.Ltd  and stated  that it is to be remembered that Ms Hema is associated with  Damayanti group. Learned Counsel referred to  Shri Navanit N Rana�s (Director GNH Global Securities Ltd ) deposition and stated that he had also stated  that Equity Investments  PLtd and Gandak Investment P.Ltd are related to Videocon group, and  that Shri Rana to a question as to how was his  pay  in liability for settlement 12 met and how did he  receive the credit for share  of BPL , VIL, SIL sold in settlement 13 had stated that �. 69500 VIL shares were squared off with Seth Securities and 2,25,000 VIL shares  were sold at �all or none�  basis at the instructions of the customer and  all these transactions were for  Damayanti group.  Shri Dada stated that  from Shri Rana�s deposition the pattern is clear that money went from Videocon group to   Damayanti group and Damayanti group played. He also referred to the statement of Satvinder Pal Singh Gulati of LKP  group  to show the nexus of Shri harshad Mehta and Damayanti group and the Appellant company in the context, that  Shri Singh had stated that he  had transacted in the shares of VIL as recommended by Harshad Mehta. Shri Dada  also referred to Shri Darshan Mehta�s (Director Mehta Integrated Finance Ltd ) answer to  the question � who had placed orders with the broker Madhukar Seth for the deal in Videocon Ltd� that   �The clients had  themselves placed the orders as well as communicated to us. Day today operations of the deal are handled by the clients directly under intimation to us�

In this context he referred to that  portion of the  impugned order relating to the bail out and attempted  to link the transactions referred to therein with the statements of the brokers. Shri Dada stated that in reality JHPL  is a close  associate of Videocon group, that the said JHPL even uses  the letterhead of the other companies in the group and as an example  and in support he cited the use of Videocon Leasing�s letterhead by JHPL , on which MOU with  Sriram group was drawn up, that  JHPL�s claim of  arms length transactions is baseless as there is enough reason to believe JHPL has close  link with   Videocon group . In this context Shri Dada  also referred to the statement of  Darshan Mehta that the MIFL/MSL  had  done transactions on behalf of their clients Madhukar Sheth for purchase of shares of the Appellant company in the month of June, 1998 as specified and directed by their clients Sangath Investments PLtd and Sheth Integrated Pvt.Ltd, that JHPL  made payments to Madhukar Sheth on behalf of the clients, for the orders placed  by the clients with the broker Madhukar Seth. Shri  Dada also referred to the statement of Shri Ashok Jogani of Sangath Investment P.Ltd that he had dealt in  the Appellant company�s  shares  that he had purchased approx. 10 lakh shares of the Appellant company  through MIFL and the deal was done with Madhukar Sheth, that to a  query as to why the deal was done through Sheth with whom MSL or  MIFL  had no dealings  in the  normal course Shri Jogani  had  stated  that � when we got the put option offer, we approached Joy Holdings P.Ltd to finance our purchase. Joy Holdings Mr. Shelgikar is known to us. They agreed to finance on the condition that share shall be held in the name of MIFL and physical delivery of shares will be kept with Joy Holdings till repayment of loan. Shares will be purchased through   whom was also stipulated by Joy. The shares were to be transferred in the name of MIFL because MIFL had guaranteed repayment of loan taken by Sangath�. Shri Dada referred to Shri Jogani�s following deposition summing up the position that:

�Sangath were approached by Dombell for put option of ten lakh shares of Videocon @ Rs.155/- upto 30.6.99. We approached Joy who sanction an IDC of Rs.10 crores @ 3% for purchase of VIL shares on the condition that these shares are purchased from Madhukar Sheth,  transferred in the name of MIFL and physically to be kept with Joy. No where  asked by Joy to place order for VIL shares on Madhukar Sheth @ approx. 111-112 per share. We placed our order for  for approx. ten lakh shares on Madhukar Sheth and the  order was confirmed on Rs.111 and 112. We do not  know how this rate was arrived at. We have received physical delivery of five lakh shares out of which 1,77,300 have been sent for transfer in the name of MIFL. And the balance 2,22,700 are lying with Joy. Remaining 6 lakhs shares are being c/f by broker on our account�.

Learned Counsel submitted that from the conduct of the Appellant company, it is clear that it had indulged in market manipulation. In this context he referred to the press statement dated 9.4.1998 made by the promoters discharging  their plan to acquire 2% from the open market and stated that it was the triggering point, that the promoters did not buy any shares till May, 1998. It  funded Damayanti group�s,  transactions, created price distortion and volume scarcity in the market.  He submitted that the need for bail out was by way of  a quid pro quo measure, as it was necessary to save  the brokers in distress  who had transacted in the Appellant company�s  share at the behest of the Appellant company  and had manipulated the market. Shri Dada stated that there is no indication, that the bail out was made at the instance of BSE and this  is confirmed by Shri Dhoot  in his deposition.

Shri Dada  referred to the provisions of regulation 4(a) and 4(d) and explained its scope and reach and stated that the Appellant company�s indirect involvement is sufficient to attract the provisions of the said regulations. Shri Dada stated that there is ample evidence to show that JHPL  acted only as a dummy to create an impression that the funding by the Appellant company  was not for purchase of its shares, that it is clear from the unsustainable alibi such as paying money to private companies �towards application money on provisional basis�etc. . Shri Dada stated  that it cannot be viewed that Rs.10 crore supplied by the Appellant  is a negligible amount,  that the money was used for carry forward transaction  and by using the same as margin money  huge transaction was   possible. Shri Dada referring to the Apellant seeking shelter under  the Takeover Regulations  submitted that the Regulations  is not meant to  create artificial market as the press reports on the  would be creeping acquisition and belated public offer was meant only to  fool the public share holders.

Shri Dada referred to the price movement in the shares of the Appellant company in BSE and NSE vis-à-vis the respective index  to show the abnormality. He also referred to the data relating to the trading position of Damayanti group with certain brokers in the Appellants shares to show the build up over the period. In particular he referred to the trading position of S/Shri G.N.Hegde, S.N.Nangalia, R.R.Mohta, P.R Shah., R.R.,Bohra and Mahico Ltd etc., to show the extent of the build up position in the Appellant�s shares.

Shri Dada referred to the show cause notice and stated that it has been clearly mentioned therein  as to the consequences that would follow for the  of violation of regulation 4(a) and 4(d)  and the applicable legal provisions  in the context of the prima-facie finding  that  the Appellant company had indulged in the market manipulation. Vide the said notice the Appellant company was �requested to show-cause why directions including directions prohibiting it from dealing in securities and accessing  the capital market and any other suitable direction in the interest of investors and securities market under Section 11 read with 11B of the SEBI Act and Regulation 11 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices  relating to Securities Market) Regulations should not be issued�  and  the Appellant company was also requested  �to show cause as to  why prosecution proceedings under section 24 of SEBI Act, 1992 should not be initiated  for the above mentioned violations�. He further stated that, even if it is viewed that under section 11 B such a direction cannot be issued following the Tribunal�s decision in  Sterlite case (supra),  still the order is to be sustained as regulation 12(a)  empowers Respondent SEBI  to direct the person concerned not to deal in securities . In this context he referred to the scope of the words  �dealing in securities�, with reference to the definition available in regulation 2(b), �that dealing in securities means an act of buying , selling or other wise dealing in any security or agreeing to buy, sell or otherwise deal in any security by any person either as principal or agent�. Shri Dada submitted that �dealing in securities� is wider in its scope and includes  �accessing the capital market� and therefore the impugned direction to  the Appellant  company not to access the capital market is well within the powers vested in the Respondent.

Shri Dada referred to the standard of proof required to  take action in matters like the one under consideration  and stated that the Appellant  has been subjected only to adjudication, that the standard of proof required  in an  adjudication is not that high as required in a criminal proceeding, that in a criminal proceeding evidential standard of proof is beyond reasonable doubt but the requirement in an enquiry like the present one is preponderance of probabilities , which is much less than the strict proof requirement in a criminal proceeding. He cited the decisions of the Hon�ble Supreme Court in Gulabchand vs. Kudilal AIR 1966 SC 1734  in support .He also referred to the decision of the Hon�ble Special Court (Trial  of Offences Relating to Transactions in Securities at Bombay) in National Housing Bank v. ANZ Grindlays. 1998(2)LJ  153 in this regard. Shri Dada submitted that to establish the charge of manipulation and hold a person responsible for the same circumstantial evidence is sufficient and from the material on record it is evident that Appellant  company had indulged in market manipulation attracting the provisions of regulation 4(a) and 4(d) Countering Shri Sundaram�s interpretation of regulation 4, Shri Dada submitted that the scope of the regulation is wide enough to bring in, the conduct of the Appellant thereunder. In this context Shri Dada referred to the  definition of the expression �fraud�  in  regulation 2 (c) and stated that it is not  an ingredient of regulation 4(a) or 4(d)  as is being made out by Shri Sundaram, that wherever fraud/fraudulent transactions are covered, it has been specifically included in the regulation, as in regulations 3 and 6.  Shri Dada explained the ingredients of regulation 4(a) and (d) and stated that deceit need not necessarily be there to attract the  regulation. He also emphasised the expression �directly or indirectly� in regulation 4(a) and stated that in the instant case it was the Appellant company who  indirectly  caused  transactions  in shares and indulged in manipulation. He reiterated  the  finding in the impugned order  that as a result of the carry forward position  built up by Damayanti group of brokers, and at a time  when they were to face the music, Videocon group  appeared on the horizon  as their saviour to bail them out, that they were  not simply interested in the brokers but it was  because  these brokers  had acted at the behest of the Appellant. Shri Dada stated that   self benefit was the motive and  therefore regulation 4(a) and 4(d) attracted. Learned Senior Counsel submitted that in the light of the finding that the Appellant had manipulated the market to its benefit, the impugned order  is perfectly justified and need be upheld.

In support of the submission that Respondents have  power to issue directions under section 11B of the Act,  Shri Dada cited this Tribunal�s decision in Bank of Baroda Vs. Securities and Exchange Board of India (2000)38 CLA 226 (SAT) and decisions of High Courts in (1) Anand Rathi and Ors. v. Securities and Exchange Board of India (2001) 32 SCL 227(Bom), (2) M.Z.Khan v. SEBI (AIR 1999 Delhi 64), (3) SEBI v. Alka Synthetics (1999) 19 SCL 460 (Guj)  and  (4) R.R.Bohra v. SEBI (1999) 33 CLA 243 (Bom).

Shri Dada submitted that various High Courts have upheld the  powers of the Respondent  under section 11/11B to issue  appropriate directions as an  interim measure though  penal  in nature and as such the Respondent is empowered to issue  directions under section  11/11B  which are penal in nature, in its final orders also.

With reference to the plea of S/Shri Dhoot, Shelgikar and Hegde against their prosecution, Shri Dada stated that under section 24, prosecution  lies against them and it is not necessary that a full fledged enquiry  following the rules of natural justice should precede the decision to prosecute,   that  the principles of natural justice will be followed  in the proceedings before the  trial Court. He re-iterated that even if the Appellant company is not to be prosecuted, S/Shri Dhoot, Shelgikar and Hegde can still be prosecuted independently  as the scope of section 24 is wide  enough in this regard and explained the scope of section 24.  Shri Dada submitted  that the Tribunal has no power to decide  in an appeal as to whether the person is liable to be prosecuted  or not under  section 24,  that the powers available under section 482 of Cr.PC are not available to the Tribunal.

Shri Dada submitted that in the light of the facts and circumstances as  unfolded in the order,  there is every reason to hold that the Appellant company had indulged in manipulating the market violating   the provisions of regulation 4(a) and 4(d) attracting the consequences as laid down in regulation 12(a) and section 11 and 11B of the Act,  and, therefore the impugned order has been rightly issued.

I  have carefully considered the  submissions made by  the learned Counsel for the parties, the pleadings and the  entire material on record  before me

The impugned order is captioned  �Order against M/s.Videocon International Ltd in the matter of price manipulation in the scrip of Videocon International Ltd�. The reach of the order  and reason for issuing the  order is thus clear from the said caption itself. The background in which the order was issued,  has been briefly  stated  in the impugned order. It has been stated  therein that in the context of extreme volatility and undue  movements in the shares of  the Appellant company, BPL  and Sterlite in April-May, 1998,  Respondent  SEBI conducted investigations to ascertain whether the unusual market behaviour was  due to any manipulations. The investigations indicated  that the market  behaviour  relating to  the Appellant company�s shares was due to manipulation and viewed prima-facie  the Appellant responsible for the same,  attributing the  creeping acquisition of 14.24 lakh shares at the rate of Rs.165/- by the promoters,  and funding a set of brokers described as �Damayanti group� to acquire  the Appellant�s shares  in large proportions. In the light of the said prima-facie finding,  Respondent SEBI decided to inquire into  the matter and accordingly  show cause notice was issued to the Appellants. The matter was adjudicated.  After adjudication, Respondent Chairman  holding the Appellant company  guilty of violating regulation 4(a) and 4(d) of  the 1995 Regulations, passed the impugned order on 19.4.2002 directing the Appellant company �not to raise money from the public in the capital market for a period of 3 years in the interest of investors�. It was  also further directed that  �prosecution proceedings be launched against the company viz. Videocon International Ltd through its directors/officers i.e. Mr.V.N.Dhoot, Mr.S.K.Shelgikar and Mr.S.M.Hegde,  under the provisions of SEBI Act, 1992�

Shri Sundaram�s submission that the impugned order was passed without following the principles of natural justice as adequate opportunity of being heard was not given and the witnesses were not allowed to be cross examined, lost the vigour as he himself stated that he was not pressing the issue at this juncture. However, he had urged that the evidence of  persons like S/Shri Satyanaran Nangalia, Navnit Rana (of GNH Global) etc., relied on by  the Respondents be discarded as their evidence is untested in cross examination and their credibility is doubtful.  But this argument does not hold good as the Appellant itself has relied on certain portions  of their statement to meet its case., In the case of S/Shri V.N.Dhoot, S.M.Hegde, S.K.Shelgikar, (appellants in appeal No.24,25 and 26 respectively) also it was urged that the Respondents had not followed the principles of natural  justice and as such the impugned order  against them is bad and untenable. On  a perusal of the order , I find that the order is directed   only against the Appellant company and the direction is to launch prosecution proceedings against the Appellant company through S/Shri Dhoot, Hegde and Shelgikar  considering them as the company�directors/officers. Therefore in the absence of any adverse finding or charge against them   in the order, and   for   the  reason  that  they are  being proceeded  in the light of the Respondent�s finding that the company is guilty, and further that, there are in built provisions in the Cr.PC ensuring sufficient opportunities  to the accused to be heard, before passing any adverse order against them,    it is difficult to hold that the Respondents  should have heard them before passing the order and by not doing so  failed to follow the principles of natural justice.  Opportunity  of being heard before launching a prosecution is not ordinarily known to any penal jurisprudence. It is to be noted  that the Appellants were also asked  vide notice dated 20.12.1999 to show cause as to why prosecution proceedings under section 24 of the Act should not be initiated.  The requirements  of regulation 8 of the 1995 Regulations have thus been complied with.

It has been stated in the operative portion of the order that powers under  sections 11 and 11B of the Act have been invoked to issue the impugned  directions.

Though there is no specific reference to regulation 11 of the 1995 Regulations therein,  on a perusal of the order and the show cause notice, it can be safely inferred that power available in regulation 11 of the 1995 Regulations has also been invoked. The omission to specifically refer the said regulation in the order is not fatal, as there is a legal source of authority to issue the directions.

It is to be noted that the object of the Act is broadly stated in its preamble in the following words,  that   it is an Act  �to provide for the establishment of a Board to protect the interests   of the investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto�.  Section 3 of the Act   empowers the Central Government to establish a Board    by  the   name   of   the Securities  and  Exchange Board  of India, with a Chairman and five  members.  The Board is in position since 1992. In terms of sub section 3 of section 4 of the Act, in the areas otherwise determined by regulations, the Chairman also enjoys all powers of the Board. The impugned order  has been  made  by the Respondent Chairman exercising the concurrent power of the Board vested in him.

Chapter IV of the Act deals with the functions of the Board. This chapter  comprises 4 sections � i.e.  Section 11, on functions of the Board , section 11A  on matters to be disclosed by the companies, section 11AA on   Collective investment scheme and section 11B  on power to issue directions. Since the powers under section 11 and 11B  have been invoked in the matter, it is felt necessary to have  a look at these two sections. According to sub section (1) of section 11:

�Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by  such measures as it think fit�

Before that let us also have a look at  section 11B invoked by the Respondent to issue the directions.  Text of section 11B is extracted below:

�Power to issue directions

11B. Save as otherwise provided in section 11, if after making or causing to be made an enquiry, the Board is satisfied that it is necessary;-

(i) in the interest of investors, or orderly development of securities  market; or

(ii) to prevent the affairs of any intermediary or other persons referred to in section 12 being conducted in a manner detrimental to the interest of investors or securities market; or

(iii) to secure the proper management of any such intermediary or person.

(a) to any person or class of persons referred to in section 12, or associated with the securities  market; or

(b) to any company in respect of  matters specified in section 11A, as may be appropriate in the interests of investors in securities and the securities market�

Regulation 2(b) defines dealing in securities as under:

�dealing in securities� means an act of buying, selling or otherwise dealing in any security or agreeing to buy, sell or otherwise deal in any security by any person either as principal, or as agent�.

(c) �Fraud includes any of the following acts  committed by a party to a contract or with his connivance, or by his agent with  intent to deceive another party thereto or his agent or to induce him to enter into the contract:

(1) the  suggestion, as to a fact, of that which is not true, by one who does not believe it to be true

(2) the active concealment of a fact by one having knowledge or belief of the fact

(3) a promise made without any intention  of performing it

(4) any other act fitted to deceive

(5) any such act  or omission as the law specially declares to be fraudulent; and �fraudulent� shall be construed accordingly,

Chapter  II is the core chapter in the Regulations titled �Prohibition of Fraudulent and Unfair Trade Practices relating to securities market�. Regulation 3 thereunder prohibits any person from buying, selling  or otherwise, dealing in securities in a fraudulent manner. Prohibition against market manipulation� is covered by regulation 4.  Regulation 5 is on � Prohibition of misleading statements to induce sale or purchase of securities� and regulation 6 prohibits �unfair trade practices relating to securities�. In the present case the charge is that the Appellant has violated regulation 4(a) and (d). Full text of the said regulation 4 is extracted below:

Prohibition against market manipulation:

4. No person shall �

(a) effect, take part in, or enter into, either directly or indirectly, transactions in securities, with the intention of artificially raising or depressing the prices of securities,  and thereby inducing the sale or purchase of securities by any person;

(b) indulge in any act, which  is calculated to create a false or misleading appearance of trading on the securities market;

(c) indulge in any act which results in reflection of prices of securities based on transactions that are not genuine trade transactions;

(d) enter into a purchase or sale of any securities, not intended to effect transfer of beneficial ownership but intended to operate only as a device to inflate, depress, or cause fluctuations in the market price of securities;

(e) pay, offer or agree to pay or offer, directly  or indirectly, to any person any money or money�s worth for inducing another person to purchase or sell any security with the sole object of inflating, depressing, or causing fluctuations in the market price of securities;

�11. Power  of the Board to issue directions:- The Board may, after consideration of the report referred to in regulation 10, and after giving a reasonable opportunity of hearing to the person concerned, issue directions for ensuring  due compliance with the provisions of the Act, rules and regulations made thereunder, for the purposes specified in regulation 12.

12. Purpose of directions:- The purpose  for which directions under regulation 11 may be issued are the following namely:

(a)    directing the person concerned not to deal in securities in any particular manner.

(b)     requiring the person concerned to call upon any of its officers, other employees or representatives to refrain dealing in securities in any particular manner;

(c)   prohibiting the person concerned from disposing of any of the securities acquired in contravention of these regulations;

(d)  directing the person concerned to dispose of any such securities acquired in contravention of these regulations, in such manner as the Board may deem fit, for restoring the status-quo ante.

13. Suspension or cancellation of registration:- The Board may, in the circumstances specified in  regulation 11, and without prejudice to its power under regulation 12, initiate action for suspension or cancellation of registration of an intermediary holding g a certificate of registrations under section 12 of the Act;

Provided that no such certificate of registration shall be suspended or cancelled unless the procedure specified in the regulation applicable to such intermediary is complied with�

On a perusal of regulation 4 it is clear that prohibition is  against market manipulations stated  in clauses  (a) to (e) therein.  According to the impugned order the  Appellant  company  indulged in the type of  market manipulation referred to at clause (a) and (d) . Text of the regulation has been already extracted above.  To attract  regulation 4(a)  (i)  a  person should have  effected, taken part in, or entered  into either directly or indirectly, transactions in securities (ii)  the transactions must be  with an  intention (iii)  such transaction must be to artificially raise or  depress the  prices of securities (iv) the result of the  action must be to induce  the sales or purchase of securities by any person. The ingredients  of regulation 4(d) are that  (i) a person must enter into a purchase or sale of any securities (ii) said purchase or sale  must not be intended to effect the  transfer of beneficial ownership (iii)the  purchase or sale must be intended to operate only  as a  device to  inflate, depress or cause fluctuations in the market price of securities. On a perusal of the regulation it is clear that reach of clause (a) is  wider than the reach of  clause (d). Regulation 4(a) brings not only  the purchaser and seller but even third parties also  to its ambit , if they are found in any way involved in effecting or taking part in the transactions directly or indirectly. The motive behind the action and the effect of the actions is  also relevant. Transactions in securities, with the intention of raising or depressing the  prices of securities and thereby inducing the sale or purchase of securities by any person is the pointer in this regard. Artificial action to induce other persons to transact in securities  is the core theme of regulation 4(d). According to Blacks Law Dictionary �deceit� means � a fraudulent and deceptive misrepresentation, artifice  or device used  by one or more persons to deceive and trick another, who is ignorant of the true facts,  to the prejudice and damage of the party imposed upon�.  On a careful perusal of the regulation it is clear as Shri Sundaram pointed out that  element of deceit is an underlying factor in the transaction. A genuine  transaction by itself cannot attract the regulation though such a transaction had resulted in market  price variation. Regulation 4(a) attracts only  if the transaction is made with an intention of artificially raising or depressing the prices of securities so as to induce any other person to sell or purchase the securities. The participation need not necessarily be direct, it can be indirect as well.

Prohibition in  regulation  4(d) is on entering into transactions for a purchase or sale of any securities not intended to effect transfer of beneficial ownership but intended only as a  device to distort the market price of securities. In other words the regulation covers  speculative trading. Under regulation 4(d) it is not necessary that the action  should result in inducing others to purchase or sell the securities as in the case of regulation 4(a). It has to be noted that in both the clauses, the intention of the party is relevant.  Therefore an  element of mens rea is  also involved.

The factual matrix based on which charge of market manipulation has been  levelled against the Appellant  company is as under:

(1) Public announcement  by the promoters on 9.4.98 stating that they would acquire 2% equity capital of the company by making  an open offer @ Rs.140/-  per share as against the then prevailing rate of Rs.62/- (offer price  was revised to Rs.165 on 25.5.98)

(2) Providing  funds  to the tune of Rs.10 crores to Damayanti group, a front for  Shri Harshad Mehta, a person notified under the Special Court Act,  during 29.4.98 to 29.5.98 to build up positions and for  cornering  the floating stock.

(3) Providing   funds to the tune of Rs.15.53 crores to bail out  some of the brokers connected with Damayanti group, trapped in payment crisis in BSE in June, 1998.

�As regards the open offer of the company to acquire 2% of its scrip capital it was contended on behalf of the company that though they were not liable to make an open offer for the acquisition of the shares of the company to the extent of 2%, there is nothing illegal about it, While this may be true, the timing of the offer of the company in April and its subsequent revised offer in May, 1998 has to be seen against the background where its share prices were showing unusual price and the company�s funding of the operators in the market who built long positions in the scrip of the company. Such announcements by the promoters had a material impact in artificially increasing the price and volume of the scrip. The traded volumes in Videocon scrip at the BSE which was around 10 lacs shares prior to the announcement on 9.4.1998 reduced a low of just  24, 000 shares on 10.4.98, 12, 000 shares on 13.4.98 and to 10, 000 shares on 15.4.98 i.e. immediately after the announcement by t he promoters. A similar change in the traded volumes was observed at NSE, where the traded volumes dropped to just 3, 000 shares on 10.4.98, 2,100 shares on 23.4.98 and 600 shares on 15.4.98 as against a volume of between 3 lacs to 5.76 lacs shares a day during 17.3.98 to 3.4.98 The announcement by the promoters also had an immediate impact on the traded prices of GDR of Videocon. The Videocon GDR which was illiquid at about 1.45 each jumped to 2.66  each on the announcement by the  promoters of their intention to acquire 2% of the equity  of Videocon at price substantially higher than the prevailing market price. This  bench marking  of the price  is also reflected in the price circuit filters which this scrip hit at the BSE. The details when the scrip hit the circuit filter are given as under
 

Date	Circuit filter (Rs.)
13.4.98	77.90
20.4.98	97.35
21.4.98	105.35

As per the Takeovers Regulations  public announcement to acquire shares is required on the  acquirer�s  holding in the company crossing  the bench mark provided in the regulation. Regulation 11 (1) as  it stood at the time of acquisition of shares by the promoters in June, 1998 reads:

�No acquirer who, together with persons acting in concert with him,  has acquired,  in accordance with the provisions of law not less than 10 percent but not more than 51% of the shares or voting rights  in a company, shall acquire,  either by himself or through or with persons acting in concert with him,  additional shares or voting rights entitling him to exercise more than 5% of the voting rights in any period of 12 months, unless such acquirer makes a public announcement to acquire shares in accordance with the Regulations�.

�Respected Sir,

Sub: Consolidation by Promoters - Dhoot family and associated interest

In Videocon International Ltd, under the 2% p.a. scheme.

As is well known, the Dhoot family is in management control of Videocon International Limited.

The Dhoot Family and associated interests now wish to further consolidate their equity holdings in Videocon International Limited by acquiring 2% in the open market, especially in view of the unusual and inexplicably high trading volumes witnessed in the scrip in recent weeks.  In line with practices of best corporate governance, we want to be totally transparent in the process of acquisition of this 2% extra stake and wish to keep SEBI duly informed about this.

Since we have enjoyed the support of thousands of small investors, we propose to acquire this 2% by an open transparent Public Offer, almost in line with all SEBI regulations for an open Public Offer.  We believe that if we go through this Public Offer route, we would be serving small investors� best interest which is the mission of the Videocon International Limited management as well as of SEBI.  Needless to say if acceptance exceed 2%, our basis of acceptance will be on a proportionate basis favouring small retail shareholders.

We believe that such a Public Offer is commensurate with the letter and the spirit of SEBI Rules in connection with the captioned subject.  Using the existing mechanism of secondary market operations, which is the other alternative to acquire 2%, will benefit only a few speculators as against thousands of small investors in case of acquisition by Public Offer.  The price which we are proposing to offer to shareholders is Rs. 140/- per share.

Due to tactical and pressing market reasons, we propose to make a press announcement immediately next week setting out our intention to acquire 2% via an open Public Offer.  We look forward to your support and guidance in this regard.� (emphasis supplied)

The version that the share price was artificially raised during the said period by manipulating the market by  Damayanti group at the behest of the Appellant company by using Rs.10 crores provided by the Appellant company  also  remains unsubstantiated. It defies logic to say that  the promoters planning to buy shares from  the market at such a higher   price would do something to further increase the cost of acquisition. If there was any other motive behind such an action, the Respondents should have explained the same. In the absence of any credible reasoning it is not possible to buy the Respondent�s argument in this regard.

Now coming to the details of the funding, it has been  stated that  �Videocon group�  provided Rs.10 crores to certain brokers of BSE and NSE,  who were dealing in the Videocon scrip on behalf of Damayanti group, a front of Shri Harshad Mehta, a person notified under the Special Court Act.  In fact funding is stated to have been made in two tranches� (i)  Rs. 10  crores during April;-May 1998 i.e. at the time when the promoter of the Appellant had announced  to  make the public  offer to acquire 14.24 lakh shares at the rate of Rs.140/165 per share and (ii) Rs.15.53 crores during  4.6.98 to 30.7.98 to bail out the �brokers in distress�.

With reference to the funding of Rs.10 crores Shri Dada had pointed out that JHPL advanced a sum of Rs.5.50 crores to Equity Investments P.Ltd during the period 29.4.98 to 28.5.98 and Rs.4.50 crores to Gandak Investments P.Ltd during 2.5.98 to 19.5.98 that both these companies are admittedly Videocon group companies. Out of the said Rs.10 crores paid  to the said two companies , Rs.4.50 crores was advanced to Sony securities, Rs.3.0 crores to Valfin Finance, Rs.1.25 crores each to S.N.Nangalia and GNH Global , all BSE and NSE brokers and  they in turn purchased shares of the Appellant company from  the Damayanti group entities for the said Equity and Gandak. In this context he referred to funding pattern stated  in the order that �the funds were routed from Videocon International Ltd and placed at the disposal of BSE,NSE brokers through a myriad of transactions through several bank accounts�. �It was observed that  funds were transferred to Shri Harshad Mehta  through Damayanti Group to build up large positions. Ostensibly , group companies of Videocon purchased on spot basis certain shares namely Global Telesystems , Kreble Biotech etc. On each occasion the counter party who had delivered the shares was Damayanti Group. Thus an ingenious way was devised to transfer the funds from Videocon Group to Damayanti Group�. �It was found that Damayanti group acting through a set of brokers had built up a large concentrated positions of around more than 50% of the total position at the exchanges in thes crip of Videocon. This cornering of shares had created artificial market and price manipulation in the scrip�.

In the order under the heading �Flow of Funds from Videocon Group�  the Respondents have chartered the movemment of funds from the Appellant company. Summary of the flow of funds specified in the order is found in a letter dated 1.7.1998 addressed to the Respondent by the Appellant company. In the said letter �movement of funds to Joy Holdings Pvt.Ltd from Videicon Group of companies� has been shown    as follows: (contd. On next page)

It could be seen from the above information that substantial part of the  money belonged to Videocon Petroleum Ltd (VPL)The said company had �given loan to� the Appellant company and Videocon Appliances Ltd (VAL) and  they in turn paid to Domebell  Investments P.Ltd (DIPL), the amount due to VPL, at its behest. The said DIPL transmitted the amount to JHPL. Rs.10 crores so given to JHPL was given to Equity Investments and Gandak Investments. They in turn are alleged to have  ultimately provided the amount to  Damayanti group. This transaction is in the first tranche of  funding.  I do not see anything  in the order disputing the position stated in the said letter.  Videocon Petroleum Ltd had given loans to the Appellant company and  Videocon Appliances Ltd. It has been stated at several places in the order that  the funds were provided by  �Videocon group�.  Shri V.N.Dhoot, Chairman of  VPL had stated that VPL had surplus funds of Rs.500 crores in 1998. In this context VPL�s letter dated 13.4.1998 to JHPL relied on by the Respondents is also relevant. Vide the said letter  VPL had provided Es.20 crores to  JHPL by way of ICD for a period of 16 months @ 20% interest  per annum. Proximity of this funding  by JHPL  of Equity and Gandak to the  tune of Rs.10 crores need also be noted. In the context of bail out it has been stated that �the fund flow of the purchasing entities, the concerned brokers etc. revealed that these brokers received from entities connected with  Videocon group only. Therefore   the said funds (15.5 crores) were made available by JHPL after receiving the same from Videocon Group of companies�� The fountain head of fund flow appears to Videocon Petroleum Ltd. Not only the letter dated 1.7.98 but there is also  corroborating  evidence to the said effect. The statement made by the Appellant company in the letter dated 1.7.1998 has been taken cognizance of by the Respondents   is evident from the questions put by the Investigating Officer (I.O) to Shri Hegde while recording his statement. It is seen from Shri Hegde�s deposition  dated 9.7.98 that the I.O had asked  him to �explain the logic of money flowing from VPL to Equity Investments P.Ltd and  Gandak Investments Pvt.Ltd� (Q.27) and in answer  there  to  Shri Hegde  had  stated: �This  flow of  funds  approximately Rs.10 crores from VPL  to Equity Investments  P.Ltd and M/s.Gandak Investments P.Ltd is at the instance of my Chairman Shri V.N.Dhoot. Only he can explain this�. The I.O had confronted Shri Dhoot with said statement of Shri Hegde  as could be seen from the deposition of Shri Dhoot   dated 20.7.99. The I.O  had put the following  Question to Shri  Dhoot   �Mr.Hegde stated in his statement that the cheques to Valfin,  Sony, GNH, S.N.Nangalia were given to them based on your instructions, What is your reply? (it is to be noted that these are four entities to whom Rs.10 crores were paid at a time the public offer was in the offing. ).  In reply thereto Shri Dhoot had stated �I am the Chairman of Videocon Petroleum Ltd (VPL) and this company had surplus funds of Rs.500 crores in 1998. Out of this, around Rs.25 crores were invested in listed  securities. This was a normal investment of the investment division of VPL�. In this context the statement of Shri  Hegde in answer to the following question is also relevant:

Q.31: Is it true that this purchase of shares was made from M/s.,S.N.Nangalia, Sony Securities, GNH Global Securities, Valfin Finance etc., which involved purcahse of VIL shares alongwith other shares?

Ans. This payment was not made for buying VIL shares but was meant for purchase of other shares.

Q.32: Were these payments to the above brokers meant for purchase of shares or were they in the nature of loans given to the brokers  or on behalf of any third party?

Ans: These payments  were for purchase of shares only and not as loans.
The involvement  of Videocon  Petroleum in the funding is furhter evidenced   from    the said    company�s  letter  dated 13.4.1998   addressed to JHPL relied  on by the   Respondent. In   the  said letter   it   has  been stated   that � with   reference   to your  letter dated  10.4.1998,   wherein   you   had   agreed   for   an   intercorporate deposit of Rs.20 crores @ 20p.a. for a period of 16 months in one or more   tranches.  We are pleased to inform you that the company is pleased to extend ICD for a period of 16 months @ 20% p.a.  aggregating Rs.20 crores as per the request of your company from time to time�.

The reason attributed by the Respondents to the Appellant   resorting to the alleged indirect funding for acquisition of its own shares, is that under section 77 of the  Companies Act, a company cannot acquire its own shares.  Section 77 of the Companies Act restricts a company from purchasing its own shares. But the section also porhibits financing directly or indirectly any person for  purchasing/subscribing to  the company�s  shares. That being the legal provision, it is difficult to accept the Respondent�s version that the Appellant knew only a part of section 77 and not the whole section.  If a company like the Appellant knew about  prohibition of acquisition of its own shares in terms of section 77 of the Act, it should also be aware of the prohibition on funding  others to purchase its own  shares!  Section 77 prohibits not only acquisition of own shares  but funding for the purpose also.

Further, even  if the Respondents� version that the money belonged to the Appellant  is accepted, still the funding was done intentionally  to manipulate the market has to  be established to hold the Appellant liable for violation of regulation 4(a) and 4(d) . As stated earlier the intention/motive in hiking the price  at a time when the Appellant�s  promoters themselves  had decided to purchase shares remains unexplained. There is no evidence to show that the Appellant had directed purchase of its own shares. It is seen from the Appellant�s balance sheet that it has a large investment portfolio running into several crores with investments in the shares of several companies, both listed and unlisted.

Further, no credible evidence has been produced  to show that the Appellant company and Damayanti group had any nexus and the Damayanti group purchased shares at the behest of the Appellant. Casual observations alone is not sufficient to show that the said Damayanti group had acted on the instructions of the Appellant. Funds provided at the behest of BSE management  to bail out cannot be presumed  as a measure to bail  out Damayanti group brokers, in the  context of the Respondent�s  failure to link the payment directly to Damayanti group entities. On the  contrary the evidence on record shows that it was done at the behest of BSE amd NSE to overcome  a payment crisis and save the market from a crash and the beneficiaries were not chosen by the Appellant.

The Respondents have stated that the Videocon group had provided Rs.15.53 crores to bail  out the brokers trapped in the  payment crisis. According to the impugned  order some of the brokers dealing  on behalf of Damayanti group who had cornered a substantial stock of the company�s shares faced payment problems in June 1998, could not discharge their commitment towards pay in liabilities. The outstanding carry forward position of some of these brokers were taken up by Madhukar Seth & Co., M/.s.Jaisukhlal Jagjivan, Spring Field Securities and Ventura Securities Ltd., brokers of BSE through �all or none� or bulk deals at predetermined rates and quantities by synchronising  the logging in of the trades by the buyers and the sellers. The prominent entities who purchased the Videocon shares through the said brokers were, Mehta Integrated Finance Ltd /Mehta Securities Ltd, Spring Field Securities Ltd and Fedex Securities Ltd (Total amount Rs. 15.53 crores). As per the details stated in the order �Madhukar Seth & Co., had taken over the outstanding purchase positions of the BSE brokers in the Videocon Scrip to the extent of 5,65,000 shares Totally 10 lakh shares were sold  by Madhukar Seth as a bail out package to the entities connected with Videocon group. Payments to the extent of Rs.773.18 lakhs were �received by Madhukar Seth from JHPL, an entity which received funds from Videocon group�. Another instance  of bail out package recorded in the orders is purchase of 5,03,000 shares of Videocon purchased @ 111.50 aggregating Rs.5.62 crores by  Fedxex Securities Ltd through M/s.Ventura Securities, member  of BSE who had taken over the carry forward positions of the brokers who had payment problems�. As per the order the  payment by Fedex  for purchase of  these shares was made partly out of  receipt of share application money of Rs.50 lakhs from JHPL, a loan of Rs.90 lakhs from JHPL, Rs.1.25 crores from Videocon International towards deposit for  lease etc.!

The fact that �Videocon group� had made available funds to the tune of  Rs.15.53 crores to bail out the brokers  trapped  in the pay ment crisis  in June, 98 is  born out of material available on record. The background of providing the funds  has been explained by the Appellant in its written submission dated 20.12.1999 before the Respondent  in response to the  show cause notice that �when the officials of Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) sensed a payment crisis, both  the BSE and NSE made  a bonafide effort to try and  prevent collapse or crash of the market and both BSE and NSE approached the promoters of VIL to overcome the crisis. Without prejudice and without admitting, it can be said that , if at all it is the promoters who indulged into the activities to prevent the crisis, and that too, at the behest of the BSE and NSE. At all times, it was projected to the promoters and they understood that the actions and assistance on their part had the endorsement  and approval not only of BSE and NSE officials, but also  of SEBI itself�.  The fact of the payment crisis and the exchanges� attempt  to diffuse the situation has been corroborated  in the deposition of Shri Navneet N Rana (of GNH). There is no evidence to show that any particular broker  chosen by the Appellant was bailed out  as transactions were put through BOLT  and the counter party details were not available at the time of transacting the business, as per the statement of the brokers available on record.

In the order there is a categorical finding that �Damayanti group acting through a set of brokers had built up a large concentrated  positions of around more than 50% of the total position at the exchange in the scrip of Videocon. This  cornering of shares had created artificial market and price manipulation in the scrip�. There is a  three full page discussion in the order to the effect  that Damayanti group was acting as a front for Shri Harshad Mehta. But the Respondents have failed  to prove that the said Damayanti group had acted at the behest of the Appellant company and thereby distorted the market.  As long as the Appellant company�s role  in the game is not established, the Appellant company cannot be proceeded against, for the so called   omissions and commissions of the said Damayanti group. As stated earlier, in the absence of reasonably good evidence to support,  charge of market manipulation , which is a very serious one, cannot stick on the Appellant company,  merely on  surmises and conjunctures .

In this context, with reference to the test of evidence applicable to the domestic inquiries, Shri  Dada  had referred to the decision in Gulabchand (supra) that �it is wrong to insist that in civil cases such charge must be proved clearly and beyond reasonable doubt�.  He had also cited the  Hon�ble Bombay High Court in National Housing  Bank (supra) in this regard. In the said case the Hon�ble  High Court  had reiterated the principle laid down by the  Hon�ble Supreme Court in Gulabchand�s case.  This Tribunal is not suggesting for a moment that to  proceed against a   person under regulation 4(a) and 4(d) , the charge must be proved beyond reasonable doubt.  The nature of evidence required for the purpose was considered by this Tribunal in Sterlite case (supra), . In the Sterlite case also the charge was manipulation of the market and the direction issued was also identical, but for the tenure of the prohibition. In the said case also  Appellant  Sterlite was represented by Shri Sundaram and the Respondent SEBI  by Shri Dada. The views expressed by this Tribunal in the said case are squarely applicable to the present case also. It was held in the said case:

�Shri  Dada had argued about the degree of  evidence required  in an adjudication like the one,  in contradistinction  to the nature of evidence required  in  criminal proceedings  in a court of law, that   in an inquiry like the instant one it is the �preponderance of probability� that is to be taken into consideration and not to go by  �proof beyond doubt� as  required in criminal proceeding.

In this context it is to be noted  that Chairman holding the Appellant guilty of indulging in  price manipulation has stated that  �creation of false market and price manipulation is a very serious offence�. Evidence merely probabalising   and endeavouring to prove the  fact on the basis of preponderance of probability  is not  sufficient to establish  such a serious offence of market manipulation. When such a serious offence is investigated and  the charge is established , the fall out of the same is multifarious .  The impact of such an adverse finding is wide especially   in the case of a large public company having large number of investors. The stigma sticks and it also hurts,  not the company alone, but its shareholders as well. �Not all the King�s horses and all the King�s men� can ever salvage the situation.   Mere conjunctures and surmises are not adequate to hold a person guilty of such a serious offence. The  extent of proof required to hold the delinquent guilty has been explained by the Hon�ble Supreme Court in Bank of India v. Degala Surya Narayana (AIR 1999 SC 2407) . The Court held:

�strict  rules of evidence are not applicable to departmental enquiry proceedings. The only requirement of law is that the allegation against the delinquent officer must  be established  by such evidence acting upon which a reasonable person acting  reasonably and objectively may arrive at a finding upholding the gravamen  of the charges against the delinquent officer. Mere conjuncture or surmise  cannot sustain the finding of  guilt even in departmental enquiry proceeding.(emphasis supplied)

In M.S.Bindra v. Union of India, (1998) 7 SCC 310 the Court had while deciding an appeal against the removal of an officer from  service on doubtful integrity held  that �  mere possibility is hardly sufficient to assume that it would have happened�. In Nandakishore Prasad v. State of Bihar (1978) 3 SCC 366, the Court while considering the appeal  against the removal of an employee from service based on the findings of a departmental enquiry viewed that � Before dealing with the contentions canvassed, we may remind ourselves of the  principles  in point crystalised by judicial decisions. The first of these principles is that disciplinary proceedings before a  domestic tribunal are of a quasi judicial character; therefore, the minimum requirement of the rules of natural justice is that tribunal should arrive at its conclusion on the basis of  some evidence, i.e. evidential material which with some degree of definiteness   points to the guilt of the delinquent  in respect of the charges against him. Suspicion cannot be allowed to take the place of proof even in domestic inquiries. As pointed  out by this Court in Union of India v.  H.C.Geol (AIR 1964 SC 364) �the principle  that in punishing the guilty scrupulous care must be taken to see that the innocent are not punished, applies as much to regular criminal trials as to disciplinary inquiries held under the statutory rules�. (emphasis supplied).

�In any  case we are left in doubt whether the complainants version with which he had come forward with considerable delay was really truthful. We think that in a case of this nature, involving possible debarring of the advocate concerned the evidence should be of a character which should leave no reasonable doubt about guilt. The  Disciplinary Committee had not only found the Appellant guilty but had disbarred him   permanently. ( In Re An advocate AIR 1989 SC 245)� (emphasis  supplied).

�It is true that there is no difference between the general rules of evidence in civil and criminal cases and the definition proved in section 3 of the Evidence Act does not draw a distinction between civil and criminal cases. Nor does this definition insist on perfect proof because absolute certainty  amounting to demonstration is rarely to be had in the affairs of life. Nevertheless, the standard of measuring proof prescribed by the definition is that of a person of prudence and practical good sense��.. The same is equally true about proof a charge of corrupt practice which cannot be established by a mere balance of probabilities�. (emphasis supplied)

�To such a situation though the provisions of the Code of Criminal  Procedure or the Evidence Act may not apply, except in so far as they are statutorily made applicable, the fundamental principles of criminal jurisprudence and of natural  justice must necessarily apply. If so, the burden of proof is on the customs authorities and they have to bring home the guilt to the person alleged to have committed a particular offence under the said Acts by adducing evidence� (Ambalal v. Union of India AIR 1961 SC 264).

A public offer resulting in purchase of shares at a price relatable to the book of value of the  company�s shares, unless proved otherwise, cannot be considered as an act of market manipulation. In the instant case it was the promoters who  purchased shares in the public offer and as such for the  impact of such  a public offer if any, the company cannot be held  liable,  unless the company�s involvement  therein is clearly established , which the Respondents have failed to do.  It is also to be noted that the Respondents  have failed to identify the exact   source of funds flow to the market that as to whether  it was the  Appellant�s  money or  VPL�s . The evidence shows that it was VPL�s and the Appellant was only one of the links in the chain of fund movement  to the market.  Even if it is assumed that it was the Appellant�s fund,  in the absence of reasonable  evidence to show the nexus between the Appellant  company and Damayanti group and further that the said Damayanti group acted at the behest of the Appellant company, it is not possible to hold the  Appellant  liable for the activities of Damayanti  group, especially in view of the seriousness of the allegation and  the legal  consequences thereof. Bail out per se is not an act of manipulation. At best it can be considered as a corroborative action. The Respondents have not made out any case that the brokers who faced payment problem were holding large positions  on the Appellant�s account. On the contrary the Respondents have stated that it was  Damayanti group   for Shri Harshad Mehta
cornered the shares.  But the relevance of that again depends  on the evidence showing as to whehter it was a quid pro quo measure. Not enough  evidence in this regard has been adduced by the Respondents. Even though Shri Harshad Mehta has been projected as the �man behind�, it appears  that he was not even questioned and there is no  indication of having his activities/role investigated in this regard to establish the Appellant�s allged connivance with him in the transactions.

It is also seen from the  material on record that the  market volatility  was not confined to the Appellant�s shares alone, but the shares of companies like Sterlite, and BPL were also involved, and there was payment crisis in respect of  the transactions entered into by the brokers in respect of the said companies� shares also. It cannot be a coincidence  that the shares of these three companies were involved during the market volatility witnessed in April- May, 1998. It is nobody�s case that those three companies are under the same management. Therefore it is obvious that there was a third party, which  played a  major role in the market manipulation and that third party according to  the Respondents was Damayanti group. The impugned order has left out the Damayanti group  from  the range of the order. According to the  Respondents  it was Shri Harshad Mehta who acted through Damayanti group. There is no indication in the order that Shri Harshad Mehta was examined and his statement was recorded/considered. Since Shri Harshad Mehta, according to the Respondents, being the person who manipulated the market through his front companies, it was incumbent on the Respondents to record his statements and  also of those concerned persons in  his front companies.  Subjecting Shri  Harshad Mehta and others to separate investigation and passing separate orders is not a  substitute for obtaining his/their statements in the present case.

Respondent Chairman has directed the Appellant company �not to raise money  from  the public in the  capital  market for a period of 3 years in the interest of  investors�. It  has  also been  directed  that  �prosecution  proceedings be launched against the company through its directions/officers i.,e. Mr.V.N Dhoot, Mr.S.M.Hegde, Mr. S.K.Shelgikar under the Act�. The directions  have been issued invoking the powers under section 11 and 11B of the Act. Learned  Senior Counsel for the Respondents had submitted that not only under section 11 and 11B but under regulation 12(a) also  such  directions can be issued. Texts of section 11 and 11B and regulation 12(a) have  already  been extracted  in the earlier part of this order.

This Tribunal  had considered the scope and reach of the said two sections in  Sterlite case(supra) and had viewed as under:

�Now  on the direction issued by the Respondent.  It is seen from the order that  the direction debarring the Appellant accessing the capital market  was issued invoking the powers vested in the Respondent under  section 11 and  11B of the Act . Since I have already reproduced the text of these two sections in the  earlier part of this order, the same  is not reproduced again. The Tribunal had occasion to examine the scope and  reach of these sections in Bank of Baroda v. Securities Exchange Board of India ((2000) 26 SCL 532 : (2000) 38 CLA 226: (2001) CLC 714): and had expressed the following view:

�Section 11 and section 11B are interconnected and coextensive as both these sections are mainly focussed on investor protection. On a careful perusal of the said section 11 referred to  in the earlier paragraphs, it could be seen that the Respondent has been in no uncertain terms  mandated to protect the interests of investors in securities by such measures as it thinks fit. Of course those measures are  subject to the provisions of the Act.  The expression �measure� has not been defined in the Act. So we have to go by its generally understood meaning. According to Corpus  Juris Secundum  measure  means  �anything  desired or done with a view to the accomplishment of  a purpose, a plan or course of action intended to obtain some object, any course of action proposed or adopted by a Government�. However, I am  not inclined to  agree  with  the  Respondent�s  view  that the power under section 11 is unlimited.  I am of the view that the legislature has  circumscribed  the power, by  putting the caveat  that these measures are subject to the provisions of the Act. The ambit  of power is contained within the frame work of the Act.  But within the  statutory frame work such power reigns.

While section 11 deals with the functions of the Board, section 11B is on the powers of the Board.  Section 11B is more action oriented, in a sense it is a functional tool in the hands of the Board. In effect section 11B is one of the executive  measures available to the Respondent to enforce its prime duty of investor protection. As could be seen from the text of the section reproduced above, the Respondent is empowered  to issue directions in the interests of  investors to any person or class of persons referred to in section 12 of the Act or associated with the securities market. In other words the section identifies the persons to whom and the  purposes for which,  directions can be issued.

Gujarat High Court had examined  the scope of section  11 and section 11B vis-a-vis the  Respondent�s position, while deciding an appeal  against the Single Judge�s order  in Alka Synthetics Case (supra). The basic issue  for consideration before the Division Bench in the said  appeal was as to whether the Respondent had the authority to issue an order  under section 11B of the Act for impounding  or forfeiting the  money received by stock exchanges, as per the concluded transactions under  its procedure, until final decision is  made. While negating the views of the Single Judge, and upholding the Respondent�s power to issue such a direction under section 11B the Court observed:-

�The SEBI  Act is an Act of remedial nature and, therefore, the preset cases could not be compared with the cases relating to the fiscal or taxing statutes or other penal Statutes for the purposes of collection of levy, taxes etc. As and when new problems arise, they call for new solutions and the whole context in which the SEBI had to take a decision, on the basis of which impugned orders were passed, cannot be said to be without authority  of law in face of the provisions contained in section 11 and section 11B. As the language of section 11(1) itself shows and as the matters for which the measures can be taken are provided in sub-section(2) of  section 11. It is clearly made out by the plain reading of the language of the section itself that the SEBI has to protect the interests of the investors in Securities and has to regulate the securities market by such measures as it thinks fit and such measures may be for any or all of the matters provided in sub-section (2) of section 11 and in due discharge of this duty cast upon the SEBI as a part of its statutory function, it has been invested with the powers to issue directions under section 11B. �����. Thus, so far as the authority of law in the SEBI to issue such directions is concerned, such authority to take measures as it thinks fit is clearly discernible on the  basis of the provisions contained in section 11 read with section 11B of the SEBI Act. ����..We have to therefore consider and interpret the power of SEBI under the provisions so as to see that the objects sought to be achieved by Act is fully served, rather than being defeated on the basis of any technicality������ The duty and function had been entrusted to take such measures as it think fit and in order to discharge this duty, the power is vested under section 11B. ������. The authority has  been given under the law  to take appropriate measures as it thinks fit and that by itself  is sufficient  to cloth the SEBI with the authority of law�.

One has  to view the powers of the Respondent under the provisions of the Act in the context of the  objects sought to be achieved by the Act and the duty cast on them in achieving the same. Section 11 and section 11B give enormous  authority to the Respondent in this regard. As long as the power exercised under section 11B is subject to the provisions of the Act and well within the legal and constitutional frame work, intended to achieve the purposes of the Act  and subjecting the  persons specified in the section, the power will sustain. Since the  exercise of power is  subject to the provisions of the Act and the purposes for   which it can be exercised and the persons to whom it can reach has been  specified in the section, it can not be said that the  power is  unguided or   unlimited. It is a wholesome provision designed to achieve the objectives of the Act.�

It has to be noted that section 11B  does not even remotely empower the Respondent  to impose penalties. Hon�ble Calcutta High Court had held that prescribing an offence and its punishment is an essential  plenary function of the legislature  (D.N.Ghosh  v. Addl. Sessions Judge (AIR 1959 Cal.208.) Hon�ble Gujarat High Court also held the same view in Delux  Land Organisers v. State of Gujarat (AIR 1992 Guj. 75) holding that

�any power to impose penalty must be statutorily warranted and executive  Government cannot create penal provisions by issuing circular when there is no authority to impose  such penalty flowing from any provision of law�. Hon�ble Supreme Court in Khemka and Co.(Agencies) Pvt.Ltd v. State of Maharashtra (AIR 1975 SC 1549) , while considering the question as to whether the assessee under the Central Sales Tax Act, 1956 could be made liable for penalty under the provisions  of the State Sales Tax Act, had considered the power to impose penalty.   It had held:

�It is  well settled canon  of construction of statutes that neither a pecuniary liability can be imposed nor an offence created by mere implication. It may be debatable whether a particular procedural provision creates a substantive right or liability. But I do not think that the imposition of pecuniary liability which takes the form of a penalty or fine for a breach of a legal right can be relegated to the region of mere procedure and machinery for the realization of tax. It is more than that. Such liabilities  must be created by clear, unambiguous  and  express enactment. The language used should leave no serious doubts about its effect so that the persons who are to be subjected to such a liability for the infringement of law are not left in a state of uncertainty as to  what their duties or liabilities are. This is an essential requirement of a good  government of laws�. (emphasis supplied)

Learned Senior Counsel had cited the following cases to support  his  contention that the Respondent is empowered to  issue the impugned direction:(1) Anand Rathi and Ors. v. Securities and Exchange Board of India (2001) 32 SC227(Bom), (2) M.Z.Khan v. SEBI (AIR 1999 Delhi 64), (3) SEBI v.Alka Synthetics (1999) 19 SCL 460 (Guj)).(4) R.R.Bohra v. SEBI((1999) 33 CLA 243).

I have  carefully gone through each one of  these decisions  and find no support to hold that  after completing the enquiry, a direction under section 11B which  tantamounts to   imposition of penalty can be issued.  No doubt a direction under section 11B can reach a company  whose shares are listed in stock exchanges  as the company can be considered as �person associated with the securities market� in terms of section 11B(a). But from the  purpose for which the direction which SEBI can issue under section 11B as provided in the section, it is  clear that a direction on conclusion of the inquiry cannot be in the nature of a penalty.  Directions  under section 11B can be issued only on being satisfied  by the Board after an inquiry that it is necessary �
 

(i) in the interest of investors, or orderly development of securities  market; or

(ii) to prevent the affairs of any intermediary or other persons referred to in section 12 being conducted in a manner detrimental to the interest of investors or securities market; or

(iii) to secure the proper management of any such intermediary or person.

The decisions relied on by Shri  Dada  cited above are  in the context of challenge to SEBI�s authority to issue interim orders during the pendency of the inquiry and the Courts had viewed that such orders which are required to protect the interest of the investors can be issued. The impugned direction   for the same reason stated in the Sterlite case extracted above,is nothing but a penalty in effect and is in fact against the interest of investors,  as a ban on raising funds to meet the  Appellant company�s business requirements is likely to adversely affect   the company�s ongoing  business activities and further expansion /development and thereby the shareholders� interest .

Learned Senior Counsel for the Respondents  had  putforth an alternate argument that even if it is held that in the light of this Tribunal�s  decision in Sterlite�s case  section 11B cannot be used for debarring the Appellant  accessing the capital  market, still the Respondents can issue such direction under regulation 12(a) read with regulation 11 as the said  regulation empowers Respondent SEBI  to direct the person concerned �not to deal in securities in any particular manner�. According to the learned Senior Counsel the words �not to deal in securities� are wide enough to cover debarring a company from accessing  the market for a specific period. This interpretation of regulation 12(a) I am afraid, is  too far fetched . It is well accepted in the market circle that � accessing the capital market� and �dealing in securities� are different.  In fact the impugned direction is very clear in this regard. The ban is on the Appellant company �raising money from the public in the capital market for a period of 3 years�, leaving little  doubt. Raising money by a company from the public by any standard cannot be considered as an act of dealing in securities. �Dealing in securities� normally means transactions in securities. �Dealing in securities� as per the definition at regulation 2(b) means � an act of buying, selling or otherwise dealing in any security or agreeing  to buy , sell or otherwise deal in any security by any person either as principal or agent�. The act of raising capital from the market by its very nature does not come under  the definition  �dealing in securities�. Therefore the Respondents� contention that under regulation 12(a) it  is empowered to issue such direction is untenable.

The Respondents have also  stated that the impugned direction is issued in the interest of investors. But there is no explanation as to how  the said direction is  in the  interest of investors at this point of time.  In fact for the reason stated in the preceeding paras  issuing such a ban on the Appellant company raising capital for three years  is against the interest of the investors and thereby against the purpose for which  direction under section 11B is permitted to be issued. The view taken by this Tribunal in Sterlite case extracted  above in relation to issuance of directions under section 11 and 11B,  in equal force is applicable to the present case also.  In the said  view of the matter the impugned direction has no legal backing and therefore cannot sustain.

As already stated, in the absence of sufficient material evidence to establish that the Appellant had directly  or  indirectly indulged in market manipulation, the impugned order holding the Appellant guilty of violating regulation 4(a) and 4(d) cannot sustain and therefore deserves to be set aside.

In the appeals filed by Shri  V.N.Dhoot, Shri S.M.Hegde, and Shri S.K.Shelgikar (appeals Nos. 24,25,and 26) they had inter-alia  prayed to set aside the direction to launch prosecution against them. They have adduced several grounds. In this connection it is to be noted that there is no finding of guilt in the order against the said Appellants.  The direction  is to prosecute the Appellant company  through the Appellants.

On a perusal of the order it is seen that the prohibition on the Appellant company on raising money  from the public in the capital market is made invoking the provisions of section 11 and 11B  of the Act and regulation 11 and 12 of the 1995 Regulations. Prosecution against the Appellant company  through its directors/ officers has been ordered  under section 24 of the Act. In this context, the following observation made in the  interim order made  by this Tribunal in BPL Ltd v. SEBI (2001) 32 SCL 95 is considered relevant.

�In terms of section 24(1), if any person contravenes or attempts to contravene or abets the contravention of the provisions of the Act or any rules or regulations made there under he shall be punishable with imprisonment  for a term which may extend to one year, or with fine or with both. In terms of section 26(1) of the Act, cognizance of an offence punishable under the Act etc. by a court is permissible only on a complaint made by SEBI ( the Respondent).

�27(1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided  that noting contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

������.�.

On a perusal of the section, it is thus clear that for the offence committed by a company its directors/officers are not automatically punished along with the company.    Section provides safeguards by giving opportunity to them to prove their non  involvement in commission of the offence, to escape from the attendant penal consequences.  It could be seen that as per the provisions of section 27 only those persons in charge and responsible at the relevant point of time for conduct of business of the company alone are deemed to be held guilty for contravention.  So legal fiction comes into operation against the persons indicated only on establishing facts, which are appurtenant with the contravention.  Such persons can successfully resist the prosecution by establishing want of  knowledge about the contravention or exercises of due deligence to prevent the same.  Such onus on a person can not be considered so heavy.  Ordinarily the same could be discharged.

Referring to the Appellant�s submission that criminal prosecution results in diminishing the personal reputation of the concerned person , I would only refer to the following observation made by the Bombay High Court in ANZ Grindlay�s case (Supra).
�We are unable to accept the plea that impugned provisions abrogates prestige or reputation of the official because he/she had to face prosecution.  No person can maintain the dignity or cherish prestige by avoiding due process of law.  Law being a guardian, it maintains and protects the dignity and honour of every person.  Dignified and honourable persons have to stand the test and trial articulated by Law.  And in obedience, he or she has to submit to the process.  Cherishing majesty of law and its process is a inner core of the dignity of individual  in a Democratic World, which runs on the wheel of Rule of Law�.

Certainly Section 15T of the  Act enables any person aggrieved by an order of SEBI to file an appeal to the Tribunal.  From Section 15T  it is clear that  to file an appeal there should be an order to start with. Then comes the impact of the order. If a person  is aggrieved by that order, he is entitled to file an appeal. Since the section uses the wider expression � any person� right of appeal is not restricted only to the parties before the Board in the proceedings. Anybody, whether he was a party or not in the proceedings  before the Board, is entitled  to prefer an appeal,  provided he is aggrieved by that order. Thus the first test is the existence of an order and then the impact of that order on a person.

It has been described in Corpus Juris Secundum (Vol.IV) that �broadly speaking a party or person is aggrieved by a decision only when it operates directly and injuriously upon his personal pecuniary or proprietory rights�. It is not possible to subscribe to the view that by a  direction to launch prosecution would  operate directly and injuriously on any of the rights of the Appellants. The expression �aggrieved person� in section 15T means person affected by an order. In that sense the Appellants  are not aggrieved persons. A decision to launch prosecution by itself cannot be considered a cause of grievance to approach the Tribunal by way of an appeal. Therefore I am of the view that a direction to launch prosecution against the Appellant company is not an order appealable in the Tribunal and  the Tribunal is not empowered to adjudicate  the same.

According to the learned  Senior Counsel for the Appellants,   the Respondents have already launched prosecution against the Appellants. As Shri Dada, learned Senior Counsel for the Respondents did   rightly point out, this Tribunal does not enjoy the  inherent powers of  High Courts under section 482 of the Cr.PC to issue any order for  quashing  pending proceedings before any Court of law.

For the reasons stated above this Tribunal  is of the  view that it is beyond the jurisdiction of this Tribunal to issue any order setting  aside the Respondents�  direction to launch  prosecution  against the Appellant company though its directors and officers.  Therefore I do not consider it necessary to examine the grounds adduced by the Appellants in support of their contention, in this regard.

For the reasons stated above the Respondents� order directed  to the Appellant company �not to raise  money from the public in the capital market for a period of  3 years� is set aside.

Appeals allowed to the extent stated above.