Shri Soma Sekhar Marthi vs Sebi on 18 January, 2018

Securities Appellate Tribunal

Shri Soma Sekhar Marthi vs Sebi on 18 January, 2018

BEFORE THE            SECURITIES APPELLATE TRIBUNAL
                             MUMBAI

                                         Date of Decision : 18.01.2018

                                    Misc. Application No. 322 of 2017
                                    And
                                    Appeal No. 164 of 2016

Securities and Exchange Board of India
SEBI Bhavan, Plot No.C-4A, G Block,
Bandra Kurla Complex,
Bandra (East),                                    ...Applicant
Mumbai - 400 051.                                  (Orig. Respondent)

Versus
Transgene Biotek Ltd.
having its registered office at
Plot 68, 69 & 70, IDA Bollaram
Medak - 502 325                                  ...Respondent
Andhra Pradesh.                                   (Orig. Appellant)

                                    WITH
                                    Misc. Application No. 323 of 2017
                                    And
                                    Appeal No. 165 of 2016

Securities and Exchange Board of India
SEBI Bhavan, Plot No.C-4A, G Block,
Bandra Kurla Complex,
Bandra (East),                                     ...Applicant
Mumbai - 400 051.                                   (Orig. Respondent)

Versus

Dr. Koteshwara Rao
Chairman & Managing Director of
Transgene Biotek Ltd.
having its registered office at
Plot 68, 69 & 70, IDA Bollaram
Medak - 502 325                                     ...Respondent
Andhra Pradesh.                                      (Orig. Appellant)

                                    WITH
                                    Misc. Application No. 324 of 2017
                                    And
                                    Appeal No. 166 of 2016
Securities and Exchange Board of India
SEBI Bhavan, Plot No.C-4A, G Block,
Bandra Kurla Complex,
Bandra (East),                                    ...Applicant
Mumbai - 400 051.                                  (Orig. Respondent)

Versus
                                     2



Mr. Narayana Murthy Pentayala
Flat No.104, B-Block,
Bhavya's Anandam Apartments,
Nizampet Road, KPHB,                                ...Respondent
Hyderabad - 500 072.                                 (Orig. Appellant)

                                    WITH
                                    Misc. Application No. 325 of 2017
                                    And
                                    Appeal No. 167 of 2016

Securities and Exchange Board of India
SEBI Bhavan, Plot No.C-4A, G Block,
Bandra Kurla Complex,
Bandra (East),
Mumbai - 400 051.                                 ...Applicant
                                                   (Orig. Respondent)

Versus

Mrs. Nirmala Rao
Plot 364, Road No.25a,
Jubilee Hills, Hyderabad,                           ...Respondent
Telangana State - 500 034.                           (Orig. Appellant)

                                    WITH
                                    Misc. Application No. 326 of 2017
                                    And
                                    Appeal No. 168 of 2016

Securities and Exchange Board of India
SEBI Bhavan, Plot No.C-4A, G Block,
Bandra Kurla Complex,
Bandra (East),                                   ...Applicant
Mumbai - 400 051.                                 (Orig. Respondent)

Versus

Mr. K. Srinivas
Plot 364, Road No.25a,
Jubilee Hills, Hyderabad,                          ...Respondent
Telangana State - 500 034.                          (Orig. Appellant)

                                    WITH
                                    Misc. Application No. 327 of 2017
                                    And
                                    Appeal No. 169 of 2016

Securities and Exchange Board of India
SEBI Bhavan, Plot No.C-4A, G Block,
Bandra Kurla Complex,
Bandra (East),                                   ...Applicant
Mumbai - 400 051.                                 (Orig. Respondent)
                                       3


Versus

Shri Soma Sekhar Marthi
H.No.1-2-699, Flat No.205,
Parkview Apartments,
Adikmet,Vidyanagar,                                      ...Respondent
Hyderabad - 500 044.                                      (Orig. Appellant)


Mr. Mustafa Doctor, Senior Advocate with Mr. Pulkit Sukhramani and
Ms. Vidhi Jhawar, Advocates i/b The Law Point for the Applicants (Orig.
Respondents).

Mr. L.S. Shetty, Advocate with Mr. U.R. Naik and Mr. Asman Mishra,
Advocates i/b L.S. Shetty & Associates for Respondents (Orig. Appellants).


CORAM : Justice J.P. Devadhar, Presiding Officer

Jog Singh, Member
Dr. C.K.G. Nair, Member

Per : Dr. C.K.G. Nair (Oral)

1. These six Miscellaneous Applications have been filed by Securities

and Exchange Board of India (‘SEBI’ for short) seeking extension of time to

complete the investigation and issuing show cause notices to all the

appellants in these appeals. Vide order dated August 17, 2017 this Appellate

Tribunal had disposed of all these appeals directing SEBI to complete the

investigation and issue show cause notices to the appellants therein latest by

December 31, 2017. It was also ordered that in the event SEBI failed to

issue show cause notice by December 31, 2017 ex parte ad interim order and

confirmatory order passed by SEBI on November 20, 2014 and March 19,

2016 shall come to an end from January 1, 2018.

2. Learned Senior Counsel Shri Mustafa Doctor appearing on behalf of

SEBI reiterated the prayer contained in the Miscellaneous Applications for

the indulgence of this Appellate Tribunal. It was submitted that the

undisputed fact in the interim / confirmatory order passed by SEBI was that

funds collected by issuing GDRs have been diverted to various entities.
4

Since some of these entities are based abroad they need to obtain

information relating to such entities from financial sector regulatory

authorities in various countries such as Belgium, Spain, Switzerland etc.

The regulatory authority from Belgium has confirmed that they will be

sending the relevant information by February 15, 2018. Similarly, responses

from other five regulatory authorities abroad are awaited. Further, SEBI is

following with reminders with other agencies abroad as well as agencies in

India, such as, Enforcement Directorate. Since diversion of funds is an

admitted position, it would not be in the interest of justice to let off the

appellants without a proper and complete investigation. Accordingly, to

complete the investigation and to issue show cause notice additional four

months time may be granted.

3. Learned Counsel for the Respondents (Orig. Appellants) Shri L.S.

Shetty submitted that this Appellate Tribunal has already passed a just order

giving SEBI time till December 31, 2017. The ad interim order was passed

in November 2014 and confirmatory order passed in March 2016 and delay

in completing the investigation is seriously prejudicing the interests of the

appellants. He, particularly, stated that Appellants in Appeal No. 167 of

2016, 168 of 2016 and 169 of 2016 have no connection with the entire issue.

They are respectively wife and son of the Managing Director of the

appellant company (Appellant in Appeal No. 164 of 2016) and the appellant

in Appeal No. 169 of 2016 is a Practicing Company Secretary who happens

to be a Director of the appellant company for some time. Since these three

appellants had no role in the alleged diversion of funds by the company and

other Directors atleast the interim and confirmatory order against them

should be vacated forthwith.

5

4. Given the seriousness of the matter we do not find it appropriate to

vacate the ad interim / confirmatory order against any of the appellants at

this stage. Even in case of wife and son of the Managing Director and in the

case of the Practicing Company Secretary, it is admitted that they were not

in the business of trading in the securities market. In such a case, granting

extension of time to SEBI cannot be said to be seriously prejudicing their

interest. However, since the matter has been going on from November 2011

and this Appellate Tribunal had directed SEBI to complete the investigation

by December 31, 2017, as a final chance, we give another four months time

to SEBI to complete the investigation and issue show cause notices to the

appellants.

5. Accordingly, SEBI is directed to complete the process and issue

show cause notice, if any, by April 30, 2018 failing which from May 1,

2018 the ad interim / confirmatory order would stand vacated against all the

appellants herein. It is made clear that no further adjournment would be

granted.

6. All the Miscellaneous Applications are disposed of in the aforesaid

terms with no order as to costs.

Sd/-

Justice J.P. Devadhar
Presiding Officer

Sd/-

Jog Singh
Member
Sd/-

Dr. C.K.G. Nair
Member
18.01.2018
Prepared and compared by: msb

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