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WTM/SR/IVD-ID-7/ 21 /03/2017
SECURITIES AND EXCHANGE BOARD OF INDIA
CORAM: SHRI. S RAMAN, WHOLE TIME MEMBER
ORDER
Under Sections 11(1), 11(4)(d) and 11B of the Securities and Exchange Board of India Act, 1992
In respect of –
S. No.
Name PAN
1. Beejay Investment & Financial Consultants Private Limited AABCB0832B
2. Mr. Sudhir Jain AEUPJ6167K
3. Ms. Rashmi Jain ABBPL1283E
4. Eversight Tradecomm Private Limited AAACE7667E
5. Mr. Adish Jain AGZPJ0317Q
6. Mr. Peeyush Jain AFNPJ8263L
7. Stupendors Traders Private Limited AADCS7524F
8. Mr. Vicky Kothari AKQPK4594D
9. Ms.Prativa Kothari AWCPK5030E
10. Neelanchal Mercantile Private Limited AAACN8842N
11. Mr. Surendra Agarwala ADHPA1860E
12. Mr. Bhupendra Kumar Dhanuka ACOPD8512C
13. Divyadrishti Merchants Private Limited AABCD8147K
14. Divyadrishti Traders Private Limited AABCD8146J
15. Mr. Debasis Mishra AHBPM8657M
16. Mr. Rajesh Kumar Agarwal ADDPA1188K
17. Mr. Kinkar Bhattacharya AMDPB1266E
18. Mr. Sukanta Chatterjee AIRPC7338Q
1. Securities and Exchange Board of India (“SEBI”), passed an ad-interim exparte Order dated June 16, 2016
against 18 entities, viz. Beejay Investment and Financial Consultants Pvt. Ltd. (Beejay) and its Directors,
viz. Mr. Sudhir Jain (Sudhir Jain), Ms. Rashmi Jain (Rashmi Jain), Eversight Tradecomm Private Limited
(Eversight) and its Directors, viz., Mr. Adish Jain (Adish Jain), Mr. Peeyush Jain (Peeyush Jain),
Stupendors Traders Private Limited (Stupendors) and its Directors, viz., Mr. Vicky Kothari (Vicky
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Kothari), Ms. Prativa Kothari (Prativa Kothari), Neelanchal Mercantile Private Limited (Neelanchal)
and its Directors, viz., Mr. Surendra Agarwala (Surendra Agarwala), Mr. Bhupendra Kumar Dhanuka
(Bhupendra Dhanuka), Divyadrsihti Merchants Private Limited (DDM) and Divyadrishti Traders
Private Limited (DDT) and the Directors of DDM and DDT, viz., Mr. Debasis Mishra (Debasis Mishra),
Mr. Rajesh Kumar Agarwal (Rajesh Agarwal), Mr. Kinkar Bhattacharya (Kinkar Bhattacharya) and Mr.
Sukanta Chatterjee (Sukanta Chatterjee). All the said four directors are common for both DDM and
DDT. The aforesaid entities are hereinafter referred to individually by their respective names and
collectively as the Noticees. Vide the aforesaid Order, it was inter alia directed as under:
“to impound the alleged unlawful gains of a sum of `27,44,34,765/- (alleged gain of `18,99,43,661/- + interest of
`8,44,91,104/- from 01/10/2012 to 15/06/2016) jointly or severally from the aforesaid eighteen Noticees,
the aforesaid Noticees are further directed:-
not to dispose of, transfer, alienate or charge any of their assets (movable or immovable) till such time the amounts
mentioned above are credited to an escrow account {“Escrow Account in Compliance with SEBI Order dated June
16, 2016 – A/c (in the name of the respective persons/entities)”} created specifically for the purpose in a Nationalized
Bank. The escrow account/s shall create a lien in favour of SEBI and the monies kept therein shall not be released
without permission from SEBI.
to provide, within 7 days of this Order, a full inventory of all their assets and properties and details of all their bank
accounts, demat accounts and holdings of shares/securities, if held in physical form and details of companies in which
they hold substantial or controlling interest.”
2.1 The aforesaid ad interim exparte order was passed under the following factual background:
i. SEBI received a Suspicious Transaction Report (“STR”) dated December 21, 2012 from Financial Intelligence
Unit (“FIU”) generated by ICICI Bank Limited (“ICICI Bank”) with respect to the high value
transactions noticed in the Bank accounts of three of the Noticees, viz. Beejay (A/c No. 627705044687,
ICICI Bank), Sudhir Jain (A/c No. 627705054140, ICICI Bank) and Eversight (A/c No. 627705054145,
ICICI Bank) during the period September 10, 2011 to September 09, 2012. The aforesaid entities were
already under restraint from accessing the market during the period September 10, 2011 to September 09,
2012 as per direction issued by SEBI vide interim order dated June 04, 2009 for their alleged manipulation
in the scrips of Cals Refineries Limited (Cals), Confidence Petroleum India Limited (Confidence), Bang
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Overseas Limited (Bang), Shree Precoated Steels Limited (SPSL) (now known as Ajmera Realty & Infra
Limited) and Temptation Foods Limited (Temptation).
ii. As the aforesaid entities were under restraint imposed by SEBI vide interim order dated June 04, 2009 for
the manipulation in the said four scrips, during the aforesaid period of September 10, 2011 to September
09, 2012 (when the abovementioned suspicious transactions were noticed by FIU), SEBI ordered an
investigation into the dealings of Beejay, Sudhir Jain and Eversight for the period September 01, 2011 to
September 30, 2012 (“Investigation Period”) to ascertain whether there were any violations of the
provisions of SEBI Act, 1992 (“SEBI Act”), Rules and Regulations made thereunder and SEBI directions.
iii. The investigation revealed that the debarred entities, Beejay, and Eversight transferred funds,
directly/indirectly, to the connected entities, viz. Stupendors, Neelanchal, DDM and DDT during the
investigation period. Neelanchal, DDM and DDT in turn transferred funds to various brokers for trading.
In the process, the aforesaid Noticees allegedly made unlawful gains. The relevant findings made in the
investigation report are summarized as under:
a. The debarred Noticees, Beejay and Eversight had transferred a total amount of `17.78 crores to
Neelanchal during the investigation period. Beejay had also (directly/indirectly) transferred funds
through Stupendors to Neelanchal, who in turn transferred the same to different brokers for trading.
For instance, on December 08, 2011, an amount of `2 crores were transferred by Beejay through
Stupendors, to Neelanchal who in turn transferred the same to the broker (Religare Securities Ltd.).
Numerous such transactions involving huge amounts have been noted in their accounts during the
investigation period.
b. Similarly, DDM and DDT received an amount of ̀ 42.28 crores from Beejay and Eversight, out of which
an amount of `21.49 crores has been transferred to the brokers, for trading during the investigation
period.
c. The total funds flow from the debarred Noticees viz. Beejay and Eversight, directly to the connected
entities, i.e Noticees, viz. Neelanchal, (A/c No. 627705500278, ICICI Bank), DDM, (A/c No.
000605010065, ICICI Bank & 00082340012275, HDFC Bank) and DDT (000605010082, ICICI Bank)
during the investigation period was as under:
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(in `crores)
Serial no.
Name of Entity Amount Received from debarred entities
Amount Transferred to brokers
Proportion of the funds received from debarred entities that are transferred to brokers for trading
1. Neelanchal Mercantile Pvt Ltd
Beejay 0.30
38.59 46% Eversight 17.48
Total 17.78
2. Divyadrishti Merchants Pvt Ltd
Beejay 28.94
17.20 100%
Eversight 0.85
Total
29.79
3. Divyadrishti Traders Pvt Ltd
Beejay 12.49 4.29 100%
Total 12.49
d. The aforesaid table indicates that the debarred Noticees, Beejay and Eversight had transferred a total
amount of `17.78 crores to Neelanchal during the investigation period. Neelanchal, in turn transferred
`38.59 crores to the brokers for trading. The proportion of funds received by Neelanchal from the
debarred Noticees, viz. Beejay and Eversight, for trading is therefore considered as 46%. Accordingly,
46% of the profits made by Neelanchal by trading during the investigation period is attributed to Beejay
and Eversight.
e. Similarly, DDM and DDT received a total amount of `42.28 crores (` 29.79 crores + ` 12.49 crores)
from Beejay and Eversight, out of which an amount of `21.49 crores ( ` 17.20crores + ` 4.29 crores )
was transferred to the brokers for trading during the investigation period. The entire funds transferred
by DDM and DDT to the brokers during the investigation period was found to have been received
(directly/indirectly) from the debarred Noticees, viz., Beejay and Eversight (as the amounts transferred
to DDM and DDT were higher than that transferred by DDM and DDT to the brokers). Accordingly,
the entire profits (100%) made by DDM and DDT by trading during the investigation period is attributed
to Beejay and Eversight.
f. Investigation therefore observed that the Noticees, viz. Neelanchal, DDM, DDT and Stupendors had
facilitated the trades of the debarred Noticees, viz. Beejay and Eversight by transferring funds received
from them to the aforesaid stock brokers, in contravention of extant SEBI’s directions. It was hence
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concluded that the Noticees made alleged unlawful gains to the tune of `27.36 crores (alleged gain of
`18.99 crores + interest of ` 8.36 crores) in aggregate through trading in the securities market during
the debarment period.
g. The Noticees, viz. Sudhir Jain and Rashmi Jain were the Directors of Beejay, Adish Jain and Peeyush
Jain were the Directors of Eversight, Vicky Kothari and Prativa Kothari were the Directors of
Stupendors, Surendra Agarwala and Bhupendra Dhanuka were the Directors of Neelanchal, Debasis
Mishra, Rajesh Agarwal, Kinkar Bhattacharya and Sukanta Chatterjee were the Directors of both DDM
and DDT. The said Directors were in charge and responsible for the conduct of the business and day to
day affairs of the respective companies during the period of investigation and hence liable for the
activities of the Companies during the said period.
h. Investigation also observed that the stock broker, viz. Korp Securities (through whom DDM and DDT
traded) was connected to the Noticees, viz. DDM, DDT and Neelanchal. The director of Korp
Securities, viz. Mr. Sushil Kumar Agarwal and one of the directors of DDM and DDT, viz. Rajesh
Agarwal are brothers. Further, DDM holds 17,500 shares of Milestone Shares & Stock Broking Pvt Ltd,
who in turn holds 1,250,000 shares of Neelanchal.
2.2 In view of the aforesaid findings of the investigation and also considering the possibility that the aforesaid
debarred entities and the connected entities might divert the unlawful gains (subject to the adjudication of the
allegation on the merits in the final order), which may result in defeating the effective implementation of the
possible direction of disgorgement (of the illgotten gains made by the Noticees by trading during the
debarment period), if any, to be passed after adjudging the matter on merits, SEBI vide the said ad-interim
exparte Order dated June 16, 2016 (mentioned at Paragraph No. 1) inter alia directed the Noticees, viz.
Beejay, Eversight, Stupendors, Neelanchal Mercantile, DDM and DDT and their Directors, who were
responsible for the conduct of the said companies viz. Sudhir Jain and Rashmi Jain (Beejay), Mr. Adish
Jain and Mr. Peeyush Jain (Eversight), Mr. Vicky Kothari and Miss Prativa Kothari (Stupendors) Mr.
Surendra Agarwala and Mr. Bhupendra Dhanuka (Neelanchal) and Mr. Debasis Mishra, Mr. Rajesh
Agarwal, Mr. Kinkar Bhattacharya and Mr. Sukanta Chatterjee (DDM and DDT) to impound the alleged
unlawful gains of a sum of ` 27,44,34,765/- (alleged gain of ` 18,99,43,661/- + interest of `8,44,91,104/-
from 01/10/2012 to 15/06/2016).
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2.2.1 The said Order also observed “As the present investigation was focused on the fund flows observed from the Bank
Account statements of Mr. Sudhir Jain, Beejay Investment & Financial Consultants Private Limited and Eversight
Tradecomm Private Limited, under reference from FIU, and the corresponding bank accounts of the entities facilitating trades
of the debarred entities, the Securities and Exchange Board of India shall conduct fresh investigation into the matter covering
the other bank accounts also, that were used for trading, by the entities, which would have been used to aid the debarred entities
to trade in the market. The same shall be completed as expeditiously as possible. If any violations are brought out in the
investigation, the Securities and Exchange Board of India shall proceed in accordance with law”.
2.2.2 The aforesaid Noticees were provided with an opportunity to file their replies to SEBI within 21 days from
the date of the receipt of the Order. They were also advised to indicate in their replies whether they wish
to avail an opportunity of personal hearing in the matter.
3.1 Pursuant to this, the following Noticees filed their replies to the allegations in the said interim order:
i. Beejay vide letter dated September 22, 2016;
ii. DDT vide letter dated October 06, 2016;
iii. DDM vide letter dated September 21, 2016;
iv. Rajesh Agarwal vide letter dated October 27, 2016;
v. Kinkar Bhattacharya vide letter dated October 22, 2016;
vi. Sukanta Chatterjee vide letter dated October 24, 2016.
3.2 The remaining Noticees, viz. Sudhir Jain, Rashmi Jain, Eversight, Adish Jain, Peeyush Jain, Stupendors,
Vicky Kothari, Prativa Kothari, Neelanchal, Surendra Agarwala, Bhupendra Dhanuka and Debasis Mishra
did not file any reply despite the interim order being served upon them. Two of the Noticees, viz.
Neelanchal and Surendra Agarwala (one of the Directors of Neelanchal) filed a Writ Petition before the
Hon’ble High Court of Calcutta inter alia challenging the said ad-interim exparte dated June 16, 2016. The
Hon’ble High Court of Calcutta, vide Order dated January 06, 2017 inter alia directed that Neelanchal
should file its reply to the SCN within 10 days from the date of the Order and on receipt of such reply
SEBI would dispose of the same in accordance with law within four weeks thereafter. The Hon’ble court
also ordered that Neelanchal shall make an application for opening of a new bank account as well as demat
account and carry on business. Subsequent to this, Neelanchal filed its reply vide letter dated February 01,
2017 (received by SEBI via e-mail dated February 02, 2017), i.e. after a delay of 15 days (February 02, 2017
rather than January 16, 2017). Vide the said letter, they also sought copies of investigation report, STR and
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Form 32 (filed by Neelanchal) obtained from MCA website (wherein the email id of the director of
Eversight, Mr. Peeyush Jain ([email protected]) was mentioned as the e-mail id of the
director of Neelanchal). The relevant documents sought by the Noticee have been forwarded to them vide
letter dated February 16, 2017.
3.3 In the meanwhile, seven of the Noticees, viz. Beejay, Neelanchal, DDM, DDT, Rajesh Agarwal, Kinkar
Bhattacharya and Sukanta Chatterjee (who sought personal hearing) were given an opportunity of personal
hearing before me on February 07, 2017. During the hearing held on February 07, 2017, only four of the
Noticees, viz. Beejay, Neelanchal, DDT and DDM appeared and made their respective submissions. The
remaining three Noticees did not avail the opportunity of personal hearing. During the hearing, the
aforesaid four Noticees sought time to file their additional written submissions in the matter. Accordingly,
they were granted time till February 15, 2017. The Noticees were also directed to furnish the following
information/documents by February 15, 2017:
Beejay to provide the details along with full particulars including the rationale, documentary proof, etc. in respect of each
of the transactions during the period September 01, 2011 to September 30, 2012 appearing in the Accounts of
Stupendors, Neelanchal, DDM and DDT in the books of accounts of Beejay (Annexure A, B, C and Annexure-2 of
the reply dated September 22, 2016 filed by Beejay).
Neelanchal to provide the details/explanation along with full particulars including the rationale, documentary proof, etc.
in respect of each of the transactions during the period September 01, 2011 to September 30, 2012 appearing in the
Accounts of Beejay and Eversight in the books of accounts of Neelanchal (Annexure 3 and 4 of the reply dated February
01, 2017 filed by Neelanchal).
Neelanchal to provide details/explanation along with full particulars including the rationale, documentary proof, etc. in
respect of each of their transactions/fund transfers with Stupendors during the period September 01, 2011 to September
30, 2012,
Neelanchal to respond to SEBI letter dated 19/10/2016 followed by two reminders dated 01/11/2016 and
11/11/2016 [issued pursuant to the present investigation],
DDM and DDT to provide the details along with full particulars including the rationale, documentary proof, etc. in
respect of the transactions/fund transfers carried out by them with entity Beejay and the stock broker, Korp Securities
during the period September 01, 2011 to September 30, 2012.
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3.4 Subsequent to this, Beejay, DDT and DDM vide separate letters dated February 18, 2017 filed their
respective written submissions. The Noticee, Neelanchal filed their reply vide letter dated February 27,
2017.
The replies and submissions of the Noticees are summarized as under:
i. Beejay vide letters dated September 22, 2016 and February 18, 2017 inter alia submitted as under:
a. We have not traded directly/indirectly in the securities market as alleged in breach of prohibitory directions issued by SEBI
vide its Order dated 04.06.2009 r/w 19.01.2010. We have strictly complied with/adhered to the directions issued by
SEBI and there is no contravention of the same. Findings in the said Order are based on the presumption that we had
traded indirectly by transferring funds, directly/indirectly, to the alleged connected entities during the investigation period
while the prohibitory directions issued by SEBI were in force. The said presumption is totally misplaced, is based on mere
surmises and conjectures and is also completely contrary to factual position on record.
b. The allegations in the said Order are primarily based on movement of funds between various entities including Beejay during
the investigation period i.e. September 01, 2011 to September 30, 2012.
c. In so far as Stupendors is concerned, at all points of time Beejay had to pay the amounts to Stupendors, raised by Beejay
at earlier point of time from Stupendors. As on 01.09.2011, Beejay had to return an amount of Rs 21,68,75,000/- to
Stupendors and as on 27.09.2012 the amount stood at Rs 59,25,90,000/-. During the entire investigation period, Beejay
had either been further borrowing or been repaying the amounts. The balances kept fluctuating. But at all points of time,
during the investigation period, Beejay had to repay the amounts to Stupendors.
Therefore, whatever funds were transferred by Stupendors to other entities (who are alleged to have traded in the
securities market) were funds belonging to Stupendors alone. Further, Beejay had no role or involvement in transfer of funds
by Stupendors to others and Beejay is not aware of the utilization of funds held by Stupendors. Furthermore, Beejay
categorically submit that the fund transfers by Stupendors were not on our behest or on our behalf or on our instruction.
d. In so far as DDT is concerned, at all points of time (except for short time period) we had to pay the amounts to DDT,
raised by us at earlier point of time from DDT. As on 01.09.2011, we had to return an amount of `1,61,10,000/- to
DDT and as on 03.07.2012 (post which there are no fund transfers till 30.09.2012) the amount stood at `1,00,000/-
During the period 01.09.2011 to 12.10.2011, Beejay had to repay the amounts to DDT. As on 12.10.2011,
Beejay had to repay an amount of Rs 86,60,000/-.
During the period 13.10.11 to 03.02.2012, Beejay had to receive amounts from DDT. As on 03.02.2012,
Beejay had to receive an amount of Rs 3,48,40,000/-. Significantly, during this period there are no transactions
which have been alleged to have been funded by Beejay.
During the period 04.02.2012 to 03.07.2012, Beejay had to repay the amounts to DDT. As on 03.07.2012,
Beejay had to repay an amount of Rs 100,000/-.
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e. From the aforesaid, it is clear that the balances kept fluctuating. But at all points of time (except for short time period),
during the investigation period, Beejay had to repay the amounts to DDT. Therefore, whatever funds were transferred by
DDT to its brokers were funds belonging to DDT alone. Further, Beejay had no role or involvement in transfer of funds
by DDT to its brokers and we are not aware of the utilization of funds held by DDT. Furthermore, Beejay categorically
submit that the fund transfers by DDT were not on Beejay’s behest or on Beejay’s behalf or on Beejay’s instruction.
f. In so far as DDM is concerned, at all points of time (except for short time period) Beejay had to pay the amounts to DDM,
raised by Beejay at earlier point of time from DDM. As on 01.09.2011, Beejay had to return an amount of Rs.
14,32,21,300/- to DDM. Thereafter, till 19.03.2012 the same status continued and as on 19.03.2012 Beejay had to
pay an amount of Rs 41,25,000/- to DDM.
g. During the period 20.03.2012 to 30.07.2012, Beejay had to receive amounts from DDM. As on 20.03.2012, Beejay
had to receive an amount of Rs 58,75,000/- and as on 30.07.2012 Beejay had to receive an amount of Rs 4,26,00,000/-
Significantly, during this period there are no transactions which have been alleged to have been funded by Beejay.
h. From the aforesaid, it is clear that the balances kept fluctuating. But at all points of time (except for short time period),
during the investigation period, Beejay had to repay the amounts to DDM. Therefore, whatever funds were transferred by
DDM to its brokers were funds belonging to DDM alone. Further, Beejay had no role or involvement in transfer of funds
by DDM to its brokers and Beejay is not aware of the utilization of funds held by DDM. Furthermore, Beejay categorically
submits that the fund transfers by DDM were not on Beejay’s behest or on Beejay’s behalf or on Beejay’s instruction.
i. Nothing has been brought on record to substantiate that Beejay was in any manner, involved in fund transfers by DDM
to brokers or that the fund transfers were at Beejay’s behest or on Beejay’s behalf or on Beejay’s instruction. Therefore, the
issue of DDM transferring funds to brokers on Beejay’s behalf for the purpose of trading etc. as alleged cannot and does
not arise.
j. In so far as Neelanchal is concerned, there are insignificant fund transactions. The amount (i.e. Rs 5lacs) lent on
23.11.2011, 09.12.2011, 23.12.2011, 30.12.2011 was reversed on the same day. The amount (i.e. Rs 5lacs) borrowed
on 07.03.2012 was repaid back on 09.03.2012 and the amount (i.e. Rs 5lacs) borrowed on 23.05.2012 was repaid
back on 12.06.2012. Admittedly, at any given point of time the amount borrowed or lent was not more than Rs 500,000/-
which is exceedingly insignificant. Therefore, based on the said fund transfer, Beejay cannot be alleged to have traded through
Neelanchal.
k. With regard to the observations pertaining to the alleged connection with various related/connected entities, Beejay denied
that they were connected to any related or connected entities save and except to the extent as stated herein below:
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Insofar as Shri Adish Jain, and Shri Peeyush Jain are concerned, it is submitted that they are distant relatives of our
director Mr.Sudhir Jain. Further, Shri Vicky Kothari, is related to Beejay’s Director. All of them are financially
independent and trade independently. Further, Beejay has no role to play in their day to day business activity.
Insofar as DDT, DDM and Stupendors are concerned, Beejay stated that Beejay has no relation/connection or nexus
with them save and except borrowing, lending and dealing in unlisted securities in the ordinary course of Beejay’s
business. The shares of Siddhi Commotrade Pvt Ltd and Corus Marketing Pvt Ltd were acquired by Beejay in the
ordinary course of their business. Further, nothing has been brought on record to substantiate the allegation that they
had traded indirectly in the securities market by transferring funds, directly/indirectly, to the said entities.
Based on the trading done by the said entities, it has been surmised that Beejay had traded indirectly in the securities
market by transferring funds, directly/indirectly which is legally untenable and unsustainable. Even the profit gained
by the said entities has not been transferred to them.
It is categorically submitted that the entire relationship/grouping is erroneous and completely contrary to the factual
position on record and is based merely on surmises and conjectures. Since the grouping is erroneous, the whole edifice of
the Order fails.
l. It is submitted that the calculation of profit is totally absurd, illogical, notional and inacceptable. It was denied that Beejay
has made any profits as alleged.
m. Beejay had no role whatsoever in the trading done by the said entities. Even nothing has been brought on record even remotely
suggesting that Beejay had any role in trading by the said entities. Further, Beejay was not aware of the profit/loss incurred
by the said entities during the investigation period or at any point prior to or post the investigation period.”
ii. Neelanchal vide letters dated February 02, 2017 and February 27, 2017 inter alia submitted as
under:
a. “We, Neelanchal Mercantile Pvt. Ltd., have been registered as a non-deposit raising NBFC with the Reserve Bank of India
since 1st January, 2008. We commenced our business of shares & securities trading from 5th November, 2009 and have set
a strong track record in all our activities. Our business is to make investment in securities, besides granting of loans &
advances,
b. We have been trading in the securities market, in the ordinary course, based on our commercial wisdom and analysis, through
various brokers viz JM Financial Services Private Limited, IFCI Financial Services Limited, India Infoline Limited,
Religare Securities Limited, Aditya Birla Money Limited, Saffron Global Markets Private Limited. Further for the purpose
of our trading we have availed margin funding facilities from various NBFC’S (viz JM Financial Products Limited, Narayan
Sriram Investments Private Limited, India Infoline Finance Limited, Religare Finvest Limited). Such margin funding were
our principal source of investments in listed shares & securities and our trading were carried out based on margin funding
limits provided to us by NBFC’s of reputed Broking Houses,
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c. The Impugned Order has been passed in gross violation of principles of natural justice and in complete violation of provisions
of section 11(4) and 11B of SEBI Act. The facts and circumstances of the case do not justify passing of any ex parte order.
Here we may point out that, on May 07, 2015, we had received letter from SEBI seeking various details from us regarding
certain fund transactions between us, “Beejay”, “Eversight” and “Sudhir Jain” during the period September 01, 2011 to
September 30, 2012. The details were provided by us to SEBI vide our letter dated July 31, 2015. We submit that
subsequent to our letter dated July 31, 2015 there has been no communication from SEBI. Thereafter, suddenly after almost
more than 10 months from the last communication, the Impugned Order was passed, without issuing any Show Cause Notice
or granting any opportunity of hearing and without taking our reply into consideration.
d. The directions contained in the Impugned Order are also in total breach of section 11(4) of the SEBI Act. SEBI has cleverly
circumvented the provisions of section 11(4)(e).
e. The direction to disgorge, even before the matter has been finally adjudicated on merits, is totally arbitrary, unreasonable and
legally untenable. In the absence of any express power to charge interest on the alleged disgorged amount, the direction to pay
interest is totally illegal. The direction to pay interest @ of 12% at this juncture from the back date, when the liability has
not been crystallized, is totally unjustified and unwarranted.
f. It is submitted that all our trades during the Investigation Period were executed on a recognized stock exchanges, executed
through SEBI Registered Stock Brokers (who had completed our KYC norms), settlement were made by exchanges and there
has been no illegality in our trades. Even 'The Order' has not brought anything on record or alleged that our trades were in
violation of SEBI Act or Regulations,
g. It is alleged that we are related to DDM, based on the fact that DDM held 17,500 Equity Shares of Milestone Shares &
Stock Broking Pvt. Ltd. which in turn hold 12,50,000 shares of our company. It is submitted that Milestone Share &
Stock Broking Pvt. Ltd. is our holding company (holding just 55.60% of our voting capital) and DDM had became its
minority shareholder on 31/03/2010, holding just 5.43 % of the share capital. There was no restraining order by SEBI
or any other regulator against DDM when share were allotted by Milestone to DDM. Thus, nothing adverse is to be inferred
against us based on the fact that DDM happens to be a minority shareholder of our holding company. It is further submitted
that DDM did not had any management control of our company or of our holding company,
h. It is submitted that SEBI has drawn adverse inference against us by inferring that we were a 'Dummy' entity. It is vehemently
denied that we are a Dummy entity. The observation made by SEBI at para 4(m) of 'The Order' are based on flawed
rational and without appreciating the facts on records. In this regards we would like to submit that we are a Non-Banking
Finance Company registered with RBI and that we enjoy considerable goodwill and reputation in the market and broking
fraternity. We wish to place the following on record. We had contributed significantly to the nation exchequers by way of taxes
and levies. SEBI's observations that "it can be deduced that Neelanchal was a 'dummy' entity" are thus in bad taste, based
on erroneous observation;
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Nature of Expenses Financial Year 2010-11 Financial Year 2011-12 Financial Year 2012-13
Service Tax Paid 14,92,304 35,61,726 1,21,07,486
Securities Transaction Taxes 52,77,968 1,44,09,816 34,79,667
TOT, Stamp Duty and other Statutory Levies
52,79,964 3,63,38,000 2,95,08,465
Finance Charges 1,39,25,144 5,78,00,974 5,77,54,245
Inventories of Quoted shares as at year end 31,37,07,600 78,01,18,938 20,98,02,334
i. It has been alleged at para 4(f) of 'The Order' that we are connected to Eversight and that we share a common E-Mail Id
with Eversight namely, [email protected]. In our written submission dated 01.02.2017 we had denied that
the said E-Mail Id belongs to us and we had sought details from SEBI, based on which SEBI has drawn such observation.
During the course of the personal hearing it was pointed out to our Authorised representative, that the E-Mail Id of our
company was mentioned as [email protected] in Form 32 filed with MCA on 10.03.2011 In this regards
it is submitted that our E-Mail Id is [email protected] and not [email protected]. Form 32
is respect of resignations of our Directors was filed by our auditor. The clerical staff from his firm has filled in wrong E-
Mail I'd in the form, which went unnoticed by us. We are sorry for the same and reiterate that our E-Mail Id has always
been [email protected] and [email protected]. We enclose herewith necessary evidence by way of
communication from our bankers and our DP Client Masters to show that our E-Mail Id during the relevant point of
time was [email protected] and [email protected]. The same may kindly be taken on records.
Transaction with Beejay:
j. We have entered into financial transactions with Beejay in the ordinary course of our business of NBFC. We had taken
and given very short term loans and advances mostly in the nature of intraday transactions or for a day or two. We are
enclosing herewith ledger a/c with Beejay for the period 01.09.2011 to 30.09.2012 as Annexure - 3, wherein there are
6 payments & 6 receipts of Rs.5,00,000/- each. We have taken very short term loan on 3 occasions which were repaid to
Beejay during the day end. On two occasion Beejay has taken loan from us, which were repaid by Beejay after 2 days on
one occasion and after about 20 days on other occasion.
Transaction with Eversight:
k. The transactions with Eversight were in the ordinary course of our business of NBFC. We had taken and given short
loans and advances. We are enclosing herewith Ledger a/c of Eversight for the period 01.09.2011 to 30.09.2012 as
Annexure – 4. During the financial year 2011-12, we had taken intraday loan from Eversight for a sum of
Rs.5,00,000/- on 2 occasion. The same were repaid by day end. We had given short term loan of Rs.5,00,000 each on
two occasions, which were repaid by Eversight.
Page 13 of 32
l. During the financial year 2012-13, we had taken short term advances from them in the ordinary course, which were repaid
to them on demand. The maximum amount outstanding at any point of time during the year was Rs.12,28,00,000/- on
27/07/2012 which was repaid to them subsequently. As at year end i.e March 31, 2013 there was no outstanding
payable or receivable with them.
m. From 05.06.2012 to 30.09.2012, we had regular transactions of receipts and repayment of Loan/Advance with
Eversight in the ordinary course and none of which were for the alleged trades of Eversight. As at 30/09/2012 a sum of
Rs.12.03 crores was payable to Eversight which has been repaid to them in January, 2013 and as at year end 31.03.2013
a sum of Rs. NIL was payable to them.
Transaction with Sudhir Jain:
n. During the Investigation Period we had received Advances from Sudhir on 3 instances of Rs. 5 lakhs each and the same
were repaid on the same day. The day end balance in all such case was Rs. NIL. Thus, it cannot be alleged that Sudhir
Jain has traded through us. The daily day end Closing Balance of Sudhir Jain during the Investigation Period was Rs.
Nil.
o. It is submitted that we have repaid all the sum of money received from the debarred entities during the Investigation Period
and nothing is due & payable to them. No part of the amount received in lying due with us.
p. Further to the above, it is denied that we had received a sum of Rs. 0.30 crores from Beejay and Rs. 17.48 crores from
Eversight during the Investigation Period for the purpose of enabling their trades. It is further submitted that the details of
Rs. 38.59 crores allegedly transferred to brokers has not been provided in 'The Order'. There are no evidence in 'The
Order' that the amount received from Beejay and Eversight have been transferred to the brokers.
q. Thus, the allegations leveled against us are based on mere surmises and conjunctures, assumptions and presumptions.
r. All the trades during the Investigation period were executed on the floor of the exchanges, and were on our own account.
Contracts notes were generated in our name, pay in & pay out obligation were made by us, we were the beneficial owner of
all the shares & securities during the period and all the transactions and the resultants profit & loss were duly disclosed
in our books, which were duly audited.
s. It is submitted that our Directors & Shareholders are different from Directors & Shareholders of other companies listed
in the Ex parte Order and that none of the barred entities viz. Beejay, Sudhir, Eversight or Stupendors are our
shareholders. Further, it is stated in the Ex parte Order that DDM held 17,500 Equity Shares of Milestone Shares &
Stock Broking Pvt. Ltd. which in turn hold 12,50,000 shares of our company. It is submitted that Milestone Share &
Stock Broking Pvt. Ltd. is our holding company (holding just 55.60% of our voting capital) and DDM had became it’s
minority shareholder on 31/03/2010, holding just 5.43% of the share capital of Milestone. There was no restraining
order by SEBI or any other regulator against DDM when share were allotted by Milestone to DDM. Thus nothing
Page 14 of 32
adverse is to be inferred against us based on the fact that DDM happens to be a minority shareholder of our holding
company.
t. It is submitted that all our trading during the “Investigation period” were on our own account and that no part of the same
relates to the debarred entities, Beejay and Eversight.
u. We state that it is matter of record that during the period under investigation, we had bought and sold several shares/scrips
on NSE and BSE through IFCI Financial Services Limited, Religare Securities Limited, Aditya Birla Money Limited
and India Infoline Limited and in fact prior to investigation period and even thereafter, our pattern of trades has always
been the same. …..In fact even prior to and post the investigation period, we had several transactions with the said debarred
entities and since the said fund transactions have nothing to do with our trading in the securities market, we fail to
understand on what basis SEBI even assumes that our trades on NSE and BSE were on behalf of said debarred entities,
v. We state that SEBI’s prima facie observation that “Korp” was connected to us is wrong & flawed. We have never been a
client of “Korp” or had any financial transaction with “Korp”……..
w. In respect of our trades on NSE: SEBI has worked out notional profit of Rs.20,50,14,938/- in respect of our trades in
Pipavav Def. & Offshore Engg. and a notional loss of Rs.2,27,43,858/- in respect of our trades in Pipavav Shipyard
Ltd. We understand that, both the companies are one and the same. Further to that such profit & loss are also not set off
in working out the alleged gain.
x. In respect of our trade in the script of SRS Ltd on NSE & BSE, we have been allotted 32,98,718 shares @ Rs. 58/-
each, during the Investigation period. Such acquisition has not been considered by SEBI in tabulating profit & loss.
Further corporate action like acquisition through bonus issue e.g in the case of Nitin Fire Protection Industries Ltd. has
not been considered,
y. ……….SEBI has observed that our Directors are responsible for our conduct and therefore liable; however SEBI fails to
understand that the trades entered into by us were in the normal course of business and same is well established and clear
from the material relied by us hereinabove. Therefore, question of holding us or our directors guilty of any violation is
improper”
iii. DDM vide letters dated September 21, 2016 and February 18, 2017inter alia stated:
(a) “The movement of funds between us & Beejay on 26/08/2011 predates the Investigation period. Further, it has been
stated in the Impugned Order that the movement of funds from Beejay to us on 02/09/2011 was towards our trade
through Korp on 02/09/2011. In this regards we submit as under:
i. On 02/09/2011 we had received a sum of Rs.30 lacs from Beejay towards our dues as on 01/09/2011 i.e start
of the investigation period.
Page 15 of 32
ii. The movement of funds between us & Korp of Rs. 30 lacs were into Korp's ICICI Bank a/c 000605016720,
which is a General Business account of Korp. The said account of Korp is not a NSE/BSE Client account. Thus,
the transfer of funds to Korp was not for the purpose of our trading.
iii. It has been stated by SEBI that the funds received by us from Beejay were for our trades on BSE through Korp on
02/09/2011. It is denied that we have traded on 02/09/2011 on BSE through Korp. From the above it is
apparent that the inference drawn by SEBI are factually incorrect, erroneous and flawed.
(b) Based on the above it is apparent that SEBI has drawn erroneous inferences based on movement of funds between us &
Beejay, which were in the ordinary course.
(c) It is submitted that SEBI has merely stated that we have received a sum of Rs. 29.79 crores (28.94 crores from Beejay
and 0.85 crores from Eversight) during the Investigation period and that we have transferred a sum of Rs. 17.20 crores to
our brokers. The details of the same have not been provided in the Exparte Ad Interim Order. Further, SEBI has not
brought on records any evidences to show that the payments to our Brokers were out of funds received from Beejay or
Eversight. The very fact that there is difference in the amount paid by these entities i.e Rs. 29.79 crores to us and that that
paid by us to our Brokers i.e Rs17.20 crores is an indicator that the funds received by us from these entities were not for
the purpose of enabling their trades in securities market.
(d) No part of the amount paid by us to Korp for the pupose of our trading in the securities market has been sourced from
Beejay or Eversight.
(e) Based on erroneous observation, assumption & presumptions SEBI has worked out alleged "Gains" in respect of our
trades in an arbitrary, whimsical & callous manner. It is SEBI's own showing that most of the trades entered into by us
on NSE and BSE have resulted into huge losses. We submit that our said trades on NSE and BSE have resulted in a
net loss of Rs. 5,78,61,817/-. However, we fail to understand that on what basis SEBI has recorded that we had made
a gain of Rs. 98,36,879/- by entering into said trades. Even according to SEBI the impugned transactions were on the
platform of the Exchanges and therefore instead of considering the actual rates SEBI has considered weighted average price,
assumed opening prices and closing prices. In any event SEBI's computation by completely ignoring the actual losses, is
absurd and illogical.
(f) SEBI has erred in observing that "the entire profit made by the said entities (us) by trading during the investigation period
is attributed to Beejay & Eversight". The observation has been made by SEBI based on the observation that the amount
transferred to us by Beejay & Eversight is higher than that transferred by us to brokers. The same is absurdity and illogical
and shows the callous and casual manner in which investigation has been carried out and observation made. Assuming
(without admitting) the allegation to be true, SEBI has not brought out anything on records to explain as to why Beejay
&Eversight has collectively paid us Rs. 29.79 crores when we have paid only Rs. 17.20 crores to our brokers and why
100% of our trading is attributable to be on behalf of Beejay and Eversight.”
Page 16 of 32
iv. DDT vide letters dated October 06, 2016 and February 18, 2017inter alia submitted:
(a) “The Movement of funds between us & Beejay on 18/08/2011 predates the Investigation period. Further, it has been
stated in the Impugned Order that the movement of funds from Beejay to us on 11/10/2011 was towards our trade
through Korp on 12/10/2011. In this regards we submit as under:
On 11/10/2011 we had received a sum of Rs.40 lacs from Beejay. A part of the same i.e Rs. 11.10 lacs were towards
our dues as on 01/09/2011 i.e start of the investigation period and balance Rs. 28.90 lacs were towards our advance
given to Beejay on 08/09/2011.
The movement of funds between us & Korp of Rs.15 lacs were into Korp's ICICI Bank a/c 000605016720, which
is a General Business account of Korp. The said account of Korp is not a NSE/BSE Client account. Thus, the transfer
of funds to Korp was not for the purpose of our trading.
The difference in amount received by us from Beejay & that paid by us to Korp indicate that we had received funds from
Beejay for purpose other than trading on their behalf.
(b) It has been stated and inferred that the funds received from Beejay were for our trades through Korp on 12/10/2011. It
is submitted that on 12/10/2011, we had sold 185 shares of Neha International Ltd. on BSE @ Rs.113.90 for a
total sum of Rs. 21,402/-. From the above it is apparent that the inference drawn by SEBI is erroneous and flawed. If
such trades were to be on behalf of Beejay as alleged, Beejay would not have made a payment of Rs. 40 lacs to us, on the
contrary we would have paid Beejay Rs.21,402/-
(c) We did not had any transaction with Eversight during the Investigation period.
(d) It is submitted that SEBI has merely stated that we have received a sum of Rs. 12.49 crores from Beejay during the
Investigation period and that we have transferred a sum of Rs.4.29 crores to our brokers. The details of the same have not
been provided in the Exparte Ad Interim Order. Further, SEBI has not brought on records any evidences to show that
the payments to our Brokers were out of funds received from Beejay. The very fact that there is difference in the amout paid
by Beejay to us and that that paid by us to our Brokers is an indicator that the funds received by us from Beejay was not
for the purpose of enabling the trades of Beejay in securities market.
(e) Based on erroneous observation, assumption & presumptions SEBI has worked out alleged "Gains" in respect of our
trades in an arbitrary, whimsical & callous manner. It is SEBTs own showing that most of the trades entered into by us
on NSE and BSE have resulted into huge losses. We submit that our said trades on NSE and BSE have resulted in a
net loss of Rs.6,35,20,439/-. However, we fail to understand that on what basis SEBI has recorded that we had made
a gain of Rs. 1,01,79,817/- by entering into said trades. Even according to SEBI the impugned transactions were on the
Page 17 of 32
platform of the Exchanges and therefore instead of considering the actual rates SEBI has considered weighted average price,
assumed opening prices and closing prices. In any event SEBI's computation by completely ignoring the actual losses, is
absurd and illogical.
(f) SEBI has erred in observing that "the entire profit made by the said entities (us) by trading during the
investigation period is attributed to Beejay & Eversight". The observation has been made by SEBI based on the
observation that the amount transferred to us by Beejay is higher than that transferred by us to brokers. The same is
absurdity and illogical and shows the callous and casual manner in which investigation has been carried out and observation
made. Assuming (without admitting) the allegation to be true, SEBI has not brought out anything on records to explain
as to why Beejay has paid us Rs.12.49 crores when we have paid only Rs.4.29 crores to our brokers and why 100% of
our trading is attributable to be on behalf of Beejay.”
Common submissions by DDM and DDT:
(a) “The transactions in shares & securities alleged in the Exparte Ad-Interim Order were entered by us in the normal course
of our business, out of our own funds and wisdom. The same were executed by us through our brokers, and the risk rewards
in respect of these trades were ours. Contracts notes were generated in our name, pay in & pay out obligation were made
by us, we were the beneficial owner of all the shares & securities during the period and all the transactions and the resultants
profit & loss were duly disclosed in our books and the resultant profit & loss were duly assessed to taxes.
(b) We had entered into several financial & commercial transactions with several entities including Beejay Investment and
Financial Consultant Pvt Ltd. (Beejay) and Eversight Tradecom Pvt Ltd. (Eversight) during the period under
investigation.
(c) It is matter of record that Beejay & Eversight are NBFC's and the relationship that we had with these entities are strictly
commercial in nature and it is erroneous to even infer that these entities have traded through us in the securities markets.
It is also on record that our relationship with these entities predates the Orders passed by SEBI against them. Merely
because we had some bonafide transactions with them which has no connection with our trades in the securities market, it
cannot be inferred that we traded on behalf of these entities. In any event SEBI has not even attempted to establish or even
show any correlation between funds transfers between us and these entities and our trades in the normal course of business.
(d) The erroneous inference has been drawn by SEBI based on movement of funds between us & Korp in Korp's ICICI Bank
a/c 000605016720. The said account of Korp is a General Business purpose account and not NSE / BSE Client
account. The movement of funds between us & Korp in this account was not for the purpose of our trading.
(e) If SEBI is right in presuming that these were not our trades and these were trades of the debarred entities it is clear from
the said assumption that the profits or losses if any resulting out of said trades also would then belong to these debarred
entities and would not belong to us. In that case it is unfair and unwarranted on part of SEBI to hold us jointly responsible
Page 18 of 32
for depositing the impounded amounts/alleged unlawful gains and attaching our accounts for the same. There is nothing on
record to even suggest that we were controlled by these debarred entities.
(f) Even as per SEBI's Order, we sold more shares than the one we bought, during the Investigation period. The only logical
understanding would be that we had an opening stock of shares which resulted into sale. On this ground itself it is clear
that the allegations made by SEBI are incorrect. It is also recorded that 100% of our trading was on behalf of the debarred
entities. If it is SEBI's own case that we sold more shares than the one we bought, how is it even possible to assume that
100% of our trading was on behalf of debarred entities?
(g) It is also important to note that even as per SEBI the Suspicious Transaction Report (STR) received by SEBI was on
December 21, 2012 and only in April 2015, SEBI called upon us to provide certain details. The said details were
provided by us and last of such communication between us and SEBI was on July 3, 2015. Thereafter for almost a year
there was no communication from SEBI and therefore we fail to understand the reason for passing an Exparte Ad- Interim
Order against us. SEBI ought to have issued a Show Cause notice and provided a full opportunity for us to defend and
only thereafter they ought to have taken a final decision. However, SEBI chose to pass a drastic order whereby SEBI's
attempt is only to kill the company.
(h) No urgency has been shown by SEBI while passing such harsh directions i.e. freezing of accounts and impounding of
amounts. ………….. We state that such directions are not remedial or preventive and rather the same are penal. Further
it is highly unfair and unreasonable on part of SEBI to make the Exparte Order effective immediately without providing
any opportunity to us to explain why same are incorrect and cannot be implemented.
(i) SEBI in Exparte Ad-Interim Order recorded that the alleged unlawful profits were by Beejay and Eversight therefore
there was no question of issuing an Exparte order directing these entities alongwith us to jointly and severally deposit the
said alleged unlawful gains,
(j) Nothing has been alleged against us or brought on records to demonstrate that we have violated the provision of the Act or
Regulations vide our trading in the ordinary course during the Investigation Period.”
v. Rajesh Agarwal vide letter dated November 01, 2016 inter alia submitted:
(a) “The order dated June 16, 2016 is of grave consequence to me. The directions issued by you against me have resulted in
deprivation of my right to carry on legitimate business activities and have tarnished my reputation, besides causing severe
financial crisis to me,
(b) I was a Director of DDT and DDM from April 01, 2011 to June 29, 2012 and that at present I do not have access to
any records and documents of these companies. My reply are thus based on the vivid memories I had during my association
with these companies. I was not a Director of these entities for a substantial part of the Investigation Period,
Page 19 of 32
(c) I do not have any relation / link / connection / association/ nexus with the alleged Sudhir Jain, Beejay Investments &
Financial Consultants Pvt. Ltd. or Eversight Tradecomm Pvt. Ltd.
(d) I am not a shareholder of DDT or DDM and that during my Directorship I had carried on the affairs of these companies
in the best possible manner so as to enhance the shareholders value. I have acted with the other Directors and management
of these companies in keeping with my duties as a Director of these companies, All the trades and dealing that these
companies have carried out during my tenure as a Director were in the ordinary course and devoid of any manipulative
intent. I deny that any part of the trades of DDM and DDT during my tenure as Director was on behalf of any other
entity. It is further submitted that Beejay and Eversight has transferred sum of monies to these entities in the normal course
and not for carrying out any trades in the securities market as alleged.
(e) I am a brother of Mr. Sushi! Kumar Agarwal, who was a Director of Korp in the past. Myself and my elder brother, Mr.
Sushil Kr. Agarwal, are independent and have independent livelihood. We both reside at different places and do not have
any business connection. Both of us have independent living. DDM & DDT has been trading through Korp in the past
also. During the Investigation period, till the time I was a Director of these companies, DDM & DDT have traded
through other brokers also and not exclusively with Korp. Therefore, the connection pointed out is irrelevant and ill conceived,
(f) I carried out my duties as a Director of these companies in a bonafide manner, and in the ordinary course. That the alleged
flow of funds from Beejay & Eversight were in the ordinary course and were there in the past also. DDM & DDT were
trading in the securities markets in the past also. All the act and deeds of these companies during my tenure as a Director
were in the ordinary course and nothing has been brought on records that these companies have committed any offence with
my consent or connivance, or any offence is attributable to any neglect on my part,
(g) The only power in SEBI's hands to attach the bank account of any person involved in violation of any of the provisions of
this Act, or the rules or the regulations made there under, is subject to the check and balance of making an application for
approval of such attachment to a First Class Judicial Magistrate. In the present case, SEBI has not obtained any such
approval necessary for attaching our bank account to any degree. Further, the proviso makes it clear that SEBI has no
power to attach bank accounts which are not actually involved in the alleged violation. Therefore, no such direction to bank
to not to debit the bank account could have been issued.
(h) Since no transactions have been done by me in the securities market and no proceeds of any securities involved in the alleged
transactions pertaining to trading done by other entities are lying in my bank account, no direction to my Banks to not
debit my account could have been issued. Further, since no proceeds of securities are lying in my demat account no direction
to depositories to not debit my account could have been issued….. it is clear that the whole exercise of power by SEBI is
totally illegal and completely contrary to express and mandatory provisions of Section 11 (4) of SEBI Act,
(i) Pursuant to the "said order" my livelihood and my survival is at stake. I am unable to finance my medical requirement
and my family financial needs. Doctors have advised me admission to hospital again in the month of December, 2016 for
Page 20 of 32
which I need to raise finance, I therefore request your goodself to view my case sympathetically and the order freezing my
bank account be revoked immediately”
vi. Kinkar Bhattacharya vide letter dated October 22, 2016 inter alia submitted:
(a) I am a Director of Divya Drishti Traders Pvt. Ltd. and Divya Drishti Merchants Pvt. Ltd., since March 30, 2012, I
was not a Director of these entities for a substantial part of the Investigation Period. I do not have any alleged link /
connection / nexus with any of the alleged entities in the 'said order", except DDTPL and DDMPL, wherein I am a
Director and hence no negative inferences should have been drawn against me,
(b) I am not a shareholder of DDT or DDM and that I have carried on the affairs of the companies in the best possible
manner so as to enhance the shareholders value. I have acted with the other Directors and management of these companies
in keeping with my duties as a Director of these companies. All the trades and dealing that these companies have carried
out during my tenure as a Director were in the ordinary course and devoid of any manipulative intent. I deny that any part
of the trades of DDM and DDT during my tenure a Director was on behalf of any other entity. I submit that Beejay and
Eversight has transferred sum of monies to these entities in the normal course and not for carrying out any trades in the
securities market as alleged,
(c) The allegation are without any basis and legally not tenable. It is submitted that I carried out my duties as a Director of
these companies in a bonfide manner, and in the ordinary course. That the alleged flow of funds from Beejay & Eversight
were in the ordinary course and were there in the past also. These companies were trading in the securities markets in the
past also. All the act and deeds of these companies during my tenure as a Director were in the ordinary course and nothing
has been brought on records that these companies have committed any offence with my consent or connivance or any offence
is attributable to any neglect on my part,
(d) The directions issued by you against me have resulted in deprivation of my right to carry on legitimate business activities
and have tarnished my reputation.
(e) I adopt the reply given by Divya Drishti Traders Pvt. Ltd. (DDTPL) and DDM Pvt. Ltd (DDMPL), wherein I am
a Director.
vii. Sukanta Chattejee vide letter dated October 24, 2016 replied as under:
(a) I was a Director of DDTPL and DDMPL from 30th March, 2012. Thus, I was not a Director of these entities for a
substantial part of the Investigation Period. I do not have any alleged link/connection / nexus with any of the alleged
entities in the 'said order", except DDTPL and DDMPL, wherein I am a Director and hence no negative inferences
should have been drawn against me,
Page 21 of 32
(b) I am not a shareholder of DDTPL or DDMPL and that I have carried on the affairs of the companies in the best possible
manner so as to enhance the shareholders value. I have acted with the other Directors and management of these companies
in keeping with my duties as a Director of these companies. All the trades and dealing that these companies have carried
out during my tenure as a Director were in the ordinary course and devoid of any manipulative intent. I deny that any part
of the trades of DDMPL and DDTPL during my tenure a Director was on behalf of any other entity. I submit that
Beejay and Eversight has transferred sum of monies to these entities in the normal course and not for carrying out any
trades in the securities market as alleged,
(c) I carried out my duties as a Director of these companies in a bonafide manner, and in the ordinary course. That the alleged
flow of funds from Beejay & Eversight were in the ordinary course and were there in the past also. DDM & DDT were
trading in the securities markets in the past also. All the act and deeds of these companies during my tenure as a Director
were in the ordinary course and nothing has been brought on records that these companies have committed any offence with
my consent or connivance, or any offence is attributable to any neglect on my part,
(d) The only power in SEBI's hands to attach the bank account of any person involved in violation of any of the provisions of
this Act, or the rules or the regulations made there under, is subject to the check and balance of making an application for
approval of such attachment to a First Class Judicial Magistrate. In the present case, SEBI has not obtained any such
approval necessary for attaching our bank account to any degree. Further, the proviso makes it clear that SEBI has no
power to attach bank accounts which are not actually involved in the alleged violation. Therefore, no such direction to bank
to not to debit the bank account could have been issued.
(e) Since no transactions have been done by me in the securities market and no proceeds of any securities involved in the alleged
transactions pertaining to trading done by other entities are lying in my bank account, no direction to my Banks to not
debit my account could have been issued. Further, since no proceeds of securities are lying in my demat account no direction
to depositories to not debit my account could have been issued….. it is clear that the whole exercise of power by SEBI is
totally illegal and completely contrary to express and mandatory provisions of Section 11 (4) of SEBI Act,
(f) Pursuant to the "said order" bank account of my mother, bearing a/c no. 33110062479 with Standard Chartered Bank,
19, N.S.Road Branch, Kolkata - 700 001 has been frozen for debits. It is submitted that my mother, a widow, aged 80
years is a pensioner and the account has myself as the second holder for ease of operation, as my mother is too old to visit
the branch and operate the account herself. It is further submitted that, I have never used the said account for my personal
transaction and that no part of the alleged transaction during the Investigation Period have been transacted from the said
account. The account solely belongs to my mother and she is dependent on her pension for survival. It is humbly prayed that
necessary instructions / order be made to Standard Chartered Bank for allowing normal operation of the account as any
delay would deprive my old, widow mother of her survival. She is dependent on the pension received in the account for her
survival,
(g) There is no justification for subjecting me to the directions made in the order. It is submitted that, as your goodself could
see, that I have not committed any wrong and no charge has been established against me even prima facie, to warrant any
action. Since your order has adverse impact not only on my reputation and recognition, it will be unfair to subject me to
such an order pending investigation.”
Page 22 of 32
4.1 I have carefully examined the investigation report, interim order, replies filed by the Noticees and the
additional written and oral submissions made before me by the Noticees along with the documents
submitted therewith. Before dealing with submissions of the Noticees on merits, it is necessary to deal
with the preliminary objections raised by them.
4.2 The Noticees viz. Beejay, Neelanchal, DDM and DDT, have contended that the interim order was passed
without issuing show cause notice or granting opportunity of hearing and this is in gross violation of
principles of natural justice. The Noticees have also contended that the direction to disgorge, even before
the matter has been finally adjudicated on merits, is totally arbitrary, unreasonable and legally untenable
and that there is no express power to charge interest on the alleged disgorged amount. In this regard, I
note that the power of SEBI to pass interim orders flows from Sections 11 and 11B of the SEBI Act
which empower SEBI to pass appropriate directions in the interests of investors or securities market,
pending investigation or inquiry or on completion of such investigation or inquiry. Exigencies of the
situation also warrant urgent action by SEBI so that profit or ill- gotten gains are not fritted away till the
matter is finally disposed of. The law with regard to doing away with the requirement of pre-decisional
hearing in certain situations is well settled. The following findings of the Hon'ble Supreme Court of India
in the matter of Liberty Oil Mills & Others Vs Union Of India & Other (1984) 3 SCC 465 1984 Indlaw
SC 326 are noteworthy:-
"It may not even be necessary in some situations to issue such notices but it would be sufficient but obligatory to consider
any representation that may be made by the aggrieved person and that would satisfy the requirements of procedural fairness
and natural justice. There can be no tape-measure of the extent of natural justice. It may and indeed it must vary from
statute to statute, situation to situation and case to case. Again, it is necessary to say that pre-decisional natural justice
is not usually contemplated when the decisions taken are of an interim nature pending investigation or enquiry. Ad-
interim orders may always be made ex-parte and such orders may themselves provide for an opportunity to the aggrieved
party to be heard at a later stage. Even if the interim orders do not make provision for such an opportunity, an aggrieved
party has, nevertheless, always the right to make appropriate representation seeking a review of the order and asking the
authority to rescind or modify the order. The principles of natural justice would be satisfied if the aggrieved party is given
an opportunity at the request. "
4.2.1 In the instant matter, the ad-interim exparte order was passed under the provisions of Sections 11(1), 11(4)
and 11B of the SEBI Act. The second proviso to Section 11(4), in fact, state the following: "Provided
Page 23 of 32
further that the Board shall, either before or after passing such orders, give an opportunity of hearing to such intermediaries
or persons concerned". Further, various Courts, while considering the aforesaid sections of the SEBI Act
have also held that principles of natural justice will not be violated if an interim order is passed and a
post- decisional hearing is provided to the affected entity. Reference may also be drawn to the following
judgments of the Hon'ble High Courts in this regard:
a. The Hon'ble Bombay High Court in Anand Rathi & Others Vs. SEBI (2002 (2) BomCR 403 2001
Indlaw MUM 26 observed as under:
"31. It is thus clearly seen that pre decisional natural justice is not always necessary when ad- interim orders are made
pending investigation or enquiry, unless so provided by the statute and rules of natural justice would be satisfied if the
affected party is given post decisional hearing. It is not that natural justice is not attracted when the orders of suspension
or like orders of interim nature are made. The distinction is that it is not always necessary to grant prior opportunity of
hearing when ad-interim orders are made and principles of natural justice will be satisfied if post decisional hearing is given
if demanded.
32. Thus, it is a settled position that while ex parte interim orders may always be made without a pre decisional opportunity
or without the order itself providing for a post decisional opportunity, the principles of natural justice which are never
excluded will be satisfied if a post decisional opportunity is given, if demanded."
b. The Hon'ble High Court of Judicature for Rajasthan at Jaipur in the matter M/s. Avon Realcon Pvt.
Ltd. & Ors Vs. Union of India & Ors (D.B. Civil WP No. 5135/2010 Raj HC) has held that:
"...Perusal of the provisions of Sections 11(4) & 11(B) shows that the Board is given powers to take few measures either
pending investigation or enquiry or on its completion. The Second Proviso to Section 11, however, makes it clear that
either before or after passing of the orders, intermediaries or persons concerned would be given opportunity of hearing. In
the light of aforesaid, it cannot be said that there is absolute elimination of the principles of natural justice. Even if, the
facts of this case are looked into, after passing the impugned order, petitioners were called upon to submit their objections
within a period of 21 days. This is to provide opportunity of hearing to the petitioners before final decision is taken.
Hence, in this case itself absolute elimination of principles of natural justice does not exist. The fact, however, remains as
to whether post-decisional hearing can be a substitute for pre-decisional hearing. It is a settled law that unless a statutory
provision either specifically or by necessary implication excludes the application of principles of natural justice, the
Page 24 of 32
requirement of giving reasonable opportunity exists before an order is made. The case herein is that by statutory provision,
principles of natural justice are adhered to after orders are passed. This is to achieve the object of SEBI Act. Interim
orders are passed by the Court, Tribunal and Quasi- Judicial Authority in given facts and circumstances of the case
showing urgency or emergent situation. This cannot be said to be elimination of the principles of natural justice or if ex-
parte orders are passed, then to say that objections thereupon would amount to post-decisional hearing. Second Proviso to
Section 11 of the SEBI Act provides adequate safeguards for adhering to the principles of natural justice, which otherwise
is a case herein also..."
4.2.2 The interim order in the instant case has been passed by taking into account the facts and material
brought out by the investigation conducted by SEBI. The facts and circumstances necessitating issuance
of ad-interim ex parte directions have been elaborately explained in the said interim order (Paragraph No
6). The direction for impounding the illegal gains along with applicable interest in this case was issued
to prevent the diversion of illegal gains by the Noticees. The said Order was passed after taking into
account the fact that non-interference by SEBI at that stage would have defeated the effective
implementation of the directions of disgorgement, if any that might have to be passed after adjudication
on merits. If no such directions were issued, it would result in irreparable injury to the interests of the
securities market and the investors. It is also pertinent to note that the interim order also provided the
Noticees a post decisional opportunity, to reply to the allegations and a personal hearing.
In view of the above, I find that the aforesaid interim order passed by SEBI was not in
disregard of the principles of natural justice since, in accordance with the settled law, the Noticees were
granted an opportunity to file their replies and also avail the opportunity of personal hearing, which was
afforded.
4.2.3 The amount directed to be impounded (i.e an amount of `18,99,43,661/- ) in the instant matter as per
the interim Order, is the alleged illegal gain made by the Noticees by trading during the debarred period,
i.e. September 10, 2011 to September 09, 2012, thereby flouting extant directions issued by SEBI. The
interest @ 12% per annum (i.e an amount of `8,44,91,104/- ) from September 10, 2012 till the passing
of interim order was computed on the said illegal gain. The direction to impound the illegal gains along
with applicable interest on the same was in the interest of investors so that the value of funds credited
to the said account is not eroded and the amount is impounded till the matter is finally disposed of.
I, therefore, do not find merit in the contentions of the Noticees.
Page 25 of 32
4.3 Another preliminary contention raised by the Noticees was that the directions contained in the interim
order are in total breach of Section 11(4) of the SEBI Act and SEBI has circumvented the provisions of
Section 11(4) (e) of the SEBI Act, which provides for the procedures to be followed while attaching the
bank accounts of the entities involved.
In this regard, it is observed that the power under Section 11 and 11B of the SEBI Act, 1992
can be invoked at any stage, i.e., either during pendency or on completion of inquiry or investigation. As
per Section 11(4) (d) of the SEBI Act, SEBI has the power to impound and retain the proceeds or
securities in respect of any transaction which is under investigation. In the instant matter, SEBI, in
exercise of the powers conferred on it under Section 11(4) (d) of the SEBI Act, has directed the Noticees
(vide the said interim order) to impound the illegal gain along with the interest (i.e an amount of
`27,44,34,765/-). Further, the said Order allowed the Noticees to make debits in excess of the amount
to be impounded from the bank accounts (frozen pursuant to the said interim Order). Also, credits if any,
into the accounts are also allowed. In view of the above, the contention raised by the Noticee that SEBI
has circumvented the provisions of Section 11(4) (e) of the SEBI Act is not tenable.
5 Having dealt with the preliminary contentions of the Noticees, I now proceed to deal with submissions of
the Noticees on merit.
5.1 The interim Order has clearly explained the connection amongst the Noticees and the fund transactions
observed in the various bank accounts of the Noticees. It has clearly been stated in the said Order that the
fund transactions between the Noticees were not significant prior to the investigation period. However,
during the investigation period, i.e. the period during which the Noticees, viz. Beejay and Eversight were
undergoing debarment, the fund transactions between the Noticees became significant. It was found that
the debarred entities, viz. Beejay and Eversight had transferred a total amount of `17.78 crores to
Neelanchal and Neelanchal in turn transferred an amount of `38.59 crores to the brokers, viz. Religare
Securities, IFCI Financial., Aditya Birla Money, and India Infoline during the investigation period. It was
observed that Neelanchal traded in the market through the said brokers. Similarly, the Noticees, DDM
and DDT received amounts of `29.79 crores and `12.49 crores respectively from the debarred entities,
viz. Beejay and Eversight. Out of the said amounts (i.e ` 29.79 crores and ` 12.49 crores), DDM and DDT
transferred ` 17.20 crores and ` 4.29 crores respectively to brokers for the purpose of trading.
Page 26 of 32
The main contention of the Noticees, viz. Beejay, Neelanchal, DDM and DDT is
that the alleged financial transactions were in the ordinary course of their business. They have also stated
that they had taken and given Short Term Advances and Loans mostly in the nature of intraday transactions.
It is however noted that even though the Noticees, Neelanchal and Beejay state that they are registered as
non-deposit raising NBFCs with Reserve Bank of India (RBI), they did not provide any documents in
respect of the loan transactions involving huge amounts in their accounts. Being registered NBFC, it is
strange that they had entered into loan transactions involving huge amounts with the debarred entities in
its normal course of business without execution of appropriate documents. Similarly, the Noticees, DDM
and DDT have stated that their relationship with the debarred entities, i.e. the Noticees, viz. Beejay and
Eversight are strictly commercial in nature. However, no documents have been furnished by them to
substantiate high value transactions in their accounts during the investigation period. Hence, terming such
high value transactions as mere short term loans and advances sans documentary proof, could only be seen
as an afterthought. The contentions in this regard are therefore devoid of merit.
It is also pertinent to note that during the hearing held on February 07, 2017, the Noticees, viz.
Beejay, Neelanchal, DDM and DDT were directed to provide details along with documentary proof and
full particulars including the rationale, etc. in respect of each of the high value transactions found in their
bank account statements/books of accounts during the investigation period. Apart from merely stating
that those transactions were executed during the ordinary course of business and were in the form of Short
Term Loans and Advances, the Noticees failed to provide any satisfactory reply/explanation in respect of the
said transactions. It is also observed from the transaction statements provided by the Noticees, viz. Beejay,
Neelanchal, DDM and DDT that there were multiple high value transactions in their accounts on the same
day. This apart from strengthening the inference that the Noticees were acting in concert, also clearly
establish the connection and tacit understanding between them. In view of the aforesaid, I am inclined to
reject the contentions put forth by the Noticees that the transactions with the debarred entities were only
Short Term Loans and Advances sans documentation.
5.2 In respect of the connection alleged to have existed between Neelanchal and Eversight, i.e. the e-mail ID
([email protected]) of the director of Eversight, viz. Mr. Peeyush Jain, was mentioned in
the Form 32 filed by Neelanchal, Neelanchal in their reply dated February 27, 2017 have submitted that
the clerical staff from their office have filled in wrong e-mail ID in the form, which went unnoticed by
them. It is however noted that the said Form 32 was filed by the Auditor of Neelanchal. In view of this,
Page 27 of 32
and also considering the connection between the entities as evident from the high value transactions (stated
earlier in previous paragraph), I am of the view that the submission is devoid of merits.
5.3 The Noticees, viz. Rajesh Agarwal, Kinkar Bhattacharya and Sukanta Chatterjee (Directors of DDM and
DDT) vide letters dated October 27, 2016, October 22, 2016 and October 24, 2016 respectively submitted
that they were not directors of the companies for a substantial part of the investigation period and that all
the trades and dealing that the companies have carried out during their tenure as directors were in the
ordinary course and hence devoid of any manipulative intent. The directors of Beejay, Eversight,
Stupendors, one of the directors of Neelanchal, and one of the Directors of DDM and DDT did not file
reply. Further, Neelanchal in its reply vide letter dated February 02, 2017, on behalf of its director, Surendra
Agarwala submitted that the trades entered were in the normal course of business and the question of
holding them or their directors guilty of any violation is improper.
It is a settled position of law that the directors, during their tenure, are responsible and
liable for the conduct of the day to day affairs and business of the company and therefore cannot exclude
themselves from the liabilities arising out of the activities of the Company. The material available on record
such as MCA filings, etc. prima facie indicate that the aforesaid Noticees were the directors of the Companies
during the period of investigation. I therefore cannot accept the aforesaid contentions put forth by the
Noticees.
5.4 Neelanchal in their reply have further contended that the profit calculation arrived at in the interim order
is erroneous as SEBI failed to consider the fact that the entity was trading on both NSE and BSE
simultaneously and accordingly SEBI did not consider the net position in various scrips that the entities
have traded in. In this regard, I note that:
The said calculation arrived at in the interim Order was on the basis of net profit made by the Noticee
in each stock exchange, i,e, NSE and BSE.
The fact that they were simultaneously trading in both the exchanges was brought to the knowledge of
SEBI by the Noticee vide their letter dated February 02, 2017.
5.4.1 Accordingly, the scrip-wise net position limit of the Noticee vis-a’ vis both the stock exchanges and the
profit earned by Neelanchal on such basis is worked out. The revised profit calculation (on the basis of
the details given by the Noticee) is as under:
Page 28 of 32
Name of Scrip Exchange Buy Qty
Wt Avg Buy Price
(in ` ) Sell Qty
Wt Avg Sell Price
(in ` )
Opening Price
(in ` )
Closing Price
(in ` ) Profit (in ` )
BSE - 0 25,720 373.76
NSE 390,000 366.42 364,280 371.10
Total 390,000 366.42 390,000 371.27
BSE 75,000 122.50 132,239 133.23 134.00
NSE 25,000 135.50 12,761 95.99 135.75
Total 100,000 125.75 145,000 129.95 NA
BSE 95,000 296.21 1,000 327.50 292.05
NSE 156,000 322.68 295,000 302.62 292.30
Total 251,000 312.66 296,000 302.70
BSE 269,000 74.07 269,000 76.95
NSE - 0.00 - 0.00
Total 269,000 74.07 269,000 76.95
BSE 73,680 253.99 54,016 245.20
NSE 45,336 253.98 65,000 247.70
Total 119,016 253.99 119,016 246.57
BSE 200,000 80.66 - 0.00
NSE 465,000 73.19 665,000 62.10
Total 665,000 75.44 665,000 62.10
BSE 153,820 205.78 123,689 209.36 151.75
NSE 456,166 193.56 350,372 181.12 152.10
Total 609,986 196.64 474,061 188.49
BSE 282,000 102.03 302,000 104.60 312.90
NSE - 0.00 - 0.00
Total 282,000 102.03 302,000 104.60
BSE 1,326,457 353.91 850,926 338.72 82.52
NSE 2,594,212 354.49 2,645,944 365.19 82.20
Total 3,920,669 354.30 3,496,870 358.75
BSE - 0.00 - 0.00
NSE 25,000 14.10 175,000 13.41 12.40
Total 25,000 14.10 175,000 13.41
BSE 150,000 56.83 1,405,874 57.53
NSE 5,110,961 55.16 3,855,087 58.00
Total 5,260,961 55.21 5,260,961 57.87
BSE 275,858 221.55 337,066 222.87 208.00
NSE 533,981 225.14 476,023 225.07 207.85
Total 809,839 223.92 813,089 224.16
BSE 250,000 61.35 25,000 24.50 55.75
NSE 81,631 95.36 206,631 24.70 56.10
Total 331,631 69.72 231,631 24.68
BSE 12,741,470 53.75 11,684,869 60.29 49.55
NSE 17,218,634 58.70 21,030,796 58.45 50.50
Total 29,960,104 56.59 32,715,665 59.11
BSE 27,556,157 80.17 26,265,517 80.73 78.30
NSE 65,164,322 76.13 49,634,520 79.07 78.45
Total 92,720,479 77.33 75,900,037 79.65
BSE 320,000 26.94 170,000 25.47
NSE 200,000 26.97 350,000 22.78
Total 520,000 26.95 520,000 23.66
BSE 250,000 33.15 250,000 30.80
NSE - 0.00 - 0.00
Total 250,000 33.15 250,000 30.80
BSE - 0.00 907,200 34.18 55.00
NSE 936,000 33.66 3,327,518 35.19 68.00
Total 936,000 33.66 4,234,718 34.98 NA
BSE 4,453,905 18.77 1,823,129 15.52 25.70
NSE 4,489,922 19.64 7,510,136 17.36 26.45
Total 8,943,827 19.21 9,333,265 17.00
BSE - 0 100,000 93.48
NSE 200,000 117.30 100,000 93.37
Total 200,000 117.30 200,000 93.42
BSE 297,000 215.59 282,800 211.11 211.05
NSE - 0.00 - 0.00
Total 297,000 215.59 282,800 211.11
BSE 99,487 255.04 42,209 264.62 250.00
NSE 99,621 254.28 231,899 246.81 252.80
Total 199,108 254.66 274,108 249.56 NA
GROSS TOTAL PROFIT
UNISYS SOFTWARES AND
HOLDINGS INDUSTRIES
VARUN INDUSTRIES LIMITED
S. KUMAR NATIONWIDE
SPLASH MEDIA & INFRA LIMITED
SRS LIMITED
SUJANA TOWERS LTD
TULIP TELECOM LTD
IVRCL LTD
MANDHANA INDUS LTD
NITIN FIRE PROTECTION
INDUSTRIES LIMITED
PARSVNATH DEVELOPERS LTD
PIPAVAV DEFENSE & OFF SHORE
ENGG
DISH TV INDIA
EVERONN EDUCATION
FINEOTEX CHEMICAL LTD
GLODYNE TECHNOSERVE LTD
GTLINFRA
ABG Shipyard
AMTEK AUTO
ARSS INFRASTRUCTURE PROJECTS
BLUE CIRCLE SERVICES
DEWAN HOUSING FINANCE
CORP LTD
1,891,404
158,868
(2,032,280)
774,017
(882,680)
(8,869,718)
(9,968,944)
(3,440,424)
(99,761,524)
134,250
14,007,699
246,042
(11,832,100)
99,120,808
191,825,171
NA
(1,712,818)
(587,500)
(107,695,320)
(23,410,081)
(4,775,467)
308,158,258
(1,330,518)
(1,259,076)
NA
NA
NA
NA
NA
NA
NANA
NA
NA
NA
NA
NA
Page 29 of 32
5.4.2 In respect of the computation of the profits alleged to have been earned by the Noticees (mentioned in
the interim Order), following have to be borne in mind:
i. The interim order dated June 16, 2016 was passed on the basis of the findings of the investigation, which
focused on the fund flow observed from the bank accounts of the debarred entities (based on the
reference received from FIU) and also the corresponding bank accounts of the entities which facilitated
the trades of the debarred entities. The profits made by the Noticees were calculated on the basis the
transactions observed in the said bank accounts. SEBI, in the same interim order (dated June 16, 2016)
therefore directed a fresh investigation into the matter covering the other bank accounts of the Noticees
(that were used for trading), which were used to aid the debarred Noticees to trade in the market.
Currently the matter is being investigated.
ii. It is worthwhile to mention that a significant number of high value transactions (involving amounts as
high as `60 crores) have been noticed in the bank accounts of the Noticees during the investigation
period. Neelanchal was not forthcoming in providing the details inter alia regarding their transactions
with Beejay, Sudhir Jain and Eversight and also transactions with various other entities as sought by
SEBI vide letters October 19, 2016 and reminders dated November 01, 2016 and November 11, 2016.
They have also failed to file their reply to the charges alleged in the interim order. It was only after the
issuance of directions by the Hon’ble Calcutta High Court (on January 06, 2017) that Neelanchal chose
to file their reply (vide letter dated February 02, 2017), to the charges alleged in the interim order (dated
June 16, 2016). Though the Hon’ble High Court directed Neelanchal to file its reply within 10 days from
the date of the Order, they filed the said reply after a delay of more than two weeks (i.e. on February 02,
2017).
iii. Further, in respect of the details sought by SEBI (vide letters dated October 19, 2016 and reminders
dated November 01, 2016 and November 11, 2016), for the purpose of present investigation, Neelanchal
replied only after being directed to do so during the hearing held before me on February 07, 2017. During
the course of hearing (held on February 07, 2017), Neelanchal was inter alia directed to reply to (i) the
aforesaid letters issued in connection with the ongoing investigation and also (ii) to provide the details
along with full particulars including the rationale, documentary proof, etc. in respect of each of the
transactions during the investigation period. They were advised to provide the details latest by February
15, 2017.
Page 30 of 32
It is however, noted that Neelanchal filed the said reply only on February 27, 2017 without
relevant documentary evidence in support of their contentions. In respect of the Noticees, viz. DDM
and DDT, it is noted that the replies filed by them are vague and without any documentary evidence in
support. Further, I note that the Noticees, Beejay, Eversight and Stupendors failed to reply to the letters
dated March 09, 2017 sent by the investigation department, seeking relevant details and documents
necessary for the ongoing investigation. However no reply has been received till date and accordingly
reminders were issued to them on March 24, 2017. In the absence of the above details, it is not possible,
at this juncture, to compute the exact funds transferred by the debarred entities to Neelanchal, DDM
and DDT to the brokers for trading.
iv. The interim Order has arrived at a notional profit made by each of the Noticees on the basis of the fund
trail observed in the bank account statements of the Noticees, under reference from FIU. The calculation
of the actual profits made by the Noticees can only be done after the present investigation pertaining to
the other bank accounts of the Noticees, which were used for trading during the investigation period is
completed.
5.5. As regards the submission put forth by Neelanchal that they be permitted to open a new bank and demat
accounts and that be allowed to carry on their business, I note that SEBI vide interim Order dated June
16,2016, inter alia directed to impound the alleged unlawful gain of a sum of `27,44,34,765/- from all the
eighteen Noticees and further not to dispose of, transfer, alienate or charge any of their assets (movable
or immovable) till such time the said amount is credited to an escrow account. Further, as per the said
Order, debits are allowed from the bank accounts (frozen as per the directions) for amounts available in
excess of the amount to be impounded (i.e. excess of `27,44,34,765/- ). In view of this, I find that there is
no embargo on the Noticees to carry on with their business or to open a new bank account or demat
account, provided the Noticees credit the amount of illegal gain which has been directed to be impounded
as per the directions (issued by the interim Order) in an escrow account.
Here, it is not out of place to mention that the present investigation (initiated on the basis
of the directions issued in the interim order), covering the bank accounts (that were used for trading by
the entities) which would have been used to aid the debarred Noticees to trade in the market, is presently
underway. Also, the entities including the Noticees herein are yet to submit the documents sought during
Page 31 of 32
the present investigation pertaining to the fund flow involving high value transactions found in their bank
accounts (used for trading during the period of investigation) with various entities, etc..
I do not therefore find it necessary to modify the directions contained in the interim
order.
6. Further, the present investigation initiated pursuant to the directions issued in the aforesaid interim order
covers other bank accounts of the Noticees, viz. Neelanchal, DDM and DDT, which were used by the
debarred Noticees, viz. Beejay and Eversight for trading during the investigation period (i.e. during the
debarment period). The preliminary analysis of these bank accounts prima facie indicated that there were
several high value transactions involving amounts as high as `60 crores with various entities including the
debarred entities during the investigation period. The frequency at which the transactions took place and
also the number of entities involved in these high value transactions raise legitimate suspicion as to the
genuineness of these transactions. It is relevant to note that till date, the Noticees have not submitted any
documents to substantiate the aforesaid high value transactions took place in their bank accounts during
the investigation period. The failure on the part of the Noticees to submit any documents in respect of
these high value transactions can only be seen, at this stage, as an effort on the part of the Noticees to
thwart the process of ongoing investigation. It is indeed in the interests of the Noticees to cooperate with
the present investigation launched by SEBI so that early disposal of the matter can be ensured.
7. All things considered, I find that at this stage the Noticees have not been able to show sufficient reasons
to draw any inference other than those drawn in the interim order against them. The Noticees have failed
to make out a prima facie case and to establish a case in their favour and have not been able to submit facts
and details which warrant revocation of the interim order. I, therefore, am of the considered view that no
intervention is called for, at this stage, in either vacating the interim directions or modifying them.
8.1 I, therefore, in exercise of the powers conferred upon me under Sections 11(1), 11(4) and 11B of the SEBI
Act read with Section 19 thereof, hereby confirm the directions issued vide ad-interim ex-parte order dated
June 16, 2016, in respect of the Noticees, viz. Beejay Investment and Financial Consultants Pvt. Ltd. and
its Directors, viz., Mr. Sudhir Jain, Ms. Rashmi Jain, Eversight Tradecomm Private Limited and its
Directors, viz., Mr. Adish Jain and Mr. Peeyush Jain, Stupendors Traders Private Limited and its Directors,
viz., Mr. Vicky Kothari and Ms. Prativa Kothari, Neelanchal Mercantile Private Limited and its Directors,
Page 32 of 32
viz., Mr. Surendra Agarwala and Mr. Bhupendra Kumar Dhanuka, Divyadrishti Merchants Private Limited
and Divyadrishti Traders Private Limited and their Directors, viz., Mr. Debasis Mishra, Mr. Rajesh Kumar
Agarwal, Mr. Kinkar Bhattacharya and Mr. Sukanta Chatterjee. The directions issued vide the interim order
dated June 16, 2016 shall continue to be in force till further directions subject to outcome of the
investigation mentioned above.
8.2 As regards the quantum of illegal gains to be disgorged, the figure already arrived at (in the interim Order)
shall be once again be looked into considering the contentions raised by Neelanchal (in the reply dated
February 01, 2017). SEBI shall also endeavor to complete the investigation within six months from the
date of this Order.
9. The order shall come into force with immediate effect. A copy of the order shall be served on the stock
exchanges and depositories for ensuring compliance with the above directions.
Order accordingly.
Place: Mumbai Date: March 27, 2017
S. RAMAN WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA