sebi:WTM/RKA/ID-8/96/2014

SEBI · SEBI · 2014-01-31 · Rajeev Kumar Agarwal, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Show Cause Notice dated February 12, 2014 disposed of without any further direction; recommendation of the Designated Authority to suspend the certificate of registration for six months rejected; interim order dated December 28, 2011 read with confirmatory order dated September 07, 2012 ceases to operate.

Provisions invoked

• s. 19
• s. 12(3)

Regulations

• Reg. 13
• Reg. 28(2)
• Reg. 6
• Reg. 14(1)(e)
• Reg. 8(2)

Parties

• PNB Investment Services Ltd.
• L.P. Agarwal

Holding

SEBI held PNB Investment Services Ltd. non-compliant on 3 of 8 charges (incorrect buy-back disclosure, non-disclosure of related party transactions with VBSL, and incorrect business overview disclosures) but declined to suspend its merchant banker registration, finding the Noticee had already effectively undergone debarment since December 28, 2011.

Full text

In respect of PNB Investment Services Ltd. Page 2 of 17 3. Pursuant to the investigations, SEBI initiated proceedings against the Noticee under the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 (the Intermediaries Regulations) and appointed the Designated Authority (hereinafter referred to as the “DA”) in respect thereof. While initiating the said proceedings it was also decided that the directions issued vide the interim

In respect of PNB Investment Services Ltd. Page 3 of 17 Supreme Court in the matter of Chander Kanta Bansal v. Rajinder Singh Anand (2008) 5 SC 117 as a prudent man would exercise in the conduct of his own affairs, means doing everything reasonable and not everything possible. (2) TSL did not disclose or inform the cancellation of land allotment by APIICL vide order dated Aug 27, 2008. (3) As its client, it was the duty of TSL to provide fair picture to the Noticee so that Noticee could include relevant details in the offer document. On the contrary, by giving a false reply, not only has TSL committed a breach of client-merchant banker relationship but it has also misguided the Noticee and tried to keep the Noticee in the dark. Further, TSL had failed to inform its board of directors and its legal advisors who were conducting legal due diligence on the immovable properties of TSL. This shows that TSL has, with a clear malicious intent, hidden the fact of cancellation of APIICL land at every possible stage. (4) The assumption of the DA that “seeking extension of time for more than 5 years is suspicious” and that such extension should have been a ground to sense that something is amiss, is incorrect as there is nothing on record available with TSL to suggest that delay in implementation of project had resulted in or was likely to result in cancellation of land allotment. (5) Vide letter dated October 10, 2008, the Chief General Manager of APIICL, by whose order land allotment w

In respect of PNB Investment Services Ltd. Page 4 of 17 B. Incorrect disclosures about the presence of employees across various office of TSL in the offer document: (1) The Notice had verified all the necessary documents pertaining to TSL's employees including attendance register, resume of key managerial personnel, appointment letters of key managerial employees, etc. (2) In order to verify TSL's claim regarding its overseas offices, TSL's office address at New Jersey, USA was verified by perusing the relevant lease agreement dated November 15, 2010 for the said premises. (3) The Noticee was informed by TSL that it had opened a branch office in Singapore on February 15, 2011 though its operation had not yet started. This fact was verified by the Noticee through the website of Singapore Government (www. psi.gov.sg). (4) Establishment of office prima facie indicates the operation thereof by certain employees. This impression was further buttressed by the fact that the TSL's officials including Mr. Pavan Kuchana had been regularly travelling abroad for business meetings. In fact, Mr. Pavan Kuchana regularly flew to the TSL's office in New Jersey to manage TSL's matters there. (5) All the aforesaid factors made the Noticee to believe that TSL had its offices in New Jersey, USA and Singapore. (6) The only other way to verify presence of overseas office would be to physically visit such offices, which in the given time and expense involved was not practically possible. (7) With re

Source: SecMarx — sebi:WTM/RKA/ID-8/96/2014. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.