SAT directs Sebi to pass fresh order in Dilip Pendse case

The Securities Appellate Tribunal today set aside Sebi's order in a case involving Dilip Pendse, former Managing Director of erstwhile Tata Finance, and asked the market regulator to issue a fresh order within six months.
The Securities and Exchange Board of India (Sebi) had in December 2012 barred Pendse for two years from the capital market for alleged involvement in unfair trade practices with regard to shares of four firms, including Infosys and TELCO (now Tata Motors).
Pendse submitted to SAT that the order had been "passed belatedly on December 24, 2012, in spite of concluding the hearing on July 17, 2011." He said the order should be set aside and the matter filed for a fresh order on merits.

In its response, Sebi had said its whole-time member who heard the matter demitted office on May 17, 2012, and was re-appointed on August 9 the same year.
The tribunal today said there is "merit" in Pendse's contention "because delay in passing the impugned order after concluding the hearing is inordinate."
"Once a whole-time member ceases to hold office, then he cannot deal with matters which were heard by him before demitting the office," SAT noted.

"In such a case, neither his reappointment relates back to the date of his demitting office nor entitles him to pass orders on matters which were heard by him before demitting office, unless the matters are heard afresh," it added.

Accordingly, SAT said the "impugned order dated December 24, 2012, is quashed and set aside and the matter is restored to the file of respondent (Sebi)."
"Respondent is directed to pass fresh order on merits and in accordance with law as expeditiously as possible and in any event within a period of six months from today," SAT added.
Sebi had probed the dealings of one Inshaallah Investments in the scrips of Himachal Futuristic Corp, Tata Engineering and Locomotive Company (TELCO), Infosys and Software Solutions India Ltd.
This followed a complaint by Tata Finance in 2002 alleging certain illegal carry forward transactions in these scrips at the behest of Pendse in 2001.

It was alleged that the transactions were executed on behalf of Inshaallah, in which a Tata Finance subsidiary, Niskalp Investment and Trading Company Ltd, had financial interest. It was stated that Pendse was director in Niskalp and Inshaallah.
It was also alleged that Pendse, along with two brokers, had executed the transactions.