Order in the matter of Unicon Capital Services Private Limited

8/18/2019 Order in the matter of Unicon Capital Services Private Limited

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WTM/SR/MIRSD/23/03/2016

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAICORAM: S. RAMAN, WHOLE TIME MEMBER

ORDER

UNDER SECTIONS 11(1), 11(4), 11B AND 11D OF THE SECURITIES AND EXCHANGEBOARD OF INDIA ACT, 1992 READ WITH REGULATION 35 OF THE SECURITIES ANDEXCHANGE BOARD OF INDIA (MERCHANT BANKERS) REGULATIONS, 1992 ANDREGULATION 107 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUEOF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009.

IN THE MATTER OF –

1. UNICON CAPITAL SERVICES PRIVATE LIMITED [PAN: AABCU0157G].

2.

SHRI GAJENDRA NAGPAL, DIRECTOR [PAN: AADPN5511A].3. SHRI RAM MOHAN GUPTA, DIRECTOR [PAN: AGDPG7175M].4. SHRI PAWAN DHANUKA, KEY MANAGEMENT PERSONNEL [PAN:

ADDPD9749D].5. SHRI PRITAM DINESH PANDYA, KEY MANAGEMENT PERSONNEL [PAN:

AORPP5179A].

Background –

1.1

Securities and Exchange Board of India ( “SEBI” ) granted a Certificate of initial registration as aMerchant Banker to Unicon Capital Services Private Limited (“Unicon Capital”), in accordance

with Regulation 8 of the SEBI (Merchant Bankers) Regulations, 1992 (“Merchant Bankers

Regulations”), for the period from December 22, 2009 to December 21, 2012.

1.2 During the validity period of the Certificate of initial registration, the Directors of Unicon Capital

were Shri Gajendra Nagpal and Shri Ram Mohan Gupta while its Key Management Personnel

were Shri Pawan Kumar Dhanuka, who was the Chief Financial Officer and Shri Pritam Dinesh

Pandya, who was the Vice President, Investment Banking and Head – Merchant Banking.

2. With effect from July 5, 2011, Regulation 8 of the Merchant Bankers Regulations was amended as

follows –

“ 8. Grant of Certificate of initial registration.

(1) The Board, on being satisfied that the applicant is eligible, shall grant a certificate of initial registration in Form B

and shall send an intimation to the applicant.


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(2) The certificate of initial registration granted under sub-regulation (1) shall be valid for a period of five years from

the date of its issue to the applicant.

(3) The merchant banker who has already been granted certificate of registration by the Board, prior to the

commencement of the Securities and Exchange Board of India (Merchant Bankers) (Amendment) Regulations, 2011,

and has not completed a period of three years, shall be deemed to have been granted a certificate of initial registration fora period of five years from the date of its certificate of registration, subject to payment of fee for the remaining period of

two years, as prescribed in Schedule II of these regulations.

(4) On the grant of a certificate of initial registration the merchant banker shall be liable to pay the fee in accordance

with Schedule II of these regulations.

…

13. In Schedule II, –

…

ii. In paragraph 3, –

a. after clause (a), a new clause shall be inserted, namely –

“(aa) The fee referred to in paragraph 1A shall be paid by the merchant banker three months before

completion of the period of three years from the date of grant of certificate of initial registration, or within a

period of three months from the date of notification of these regulations, as the case may be.; ”

3. In terms of the abovementioned Regulation 8(3) of the Merchant Bankers Regulations, a Merchant

Banker who was granted a Certificate of initial registration prior to July 5, 2011 and had yet to

complete a period of three years of such registration, was deemed to have been granted a Certificate

of initial registration for a total period of five years from the date of the aforesaid initial registrationupon payment of fees for the additional period of two years (in accordance with Clause 3(aa) of

Schedule II of the Merchant Bankers Regulation i.e. three months prior to expiry of initial registration

or within three months from July 5, 2011).

Application by Unicon Capital for renewal of its registration as a SEBI registered Merchant Banker

subsequent to December 21, 2012 i.e. after expiry of its Certificate of initial registration –

4.1 Vide letter dated January 11, 2013, Unicon Capital submitted an application to SEBI for renewal of

its registration as a Merchant Banker. As stated earlier, Unicon Capital was granted a Certificate of

initial registration for the period from December 22, 2009 to December 21, 2012.


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4.2 SEBI vide letter dated March 5, 2013, informed Unicon Capital that its Certificate of registration

had expired on December 21, 2012. SEBI further informed Unicon Capital that since it had filed

a renewal application after the expiry of Certificate of registration, the said application shall be

treated as an application for initial registration. In that regard, SEBI advised Unicon Capital to

furnish an Undertaking with regard to compliance with the requirements contained in the SEBICircular SEBI/MIRSD/DR – 2/SRP – Cir – 2/2005 dated January 4, 2005.

4.3 In this context, the aforementioned SEBI Circular SEBI/MIRSD/DR – 2/SRP – CIR – 2/2005

dated January 4, 2005, is reproduced below –

“ Renewal of Certificate of Registration.

2. If the application for renewal is received at SEBI less than 3 months before the expiry of registration and

SEBI has not advised otherwise by the date of expiry of registration, the intermediary shall stop undertaking

any fresh business/clients from the date of expiry of the registration.

SEBI may initiate any action that may be deemed appropriate for late submission of application under the

provisions of the SEBI Act, 1992 and the regulations framed there under.

It is clarified that in the above cases, the application for renewal shall mean the application complete in all

respects. Incomplete application will be treated as no application.”

4.4 Vide letter dated March 15, 2013, Unicon Capital requested SEBI to consider its application as

having been made under the aforementioned Regulation 8(3) of the Merchant Bankers Regulations

(as mentioned at Paragraph 2 at pages 1 – 2) i.e. for deemed registration as a Merchant Banker.Further, vide letter dated March 15, 2013, Unicon Capital forwarded a Demand Draft towards

registration fees for deemed registration as a Merchant Banker.

4.5 Vide letter dated March 20, 2013, –

(i) SEBI informed Unicon Capital that its Certificate of registration was valid upto December

21, 2012 and it was required to make the payment of fees for the remaining period of two

years on pro rata basis in order to obtain the deemed extension three months before

completion of the three year period from the date of grant of Certificate of initial

registration, which would have been in accordance with Regulation 8(3) of the Merchant

Bankers Regulations (as mentioned at Paragraph 2 at pages 1 – 2).

(ii) Since the application for renewal of registration was sent by Unicon Capital on January 11,

2013 i.e. only after the expiry of its Certificate of registration SEBI advised Unicon Capital

to submit the application for registration as Merchant Banker in accordance with the


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amended Regulation 8 of the Merchant Bankers Regulations (as mentioned at Paragraph 2 at

pages 1 – 2).

(iii) SEBI also returned the aforementioned Demand Draft submitted by Unicon Capital

towards registration fees for deemed registration as a Merchant Banker. SEBI once againadvised Unicon Capital to furnish an Undertaking with regard to compliance with the

requirement contained under the SEBI Circular SEBI/MIRSD/DR – 2/SRP – Cir – 2/2005

dated January 4, 2005.

4.6 However, vide letter dated January 27, 2014, Unicon Capital once again forwarded a Demand

Draft towards registration fees for deemed extension of its registration Certificate as Merchant

Banker and vide letter dated February 6, 2014, also furnished its original Certificate of registration

(having Registration no. INM000011609) to SEBI, requesting it to take further necessary action.

4.7 While SEBI was examining the aforementioned request, Unicon Capital withdrew its application

for renewal of registration as a Merchant Banker vide an e – mail dated July 21, 2014.

Ex – parte Ad Interim Order dated December 8, 2014 –

5.1 Subsequent to the withdrawal by Unicon Capital, of its application on July 21, 2014, for renewal of

registration as a Merchant Banker, SEBI noted that the said entity had filed the Draft Red Herring

Prospectus of Amsons Apparels Limited on July 28, 2014. The aforesaid filing was also confirmedby Unicon Capital vide its letter dated August 22, 2014.

5.2 SEBI also noted that Unicon Capital had submitted a Due Diligence Certificate dated July 28, 2014,

to the Bombay Stock Exchange Limited (“BSE”), wherein it was stated – “We confirm that besides

ourselves, all the intermediaries named in the Prospectus are registered with the Board and that till date such registration

is valid.” The submission of the aforesaid Due Diligence Certificate by Unicon Capital was confirmed

by BSE vide its letter dated August 22, 2014.

5.3 SEBI also noted that in addition to the abovementioned company i.e. Amsons Apparels Limited,

Unicon Capital had admittedly undertaken Merchant Banking assignments for the Public Issue of

three other companies (including filing of Draft Red Herring Prospectus/Prospectus), viz. Channel

Nine Entertainment Limited, Esteem Bio – Organic Food Processing Limited and Agrimony

Commodities Limited, despite the expiry of its Certificate of initial registration as a Merchant Banker.

The aforesaid assignments were confirmed by Unicon Capital vide its e – mail to SEBI dated August

27, 2014.


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5.4 Upon a consideration of the abovementioned facts, SEBI prima facie found the Merchant Banking

activities of Unicon Capital and its Directors alongwith the Key Management Personnel, carried out

after the expiry of its Certificate of initial registration, to be in contravention of the following

provisions of law, viz. –

i. Section 12(1) of the SEBI Act, 1992 (“SEBI Act”) and the SEBI Circular

SEBI/MIRSD/DR – 2/SRP – Cir – 2/2005 dated January 4, 2005;

ii. Clause 16 of the Code of Conduct contained in Schedule III of the Merchant Bankers

Regulations;

iii. Regulation 106O – (2) of the SEBI (Issue of Capital and Disclosure Requirements)

Regulations, 2009 (“ICDR Regulations”) read with Schedule VI thereof.

5.5 Accordingly, vide an Ex – parte Ad Interim Order dated December 8, 2014, the following directions

were issued against Unicon Capital, Shri Ram Mohan Gupta, Shri Gajendra Nagpal, Shri Pawan

Dhanuka and Shri Pritam Pandya, –

22. “ In view of the aforesaid, I, in exercise of powers conferred upon me by virtue of section 19 read with sections

11(1), 11(4), 11B and 11D of the SEBI Act, 1992, by way of this ex-parte order:

A. Restrain Unicon Capital Services Pvt. Ltd. (PAN: AABCU0157G), its directors namely, Mr.

Gajendra Nagpal (PAN: AADPN5511A) and Mr. Ram Mohan Gupta (PAN:

AGDPG7175M) and its two key management personnel namely, Mr. Pawan Dhanuka (PAN: ADDPD9749D) and Mr. Pritam Pandya (PAN: AORPP5179A) from accessing the securities

market and further prohibit them from buying, selling or dealing in securities market, either directly

or indirectly or being associated with the securities market in any manner whatsoever, with immediate

effect, till further directions;

B. Direct the above entities to cease and desist from the activities as noted above.

23. The above directions are without prejudice to the right of SEBI to take any other action that may be initiated

against Unicon Capital Services Pvt. Ltd., its directors namely, Mr. Gajendra Nagpal and Mr. Ram

Mohan Gupta and its two key management personnel namely, Mr. Pawan Kumar Dhanuka and Mr.

Pritam Dinesh Pandya in accordance with law including the action in accordance with the provisions of the

Securities and Exchange Board of India Act, 1992.

24. This order shall come into force with immediate effect. A copy of this Order shall be forwarded to all the

Stock Exchanges and the Depositories to ensure that the directions given above are strictly complied with.

25. The entities/persons against whom this Order is being passed may file their objections, if any, within twenty

one (21) days from the date of this Order and, if they so desire, may avail an opportunity of personal hearing


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before the Securities and Exchange Board of India, on a date and time to be fixed on a specific request in

writing, received from the said entities/persons.”

Proceedings pursuant to the Ex – parte Ad Interim Order dated December 8, 2014 –

6.1 In compliance with paragraph 25 of the Ex – parte Ad Interim Order dated December 8, 2014, the

following entities submitted their replies to SEBI and also made a request for an opportunity of

personal hearing, viz. –

i. Shri Gajendra Nagpal vide letter dated December 22, 2014;

ii. Shri Pritam Dinesh Pandya vide letter dated December 24, 2014;

iii. Shri Ram Mohan Gupta on behalf of Unicon Capital and himself vide letter dated December

29, 2014.

6.2 Vide letter dated January 3, 2015, Shri Pawan Kumar Dhanuka requested SEBI for an opportunity

to inspect the documents relied upon by it, in the Ex – parte Ad Interim Order dated December 8,

2014. Accordingly, an opportunity for inspection of documents was granted to him on February 3,

2015. Thereafter, vide letter dated February 11, 2015, Shri Pawan Kumar Dhanuka requested SEBI

to provide copies of twenty four documents, which were shown to him during the aforesaid

inspection. Vide letter April 7, 2015, SEBI provided the aforesaid documents to Shri Pawan Kumar

Dhanuka.

6.3 Pursuant to the abovementioned and in conformity with the principle of natural justice, an

opportunity for personal hearing was granted before me, to Unicon Capital and its Directors

alongwith the Key Management Personnel, on October 14, 2015.

6.4 During the hearing held on October 14, 2015,

i. Shri Pawan Kumar Dhanuka and Shri Pritam Dinesh Pandya appeared before me.

ii. Vide letter dated September 26, 2015, Shri Gajendra Nagpal communicated his inability to

attend the hearing on the aforesaid date; however, he requested that the submissions made

through his letter dated December 22, 2014, be considered on merits.


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6.5 The replies/written and oral submissions made during the hearing held on October 14, 2015, by

Unicon Capital and its Directors alongwith the Key Management Personnel, are reproduced below

–

i.

Unicon Capital inter alia submitted that –

a. It did not wish to continue with its Merchant Banking activities, which was

communicated to SEBI by Shri Ram Mohan Gupta on July 3, 2014.

b. Subsequently, vide an e – mail dated July 21, 2014, Unicon Capital withdrew its

application for renewal of registration as a Merchant Banker, which was communicated

to SEBI by Shri Ram Mohan Gupta.

c. The Merchant Banking activities of Unicon Capital were exclusively handled by Shri

Gajendra Nagpal, Shri Pritam Dinesh Pandya and Shri Pawan Kumar Dhanuka.

ii. Shri Ram Mohan Gupta inter alia submitted that –

a. He was appointed as Director of Unicon Capital on July 23, 2008.

b. He attained financial and operational control of Unicon Capital on September 6, 2013,

when Shri Gajendra Nagpal transferred his shareholding to him.

c. The Merchant Banking activities of Unicon Capital were exclusively handled by Shri

Gajendra Nagpal, Shri Pritam Dinesh Pandya and Shri Pawan Kumar Dhanuka, without

his knowledge and consent/approval.

iii. Shri Gajendra Nagpal inter alia submitted that –

a. He had resigned from the Directorship and all responsibilities of the Unicon Group of

Companies including as a Director of Unicon Capital w.e.f. September 6, 2013.

b. The resignation letter dated September 6, 2013, was accepted by Shri Ram Mohan Gupta

on behalf of Unicon Capital, on that same date.

c. The ‘Settlement Agreement’ dated September 2, 2013, which was signed on September 6,

2013, by him and Shri Ram Mohan Gupta clearly revealed that he (Shri Gajendra

Nagpal) alongwith his relatives, nominees and assigns had sold off their shares/interest

to Shri Ram Mohan Gupta on ‘as is where is’ basis w.e.f. September 6, 2013.

d. He was not associated with Unicon Capital in any capacity when that entity was alleged

to have carried out Merchant Banking activities in respect of Amsons Apparels Limited,

Channel Nine Entertainment Limited, Esteem Bio – Organic Food Processing Limited and

Agrimony Commodities Limited.


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e. The Dir – 12 Form filed by Unicon Capital with the Registrar of Companies (“ROC”)

(digitally signed by Shri Ram Mohan Gupta) clearly revealed the cessation of Shri

Gajendra Nagpal as Director of the aforesaid company w.e.f. September 6, 2013.

f. The ‘Share Purchase Agreement’ dated September 2, 2013, entered into between Shri Gajendra

Nagpal, Shri Ram Mohan Gupta and Unicon Capital and which was signed on September6, 2013, clearly revealed the transfer of shares from Shri Gajendra Nagpal to Shri Ram

Mohan Gupta.

iv. Shri Pawan Kumar Dhanuka inter alia submitted that –

a. He was not involved in any day – to – day affairs, business decision – making and

compliance related matters of Unicon Capital.

b. He was appointed vide a letter dated August 22, 2012 (made on the letter – head of Unicon

Financial Intermediaries Private Limited), and was designated as the Group Chief Financial

Officer in Accounts & Finance. Unicon Capital and Unicon Financial Intermediaries

Private Limited were two different and distinct entities.

c. Shri Pritam Dinesh Pandya, who was responsible for the Merchant Banking activities of

Unicon Capital, never reported to him on a daily basis but rather on a case – to – case basis.

Further, Shri Pritam Dinesh Pandya reported to Shri Gajendra Nagpal.

d. He was on leave when the Draft Red Herring Prospectus of Amsons Apparels Limited was

filed and had also tendered his resignation to Shri Ram Mohan Gupta vide an e – mail dated

August 2, 2014.e. His name was not mentioned as part of the Key Management Personnel of Unicon Capital

in Form A, as submitted by that entity while applying for renewal of registration as a

Merchant Banker, before SEBI.

f. He was not accorded a full and fair opportunity of inspection of documents relied upon

by SEBI in the Ad Interim Ex – Parte Order dated December 8, 2014.

v. Shri Pritam Dinesh Pandya inter alia submitted that –

a. He was designated as Vice President, Investment Banking and Head – Merchant Banking

and was stationed in the Mumbai Office of Unicon Capital and since October 2013,

reported to Shri Pawan Kumar Dhanuka, the Head of Investment Banking.

b. He had to seek special permission from the management/compliance team of Unicon

Capital even for uploading any Draft Red Herring Prospectus or Prospectus on that entity’s

website; hence, his activities were at all times monitored by Unicon Capital.


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c. Although he was responsible only for generating business for the Mumbai Office of

Unicon Capital, he was nonetheless officially authorised to sign business mandates in

Mumbai, on behalf of that entity, since Shri Pawan Kumar Dhanuka was based in Delhi.

However, all business mandates executed by him were after consultation with Shri Pawan

Kumar Dhanuka.d. He was not aware of the withdrawal by Unicon Capital (vide the e – mail dated July 21,

2014) of its application for renewal of registration as a Merchant Banker with SEBI.

e. He earlier reported to Shri Gajendra Nagpal but after the latter’s resignation from

Unicon Capital, he reported to Shri Pawan Kumar Dhanuka.

f. He submitted copies of two e – mails dated May 19, 2014 and August 10, 2014

respectively, regarding his resignation as Vice President, Investment Banking, to Shri

Ram Mohan Gupta.

g. He submitted a copy of his appointment letter (on the letter – head of Unicon Financial

Intermediaries Private Limited) dated January 3, 2011, revealing his appointment as Vice

President, Investment Banking.

Order of the Delhi High Court in Writ Petition (C) 7247 of 2015, Gajendra Nagpal vs. SEBI –

7. During the intervening period, Shri Gajendra Nagpal had challenged the Ex – parte Ad Interim Order

dated December 8, 2014, before the Hon’ble Delhi High Court in Writ Petition (C) 7247 of 2015.

The Hon’ble Delhi High Court disposed of the aforesaid Writ Petition vide an Order dated March

18, 2016, with the following directions:

“6. …

(I) The respondents No.1&2 SEBI to pass the final order in pursuance to the Ex-parte Order dated 8 th

December, 2014 on or before 13 th May, 2016. Liberty is also given to the respondents No.1&2 SEBI

to, if for any reason unable to pass final order against all the persons against whom Ex-parte Order was

passed, pass the final order at least qua the petitioner (Shri Gajendra Nagpal);

(II) If no final order is made as aforesaid, the ex-parte order dated 8 th December, 2014 impugned in this petition

insofar as against the petitioner shall stand vacated;

(III) In the event of the final order being against the petitioner, the petitioner shall be entitled to the remedy in

accordance with law.”


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Consideration of Issues –

8.1 I have considered the Ex – parte Ad Interim Order dated December 8, 2014, replies/written and oral

submissions made during the hearing held on October 14, 2015, by Unicon Capital and its

Directors alongwith the Key Management Personnel and all other relevant material available onrecord. In light of the same, I shall now proceed to deal with the merits of the case.

8.2 The issue for determination in the instant matter is whether the Merchant Banking activities of

Unicon Capital and its Directors alongwith the Key Management Personnel, carried out after the

expiry of its Certificate of initial registration, were in violation of the provisions of Section 12(1) of

the SEBI Act read with the SEBI Circular dated January 4, 2005; Clause 16 of the Code of Conduct

contained in Schedule III of the Merchant Bankers Regulations and Regulation 106O – (2) of the

ICDR Regulations read with Schedule VI thereof.

8.3 Before proceeding further, the relevant provisions of the SEBI Act, the Merchant Bankers

Regulations and the ICDR Regulations, which have not been reproduced earlier in this Order, are

now provided as under:

“ SEBI Act – Registration of stock brokers, sub – brokers, share transfer agents, etc.

12. (1) No stock-broker, sub- broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to

an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who

may be associated with securities market shall buy, sell or deal in securities except under, and in accordance with,the conditions of a certificate of registration obtained from the Board in accordance with the regulations made

under this Act.”

Merchant Bankers Regulations –

“ Schedule III – Code of Conduct for Merchant Bankers.

16. A merchant banker shall ensure that any change in registration status/any penal action taken by the Board

or any material change in the merchant banker’s financial status, which may adversely affect the interests of

clients/investors is promptly informed to the clients and any business remaining outstanding is transferred to

another registered intermediary in accordance with any instructions of the affected clients.”

ICDR Regulations –

Regulation 106O – (2) read with Schedule VI thereof – The Merchant Banker managing any SME

Public Issue is required to declare and undertake as follows:

“ (3) We confirm that besides ourselves, all the intermediaries named in the draft red herring prospectus/draft

prospectus/draft letter of offer are registered with the Board and that till date such registration is valid.”


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Findings –

8.4 Unicon Capital –

8.4.1 From the material available on record, it is observed that –

i. The Certificate of initial registration as Merchant Banker, granted to Unicon Capital, expired

on December 21, 2012. Thereafter, vide letter dated January 11, 2013, Unicon Capital

submitted an application to SEBI for renewal of its registration as Merchant Banker. In terms

of the amended Regulation 8(3) of the Merchant Bankers Regulations (as mentioned at

Paragraph 2 at pages 1 – 2), a Merchant Banker who was granted a Certificate of initial registration

prior to July 5, 2011 and had yet to complete a period of three years of such registration, was

deemed to have been granted a Certificate of initial registration for a total period of five years

from the date of the aforesaid initial registration upon payment of fees for the additional period

of two years (in accordance with Clause 3(aa) of Schedule II of the Merchant Bankers Regulation

i.e. three months prior to expiry of initial registration or within three months from July 5, 2011).

The failure on the part of Unicon Capital to comply with the amended Regulation 8(3) read

with Clause 3(aa) of Schedule II of the Merchant Bankers Regulations (as mentioned at

Paragraph 2 at pages 1 – 2), clearly resulted in that entity ceasing to be a SEBI registered

Merchant Banker on December 21, 2012 i.e. the date of expiry of the Certificate of initial

registration.

ii. After the expiry of its Certificate of initial registration, Unicon Capital admittedly undertook

Merchant Banking activities/assignments for the Public Issue of four companies, details of

which are provided below –

Sr.No.

Name of the Company Date of filing Draft Red HerringProspectus/Prospectus with BSE

1. Agrimony Commodities Limited 16.12.2013

2. Esteem Bio – Organic Food Processing Limited 28.05.20143. Channel Nine Entertainment Limited 21.06.20144. Amsons Apparels Limited 28.07.2014

iii. It is pertinent to note that the abovementioned Merchant Banking activities/assignments

were admittedly undertaken by Unicon Capital even after SEBI (vide letter dated March 5,

2013) informed that entity of the expiry of its Certificate of initial registration and also after

SEBI advised that entity (vide letter dated March 20, 2013) to submit the application for


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registration as Merchant Banker in accordance with the amended Regulation 8 of the

Merchant Bankers Regulations (see Paragraph 2 at pages 1 – 2) and in compliance with the

SEBI Circular dated January 4, 2005, in terms of which Unicon Capital was required to stop

undertaking any fresh business/clients from the date of expiry of its Certificate of initial

registration.

iv. It is also relevant to note that vide letter dated January 27, 2014, Unicon Capital once again

forwarded a Demand Draft towards registration fees for deemed extension of its registration

Certificate as Merchant Banker and vide letter dated February 6, 2014, also furnished its

original registration certificate (having Registration no. INM000011609) to SEBI, only to

subsequently withdraw such application vide its e – mail dated July 21, 2014.

8.4.2 In light of the abovementioned facts, I find that Unicon Capital acted as a Merchant Banker

without having a valid Certificate of registration from SEBI on the relevant dates when it filed

the Draft Red Herring Prospectus/Prospectus with BSE [as detailed at paragraph 8.4.1(ii)]. As a

result of the aforesaid, I find that Unicon Capital has indeed violated the provisions of Section

12(1) of the SEBI Act read with the SEBI Circular dated January 4, 2005, since it undertook fresh

business/clients even after it ceased to be a SEBI registered Merchant Banker pursuant to the

expiry of its Certificate of initial registration w.e.f. December 21, 2012.

8.4.3 As stated above, Unicon Capital admittedly carried on Merchant Banking activities and

assignments during the period from December 16, 2013 to July 28, 2014 [details provided at Tablein paragraph 8.4.1(ii)], even after the expiry of its Certificate of initial registration. Further, in

accordance with Regulation 106O – (2) of the ICDR Regulations read with Schedule VI thereof,

Unicon Capital submitted Due Diligence Certificate dated July 28, 2014, to BSE, wherein it was

stated – “We confirm that besides ourselves, all the intermediaries named in the Prospectus are registered with the

Board and that till date such registration is valid.” Unicon Capital had also earlier submitted to BSE, similar

Due Diligence Certificates dated December 16, 2013 (Agrimony Commodities Limited), May 28,

2014 (Esteem Bio – Organic Food Processing Limited) and June 17, 2014 (Channel Nine

Entertainment Limited) respectively. I, therefore, find that Unicon Capital contravened the

aforementioned provisions of the ICDR Regulations on account of providing a false declaration and

undertaking to BSE that it was a SEBI registered Merchant Banker.

8.4.4 I also find that the activities of Unicon Capital were in violation of the provisions of Clause 16

of Code of Conduct provided in Schedule III of the Merchant Bankers Regulations since it failed

to inform its clients i.e. the abovementioned four Companies, of the expiry of its Certificate of

initial registration w.e.f. December 21, 2012.


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8.5 Shri Gajendra Nagpal –

8.5.1 In his submissions, Shri Gajendra Nagpal inter alia submitted that he had resigned from the

Directorship and all responsibilities of the Unicon Group of Companies including as a Directorof Unicon Capital w.e.f. September 6, 2013.


i. As on March 31, 2013, the shareholding pattern in Unicon Capital was as follows –

Sr. No. Name of Shareholders No. of Shares % of Shareholding

1. Unicon Financial Intermediaries Private Limited 505000 98.0582

2. Shri Gajendra Nagpal 6500 1.26223. Shri Ram Mohan Gupta 3500 0.6796

Total 515000 100.0000

ii. The shareholding pattern in Unicon Financial Intermediaries Private Limited, which was the

major shareholder of Unicon Capital, as on March 31, 2013, was as follows –

Sr. No. Name of Shareholders No. of Shares % of Shareholding

1. Shri Gajendra Nagpal 6980000 27.502. Shri Ram Mohan Gupta 3930000 15.48

3. Jamuna Consultants Private Limited 2620000 10.324. Ms. Sameera Aga Zaidi 1500000 5.91

5. Mr. Umesh R Doshi 460000 1.816. Sequoia Capital India Growth Investment 4000 0.02

7. Ms. Vandana Manchanda 545600 2.158. Subhkam Ventures India Limited 7049000 27.77

9. Nexus India Ventures Investments 2000 0.0110. Mr. Girish R Doshi 460000 1.8111. Mr. Sanjay R Doshi 467600 1.8412. Others 1364400 5.38

Total 25382600 100.00


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iii. The period of Directorship of Shri Gajendra Nagpal in Unicon Capital (submitted to SEBI

by Shri Ram Mohan Gupta vide e – mail dated February 12, 2016), is provided below –

Sr. No. Name of Shareholder Period of Directorship

From To1. Shri Gajendra Nagpal 23.07.2008 06.09.2013

iv. The details of Directors of Unicon Financial Intermediaries Private Limited (submitted by

Shri Gajendra Nagpal vide letter dated December 22, 2014), is provided below –

Sr. No. Name of Shareholders Period of Directorship

From To

1. Shri Gajendra Nagpal 20.07.2004 06.09.20132. Shri Ram Mohan Gupta 20.07.2004 Till Date

3. Shri Ravi Kumar 12.09.2006 27.05.20084. Shri Manu Punnoose 27.05.2008 30.03.20125. Shri S K Jain 17.03.2008 31.03.2011

6. Shri Rajvi Sabharwal 24.06.2009 01.04.20107. Shri Gautam Mago 20.07.2011 22.03.2012

v. From the Dir – 12 Form filed by Unicon Capital with the ROC, which was digitally signed by

Shri Ram Mohan Gupta, it is observed that Shri Gajendra Nagpal ceased to be a Director of

the aforesaid company w.e.f. September 6, 2013.

vi.

It is noted from the Settlement Agreement (entered into between Shri Gajendra Nagpal and

Shri Ram Mohan Gupta) that – “4. Gajendra has tendered his resignation from the Board of Directors

as a Director in the aforementioned companies (which included Unicon Capital Services Private Limited and

Unicon Financial Intermediaries Private Limited) ...” The date of execution of the aforesaid

Agreement was September 6, 2013.

vii. Further, it is also noted from the Share Purchase Agreement (entered into between Shri

Gajendra Nagpal, Shri Ram Mohan Gupta and Unicon Capital) that “… the Seller (Shri

Gajendra Nagpal) has tendered his resignation from the Board of Directors of the company as a Director onthe execution of this Agreement.” i.e. September 6, 2013.

viii. Shri Gajendra Nagpal has also submitted to SEBI, a copy of his letter of resignation from

the Board of Directors of Unicon Capital dated September 6, 2013, which was addressed to

Shri Ram Mohan Gupta (and confirmed to SEBI as received by him on September 6, 2013,

vide his e – mail dated March 2, 2016) and wherein it was stated: “I hereby tender my resignation


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from the Board of Directors of Unicon Capital Services Pvt. Ltd. as I have sold all my shares as per the

Share Purchase Agreement dated 2 nd September 2013. I request the Board of Directors to relieve me from

the duties of Director effective from 06-Sep- 13.”

8.5.3

As stated earlier, Unicon Capital admittedly carried on Merchant Banking activities andassignments during the period from December 16, 2013 to July 28, 2014 [details provided at Table

in paragraph 8.4.1(ii)], even after expiry of its Certificate of initial registration w.e.f. December

21, 2012, in contravention of the provisions of the SEBI Act read with SEBI Circular dated

January 4, 2005; the Merchant Bankers Regulations and ICDR Regulations. However, upon a

consideration of the aforesaid fact in light of the facts detailed at paragraph 8.5.2, I find that Shri

Gajendra Nagpal had ceased to be a Director in Unicon Capital with effect from September 6,

2013, and had also ceased to be a Director in Unicon Financial Intermediaries Private Limited,

the major shareholder in that entity, on that same date i.e. September 6, 2013.

8.5.4 In view of the above, I find that Shri Gajendra Nagpal was not directly associated with Unicon

Capital or Unicon Financial Intermediaries Private Limited (which was the major shareholder of

Unicon Capital) as a Director during the period when the abovementioned violations were

committed by Unicon Capital. I, therefore, find that the violations alleged against Shri Gajendra

Nagpal in the Ad Interim Ex – Parte Order dated December 8, 2014, do not sustain against him.

8.6 Shri Ram Mohan Gupta –

8.6.1 In his submissions, Shri Ram Mohan Gupta inter alia submitted that the Merchant Banking

activities of Unicon Capital were exclusively handled by Shri Gajendra Nagpal, Shri Pritam

Dinesh Pandya and Shri Pawan Kumar Dhanuka, without his knowledge and consent or

approval.


i. Shri Ram Mohan Gupta admittedly attained financial and operational control of Unicon

Capital on September 6, 2013, when Shri Gajendra Nagpal transferred his shareholding to

him.

ii. Shri Ram Mohan Gupta was also a Director and substantial shareholder in Unicon Financial

Intermediaries Private Limited, which in turn was the major shareholder of Unicon Capital

[details provided at Table in paragraph 8.5.2(i)].


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iii. At the time when Unicon Capital carried on Merchant Banking activities and assignments,

Shri Ram Mohan Gupta was admittedly a Director in that entity.

iv. Vide e – mail dated May 19, 2014, Shri Pritam Dinesh Pandya informed Shri Ram Mohan

Gupta of Unicon Capital’s inability to operate without a valid Certificate of initial registration.Further, Shri Pritam Dinesh Pandya informed Shri Ram Mohan Gupta of the Public Issue

of Agrimony Commodities Limited.

v. The e – mail dated July 21, 2014, whereby Unicon Capital withdrew its application for renewal

of registration as a Merchant Banker, was sent to SEBI by Shri Ram Mohan Gupta.

8.6.3 It may be reiterated that Unicon Capital admittedly carried on Merchant Banking activities and

assignments during the period from December 16, 2013 to July 28, 2014 [details provided at Table

in paragraph 8.4.1(ii)], even after expiry of its Certificate of initial registration, in contravention

of the provisions of the SEBI Act read with SEBI Circular dated January 4, 2005; the Merchant

Bankers Regulations and ICDR Regulations. The plea of ignorance about the Merchant Banking

activities and assignments of Unicon Capital, put forward by Shri Ram Mohan Gupta, is difficult

to accept in light of the admission that he had attained sole financial and operational control of

Unicon Capital on September 6, 2013. There is no way Shri Ram Mohan Gupta could have been

unaware of the expiry of Unicon Capital’s Certificate of registration. This is also strengthened by

the fact that he had sent the e – mail dated July 21, 2014, to SEBI, whereby Unicon Capital

withdrew its application for initial registration as a Merchant Banker. Furthermore, the fact thatShri Ram Mohan Gupta was the Managing Director of Unicon Capital shows that his duties and

responsibilities were of a higher level. As the Managing Director, whatever decisions were

effected in Unicon Capital had to be taken with his consent and knowledge. In this background,

Shri Ram Mohan Gupta had full responsibility for the Merchant Banking activities and

assignments of Unicon Capital. I therefore, find the contention of Shri Ram Mohan Gupta that

he was ignorant of the Merchant Banking Activities of Unicon Capital and that the same were

exclusively handled by Shri Gajendra Nagpal, Shri Pritam Dinesh Pandya and Shri Pawan Kumar

Dhanuka, totally unacceptable.

8.6.4 I, therefore, find that the violations alleged against Shri Ram Mohan Gupta in the Ad Interim Ex –

Parte Order dated December 8, 2014, have been fairly made out.


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8.7 Shri Pawan Kumar Dhanuka –

8.7.1 In his submissions, Shri Pawan Kumar Dhanuka inter alia submitted that he was appointed as the

Group Chief Financial Officer in Accounts & Finance by an appointment letter dated August 22,

2012, which was made on the letter – head of Unicon Financial Intermediaries Private Limited.Further, Shri Pawan Kumar Dhanuka submitted that the Merchant Banking activities of Unicon

Capital were handled by Shri Pritam Dinesh Pandya, who did not report to him on a daily basis

but rather on a case – to – case basis. Shri Pawan Kumar Dhanuka submitted that he had tendered

his resignation to Shri Ram Mohan Gupta vide an e – mail dated August 2, 2014. Shri Pawan

Kumar Dhanuka also submitted that he was not accorded a full and fair opportunity of inspection

of documents relied upon by SEBI in the Ad Interim Ex – Parte Order dated December 8, 2014.


i. In the documents submitted by Unicon Capital alongwith its application dated January 11,

2013, for registration as a Merchant Banker (i.e. after the expiry of its Certificate of initial

registration on December 21, 2012), Shri Pawan Kumar Dhanuka was mentioned as one of

the Key Management Personnel in Form A. Further, in continuation of the aforesaid

application, vide letter dated March 1, 2013, Unicon Capital submitted the appointment

letter, curriculum vitae and salary slip of Shri Pawan Kumar Dhanuka in relation to him being

one of the Key Management Personnel of that entity. Alongwith the aforesaid letter, Unicon

Capital also annexed a signed undertaking from Shri Pawan Kumar Dhanuka admittedlystating: “I certify that the details provided about me in the renewal application for Merchant Banking is true

to the best of my knowledge and belief.”

ii. Shri Pawan Kumar Dhanuka admittedly resigned from his position as Chief Financial Officer

of Unicon Capital vide e – mail dated August 2, 2014.

8.7.3 It has been fairly established in the preceding paragraphs that Unicon Capital admittedly carried

on Merchant Banking activities and assignments during the period from December 16, 2013 to

July 28, 2014, even after expiry of its Certificate of initial registration, in contravention of the

provisions of the SEBI Act read with SEBI Circular dated January 4, 2005; the Merchant Bankers

Regulations and ICDR Regulations. In this context, I note that Shri Pawan Kumar Dhanuka was

clearly indicated as a Key Management Personnel of the aforesaid entity in its application for

registration as a Merchant Banker subsequent to expiry of its Certificate of initial registration. I

also note that Shri Pawan Kumar Dhanuka had signed an undertaking admittedly stating that the

details provided by Unicon Capital as part of its aforesaid application were “true to the best of my


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knowledge an d belief.” In these circumstances, I find it difficult to accept that Shri Pawan Kumar

Dhanuka was not aware of the expiry of Unicon Capital’s Certificate of initial registration on

December 21, 2012, since he was one of its Key Management Personnel. Further, in continuation

of that role as one of the Key Management Personnel of Unicon Capital, Shri Pawan Kumar

Dhanuka cannot be said to have been completely ignorant of the Merchant Banking activities andassignments of that entity carried out after the expiry of its Certificate of initial registration, which

were also prior to his resignation from his position as Chief Financial Officer of Unicon Capital.

I, therefore, find that the violations alleged against Shri Pawan Kumar Dhanuka in the Ad Interim

Ex – Parte Order dated December 8, 2014 , have been fairly made out.

8.7.4 Shri Pawan Kumar Dhanuka has also contended that he was not accorded a full and fair

opportunity of inspection of documents relied upon by SEBI in the Ad Interim Ex – Parte Order

dated December 8, 2014. From the material available on record, I note that vide letter dated

January 3, 2015, Shri Pawan Kumar Dhanuka requested SEBI for an opportunity to inspect the

documents relied upon by it, in the aforementioned Ad Interim Ex – Parte Order. Accordingly, an

opportunity for inspection of documents was granted to him on February 3, 2015. Thereafter, vide

letter dated February 11, 2015, Shri Pawan Kumar Dhanuka requested SEBI to provide copies of

twenty four documents, which were shown to him during the aforesaid inspection. Vide letter April

7, 2015, SEBI provided the aforesaid documents to Shri Pawan Kumar Dhanuka. I note that no

further request for inspection of documents was received from Shri Pawan Kumar Dhanuka. In

view of the aforesaid, I find that Shri Pawan Kumar Dhanuka was indeed accorded a full and fair

opportunity of inspection of documents relied upon by SEBI in the aforementioned Ad Interim Ex – Parte Order.

8.8 Shri Pritam Dinesh Pandya –

8.8.1 In his submissions, Shri Pritam Dinesh Pandya inter alia submitted that he was designated as Vice

President, Investment Banking and Head – Merchant Banking and was stationed in the Mumbai

Office of Unicon Capital since October 2013. Shri Pritam Dinesh Pandya also submitted that he

was responsible only for generating business for the Mumbai Office of Unicon Capital, although he

was nonetheless officially authorised to sign business mandates in Mumbai, on behalf of that entity,

since Shri Pawan Kumar Dhanuka was based in Delhi. However, all business mandates executed by

him were after consultation with Shri Pawan Kumar Dhanuka.


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i. In the documents submitted by Unicon Capital alongwith its application for registration as a

Merchant Banker dated January 11, 2013 (i.e. after the expiry of its Certificate of initial

registration on December 21, 2012), Shri Pritam Dinesh Pandya was mentioned as one ofthe Key Management Personnel in Form A.

ii. The SEBI letters dated March 5, 2013 and March 20, 2013, informing Unicon Capital of the

expiry of its Certificate of initial registration on December 21, 2012 and also the requirement

by that entity to submit the application for renewal of registration as Merchant Banker in

accordance with the amended Merchant Bankers Regulations and in compliance with the SEBI

Circular January 4, 2005, was also addressed to Shri Pritam Dinesh Pandya.

iii. Shri Pritam Dinesh Pandya was admittedly designated as Vice President, Investment Banking

and Head – Merchant Banking and was stationed in the Mumbai Office of Unicon Capital since

October 2013.

iv. Shri Pritam Dinesh Pandya was the signatory for the Due Diligence Certificates submitted

by Unicon Capital, to BSE, in relation to the Public Issues of Agrimony Commodities Limited,

Esteem Bio – Organic Food Processing Limited, Channel Nine Entertainment Limited and

Amsons Apparels Limited, respectively.

v. Vide e – mail dated May 19, 2014, Shri Pritam Dinesh Pandya had informed Shri Ram Mohan

Gupta of Unicon Capital’s inability to operate without a valid Certificate of initial registration.

Further, Shri Pritam Dinesh Pandya informed Shri Ram Mohan Gupta of the Public Issue

of Agrimony Commodities Limited.

vi. Shri Pritam Dinesh Pandya admittedly resigned from his position as Vice President,

Investment Banking of Unicon Capital vide e – mail dated August 10, 2014.

8.8.3 I note that Shri Pritam Dinesh Pandya was clearly mentioned as a Key Management Personnel of

Unicon Capital in its application for registration as a Merchant Banker subsequent to expiry of

its Certificate of initial registration. I also note that Shri Pritam Dinesh Pandya was admittedly

designated as Vice President, Investment Banking and Head – Merchant Banking of Unicon Capital

w.e.f. October 2013 i.e. prior to the Merchant Banking activities and assignments of Unicon Capital

during the period from December 16, 2013 to July 28, 2014, which were carried out even after

expiry of its Certificate of initial registration. Shri Pritam Dinesh Pandya was aware of Unicon


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Capital’s inability to operate without a valid Certificate of initial registration and despite the said

fact, he nonetheless signed the Due Diligence Certificates submitted by Unicon Capital, to BSE,

in relation to the Public Issues of Agrimony Commodities Limited (Due Diligence Certificate dated

December 16, 2013), Esteem Bio – Organic Food Processing Limited (Due Diligence Certificate

dated May 28, 2014), Channel Nine Entertainment Limited (Due Diligence Certificate dated June21, 2014) and Amsons Apparels Limited (Due Diligence Certificate dated July 28, 2014), respectively.

He admittedly also communicated the inability of Unicon Capital to operate without a valid

Certificate of initial registration to Shri Ram Mohan Gupta vide his e – mail dated May 19, 2014,

and thereafter, admittedly resigned from his position as Vice President, Investment Banking of

Unicon Capital vide e – mail dated August 10, 2014. In these circumstances, I find it difficult to

accept that Shri Pritam Dinesh Pandya was not aware or was not responsible for the Merchant

Banking activities and assignments of Unicon Capital.

8.8.4 In view of the above, I, therefore, find that the violations alleged against Shri Pritam Dinesh

Pandya in the Ad Interim Ex – Parte Order dated December 8, 2014 , have been fairly made out.

Conclusion –

9. In terms of Section 12(1) of the SEBI Act, no Merchant Banker shall buy sell or deal in securities

except under, and in accordance with, the Certificate of registration obtained from SEBI in

accordance with the Merchant Bankers Regulations. In the facts of the instant proceedings,

Unicon Capital admittedly carried on Merchant Banking activities and assignments even after theexpiry of its Certificate of initial registration, which was in contravention of the provisions of the

SEBI Act read with the SEBI Circular dated January 4, 2005. The very purpose of the requirement

of obtaining Certificate of registration from SEBI is to ensure that the concerned intermediary

acts as per the regulatory requirements put in place to protect the interests of the investors and

the securities market. Prior to the expiry of its Certificate of registration, Unicon Capital was a

SEBI registered Merchant Banker for a full three years and hence, was fully aware of the statutory

requirements. Unicon Capital also misled BSE by submitting false declarations and undertakings

that it was a SEBI registered Merchant Banker, which was in violation of the ICDR Regulations.

Unicon Capital also failed to inform its clients i.e. the four Companies for whom it filed Draft

Red Herring Prospectus/Prospectus, of the expiry of its own Merchant Banker registration,

which was in violation of the Code of Conduct contained in Schedule III of the Merchant Bankers

Regulations and also the ICDR Regulations. It has also been fairly established in the preceding

paragraphs that Shri Ram Mohan Gupta, Shri Pritam Dinesh Pandya and Shri Pawan Kumar

Dhanuka, had aided Unicon Capital in carrying out Merchant Banking activities and assignments

even after the expiry of its Certificate of initial registration and therefore, the aforesaid entities are


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liable for the aforementioned contravention of the provisions of law. All the aforementioned

entities have therefore, clearly acted in a manner, which is false and deceptive and hence,

detrimental to the interests of investors in the Indian securities market.

Order –

10.1 Having regard to the above discussion, I, in exercise of the powers conferred upon me in terms

of Section 19 of the SEBI Act read with Sections 11(1), 11(4), 11B and 11D of the SEBI Act;

Regulation 35 of the Merchant Bankers Regulations and Regulation 107 of the ICDR Regulations,

hereby –

i. Restrain Unicon Capital Services Private Limited (PAN: AABCU0157G) and its Director,

Shri Ram Mohan Gupta (PAN: AGDPG7175M), from accessing the securities market

and further prohibit them from buying, selling or dealing in securities market, either

directly or indirectly or being associated with the securities market in any manner

whatsoever, for a period of 5 years.

ii. Restrain the Key Management Personnel of Unicon Capital Services Private Limited, viz.

Shri Pawan Dhanuka (PAN: ADDPD9749D) and Shri Pritam Pandya (PAN:

AORPP5179A), from accessing the securities market and further prohibit them from

buying, selling or dealing in securities market, either directly or indirectly or being

associated with the securities market in any manner whatsoever, for a period of 3 years.

iii. I hereby also dispose of the Ex – parte Ad Interim Order dated December 8, 2014, issued to

Shri Gajendra Nagpal (PAN: AADPN5511A), without any further directions.

10.2 This Order shall come into force with immediate effect.

10.3 This Order shall be served on all Recognized Stock Exchanges and Depositories to ensure

necessary compliance.

Place: Mumbai S. RAMAN Date: March 31, 2016 WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

Order in the matter of Unicon Capital Services Private Limited

Documents

Transcript of Order in the matter of Unicon Capital Services Private Limited