Team 128a

GNLU MOOT ON SECURITIES & INVESTMENT LAW
Team code - 128
BEFORE THE HON’BLE SECURITY APPELLATE TRIBUNAL OF MUMBAI
APPEAL.NO.________/2023
UNDER section 15T by the petitioner IN
REFERENCE WITH Order Passed By SEBI
under sections 11(1),11(4), 11(4A), 11B(1), 11B(2)
and 15I of the SEBI A
IN THE CASE OF
Aglow. co(APPELLANT)
Mr.Pulkit sharma (APPELLANT)
Ms. Anjali arora (APPELLANT)
Mr. Sameer amal (APPELLANT)
TABLE OF
CONTENTS
versus
Securities and exchange board of india (RESPONDENT)
INDEX
INDEX
WRITTEN SUBMISSIONS ON BEHALF OF THE APPELLANT
TABLE OF CONTENTS
LIST OF ABBREVIATIONS 4
INDEX OF AUTHORITIES 6
STATEMET OF FACTS 8
STATEMENT OF JURISDICTION 10
ISSUES RAISED 11
SUMMARY OF ARGUEMENTS 12
ARGUMENTS ADVANCED 14
1) ISSUE -1 : WHETHER THE FAR

BY MR. PAWAN IS VALID AND IF
SUNDARYA IS STILL A
SUBSIDIARY EVEN AFTER
APPOINTMENT OF TWO ID’S IN
ITS BOARD OF DIRECTORS
1.1 The acceptance of FAR by
SEBI violates the principle of
natural justice
1.2 The FAR is made in error by
pawan gupta
1.3 Aglow did not misrepresent

saundrya as it’s associate company
2) ISSUE-2: WHETHER AGLOW HAS

ABILITY TO DIRECT THE
RELEVANT ACTIVITIES OF
SUNDARYA AND WHETHER IT
HAS FOLLOWED FAIR

ACCOUNTING TREATMENT BY
DERECOGNIZING SUNDARYA’S
ASSETS AND LIABILITIES
[2.1] LEGAL VALIDITY OF
MEMORANDUM OF UNDERSTANDING
[2.2] POWER TO APPOINT MAJORITY

OF DIRECTORS
[2.3] FAIR ACCOUNTING TREATMENT

USED BY AGLOW LIMITED
ISSUE-3: WHETHER BOARD OF

DIRECTORS OF AGLOW
IMPLEMENTED A PLAN, DEVICE AND
ARTIFICE TO DEFRAUD THE
INVESTORS BY MANIPULATING/
MISREPRESENTING THE FINANCIAL
STATEMENTS FOR PERSONAL GAINS
[3.1] CONCEPT OF FAIRNESS AND THE
PRINCIPLES OF NATURAL JUSTICE
3)
[3.2] THERE WAS NO MISLEADING
ANNOUNCEMENT MADE BY THE
COMPANY AND ITS PROMOTERS..
[3.3] NO ESTABLISHMENT OF
CONNECTED PERSON
PRAYER 29
ABBREVATIONS
% PERCENTAGE
& AND
(P) PRIVATE
P. PAGE
V. VERSUS
AIR ALL INDIA REPORTER
BOM BOMBAY
CO. COMPANY
COMP. COMPANY
ED. EDITION
ILR INDIAN LAW REPORT
M&A MERGERS AND

ACQUISITION
REG. REGULATION
SAT SECURITIES APPELLATE

TRIBUNAL
SC SUPREME COURT
SCC SUPREME COURT

REPORTS
SCJ SUPREME COURT
JOURNAL
SCR SUPREME COURT
REPORTER
SEBI SECURITIES EXCHANGE
BOARD OF INDIA
SEC. SECTION
U/S UNDER SECTION
VOL. VOLUME
INDEX OF AUTHORITIES
1) Jai beverage pvt vs State of Jammu and Kashmir

2) Pancard Clubs Limited Revisionist v. Mayank Joshi and Another 2015 SCC ONLINE
UTT 2269)
3) Jai Beverages Pvt. Ltd. v. State of Jammu and Kashmir and Ors(2006) 5 SCC 77
4) State of Uttar Pradesh v. Tipper Chand(1980) 2 SCC 341
5) J.K Industries and Another v. Union of India and Others(2007) SCC 13 673, 2007 AIR
SC 7443
6) Padinjarekkara Agencies Pvt. Ltd, Kottayam v. The ACIT Kottayam(Income tax
appellate tribunal Case no. ITA 375/COCH/2014)
7) Arcelormittal India Private Limited v. Satish Kumar Gupta and Ors(2019) 2 SCC 1
8) M/s Subhkam Ventures (I) Private Limited v. The Securities and Exchange Board of
India (SAT- appeal no. 8 of 2009 decided on 15.01.2010)
9) Walnut Packing Pvt. Ltd. v. Sirpur Paper Mills Ltd. and Another 2008 SCC ONLINE
AP 840
10) The Bombay Dyeing and Manufacturing Company Limited and Anr v. Securities and
Exchange Board of India (WTM/AB/CFID/CFID_1/20686/2022-23)
11) Vanraj Suppliers Private Limited v. Williamson Financial Services Limited NCLTCase
no.= C.P.(CAA)- 4/2021
12) Esso Standard Inc v. Udharam B Japanwalla 1975 (45) Co. cases 16 (Bom)
13) Osians Connoisseurs of Art (P) Ltd. v. SEBI, (2020) 16 SCC 745
14) BPL Limited v. Securities & Exchange Board of India , 2002 SCC OnLine SAT 15
15) Basic Clothing Pvt. Ltd. … Appellant v. SEBI 2019 SCC Online SAT 150
16) J.K. Industries Ltd. & Ors. v. Chief Inspector of Factories and Boilers Ors., (1996) 6
SCC:
17) Mr. Bhuwneshwar Mishra v. SEBI (Appeal no. 7 of 2014 — Date of decision — July
31, 2014)
18) Ramrakh R. Bohra v. SEBI [(1999) 33 CLA 243 (Bom)]
19) the Hon'ble Supreme Court in the matter of RBI v. Peerless General Finance &
Investment Co. Ltd. [(1996) 20 CLA 195/(1996) 1 SCC 642 : AIR 1996 SC 646].
20) atwar Singh v. Director of Enforcement, (2010) 13 SCC 255
21) Lloyd v. McMahon, Lord Bridge observed: (AC pp. 702 H-703 B)
22) SEBI v. Akshya Infrastructure (P) Ltd.. (2014) 11 SCC 112 : 2014 SCC Online SC 388
: (2014) 184 Comp Cas 248 : AIR 2014 SC 1963
23) Vijay Textiles Ltd. v. Securities and Exchange Board of India, 2011 SCC OnLine SAT
50
24) SEBI v. Mega Corpn. Ltd., 2022 SCC OnLine SC 361
25) Chintalapati Srinivasa Raju v. SEBI, (2018) 7 SCC 443
26) Natwar Singh v. Director of Enforcement, (2010) 13 SCC 255
27) Mohan Sigh v. Bhanwarlal (AIR 1964 SC 1366):
28) Lord Atkin in A.L.N. Narayanan Chetteyar v. Official Assignee, High Court Rangoon,
AIR 1941 PC 93
29) Svenska Handelsbanken v. Indian Charge Chrome ((1994) 1 SCC 502 : AIR 1994 SC
626
30) Sterlite Industries Ltd. v. SEBI (2001) 31 SCL 485 : (2001) 45 CLA 195 (SAT)
31) Supreme Court in Bank of India v. Degala Surya Narayana ((1999) 5 SCC 762 : AIR
1999 SC 2407).
32) R.R. Chokhani v. SEBI [2013 SCC Online SAT 73
33) Finquest Securities Pvt. Ltd. v. SEBI [2013 SCC Online SAT 75
34) Samkit Shares and Stock Brokers Pvt. Ltd v. SEBI [2004 SCC Online SAT 70]
ARTICLES REFERRED
35) Critical Analysis : Literal Rule of Interpretation, 1.2 JCLJ (2021) 13
36) Dalmia Industrial Development Limited V.Securities and Exchange
Board of India SEBI Bhavan2022 SCC OnLine SAT 2511
BOOKS REFERRED
37) CR datta on the company law 6th edition 2008
38) Sethna Indian company law (practice and procedure)
39) Principles of Indian company law by paul L. davis and sarah Worthington
40) K.M. GHOSH and DR.KP chandratres company law (with secretarial practices)
41) K.shekar guide to SEBI
42) MANUAL OF SEBI (ACT,RULES,REGULATIONS AND GUIDELINES)
STATUTES AND REGULATIONS REFERRED

43) INDIAN CONTRACT ACT, 1872
44) INDIAN COMPANIES ACT, 2013
45) SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992
46) SEBI (SUBSTANTIAL ACQUISITION AND SHARES TAKEOVER)
REGULATIONS, 1997
47) SEBI (SUBSTANTIAL ACQUISITION AND SHARES TAKEOVER)
REGULATIONS, 2011
48) SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND
DISCLOSURE REQUIREMENTS) REGULATIONS, 2009
49) SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF
FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES
MARKET) REGULATIONS, 2003
STATEMENT OF FACTS
1. Aglow is a company engaged in business of beauty salons and providing other services.
It is listed on NSE and BSE since 2007. On September 4, 2008 , a memorandum of
understanding was executed amongst aglow, sundarya private limited and Agarwal
group to build and operate three salon-cum-spas centres under aglow brand in Mumbai
, Maharashtra.
2. Both Agarwal and aglow each hold 50% of the total shareholding in sundarya which is
a private unlisted company incorporated in 2001.
3. On January 10,2022 , aglow received a notice of EGM meeting from sundarya
regarding proposal for appointment of two independent directors for meeting on jan 29,
2022.
4. On January 31, 2022, by way of a notice to the stock exchanges, Aglow inter alia
announced, after market closing hours, that Sundarya was no longer a subsidiary of
Aglow and was classified as a joint venture/associate company.
5. Pursuant to the above announcement, Aglow considered Sundarya as an associate
company w.e.f. January 29, 2022 and accordingly prepared and published its
consolidated financial statements for Financial Year (“FY”) 2021-22, excluding the
financials of Sundarya as a subsidiary from its financial statements.
6. Securities and Exchange Board of India (“SEBI”) received a complaint dated June 30,
2022 (“Complaint”) against Aglow wherein it was inter alia alleged that Aglow, despite
having control over Sundarya, did not include Sundarya as a subsidiary company in its
consolidated financial statements for the FY 2021-22, and by doing so, Aglow had
overstated its profit for the said FY.
7. SEBI directed BSE to appoint an independent audit firm to conduct forensic audit in
light of the Complaint received and appointment of Pawan LLP (“Forensic
Auditor/Pawan”) as forensic auditor to conduct forensic audit of Aglow for the period
between April 01, 2021, to March 31, 2022 was done.
8. During the audit , aglow gave submissions regarding the complaint and concluded that
Sundarya would cease to be a subsidiary of Aglow and be treated as an associate
company under joint venture category w.e.f. January 29, 2022. The stock exchanges
were, accordingly, intimated vide notice dated January 31, 2022.
9. The Forensic Audit Report (“FAR”) was received by SEBI on October 22, 2022, the
findings of which had the conclusion that Sundarya should have been consolidated by
Aglow in FY 2021-22.
10. A First Information Report (“FIR”), was filed against Mr. Pawan Gupta (lead auditor in
the present matter), along with two other auditors as accused for allegations of
corruption relating to the audit made for some other company. In November 2022, the
two other accused got arrested in Mumbai for certain allegations against them. Mr.
Pawan Gupta also applied for an anticipatory bail in respect of which the Bombay High
Court vide its order dated February 01, 2023, passed an interim direction wherein the
authorities have been directed not to arrest him till next date.
11. SEBI initiated its investigation for the period FY 2021-22, the focus of which was to
ascertain if Aglow had misrepresented its consolidated financial statements while
accounting for one of its subsidiary companies (i.e., Sundarya) for FY 2021- 22 and
whether the said misrepresentation/misstatement, if any, was in violation of the
provisions of Securities and Exchange Board of India Act, 1992 (“SEBI Act”), SEBI
(Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR
Regulations”), SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to
Securities Market) Regulations, 2003 (“PFUTP Regulations”). Thereafter, a Show
Cause Notice (“SCN”) was issued by Mr. Amit Shyamlal, Deputy General Manager,
SEBI on November 01, 2022, against Aglow and its directors/KMP.
12. It was observed that Sundarya’s operations are significantly in the hands of Aglow as
decisions/rights on critical and significant portion of the activities viz. operations,
management, services, repair, maintenance, etc. are taken by Aglow. Thus, Aglow being
the operator of the Saloons was evidently capable to direct the relevant activities of
Sundarya. Hence, Aglow has existing rights that give it ability to direct the relevant
activities, i.e., activities that significantly affect Sundarya’s returns.
13. Thus, pursuant to the announcement made by Aglow on January 31, 2022, of not
considering Sundarya as its subsidiary, Aglow de-recognized all the assets and
liabilities of Sundarya from the date of loss of control i.e., January 29, 2022. It is
observed that for FY 2020-21, Aglow had consolidated losses after tax of Rs. 27.47
crores. However, for FY 2021-22, it declared a net profit after tax of Rs. 18.05 crore.
This significant improvement, i.e., 165.72% rise in the net profit was majorly
attributable to re-measurement gain of Rs. 17.77 crore on account of treating Sundarya
as an associate company instead of a subsidiary.
STATEMENT OF JURISDICTION
The appellants have approached the hon’ble security appellate court of Mumbai in the matter
of aglow limited & ors. V. securities and exchange board of india, under section 15T of the
securities and exchange board of india.
15T. [(1) Save as provided in sub-section (2), any person aggrieved,— (a) by an order of
the Board made, on and after the commencement of the Securities Laws (Second
Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder; or
(b) by an order made by an adjudicating officer under this Act133[; or], 134[“(c) by an
order of the Insurance Regulatory and Development Authority or the Pension Fund
Regulatory and Development Authority,] may prefer an appeal to a Securities Appellate
Tribunal having jurisdiction in the matter.
[(2) ********]
(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from
the date on which a copy of the order made by the 136[Board or the Adjudicating Officer
137[or the Insurance Regulatory and Development Authority or the Pension Fund
Regulatory and Development Authority], as the case may be,]is received by him and it shall
be in such form and be accompanied by such fee as may be prescribed :
Provided that the Securities Appellate Tribunal may entertain an appeal after the expiry of
the said period of forty-five days if it is satisfied that there was sufficientcause for not filing it
within that period.(4) On receipt of an appeal under sub-section (1), the Securities Appellate
Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such
orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed
against. (5) The Securities Appellate Tribunal shall send a copy of every order made by it to
the 138[Board, 139[or the Insurance Regulatory and Development Authority or the Pension
Fund Regulatory and Development Authority, as the case may be] the] parties to the appeal
and to the concerned Adjudicating Officer. (6) The appeal filed before the Securities
Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible
and endeavour shall be made by it to dispose of the appeal finally within six months from the
date of receipt of the appeal.
ISSUES RAISED
4) WHETHER THE FAR BY MR. PAWAN IS VALID AND IF SUNDARYA IS STILL A

SUBSIDIARY EVEN AFTER APPOINTMENT OF TWO ID’S IN ITS BOARD OF
DIRECTORS
5) WHETHER AGLOW HAS ABILITY TO DIRECT THE RELEVANT ACTIVITIES OF

SUNDARYA AND WHETHER IT HAS FOLLOWED FAIR ACCOUNTING
TREATMENT BY DERECOGNIZING SUNDARYA’S ASSETS AND LIABILITIES?
6) WHETHER BOARD OF DIRECTORS OF AGLOW IMPLEMENTED A PLAN,

DEVICE AND ARTIFICE TO DEFRAUD THE INVESTORS BY MANIPULATING/
MISREPRESENTING THE FINANCIAL STATEMENTS FOR PERSONAL GAINS.
SUMMARY OF ARGUMENTS
1) WHETHER THE FAR BY MR. PAWAN IS VALID AND IF SUNDARYA IS

STILL A SUBSIDIARY EVEN AFTER APPOINTMENT OF TWO ID’S IN ITS
BOARD OF DIRECTORS
It is submitted before the hon’ble security appellate tribunal that firstly, The acceptance of
FAR by SEBI violates the principle of natural justice. Secondly, The FAR is made in error
by pawan gupta and Thirdly, aglow did not misrepresent saundrya as it’s associate
company.
2) WHETHER AGLOW HAS ABILITY TO DIRECT THE RELEVANT

ACTIVITIES OF SUNDARYA AND WHETHER IT HAS FOLLOWED FAIR
ACCOUNTING TREATMENT BY DERECOGNIZING SUNDARYA’S ASSETS
AND LIABILITIES?
The Appellant humbly submits that as per the MoU, Aglow does not have that much ability
to direct the relevant activities of Sundarya as is alleged by the Respondent side. The
Appellant also submits that Aglow has followed a true and fair accounting procedure by
derecognizing all the assets and liabilities of Sundarya. The Appellant humbly submits his
arguments in the following sub issues, viz. [2.1] Legal validity of Memorandum of
Understanding [2.2] Power to appoint majority of directors [2.3] Fair Accounting treatment
used by Aglow Limited [2.4] Valid increase in the profits of Aglow.

DEVICE AND ARTIFICE TO DEFRAUD THE INVESTORS BY
MANIPULATING/ MISREPRESENTING THE FINANCIAL STATEMENTS
FOR PERSONAL GAINS.
3) The Appellant humbly submits that as per the MoU, Aglow does not have that much
ability to direct the relevant activities of Sundarya as is alleged by the Respondent side.
The Appellant also submits that board of director acted in a prudent way by dissolving
the percentage of there shareholding in the aglow due the price increased in stock
market after derecognizing all the assets and liabilities of Sundarya. The Appellant
humbly submits his arguments in the following sub issues, viz. [3.1] Concept of
Fairness and the principles of natural justice [3.2] There was no misleading
announcement made by the company and its promoters [3.3] no establishment of

connected person [3.4] concept of preponderance of probability and proportional
increase in price as per competition.
ARGUMENTS ADVANCED
ISSUE-1 ) WHETHER THE FAR BY MR. PAWAN IS VALID AND IF SUNDARYA

IS STILL A SUBSIDIARY EVEN AFTER APPOINTMENT OF TWO ID’S IN ITS
BOARD OF DIRECTORS
1.1 The acceptance of FAR by SEBI violates the principle of natural justice
It is submitted before the hon’ble security appellate tribunal that the FAR submitted by
mr.pawan gupta is wrongfully prepared and does not present the true nature of the
findings. Further, the notice issued by SEBI for Empanelment of forensic auditors for
conducting forensic audit of listed companies, states that ‘Application shall not be
considered where disciplinary action / proceedings have been initiated against the
applicant, its partners / directors, by any regulatory body or court of law.’ Thus,
Pawan gupta at this point of time is ineligible for carrying such forensic audits due to
his undergoing trial. The fact that two of his partners were found guilty in the same case
,creates a cloud of doubt over the FAR being bogus and false. This is where the
principle of Nemo judex in causa sua, the rule against bias comes into play. There are
several types of bias, including pecuniary bias, subject matter bias, Departmental bias,
Institutional bias, preconceived notion bias etc. The underlying principle is maintaining
objectivity in dealing with or deciding a matter. This creates a sense of arbitrariness and
doubt regarding the findings of FAR on the basis of which the whole investigation was
based. This raises the concern of unfairness and misconduct in the proceedings which
defies the principle of natural justice.
King Vs Sussex (1923) All ER 233 1**where it was observed Nothing is to be done
which creates even a suspicion that there has been an improper interference with the
course of justice. The court examined catena of decisions and on these facts, the
appointment of Grant Thornton as Forsenic Auditor was quashed and set aside with a
direction to SEBI to appoint another auditor from the panel.
After the leading English case of Ridge v. Baldwin [1964 AC 40 : (1963) 2 All ER
66]2 and an equally important case of this Court in A.K. Kraipak v. Union of India
1
King Vs Sussex (1923) All ER 233
2
Ridge v. Baldwin [1964 AC 40 : (1963) 2 All ER 66
[(1969) 2 SCC 262 : (1970) 1 SCR 457] 3there was a turning point in the development
of doctrine of natural justice as applicable to administrative bodies. Both the authorities
laid down that for application of rules of natural justice the classification of functions
as ‘judicial’ or ‘administrative’ is not necessary.
Lord Reid in Ridge case [1964 AC 40 : (1963) 2 All ER 66] explained: ‘that the duty
to act judicially may arise from the very nature of the function intended to be performed
and it need not be shown to be superadded’. Hegde, J., in Kraipak case [(1969) 2 SCC
262 : (1970) 1 SCR 457]4 said that under our Constitution the rule of law pervades over
the entire field of administration Every organ of the State under our Constitution is
regulated and controlled by the rule of law. The concept of rule of law would lose its
vitality if the instrumentalities of the State are not charged with the duty of discharging
their functions in a fair and just manner. The requirement of acting judicially in essence
is nothing but a requirement to act justly and fairly and not arbitrarily or capriciously.
The procedures which are considered inherent in the exercise of a judicial power are
merely those which facilitate if not ensure a just and fair decision. What is thus
important in the modern administration is the fairness of procedure with elimination of
element of arbitrariness. The State functionaries must act fairly and reasonably
As also held in case of aminish Pradip raj vs sebi(Telangana high court) that There
are several types of bias, including pecuniary bias, subject matter bias, Departmental
bias, Institutional bias, preconceived notion bias etc. The underlying principle is
maintaining objectivity in dealing with or deciding a matter. There can be no gainsaying
the fact that an auditor, being a professional person/entity has to function with complete
impartially and independently. A shadow cast on the independence of a financial audit,
need not necessarily be backed with any specific instance of bias or mala fides. The
looming cloud of doubt itself would be a persuasive factor for interference. As observed
by the Supreme Court in Management of M/s. M.S.Nally Bharat Engineering
Company Limited (supra), non-observance of natural justice would itself cause
prejudice to a person and independent proof of prejudice, is unnecessary. Due to the
blurring of lines between an administrative order and a semi-judicial order, the decision
of the respondent No. 1/SEBI to appoint GTB as a forensic auditor of the respondent
No. 2/company would attract the doctrine of natural justice, requiring the authority to
3
A.K. Kraipak v. Union of India [(1969) 2 SCC 262 : (1970) 1 SCR 457]
4
Hegde, J., in Kraipak case [(1969) 2 SCC 262 : (1970) 1 SCR 457]
act in a just and fair manner. Acceptance by the respondent No. 1/SEBI of the
clarification offered by GTB on the aspect of bias, without offering any reasons for the
same and continuing with GTB would, in our opinion, fall foul of the principles of
natural justice. As noted above, the objection taken by the petitioner is not to an active
role of Mr. Anoop Krishna in the financial audit to be conducted by GTB. The objection
is to his very presence in the sister concern of GTB and the existence of an element of
doubt as to the impartiality of GTB, which may result in improper interference, thereby
vitiating the audit itself. The test is whether a shareholder of the respondent
No.2/company could harbour a reasonable apprehension of bias attributable to the
financial auditor and not whether the bias would actually affect the result of the audit.
Moreover aglow was not given the chance to represent themselves before the audit or
after the audit and an impunged order was passed. As the recent order in the case of
ROYAL ORCHID HOTELS LTD. VS SEBI We have heard the learned counsel for
the parties. The impugned order dated March 31, 2023 passed by the Whole Time
Member (‘WTM’ for short) of the Securities and Exchange Board of India (‘SEBI’ for
short) is ad interim order cum show cause notice. By our order dated May 9, 2023 we
had stayed the effect and operation of the impugned order. 2. The learned senior counsel
for the respondent submits that the appellant may file a reply to the show cause notice
and the matter would be decided finally by the respondent after giving an opportunity
of hearing and in the meanwhile the interim order granted by this Tribunal will continue
to operate. In this regard the learned counsel for the appellant states that he has no
objection. 3. We accordingly dispose of the appeal with the direction to the appellant to
file a reply to the show cause notice within 3 three weeks from today. The respondent
will thereafter fix a date and the matter would be heard after giving an opportunity of
hearing. Till the disposal of the matter the interim order passed by this Tribunal on May
9, 2023 will continue to operate. The appeal is disposed of accordingly.
1.2 The FAR is made in error by pawan gupta
The counsel The Forensic audit carried by mr. pawan misinterprets section 2(27) and
2(87) of companies act 2013. Section 2(87) of companies act 2013 states that
―subsidiary company or ―subsidiary , in relation to any other company (that is to say
the holding company), means a company in which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total share capital either at its
own or together with one or more of its subsidiary companies.
Firstly , the provision in subsection two of the section is incomplete as aglow holds
only 50% of the shares of saundrya and not more than that. Secondly , the provision in
subsection one states the control over board of directors. The explanation point (b) of
section 2(87) clearly states that ‘the composition of a company‘s Board of Directors
shall be deemed to be controlled by another company if that other company by exercise
of some power exercisable by it at its discretion can appoint or remove all or a majority
of the directors’. Thus it can be noticed that in a situation where section 2(87), for the
clause clear explanation is given which is to be considered rather than section 2(27) of
the companies act 2013.
The total number of directors in board of directors of saundrya were 5 ( 3from aglow
and 2 from Aggarwal) . After the appointment of two independent directors, total
number of directors became 7. Thus, previously, in order to pass an ordinary resolution,
3 votes were required and aglow had the majority for it. But after appointment of two
ID’s the number of votes required to pass and ordinary resolution had gone up to 4.
Chairman of the company was appointed by aglow which had a casting vote, but it
could only be used in case of a tie in votes while passing a resolution in board. This
second/casting/deciding vote cannot be considered as a base for majority as it cannot
be used until there is an equality of votes.
Section 2(27) defines control but it doesn’t specify the ‘control over composition of
directors’. Thus, the context in which the control [2(27)] has been mentioned in the
wrong . The control on composition of board of directors is what decides if the company
will be kept as a subsidiary or not, such control is defined separately in explanation of
section 2(87). Thus, the control defined in section 2(27) cannot be used to define status
of a subsidiary.
1.3 Aglow did not misrepresent saundrya as it’s associate company

Section 2(6) of companies act ,2013 describes :
(6) Associate company, in relation to another company, means a company in which that
other company has a significant influence, but which is not a subsidiary company of
the company having such influence and includes a joint venture company
. Explanation.—For the purposes of this clause, ―significant influence, means control

of at least twenty per cent. of total share capital, or of business decisions under an
agreement
A Company can determine if any other company is its Associate Company based on the
following criteria:
1. If the Company has significant influence over the other Company; or
2. If the other Company is a joint venture Company of the Company
A Company is said to have significant influence over the other Company if:
1. the Company controls at least 20% voting power of the other Company; or
2. the Company controls the business decisions of the other Company under an
Agreement;
3. the Company participates in business decisions of the Company under an
Agreement
To better understand the concept of “control” as provided in the explanation of
“significant influence”, Section 2(27) of the Companies Act 2013 has described the
term “control”.
As per this section, the term “control” shall include:
1. the right to appoint a majority of the directors; or
2. to control the management of a Company; or
3. to control the policy decisions of a Company
The aforesaid rights are exercisable by a person or persons acting individually or in
concert, directly or indirectly, including by virtue of their shareholding or management
rights or shareholders agreements or voting agreements or in any other manner.
As per Companies Act, 2013 a subsidiary company with regard to any other Company
means a Company in which holding Company:
1. controls the composition of Board of directors of the Company, or
2. controls more than one-half of such Company’s total voting power either on its
own or together with its one or more subsidiaries.
An Associate Company is a Company which is not a subsidiary as defined above,
therefore, an Associate Company and a subsidiary Company are two completely
different kinds of Companies.
As per Section 2(76) (viii) of the Companies Act, 2013, “related party” with reference
to a Company includes “a holding, subsidiary or an associate company of such
Company”. According to this section, an associated company is treated as a related
party for a company and consequently, the company must abide by Section 188 while
dealing with such associate companies.
However, Section 2(76)(viii) does not apply with respect to Section 188 to private
companies and also does not apply to an unlisted public company which is licensed to
operate by RBI or SEBI or IRDA from the International Financial Services Centre
located in an approved multi-services SEZ under SEZ Act.
As per Accounting Standard 28, an “Associate” is defined as an entity over which the
investor has significant influence.
“Significant influence”, as per the Indian Accounting Standard 28, means having
the power to participate in the financial and operating policy decisions of the investee
but does not mean control or joint control of those policies.
As per the Indian Accounting Standard 28, if a Company holds either by itself or
through its subsidiaries 20% or more of the voting power of another Company then it
is presumed that the Company has significant influence over the other Company unless
the Company can clearly demonstrate that this is not the case. Similarly, if a Company
either by itself or through its subsidiaries holds less than 20% voting power of any
Company then it is presumed that the Company does not have significant influence over
the other Company unless such influence can be clearly established.
To determine whether or not a Company has significant influence over the other
Company, the following evidence can be relied upon:
1. Representation of the Company on the Board of directors of the other Company;
2. Participation of the Company in the process of policy making of the other
Company;
3. Material transactions between such Companies;
4. Interchange of managerial personnel between Companies;
5. Provision of essential technical information
ISSUE 2
Whether Aglow has ability to direct the relevant activities of Sundarya and whether
Aglow has followed a fair accounting treatment by derecognizing Sundarya’s assets and
liabilities?
A. The Appellant humbly submits that as per the MoU, Aglow does not have that much
ability to direct the relevant activities of Sundarya as is alleged by the Respondent side.
The Appellant also submits that Aglow has followed a true and fair accounting
procedure by derecognizing all the assets and liabilities of Sundarya. The Appellant
humbly submits his arguments in the following sub issues, viz. [2.1] Legal validity of
Memorandum of Understanding [2.2] Power to appoint majority of directors [2.3] Fair
Accounting treatment used by Aglow Limited [2.4] Valid increase in the profits of
Aglow
.
[2.1] LEGAL VALIDITY OF MEMORANDUM OF UNDERSTANDING
B. The Appellant humbly submits that the Respondent side is completely relying on the
Memorandum of Understanding, which was signed between Aglow, Agarwal Group and
Sundarya to prove that Aglow has ability to direct the relevant activities of Sundarya. It is
humbly submitted that essentials to make a MoU valid between the parties have not been
fulfilled in this particular case. Following are the essentials of a valid MoU-:
Legal Binding Clause: A MoU would be legally binding if the parties thereto agree to insert
any such clause, the literal meaning of which would mean that such MoU intends to create a
legal relationship between the parties to the contract and that the breach of such provisions
would mean the same as a breach of a contract under the Indian Contract Act, 1872.
Insertion of a Dispute Resolution Clause: If a MoU inserts a dispute resolution clause, then,
it binds the parties to perform their obligations as mentioned orspecified in such MoU. Non
performance of which will lead to breach/dispute for which the MoU in itself shall contain a
clause which shall provide the method in which such dispute shall be resolved in good faith
and in an amicable manner.
In consistency with Section 10 of the Indian Contract Act, 1872: If a MoU fulfills all the
conditions laid down u/s 10 of the Indian Contract Act, 1872 then such a MoU should be treated
as contract between the parties.
C. The Appellant humbly submits that there is no such dispute resolution clause or arbitration
clause present in the MoU which was signed between Aglow, Agarwal Group and Sundarya. It
is further submitted that there is also not any legal binding clause which is present in the
aforementioned MoU.
D. In the matter of Pancard Clubs Limited Revisionist v. Mayank Joshi & Anr5, the MoU
neither referred to any dispute resolution clause nor said anything anything about the place of
jurisdiction in case of dispute between the parties. The Uttarakhan High Court held that “the
reliefs sought for by the plaintiffs in the original suit cannot be granted by the arbitrator in the
absence of arbitration clause. Although there is an arbitration clause in the SPSA, but the same
cannot be stretched to the subject matter of MoU and Supplementary MoU.”
E. In the case of Jai Beverages Pvt. Ltd. v. State of Jammu and Kashmir and Ors6, the
Supreme court of India held that if the conditions of the Memorandum of Understanding are
therefore complied with, the parties to the MoU will receive the profit resulting from the MoU.
As stated above, it leads to the conclusion that the binding nature of a Memorandum of
Understanding is dependent on the intention of the parties, the language used in the agreement,
as well as the nature of the agreement. The conduct of the parties following the execution of
the MoU is also a pertinent factor in determining the enforceability of the MoU.
F. In the case of State of Uttar Pradesh v. Tipper Chand7, a clause in the contract which
provided that the decision of the Superintending Engineer shall be final, conclusive and binding
on all parties to the contract upon all questions relating to the meaning of the specifications,
designs, drawings and instructions was construed as not being an arbitration clause. This Court
said that there was no mention in this clause of any dispute, much less of a reference thereof.
The purpose of the clause was clearly to vest the Superintending Engineer with supervision of
the execution of the work and administrative control over it from time to time.
G. Therefore, it cannot be said by the Respondent party that Aglow has ability to direct the
relevant activities of Sundarya by only relying upon the Memorandum of Understanding which
5
Pancard Clubs Limited Revisionist v. Mayank Joshi and Another
(Uttarakhand High Court-
2015 SCC ONLINE UTT 2269)
6
Jai Beverages Pvt. Ltd. v. State of Jammu and Kashmir and Ors
(2006) 5 SCC 772
7
State of Uttar Pradesh v. Tipper Chand
(1980) 2 SCC 341
was signed between Aglow, Agarwal Group and Sundarya. It is submitted that due to non-
fulfillment of essentials of MoU, it can be interpreted that the MoU was not enforceable.
[2.2] POWER TO APPOINT MAJORITY OF DIRECTORS
H. The Appellant humbly submits that Aglow does not have the power to appoint majority of
directors of Sundarya. Section 2(27) of the Companies Act, 2013 reads as follows, “Control
shall include the right to appoint majority of the directors or to control the management or
policy decisions exercisable by a person or persons acting individually or in concert, directly
or indirectly, including by virtue of their shareholding or management rights or shareholders
agreements or voting agreements or in any other manner.” I. The Appellant humbly submits as
per Clause 9 of the MoU which was signed between the parties, “the Board of Directors will
have a Chairman from Aglow Limited and Managing Director from Agarwal Group and
responsibilities of the Chairman and Managing Director to be clearly outlined.” It can be clearly
interpreted from this clause that Aglow did not have any kind of majority over the appointment
of directors and Key Managerial Personnel of Sundarya. This power of appointment of
directors was divided between Aglow and Agarwal to avoid any misuse of power over the other.
J. The Appellant also submits that as per Clause 10 of the aforementioned MoU, “Statutory
Auditors and Internal Auditors of Sundarya Private Limited will be appointed by Agarwal
Group.” It is submitted as per the MoU, Aglow was given the power to appoint only the
Chairman of the company whereas Agarwal Group had powers to appoint the Managing Direct
as well as the auditors of the company. This clearly shows that Aglow Limited does not have
power to appoint the majority of directors of Sundarya Private Limited in any possible way.
Moreover, as regards to the management and policy decisions of Sundarya, the power was
equally divided amongst Aglow and Agarwal Group. Therefore it is submitted that Aglow does
not have any majority over the control of Sundarya.
K. The Appellant also submits that in paragraph 25 of the show cause notice dated November
01, 2022 given by the Securities and Exchange Board of India, it is written that Aglow Limited
also has the ability to use its power (removing/appointing) Director over Sundarya to affect the
amount of its returns. It is submitted that Aglow does not have any such power to remove any
director from the board of directors of Sundarya private limited. Aglow only has the power to
appoint the Chairman for the Board meetings of Sundarya and it is not in any position
authorized to appoint or remove any other director from the Board of Directors of Sundarya.
[2.3] FAIR ACCOUNTING TREATMENT USED BY AGLOW LIMITED
L. The Appellant humbly submits that Aglow Limited has made proper and fair accounting
treatment by derecognizing Sundarya’s assets and liabilities and recording net
remeasurement gain on the loss of control over Sundarya as a subsidiary. It is submitted that
as per the provisions of Indian Accounting Standard 110 [hereinafter referred to asIND AS
110], International Financial Reporting Standards 10 [hereinafter referred to asIFRS 10],
Aglow limited has done a proper and fair method by derecognizing the assets and liabilities of
Sundarya Private Limited.M. The Appellant humbly submits that as per the definition of
“control” given in IND AS 110 and IND AS 21, a parent company has control over its
subsidiary if it has; a) the ownership, directly or indirectly through subsidiary(ies), of more
than one-half or 50% of the voting power of an enterprise; or b) control of the composition of
the board of directors in the case of a company or of the composition of the corresponding
governing body in case of any other enterprise so as to obtain economic benefits from its
activities. It is submitted that voting power of Sundarya Private Limited was divided equally
amongst Aglow Limited and The Agarwal Group. Therefore it can be easily inferred that Aglow
does not have control over Saundarya as per IND AS 110 and IND AS 21.
N. The Appellant humbly submits that as per paragraph 25 of IND AS 110, “if a parent loses
control of a subsidiary, the parent derecognizes the assets and liabilities of the former subsidiary
from the consolidated balance sheet. It is also submitted that as per IFRS [10:25], if a parent
loses control of a subsidiary, the parent derecognizes the assets and liabilities of the former
subsidiary from the consolidated statement of financial position. Therefore, it is submitted that
Aglow Limited followed proper accounting treatments and accounting standards while
derecognizing the assets and liabilities of Sundarya Private Limited.
O. The Appellant humbly submits that the Chief Financial Officer of Aglow, Mr. Sameer Amal
submitted a report to the Chairman and Managing Director of Aglow, Mr. Pulkit Sharma which
stated that as per IND AS 110, the holding-subsidiary relationship between Aglow and
Sundarya would end, and Sundarya was not required to be treated as a subsidiary during the
consolidation of financial statements. It is also submitted that for this purpose, two opinions
were sought by Aglow Limited, one from a law firm namely Legal Sense and the other from
Mr Nagarjuna, a practicing Company Secretary. It is submitted in their opinions also it was
mentioned that “with respect to the voting rights, Aglow and Agarwal Group both held equal
stake of 50% in Sundarya. So they had similar voting rights and quantum of shares.” Therefore
it can be easily interpreted that Aglow Limited did not had majority control over Sundarya and
it has followed a true and fair accounting procedure by derecognizing the assets and liabilities
of Sundarya in the consolidated financial statement.
P. The Appellant humbly submits that as per Section 2(87) of the Companies Act, 2013, a
“subsidiary company” or ”subsidiary”, in relation to any other company (that is to say the
holding company), means a company in which the holding company— (i) controls the
composition of the Board of Directors; or (ii) exercises or controls more than one-half of the
total share capital either at its own or together with one or more of its subsidiary companies.
As per this provisions it can be inferred that Sundarya was not a Subsidiary to Aglow as after
the appointment of two independent directors, it lost its majority over the board of directors of
Sundarya and it owns 50% of the total share capital of Sundarya, not more than that.
Q. The Appellant humbly submits that the applicability of Indian Accounting Standards is
discussed in the Companies Act, 2013 as well as in various precedents given by different courts
of this country. Section 133 of the Companies Act, 2013 reads as follows: “The Central
Government may prescribe the standards of accounting or any addendum thereto, as
recommended by the Institute of Chartered Accountants of India, constituted under section 3
of the Chartered Accountants Act, 1949 (38 of 1949), in consultation with and after
examination of the recommendations made by the National Financial Reporting Authority.” It
is also submitted that as per Section 129(1) of the Companies Act, 2013, The financial
statements shall give a true and fair view of the state of affairs of the company or companies,
comply with the accounting standards notified under section 133. Therefore, it can be said that
Accounting Standards are applicable and are to be strictly followed by the companies.
R. In the matter of J.K Industries and Another v. Union of India and Ors8, the Supreme
Court of India stated that, “In its origin, Accounting Standards is a policy statement or
document framed by the Institute. Accounting Standards establishes rules relating to
recognition, measurement and disclosures thereby ensuring that all enterprises that follow them
are comparable and that their financial statements are true, fair and transparent. Accounting
Standards (“AS”, for short) are based on a number of accounting principles. They seek to arrive
at true accounting income. One such principle is the matching principle. The other is fair value
principle. The aim of the Institute is to go for paradigm shift from matching to fair value
8
J.K Industries and Another v. Union of India and Others
(2007) SCC 13 673, 2007 AIR SC 7443
principle. Today the revised Accounting Standards seek to arrive at true accounting income. In
the age of globalization the attempt is to reconcile the accounts of Indian companies with their
joint venture partners abroad. The aim is to harmonize Indian Accounting Standards with
International Accounting Standards.”S. In the matter of Padinjarekkara Agencies Pvt. Ltd,
Kottayam v. The ACIT Kottayam, The Income Tax Appellate Tribunal stated that, “Hence, in
order to ensure uniform accounting practices and disclosures, the accounting standards have
been made mandatory for the companies and, hence, they are required to follow them while
preparing the financial statements. If any company deviates from the prescribed accounting
standards, it has to disclose, inter alia, the financial effect arising due to such deviation.
ISSUE 3
WHETHER BOARD OF DIRECTORS OF AGLOW IMPLEMENTED A PLAN,

The Appellant humbly submits that as per the MoU, Aglow does not have that much ability to
direct the relevant activities of Sundarya as is alleged by the Respondent side. The Appellant
also submits that board of director acted in a prudent way by dissolving the percentage of there
shareholding in the aglow due the price increased in stock market after derecognizing all the
assets and liabilities of Sundarya. The Appellant humbly submits his arguments in the
following sub issues, viz. [3.1] Concept of Fairness and the principles of natural justice [3.2]
There was no misleading announcement made by the company and its promoters [3.3] no
establishment of connected person [3.4] concept of preponderance of probability and
proportional increase in price as per competition.
[3.1] CONCEPT OF FAIRNESS AND THE PRINCIPLES OF NATURAL JUSTICE
The concept of fairness may require the adjudicating authority to furnish copies of those
documents upon which reliance has been placed by him to issue show-cause notice requiring
the notice to explain as to why an inquiry under Section 16 of the Act should not be initiated.
To this extent, the principles of natural justice and concept of fairness are required to be read
into Rule 4(1) of the Rules. Fair procedure and the principles of natural justice are in-built into
the Rules. A notice is always entitled to satisfy the adjudicating authority that those very
documents upon which reliance has been placed do not make out even a prima face case
requiring any further inquiry. In such view of the matter, we hold that all such documents relied
on by the authority are required to be furnished to the notice enabling him to show a proper
cause as to why an inquiry should not be held against him and in the current case there has
been no light to the fact of natural justice how being a prudent promoters of aglow the directors
sold of their 3.18% of share in the stock market over a long period of 11 months .
In the case of Natwar Singh v. Director of Enforcement9, (2010) 13 SCC 255,
Need to show real prejudice - Held, respondent offer or failed to show how prejudice was
caused to it by SEBI in observing rules of natural justice - All the information sought by SEBI
related to the three earlier acquisitions when the creeping limit for acquisition has been
breached for triggering the mandatory Takeover Regulations - in appeal, SAT has left the
question with regard to the earlier three acquisitions open and to be decided in accordance
with law - Clearly no prejudice has been caused to the respondent - Directions of SEBI, restored
- Securities, Markets and Exchanges - SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997 - Regn. 18 - Administrative Law - Natural Justice
Where the concept of natural justice In Lloyd v. McMahon, Lord Bridge observed: (AC pp.
702 H-703 B)10
"My Lords, the so-called rules of natural justice are not engraved on tablets of stone. To use
the phrase which better expresses the underlying concept, what the requirements of fairness
demand when anybody, domestic, administrative or judicial, has to make a decision which will
affect the rights of individuals depends on the character of the decision-making body, the kind
of decision it has to make and the statutory or other framework in which it operates. In
particular, it is well established that when a statute has conferred on anybody the power to make
decisions affecting individuals, the courts will not only require the procedure prescribed by the
statute to be followed, but will readily imply so much and no more to be introduced by way of
additional procedural safeguards as will ensure the attainment of fairness."
Simmilary negative observation in SEBI v. Akshya Infrastructure (P) Ltd.. (2014) 11 SCC
112 : 2014 SCC Online SC 388 : (2014) 184 Comp Cas 248 : AIR 2014 SC 196311
9
Natwar Singh v. Director of Enforcement , (2010) 13 SCC 255,
10
In Lloyd v. McMahon, Lord Bridge observed: (AC pp. 702 H-703 B)
11
SEBI v. Akshya Infrastructure (P) Ltd.. (2014) 11 SCC 112 : 2014 SCC Online SC 388 : (2014) 184 Comp Cas 248
: AIR 2014 SC 1963
(Paras 37 and 38)
lt is a matter of record that the respondent had asked for an opportunity of hearing but none
was granted. But the question that arises is as to whether this is sufficient to nullify the decision
of SEBl. The respondent has failed to place on the record either before SAT or before the
Supreme Court the prejudice that has been caused by not observing rules of natural justice. It
is by now settled proposition of law that mere breach of rules of natural justice is not sufficient.
Such breach of rules of natural justice must also entail avoidable prejudice to the respondent.
All the information sought by SEBI related to the three earlier acquisitions when the creeping
limit for acquisition has been breached for triggering the mandatory Takeover Regulations. In
appeal, SAT has left the question with regard to the earlier three acquisitions open and to be
decided in accordance with law. Therefore, clearly no prejudice has been caused to the
respondent offeror.
[3.2] THERE WAS NO MISLEADING ANNOUNCEMENT MADE BY THE

COMPANY AND ITS PROMOTERS.
After the appointment of two Independent Directors (“IDs”) for meeting on January 29, 2022.
Accordingly, an impact analysis was made by Aglow’s management regarding the legal,
compliance and financial implications on the appointment of IDs. And aglow lost its majority
in board of director (as per issue 1) thus On January 31, 2022, by way of a notice to the stock
exchanges, that Sundarya was no longer a subsidiary of Aglow and was classified as a joint
venture/associate company. There was a fair and just reason behind the announcement and do
not amount to fraudulent or misleading.
Similar held in the case of Vijay Textiles Ltd. v. Securities and Exchange Board of India,
2011 SCC OnLine SAT 5012
It was also observed that the so-called export order did not fructify and the company omitted
to bring this information to the notice of the investors. Investigations further revealed that after
the price of the scrip had gone up considerably, the promoters of the company (one of which is
the appellant in Appeal no. 50 of 2011) sold a substantial part of their holdings thereby making
huge profits. On the conclusion of the investigations, the Board was prima-facie of the view
that the appellants had violated the provisions of the Regulations and accordingly two show
cause notices both dated May 8, 2008 were issued to the appellants which contain identical
12
Vijay Textiles Ltd. v. Securities and Exchange Board of India, 2011 SCC OnLine SAT 50
allegations alleging that the company had made the following corporate announcements
during November 2004 to February 2005.
a) Opening of retail Showroom
b) Opening of Studio
Since no fault has been found with the announcements at (a) & (b) above, it is not necessary
to deal with those announcements in any detail. However, it was alleged that the announcement
regarding the bagging of the export order was false and misleading which did not materialize.
According to the show cause notice, this announcement was made by the company on February
21, 2005 and again on February 24, 2005 stating that it had bagged an export order worth
4.60 million US $ (about Rs. 20 Crores) from Simran Enterprises from Europe for the supply
of exclusive range of home furnishings
Here the judgment rely on the fact of current case the announcement did not amount to and
UPSI(unfair price sensitive information) and the information was reliable thus the increase in
the volume and the price from Rs. 40 to Rs. 100.00, i.e., a jump of 150% within a span of 11
months of the stock is fair and not amount to violation of Section 12A (a), (b), (c); Regulations
3(b), 3(c), 3(d), 4(1), 4(2)(e), 4(2)(f), 4(2)(k) and 4(2)(r) of PFUTP Regulations
In the case of SEBI v. Mega Corpn. Ltd., 2022 SCC OnLine SC 36113
The Tribunal, therefore, was of the opinion that the announcement is not imaginary but is based
on specific steps taken before the date of announcement, lending credence to the said activity
of fruad
And had to deal with the issue of Whether the company has violated Regulations 3(a), (b), (c)
and (d) and Regulation 4(1), 4(2)(k) and 4(2)(r) of the SEBI (PFUTP) Regulations, 2003 by
manipulating the share prices and accounts?
Ans-The Tribunal in its appellate jurisdiction came to the conclusion that the connectivity could
not be established and that the conclusions drawn by the Board were insufficient. On the basis
of the inferences drawn from the facts, the Tribunal rendered the following findings:
“There is no evidence in support of any definite sustainable link between the appellant
company and any of the traders who allegedly traded in the appellant company's scrip with the
purpose of generating volumes and thereby raising its price. The charge of manipulative
13
SEBI v. Mega Corpn. Ltd., 2022 SCC OnLine SC 361
trading in its own shares by the appellant company, therefore, fails. But it is another matter to
say that a company has manipulated its accounts with that specific object in view because there
can be a multitude of reasons why an unscrupulous management may want to show inflated
financial results in its accounts. In the present case, no material has been produced by the
Respondent to establish that the manipulation is the annual accounts of the appellant for the
year 2004-2005, if any, had been resorted to with the objective of luring investors to buy the
scrip of the company. Given the lack of any definite evidence, this charge against the appellant
also fails.”
Similar in the present case and sub issue 3.3 prove that there is no direct like in between the
parties and could lead to break in the chain of events.
[3.3] NO ESTABLISHMENT OF CONNECTED PERSON
It is on the onus of prove but the SEBI that there was a direct link between the parties and the
announcement that alleged to be fraudulent and resulted in price manipulation in the stock
market. \
As proved in the case of Chintalapati Srinivasa Raju v. SEBI, (2018) 7 SCC 44314
Natwar Singh v. Director of Enforcement, (2010) 13 SCC 25515, relied on
Securities, Markets and Exchanges -SEBI (Prohibition of Insider Trading) Regulations, 1992 -
Regns.2(c), 2(e)(i), 2(e)(ii), 2(h), 2(ha) and 3 -Insider trading on-establishment of, when
"connected person “cannot reasonably be expected to have access to unpublished price
sensitive information (UPS) by virtue of such connection -Satisfaction of second part of Regn.
2(e)(i) i.e. that connected person must reasonably expected to have access to unpublished price
sensitive information by virtue of such connection in respect of securities of a company -
Necessity of - Use of expression "reasonably expected" - Relevance of - Use of void "and" in
Regn. 2(e)(i) of 1992 Regulations, as opposed to word "or" used in 2005Regulations - Effect
of-Regn. 2(e)(i) is in two parts; first part has reference to any person who is connected with
company or is seemed to be connected with company and the second part being that such person
must reasonably be expected to have access to unpublished price sensitive information by
virtue of such connection in respect of securities of a company - Giving the word "and" its
ordinary meaning and in a conjunctive sense, held, second limb of Regn. 2(e)(i) is also to be
14
SEBI v. Mega Corpn. Ltd., 2022 SCC OnLine SC 361
15
Natwar Singh v. Director of Enforcement, (2010) 13 SCC 255
satisfied - Further, under second part of Regn. 2(e)(i), connected person must be “reasonably
expected" to have access to unpublished price sensitive inform on and expression "reasonably
expected" cannot be a mere ipse dixit - There must be material to show at such person can
reasonably be so expected to have access to unpublished price sensitive information
Thus in the current case mere knowledge of the fact wont account to fraudulent and there has
to be succulent proof that there is collaboration thus making Sameer alam free from the
accusation that being the chair men he did not told the alleged fact about Sundarya being
subsidiary.
Mohan Sigh v. Bhanwarlal (AIR 1964 SC 1366):16
“The onus of establishing a corrupt practice is undoubtedly on the person who sets it up, and
the onus is not discharged on proof of mere preponderance of probability as in the Trial of a
Civil Suit; the corrupt practice must be established beyond reasonable doubt by evidence which
is clear and unambiguous”
Shri regulation 4 and stated that it is on prohibition on the market manipulation and clauses
(a) to (e) are the type of market manipulations prohibitted. He stated that the manipulation is a
fraud and the charge of fraud whether in a civil or criminal proceedings need be established
beyond doubt. In support of this submission he relied on the observations made by the Hon'ble
Supreme Court in the following cases:
Union of India v. Chaturbhai M. Patel: ((1976) 1 SCC 747 : AIR 1976 SC 712)
“The High Court has carefully considered the various circumstances relied upon by the
Appellant and has held that they are not at all conclusive to prove the case of fraud. It is well
settled that fraud like any other charge of a criminal offence whether made in civil or criminal
proceedings, must be established beyond reasonable doubt: per Lord Atkin in A.L.N.
Narayanan Chetteyar v. Official Assignee, High Court Rangoon, AIR 1941 PC 93. However
suspicious may be the circumstances, however, strange the coincidences, and however grave
the doubts suspicion alone can never take the place of proof. In our normal life we are
sometimes faced with unexplainable phenomenon and strange coincidences, for, as it is said,
truth is strange than fiction. In these circumstances, therefore, after going through the
16
Mohan Sigh v. Bhanwarlal (AIR 1964 SC 1366):
judgement of the High Court we are satisfied, that the Appellant has not been able to make out
a case of fraud as found by the High Court.”
Svenska Handelsbanken v. Indian Charge Chrome ((1994) 1 SCC 502 : AIR 1994 SC 626)
17and stated that therein also the Hon'ble Court had re-iterated the Privy Council's observation
in Narayanan Chetteyar's case, quoted in Chaturbhai's case that “fraud like any other
charge of a criminal proceedings must be established beyond reasonable doubt. A finding as to
fraud cannot be based on suspicion and conjuncture”
Tribunal in Sterlite Industries Ltd. v. SEBI (2001) 31 SCL 485 : (2001) 45 CLA 195 (SAT)
18
on the scope and reach of regulation 4(a) and 4(d) and the test of evidence required to
establish the charge. Shri Chinoy pointed out that in the said case this Tribunal considering all
aspects had categorically observed that mens rea is an element of regulation 4(a) and 4(d). He
stated more serious the charge-more rigorous is the test of evidence. He also pointed out that
any casual approach in a matter of serious adverse effect on a public company should not be
accepted as the same would affect the interest of its large number of share holders.
In this context it is to be noted that Chairman holding the Appellant guilty of indulging in price
manipulation has stated that “creation of false market and price manipulation is a very serious
offence”. Evidence merely probabalising and endeavoring to prove the fact on the
basis of preponderance of probability is not sufficient to establish such a serious
offence of market manipulation. When such a serious offence is investigated and the charge is
established, the fall out of the same is multifarious. The impact of such an adverse finding is
wide especially in the case of a large public company having large number of investors. The
stigma sticks and it also hurts, not the company alone, but its shareholders as well. “Not all the
King's horses and all the King's men” can ever salvage the situation. Mere conjectures and
surmises are not adequate to hold a person guilty of such a serious offence. The extent of proof
required to hold the delinquent guilty has been explained by the Hon'ble
Supreme Court in Bank of India v. Degala Surya Narayana ((1999) 5 SCC 762 : AIR 1999
SC 2407). 19The Court held:
17
Svenska Handelsbanken v. Indian Charge Chrome ((1994) 1 SCC 502 : AIR 1994 SC 626
18
Sterlite Industries Ltd. v. SEBI (2001) 31 SCL 485 : (2001) 45 CLA 195 (SAT)
19
Supreme Court in Bank of India v. Degala Surya Narayana ((1999) 5 SCC 762 : AIR 1999 SC 2407).
“strict rules of evidence are not applicable to departmental enquiry proceedings. The only
requirement of law is that the allegation against the delinquent officer must be established by
such evidence acting upon which a reasonable person acting reasonably and objectively may
arrive at a finding upholding the gravamen of the charges against the delinquent officer. Mere
conjecture or surmise cannot sustain the finding of guilt even in departmental enquiry
proceeding. in various judgments, including in the cases of R.R. Chokhani v. SEBI [2013
SCC Online SAT 73],20 Finquest Securities Pvt. Ltd. v. SEBI [2013 SCC Online SAT 7521],
and Samkit Shares and Stock Brokers Pvt. Ltd v. SEBI [2004 SCC Online SAT 70] 22that
in cases of a venial breach; i.e.; an inadvertent breach, no penalty should be imposed. It has
been further held that where the lapse is technical, unintentional and does not involve any
monetary loss to any party, mere warning to comply with norms of the SEBI is sufficient, and
no penalty ought to be imposed.
violated Regulation 3(a), (b), (c), (d), 4(1), 4(2) (f), (k) and (r) of PFUTP Regulations read
with Section 12(a), (b) and (c) of SEBI Act, 1992 is completely incorrect and will not be
sustainable under established legal principles.
Dalmia Industrial Development Limited V.Securities and Exchange

Board of India SEBI Bhavan2022 SCC OnLine SAT 251123
We also find that the entire enquiry was initiated with regard to the allegation that the Company
was a shell Company which fact was found to be false. Further, the WTM has given a clear
finding that there was no violation of the PUTP Regulations and there was no
diversion of funds nor there was any manipulation in the price of the scrip and, consequently,
no fraud or unfair advantage was caused to any shareholder or investor. In the absence of any
specific loss being caused to anyone it was contended that the penalty imposed in the given
circumstances was totally disproportionate to the alleged violation apart from being harsh and
excessive.
12. Admittedly, a clear finding has been given by WTM that there is no
misappropriation of funds of the Company nor there is any manipulation in the price of the
20
R.R. Chokhani v. SEBI [2013 SCC Online SAT 73]
21
Finquest Securities Pvt. Ltd. v. SEBI [2013 SCC Online SAT 75
22
Samkit Shares and Stock Brokers Pvt. Ltd v. SEBI [2004 SCC Online SAT 70]
23
Dalmia Industrial Development Limited V.Securities and Exchange Board of India SEBI Bhavan2022 SCC
OnLine SAT 2511
scrip. The WTM has given a categorical finding that Section 12-A of the SEBI Act or
PFUTP Regulations have not been violated.
PRAYER
Wherefore, may it please the international court of jutice, in the light of facts and
circumstances of the case, issues raised, arguments advanced and authorities cited, the
petitioner prays that this Hon’ble Court may be pleased to adjudge, rule upon, and
determine the following:
1) WHETHER THE FAR BY MR. PAWAN IS VALID AND IF SUNDARYA IS STILL

A SUBSIDIARY EVEN AFTER APPOINTMENT OF TWO ID’S IN ITS BOARD OF
DIRECTORS
2) WHETHER AGLOW HAS ABILITY TO DIRECT THE RELEVANT ACTIVITIES

OF SUNDARYA AND WHETHER IT HAS FOLLOWED FAIR ACCOUNTING
TREATMENT BY DERECOGNIZING SUNDARYA’S ASSETS AND LIABILITIES?

AND
Pass any other order it may deem fit in the interest of Justice, Equity, and Good Conscience.
All of which is most respectfully prayed and humbly submitted.
(Signed)
Place:
Date Counsel for appellant


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GNLU MOOT ON SECURITIES & INVESTMENT LAW

Team code - 128

BEFORE THE HON’BLE SECURITY APPELLATE TRIBUNAL OF MUMBAI

Securities and exchange board of india (RESPONDENT)

1) ISSUE -1 : WHETHER THE FAR

1.3 Aglow did not misrepresent

2) ISSUE-2: WHETHER AGLOW HAS

HAS FOLLOWED FAIR

[2.2] POWER TO APPOINT MAJORITY

[2.3] FAIR ACCOUNTING TREATMENT

ISSUE-3: WHETHER BOARD OF

AIR ALL INDIA REPORTER

ILR INDIAN LAW REPORT

M&A MERGERS AND

SAT SECURITIES APPELLATE

SCC SUPREME COURT

U/S UNDER SECTION

1) Jai beverage pvt vs State of Jammu and Kashmir

STATUTES AND REGULATIONS REFERRED

4) WHETHER THE FAR BY MR. PAWAN IS VALID AND IF SUNDARYA IS STILL A

5) WHETHER AGLOW HAS ABILITY TO DIRECT THE RELEVANT ACTIVITIES OF

6) WHETHER BOARD OF DIRECTORS OF AGLOW IMPLEMENTED A PLAN,

1) WHETHER THE FAR BY MR. PAWAN IS VALID AND IF SUNDARYA IS

2) WHETHER AGLOW HAS ABILITY TO DIRECT THE RELEVANT

2) WHETHER BOARD OF DIRECTORS OF AGLOW IMPLEMENTED A PLAN,

announcement made by the company and its promoters [3.3] no establishment of

ISSUE-1 ) WHETHER THE FAR BY MR. PAWAN IS VALID AND IF SUNDARYA

1.2 The FAR is made in error by pawan gupta

1.3 Aglow did not misrepresent saundrya as it’s associate company

. Explanation.—For the purposes of this clause, ―significant influence, means control

[2.1] LEGAL VALIDITY OF MEMORANDUM OF UNDERSTANDING

[2.2] POWER TO APPOINT MAJORITY OF DIRECTORS

[2.3] FAIR ACCOUNTING TREATMENT USED BY AGLOW LIMITED

WHETHER BOARD OF DIRECTORS OF AGLOW IMPLEMENTED A PLAN,

[3.1] CONCEPT OF FAIRNESS AND THE PRINCIPLES OF NATURAL JUSTICE

In the case of Natwar Singh v. Director of Enforcement9, (2010) 13 SCC 255,

(Paras 37 and 38)

[3.2] THERE WAS NO MISLEADING ANNOUNCEMENT MADE BY THE

a) Opening of retail Showroom

[3.3] NO ESTABLISHMENT OF CONNECTED PERSON

Natwar Singh v. Director of Enforcement, (2010) 13 SCC 25515, relied on

Mohan Sigh v. Bhanwarlal (AIR 1964 SC 1366):16

Dalmia Industrial Development Limited V.Securities and Exchange

1) WHETHER THE FAR BY MR. PAWAN IS VALID AND IF SUNDARYA IS STILL

2) WHETHER AGLOW HAS ABILITY TO DIRECT THE RELEVANT ACTIVITIES

3) WHETHER BOARD OF DIRECTORS OF AGLOW IMPLEMENTED A PLAN,

All of which is most respectfully prayed and humbly submitted.

Date Counsel for appellant

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