SAT Dismisses Shivinder Singh’s Appeal Challenging SEBI’s Loan Recall Order
SEBI had directed Religare Enterprises and Religare Finvest to recall Rs 2,065 crore loaned to 23 entities.
The Securities Appellate Tribunal dismissed Shivinder Mohan Singh’s appeal challenging the market regulator's confirmatory order asking Religare Enterprises Ltd. and its arm to recall loans.
The Securities and Exchange Board of India had asked Religare Enterprises Ltd. and Religare Finvest Ltd. to recall Rs 2,065 crore worth of loans extended to more than 20 entities. That came after the regulator received complaints two years ago alleging financial mismanagement, diversion of funds and violation of board-approved policies by Religare Finvest for the benefit of its erstwhile promoters and their firms.
SEBI appointed a forensic auditor, which found diversion of funds through fixed deposits with Lakshmi Vilas Bank, investment in non-convertible debentures and other irregularities.
The regulator, in its March 2019 order, directed the two Religare entities to recall the loans and barred recipients from disposing of their assets.
A three-member bench of the appellate tribunal said Singh, former promoter of Religare Enterprises, didn’t challenge SEBI’s ex parte ad-interim order of March 2019. Further, he was a director and promoter in the two entities during the time of fund diversion. As such, Singh’s argument that he has nothing to do with the diversion cannot be accepted in principle at this stage, the SAT said while dismissing the appeal.
SEBI’s Order Illegal, Says Shivinder Singh
Counsel for Shivinder Singh challenged SEBI’s order on following grounds:
- SEBI’s confirmatory order directing recalling of loans is illegal as it cannot be passed under section 11(B) or 11(4) of the SEBI Act.
- The order, which is in nature of a disgorgement, cannot be passed at a stage when investigation initiated by SEBI is still under progress. The total liability can only be adjudicated after completion of the probe.
- The market regulator’s ex-parte March order was passed without issuing notice to Singh. Orders of such nature can only be passed when there are compelling circumstances, which were absent in this case.
- And lastly, he had no role in the entire diversion of funds which was done by other individuals who are being probed in the case.
Dismissing the arguments, the appellate tribunal pointed out that a show cause notice was issued to Shivinder Singh. As orders against him have been continuing since last year, the tribunal cannot examine at this stage whether such orders could be passed by SEBI or not.
The tribunal also directed SEBI to decide the matter within six months from the date Singh files a reply to the show cause notice.