The Tribunal, headed by presiding officer, Justice N. K. Sodhi, and including two members, P. K. Malhotra and S.S.N. Moorthy, confirmed on Aug. 12 that "for the reasons (stated), Appeals No. 112, 113, 145, 146 of 2010 and Appeals No. 77, 80, 81, 82 of 2011 are dismissed and the impugned orders therein upheld." However the Tribunal did allow a solitary Appeal No. 150 of 2010 and set aside the impugned order therein. No costs were awarded and the parties are to bear their own costs.
It seems that this is the end of the road for Parsoli Corporation and for the Sareshwala brothers, who claimed that their brokerage and investment business operated under Shariah-compliant financial principles. Parsoli left a trail of dissatisfied investors especially amongst the Gujarati community in the UK, Canada, Germany, the GCC countries (including Saudi Arabia) and of course India, some of whom have lost life savings and equity investments.
The good news is that the Tribunal refused Parsoli Corporation and Zafar and Uves Sareshwala any further leave to appeal to the Supreme Court of India, which means that they now have to pay the fines and serve the period of their disqualification as directors of any company in India.
Justice Sodhi in his final judgment stated that "after we pronounced the orders in court, the learned counsel for the appellants made an oral prayer (plea) that we should stay the operation of our orders to enable the appellants to continue operating in the market till such time they approach the Supreme Court. This prayer is opposed by the learned counsel appearing for the board. The prayer made on behalf of the appellants, in our view, is wholly misconceived. By orders dated June 28, 2010 and July 27, 2010, the board had restrained the appellants from accessing the securities market for a period of one year and seven years respectively and these orders had been impugned in the appeals. When the appeals were admitted, we did not stay the operation of the orders impugned therein. Now when we have affirmed those orders and dismissed the appeals, there is no reason for us to grant any interim stay. Consequently, the prayer is rejected."
Parsoli Corporation and Zafar and Uves Sareshwala in fact originally appealed to the tribunal on five counts last year following the ruling of SEBI, and this appeal was dismissed by the Tribunal by a common order dated Jan. 12, 2011.
The appellants in these five appeals however filed civil appeals in the Supreme Court which came up for hearing on May 2, and the order passed by this Tribunal was set aside and the cases remitted with a direction to pass separate orders in each of the five appeals.
Because of the enormity of the case and charges, the appeals were divided into three groups. Group 1 dealt with Appeals No. 146, 112 and 113 of 2010 and deals with the question: "Did Parsoli Corporation Ltd. and its promoters/directors defraud its shareholders by transferring their shares in their own demat accounts on the basis of forged signatures and forged/duplicate share certificates and when caught, compensate the shareholders by crediting back in their demat accounts shares through off market transactions is the primary question that arises for consideration in this group of appeals?"
Group II Appeals No. 145 of 2010, 77 and 80 to 82 of 2011 deal with the issue of whether Parsoli Corporation violated clause 35 of the listing agreement executed with stock exchange(s) where its securities are listed. According to the judgment, "Section 21 of the Securities Contracts (Regulation) Act, 1956 requires that a listed company shall comply with the conditions of the listing agreement. This agreement is in a standard form prescribed by the board. It is an important document and one of the requirements of its clause 35 is that a listed company shall file with the stock exchange where its securities are listed a statement showing its shareholding pattern including that of its promoters and the changes made therein from time to time."
The promoters of Parsoli transferred 9,61,600 shares held by them to others which brought about a change in the shareholding pattern of the promoters and Parsoli was aware of this change but it did not disclose the same to BSE. Another charge against Parsoli, according to the Judgment, is the non-intimation to the Bombay Stock Exchange (BSE) of its decision to reverse the earlier decision recommending a dividend. "The board of directors of Parsoli in their meeting held on July 4, 2005 recommended to the general body of shareholders the declaration of dividend at 10 percent per share and this information was disseminated to BSE promptly as required by the listing agreement and the regulations." This information without doubt is price sensitive.
The board of directors in their subsequent meeting held on Nov. 18, 2005 "revised the accounts by cancellation of dividend". This cancellation of dividend was approved by the shareholders in the annual general meeting held on Dec. 31, 2005 but information regarding cancellation of the dividend had not been communicated to BSE. Reversal of the earlier decision, stressed Justice Sodhi, was equally price sensitive and Parsoli was required to communicate this information to the stock exchange for the benefit of the investors in general.
The third charge against Parsoli is that during the course of investigations for the period from March 11, 2005 to July 18, 2005 Parsoli and its promoters/directors did not cooperate with the investigating officer and failed to furnish the information sought from them.
The solitary Appeal No. 150 in Group III dealt with the charge leveled against Parsoli of non-compliance of the SEBI Order February 20, 2009 by which SEBI had directed it to remove the RTA (Share Transfer Agent) and appoint another RTA within a period of six months from the date of the order. Parsoli only complied with the order after the deadline, and the Tribunal accepted the companies explanation for the delay and thus upheld the appeal in this one case.
SEBI imposed record fines on Parsoli, its directors and their front entities. These include:
i) a consolidated penalty of Rs.2.5 million on Parsoli Corporation Ltd., Zafar Sareshwala and Uves Sareshwala
ii) a consolidates penalty of Rs.30 million on the promoters' family of Sareshwalas including Zafar, Uves, younger brother Talha and father Saleha Mohammed Yunus
iii) a consolidated penalty of Rs.7 million on the Kothawalas family comprising Mohammed Alibhai, Amena Maksud, Fatema Mukthar, Maksud Yusufbahi, Mariam Yusuf, Mukhtar Yusufbhai and Yusufbahi Umarbhai. The Kothawalas were partners with Zafar Sareshwala ands his family in Parsoli.
iv) A penalty of Rs. 1 million each on Gulam Rasool Mohiuddin Bombaywala; Iftekar Mohammed Yusuf Mansoori; Aslamkhan Rehmatkhan Pathyan; Abdul Hameed Abdul Gaffer Memon and Adulsamad Abdul Gaffer Memon.
Parsoli's share registrar, Pinnacle, has also been banned as a share registrar and has been ordered to offload its existing clients to other registered share registrars. The three Parsoli brothers — Zafar, Uves and Talha have also been banned from directorshsips of public companies for seven years.
