The Bombay High Court (HC) has appointed a court receiver for all fixed assets of Anugrah Stock & Broking Pvt Ltd, while asking directors of the brokerage firm, as well its sub-broker Teji Mandi Analytics Pvt Ltd, not to leave the HC jurisdiction or country without permission.
Justice Gautam Patel of the Bombay HC also came down heavily on Anugrah for submitting additional material in a sealed cover and not filing a clean copy of its affidavit. The Court also directed all petitioners to include Teji Mandi Analytics as respondent in the case, if not already done, through amended petitions.
The bench clarified that it will not accept any submission in sealed cover saying "Anything that I can see, all parties before me are entitled to see." Justice Patel says, "I am told that Mr Rohan Cama’s clients (Anugrah) have put some additional material in a sealed cover. Of course, that has not been made available to me because these hearings are conducted online. In any case, I am making it abundantly clear that at least in my Court there is no question—and there will be never be a question—of anything being done ‘in sealed cover’."
"Anything that I can see, all parties before me are entitled to see. That is all there is to it. This is the only method that I know of to ensure an open and transparent decision-making process. Those details will, therefore, need to be set on affidavit. I am also making it clear that it is not possible for any party to unilaterally decide to put material into a sealed cover.
"Since I have made it clear that I am not permitting any sealed cover submissions there is no question of any party arrogating to itself any such right or privilege of any such nature in any circumstances," the judge says.
Mr Cama, representing Anugrah, expressed apprehension that the additional material if not submitted in a sealed cover will find its way to the press. Justice Patel, however, said it was not his concern.
"The fourth estate will do its job and I will do mine. I decide matters before me on the basis of the papers filed in Court, not newspapers delivered to my doorstep. The press exists for a reason. It has a purpose, one that it serves. I cannot and will not curtail the rights of the free press at the instance of this or that party. I refuse to proceed on the basis that the press is always irresponsible. There will be no gag orders here," the judge said.
Justice Patel, in his order says, "The choice before Anugrah is, therefore, clear. It may choose not to file whatever it has said in sealed cover and then take the consequences that follow, or it will file whatever it has said in that sealed cover on affidavit and serve this on all parties."
Fixed assets worth Rs32 crore was disclosed by Anugrah Stock and Broking including its offices at Ahmedabad, two adjoining flats in Mumbai, two office premises at Jogeshwari’s Lotus Corporate Park. In addition, there were two BMWs, including one sports model (bought at Rs91 lakh), one Mercedes-Benz (Rs61 lakh). "Anugrah will need to explain the provenance of this funds, especially in light of its showing in the same affidavit that it has negligible liquidity today," the HC said.
The list of assets was submitted by Paresh Kariya, director of Anugrah Broking to the HC. It also lists other items including office furniture and equipment, as well as air-conditioners, computers, and printers.
Anugrah has also disclosed certain financial assets, such as shares of a few companies and over 60 bank accounts. However, after reviewing the submission, Justice Patel observed "Curiously the financial securities said to be held by Anugrah are almost worthless. There are seven scrips enumerated. Four are delisted. One holding of 48,000 shares trades at Rs9.15 per share, probably below par; another holding of 168 shares is trading at Rs4.9 per share; and third holding of 48,000 shares trades at Rs0.56 per share. I am not persuaded that this is an accurate listing at all. It seems to me unreasonable to accept that a company that was doing such a high volume of business, and acquiring so many expensive assets, would have itself keep so very little in such financial investments."
Commenting on the list of bank accounts submitted by Mr Kariya, the HC pointed out that "Most of these today have a nominal balance. There is one account with Yes Bank that had a balance of merely Rs1.20 crores in August.
"Another account with HDFC had Rs79 lakh (roughly). But the major holding seems to be in the last three accounts listed at page 14. One is with IndusInd Bank and two are with Bank of India. Again, there has been some depletion in one of the Bank of India accounts, dropping from Rs9.99 crore to Rs4.98 crore in the period from April 2019 to September 2020."
While observing that the assets listed by Anugrah are way too below than the claims submitted by petitioners, which would be about Rs100 crore, the Bombay HC says, the court receiver will take symbolic possession of all assets listed by the brokerage. While the directors of Anugrah may use the flat and cars, they cannot do any transaction related with these assets as listed, the court clarified.
Senior advocate Birendra Saraf, advocate Ravi Hegde and other associates from Parinam Law Associates are representing many investors; advocate Kamal Bulchandani, who has his own money stuck, is appearing in person and representing certain investors as well, and advocate Aditya Mehta appearing for a few petitioners sought an injunction from the court on all the assets mentioned in the affidavit. Anugraha is represented by Advocate Rohaan Cama and others and Teji Mandi by Advocate Ativ Patel.
During the hearing, Dr Saraf submitted before the court that it is not a question of only wealthy investors being duped and there are pensioners who have lost their life savings and others of modest means who were promised high returns but are today left with nothing at all.
"The disclosures so far made do not even begin to address of fraction of the entirety of the aggregate claims that lie against Anugrah," the court noted.
In its affidavit, Teji Mandi Analytics disclosed "an agreement between itself and Anugrah and also pointed out that all trades and transactions were being done by Teji Mandi on behalf of Anugrah. The holding statements, contract notes if any, and the margin money statements were all issued in Anugrah’s name."
The court, taking their submissions into account, and after going through Anugrah’s affidavit, asked why an injunction order should not be passed and court receiver appointed across all its assets, including those bank accounts. Responding to this, Mr Cama, counsel for Anugrah, informed the bench that the brokerage's bank accounts were frozen by the Securities and Exchange Board of India (SEBI). He also assured the court that Anugrah would not transact in any of the bank accounts listed in the affidavit, without prejudice to his rights and contentions.
When asked to deposit passports of directors of Anugrah, Mr Cama informed the bench that the passports are already with the economic offences wing (EOW) of Mumbai police.
Justice Patel also asked Parinam Law Associates to nominate one person from their firm to serve as a single-point contact person to coordinate all these matters and collate necessary information in tabular form including all claims.
Here is the order passed by Bombay HC...
Earlier this month, the Bombay HC had barred crisis-hit Anugrah Stock and Broking from using assets worth Rs58 crore that belong to more than 25 investors, who filed a petition after the firm has stopped responding to them and their accounts have become inaccessible.
Hundreds of investors have lost large sums of money, with one south Mumbai-based family alone having invested over Rs150 crore. So, the number of litigants is likely to swell, unless other investors seek other options.
The bulk of investors in Anugrah have come through an associate firm called Teji Mandi Analytics, which was apparently running a derivatives portfolio of over Rs1,000 crore like a Ponzi scheme with assured monthly returns.
On 4th September, the National Stock Exchange (NSE) had withdrawn all trading rights of crisis-hit Anugrah Stock and Broking Pvt Ltd. Earlier on 1st September, the exchange had withdrawn Anugrah's trading rights in future & options (F&O), currency derivatives and commodity derivatives segment.
In a circular, NSE says, "On account of the regulatory concerns observed, the relevant authority of Exchange has decided to withdraw the trading rights of the member in all segments of the Exchange with immediate effect. Accordingly, in addition to the aforementioned segments, Anugrah Stock & Broking Pvt Ltd shall also be disabled in all other segments of the Exchange from 4 September 2020 before market hours."
Anugrah Stock and Broking, which won a reprieve from Securities Appellate Tribunal (SAT) on 17th August, was unable to deposit Rs165 crore with the NSE by 1st September. The Exchange then had withdrawn its trading rights and also seized its computers and books, the brokerage firm has told investors thronging to its office.
Last week, EOW of Mumbai Police has registered a case of cheating against the troubled stock-broking house, Anugrah Stock & Broking Pvt Ltd, for duping an investor of Rs8 crore. As Moneylife
has reported in the past,
the extent of investor losses in Anugrah could be as high as Rs1,000 crore and investigators have confirmed that more complaints having been subsequently coming to the EOW.
The case was registered by Ashutosh Shah at Juhu police station against the firm’s director Paresh Kariya, and Kalap Shah and Anil Gandhi of Teji Mandi Analytics and others, under criminal breach of trust and criminal conspiracy. However, no arrests have been made yet.
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