The present appeal has been filed by Multibagger Securities Research & Advisory Pvt. Ltd. & Ors. (MSRAPL â€" Appellants) against order dated
November 18, 2022 passed by Securities and Exchange Board of India (SEBI / Respondent) in terms of which the application filed by MSRAPL for
registration as Portfolio Manager (PM) was rejected and MSRAPL and its directors / promoters, namely, Sh. Manish Kumar Goyal (MKG) and Sh.
Shailesh Goyal (SG) were held to be not „fit and proper‟ persons for grant of the registration as Portfolio Manager. Further, MSRAPL was
directed not to  apply for fresh registration as Portfolio Manager for a period of five years from the date of the order.
2. Brief facts of the case are as under:- MSRAPL had  submitted to the Respondent,an application for registration as Portfolio Manager on
October 30, 2020. MKG is 80% shareholder and SG 20% shareholder in MSRAPL. MKG had been proposed to be the Principal Officer for the
proposed PM activity. MSRAPL already held registration with SEBI as an Investment Advisor (IA) since May 29, 2017 and MKG was also
registered with SEBI as Research Analyst since May 16, 2017.
2.1 While scrutinizing the application of MSRAPL for registration as PM, SEBI found out that MKG did not fulfill the criteria under Regulation 7(2)(d)
(ii) of SEBI (Portfolio Managers) Regulations, 2020, which required the Principal Officer to have at least five years‟ experience in “related
activities in the securities market including in a portfolio manager, stock broker, investment advisor, research analyst or as a fund managerâ€.
Accordingly, SEBI sought further information and supporting documents from MSRAPL.
2.2 MSRAPL submitted on February 16, 2021, information about MKG‟s employment with M/s. Maco Securities Pvt. Ltd. („Maco‟ for short) for
the period August 2004 to May 2006. In its application, MSRAPL had not mentioned about this work experience and had given the experience details
from June 2006 onwards.
2.3 The Respondent found out that the veracity of supporting documents along with Form 16 could not be established and asked for further documents
like bank statements of MKG as proof of salary drawn from Maco. The Respondent further called from M/s Sun Pharmaceutical Ltd. (SPIL),
(erstwhile Ranbaxy Laboratories Ltd.) where MKG had worked from June, 2006 to January, 2010, documents submitted by MKG to SPIL including
relieving letter / experience certificate, being his previous employer. SPIL submitted documents / information, which indicated that MKG had worked
with two CA firms, Mitra Gupta & Agarwal, Delhi and S.C. & Associates, Delhi â€" during the period August 2005 to April 4, 2006 and April 5, 2006
to June 18, 2006, respectively. Further, Respondent also asked MSRAPL to submit an undertaking that the proposed Principal Officer MKG will
surrender his Research Analyst registration with SEBI and relinquish his position as Principal Officer in MSRAPL as Investment Advisor so that
independence of proposed activities and avoidance of conflict of interest could be ensured while maintaining arms‟ length distance between
MSRAPL‟s present and proposed activities.
2.4 The Respondent concluded that MSRAPL‟s submissions regarding experience with Maco was misleading as he was actually working with CA
firms based in Delhi and not with Maco, which was based at Bangalore. Further, they held the MSRAPL‟s reply dated August 18, 2021 on the
Undertaking requirement as not logical and counter-intuitive. In view of the above, the Respondent concluded that MSRAPL was not a „fit and
proper‟ person to be registered as a Portfolio Manager and issued notice dated March 31, 2022 to MSRAPL to show cause as to why the application
for registration as PM may not be rejected. MSRAPL made written submission and got opportunity of inspection of relevant documents and personal
hearing. Based on the material on record, the SCN and reply / submissions of MSRAPL, the impugned order came to be passed on November 18,
2022.
3. We have heard Shri Manish Goel, Appellant in person and Shri Sumit Rai, learned counsel for the Respondent.
4. Before us, the Appellants‟ plea was that the rejection of their application for registration as PM and declaration of the Appellants and its directors
as not „fit and proper‟ is an act of vengeance on part of the Respondent. The Appellants had complained to the Chairman, SEBI and Finance
Ministry regarding the delay in processing of their application and due to these complaints, the Respondent started harassing them which finally
culminated in passing of the impugned order.
4.1 Further, claiming that while the SCN only sought reply as to why the application for registration as PM should not be rejected, the impugned order
declared them as not „fit and proper‟ and barred them from re-applying for further five years, the appellant sought that the impugned order should
be struck down. Refuting the Respondent‟s finding about the Appellant‟s principal officer (MKG) not having requisite experience based on the
evidence submitted by SPIL, Shri Goel submitted that the Appellant had submitted three concrete evidences in shape of experience certificate, Form
No. 16 and e-mail confirmation from Maco to indicate that MKG had more than adequate work experience as mandated under Regulation 7(2)(d)(ii)
of SEBI (PM) Regulations, 2020. It was submitted that the Respondent did not accept the direct relevant experience of approximately four years as
Research Analyst and Investment Advisor, therefore, the Appellant had to give Maco experience. SPIL was not able to give the Maco‟s details as
the Appellant had not submitted the same to them as experience in Maco was not a relevant experience with respect to the job profile there. The
Respondent‟s dependence on SPIL‟s confirmation of work experience at two CA firms in Delhi is flawed as firstly it is possible for the Respondent‟s
to influence them being a listed Company and secondly, the timing of second e-mail confirmation received from SPIL is highly suspect. The Appellant
also pleaded that principles of natural justice were not complied by the Respondent as the allegation and information based on which the impugned
order was passed, was provided much after the personal hearing was given. Further, the Respondent ignored the fact that at the time of passing the
impugned order, the experience of the Appellants as Registered Investment Advisor with the Respondent itself was of more than five years.
5. On the other hand, the Learned Counsel for the Respondent argued that the Respondent has acted within the realm of the legal framework laid out
for grant of registration as PM. The SEBI (PM) Regulation, 2020 lay down the process of registration as PM. Regulation 6 thereof allows for calling
for further information, Regulation 7(1) lays down that all matters relevant to activities of PM can be considered, Regulation 7(2)(d)(ii) lays down the
requirement of 5 years‟ experience in related activities in securities market for the Principal Officer of the applicant. Regulation 7(2)(j) states that the
applicant must be a „fit and proper‟ person and Regulation 8 states that the criteria for „fit and proper‟ person to be considered would be as
contained in Schedule - II of SEBI (Intermediaries) Regulation, 2008.
5.2 Further, as per Schedule II of SEBI (Intermediaries) Regulations, 2008, „integrity, reputation and character‟ of the person is relevant to
determine whether an applicant is „fit and proper‟. While examining the application of the Appellants, SEBI acted within the four walls of the
provisions of the regulations laid down, in observing that MKG did not fulfill the criteria that require a Principal Officer of an Applicant to have
experience of at least 5 years in related activities in the securities market. Accordingly, relevant supporting documents were sought towards work
experience of the proposed Principal Officer, MKG. The details submitted by MSRAPL included MKG‟s employment with Maco from August 2004
to May, 2006, which were found contradictory by the Respondent as information received from SPIL indicated that MKG was working in two CA
firms at Delhi during August, 2005 to June, 2006. Thus, the Respondent was correct to arrive at a conclusion that by submitting false and misleading
information to SEBI, the Appellants failed to meet the criteria of „integrity, reputation and character’ and could not be held to be „fit and
proper‟ persons so as to allow registration as PM.
5.3 Further, it was submitted that the Appellants have never denied employment of MKG in the two CA firms at Delhi and at Maco in Bangalore but
have sought to suggest that MKG had been employed in more than one firm at different locations at the same time. This suggests that the Appellant
believes that the information submitted by SPIL is correct and therefore the Appellant‟s stance is contradictory. Also, the Respondent is required to
take into account the „integrity, reputation and character‟ while applying the eligibility criteria of fit and proper on the director / promoter to the
Applicant MSRAPL. Therefore, in order to determine whether MSARPL is a „fit and proper‟ person, the criteria were extended to MKG and SG.
Considering the veracity of the documents submitted for work experience as inconclusive, the Applicants were asked to submit bank statements,
which they failed to do.
5.4 The Learned Counsel for the Respondent further stated that the principles of natural justice were duly followed by Respondent by giving them
adequate opportunities for providing documents, granting opportunity to reply to SCN and allowing inspection of documents and opportunity of personal
hearing. The Learned Counsel vehemently denied that the registration application was rejected on account of vengeance on part of the Respondent.
The Appellant have time and again wrongly attributed motives to the Respondent and have failed to submit any proof in support of their stance. He
submitted that the rejection of application of the Appellants for registration as PM is based on material available on record and a well-reasoned order
has been passed by the Respondent. Pointing out to various criminal cases / complaints filed by MKG against the officials of SEBI, the Learned
Counsel for Respondent submitted that the general conduct of MKG confirms that SEBI‟s conclusion of the Applicant and its directors / promoters
being not „fit and proper‟ for getting registration as PM was a correct decision.
6. Having heard the Appellant in person and Learned Counsel for Respondent and having seen the relevant provisions, we have no hesitation in
agreeing with SEBI that it has wide powers to call information documents etc. to determine whether an Applicant seeking registration as PM or any
other intermediary is „fit and proper‟ person. We also place reliance on this Tribunal‟s observations as quoted in paragraph 28 of the impugned
order in the matter of 63 Moons Technologies Ltd. vs. SEBI in Appeal No. 500 of 2020 decided on April 15, 2021.
6.1 In the instant case, the main area of contention between the parties is in relation to the work experience of MKG, as the proposed Principal
Officer of the Appellant Company who is also 80% equity shareholder in MSRAPL. In our view, this is a crucial eligibility criteria and there should be
no ambiguity regarding the Principal Officer of the Applicant meeting this criteria. We note that the Applicant did not originally provide the information
regarding the work experience of MKG at Maco for consideration against work experience criteria. The Appellants did not give any satisfactory
reason for this omission at the time of submitting application. As this experience in a broking firm would definitely fit in the desired criteria of
„related authorities in the securities market‟, its omission naturally raises the question as to why the same was not given. In our view, Respondent
was correct in seeking verification of this work experience by calling for further information from the Applicant and later on not getting satisfactory
responses, by seeking confirmation from a previous employer (SPIL). Once the discrepancy in work experience was noticed, the Respondent had to
conclude the disclosure as false and misleading information with regard to work experience of MKG. We note that the Appellant has not denied or
disputed the information supplied by SPIL. He went on to argue that he worked at two firms at the same time though the firms were located in
different cities. The moot question here is as to why the appellant did not disclose MKG‟s simultaneous work experience in Maco at Bangalore. In
our view, the explanation offered by the Appellant is implausible, if not improbable.
6.2 As far as the plea taken by Appellant regarding denial of natural justice is concerned, we are satisfied that more than adequate opportunities were
given to the Appellant to prove their case. Enough time was given for filing reply and to furnish further information to substantiate their claim.
Documents relied upon were furnished to the Appellant and personal hearing were given. Regarding the plea taken up by the Appellant that personal
hearing should have been given after supply of relevant documents, we note that the Appellant wrote back to the Respondent about the documents
and, therefore, are satisfied that the Appellant could get sufficient opportunity to put across their views / give explanation/ information to the
Respondent.
6.3 Regarding the allegations made by the Appellant that the impugned order was a result of vengeance on part of the Respondent as the Appellant
had made complaints to the Chairman, SEBI and the Finance Ministry, we note that the allegation remained totally unsubstantiated both in the oral
arguments made by the Appellant and in the written submission. In our view, such bald allegations made against a regulator and its officials points to
irresponsible and immature behavior on part of the Appellant and deserves no consideration.
7. In view of the aforesaid, we do not find any infirmity in the impugned order. The appeal fails and is dismissed with no order as to costs.
8. Pending Interlocutory applications(s), if any, stand disposed of.
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