ADJUDICATION ORDER NO.

- BS/AO-73/2008
ORDER UNDER SECTION 15I OF THE SECURITIES AND EXCHANGE
BOARD OF INDIA ACT, 1992 READ WITH RULE 5(1) OF THE SEBI
(PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES
BY ADJUDICATING OFFICER) RULES, 1995 IN THE MATTER OF
ADJUDICATION PROCEEDINGS AGAINST SHRI VIVEK AGARWAL.
1. I was appointed as the Adjudicating Officer to inquire into and adjudge
under Section 15I of the Securities and Exchange Board of India Act, 1992
(hereinafter referred to as the SEBI Act), the violation alleged to have
been committed by Shri Vivek Agarwal (hereinafter referred to as the
noticee) on account of his failure to comply with the directions issued by
SEBI vide order dated August 19, 2005, on account of his dealings in the
scrip of Bhoruka Financial Services Limited (hereinafter referred to as the
BFSL).

2. It is alleged that in terms of the direction dated August 19, 2005, issued by
SEBI, the noticee who belong to the promoter group of BFSL, was
directed to deposit the proceeds of the transactions in the scrip of BFSL in
the Magadh Stock Exchange in an escrow account with a nationalized
bank opened exclusively for the purpose. The noticee was further directed
to obtain a prior approval of SEBI for dealing in this account. In this
regard, it is alleged that the noticee failed to comply with the said
directions issued by SEBI. In view of the alleged failure on the part of the
noticee to comply with the directions of SEBI, adjudication proceedings
were initiated against him in terms of the provisions of Section 15I read
with Section 15HB of the SEBI Act.

NOTICE AND REPLY

3. A show cause notice A&E/BS/ 56077/2005 dated December 21, 2005 was
issued in terms of the provisions of Rule 4(1) of the SEBI (Procedure for
Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules,
1995, seeking reply of the noticee as to why an inquiry should not be held
against him in respect of the violations alleged to have been committed by
him.

4. It is noted that the noticee vide his letter dated January 19, 2006 replied to
the show cause notice. Considering the reply submitted by the noticee and

also considering facts of the case, it was decided to conduct an inquiry in

the matter and the noticee was advised to attend the inquiry scheduled on
February 3, 2006.

5. The noticee vide his letter dated January 30, 2006 requested to stay the
adjudication proceedings as he has filed an appeal against SEBIs order
dated August 19, 2005 before the Honble Securities Appellate Tribunal.
The noticee further requested that if the adjudication proceedings
continue, pending decision of Honble Securities Appellate Tribunal, then a
fresh date of hearing may be granted.

6. Considering the request made by the noticee one more opportunity of

hearing was granted to the noticee whereby the noticee was advised to
attend the hearing on February 28, 2006. The noticee vide his letter dated
23rd February, 2006, requested to defer the adjudication proceedings till
the appeal before Honble Securities Appellate Tribunal was disposed of.
As it appeared that no stay had been granted by the Honble Securities
Tribunal, another opportunity of hearing was granted to the noticee vide
hearing notice dated April 26, 2006, whereby the noticee was again
advised to attend the hearing on May 10, 2006. The noticee vide his letter
dated May 4, 2006 again requested to defer the adjudication proceedings
till the matter was disposed of by the Honble Securities Appellate
Tribunal.

CONSIDERATION OF EVIDENCE AND FINDINGS

7. It came to the notice of SEBI that trading on the platform of the Magadh
Stock Exchange at Patna (for short the exchange) had been conducted
in violation of the conditions of renewal of recognition granted to that
exchange. On scrutiny of the details of the trading, it transpired that
trading was concentrated mainly in the scrip of BFSL. DLF was the buyer
of the shares of BFSL and the sellers were the promoters of BSFL namely
Shri Satyanarayan Agarwal, Shri Vivek Agarwal, Smt Umah Agarwal, Shri
Siddhartha Agarwal, Satyanarayan Vivek Kumar (HUF), Prabhu Securities
Ltd, Bhoruka Engineering Ind. Ltd., Pragya Enterprises and its partners
(hereinafter collectively referred to as the sellers). It also transpired that
the shares had been sold approximately for a sum of Rs 109.71 crores in
just 10 trading days.

8. By an ex-parte order dated 19.08.2005, DLF was prohibited from dealing

in the scrip of BFSL and the sellers were directed to deposit the proceeds
of the sale transactions in an escrow account with a nationalized bank. It
was observed in the order that any person aggrieved by this interim exparte order may approach SEBI within 30 days of this order showing
cause for reconsideration of the directions.

9. The allegation against the noticee is that he failed to comply with the
direction dated August 19, 2005 issued by SEBI. The noticee who belong
to the promoter group of BFSL was directed vide SEBI order dated August
19, 2005 to deposit the proceeds of the transactions in the scrip of BFSL
in the Magadh Stock Exchange in an escrow account with a nationalized
bank opened exclusively for the purpose. The noticee was further directed
to obtain a prior approval of SEBI for dealing in this account. In this
regard, it is alleged that the noticee failed to comply with the said
directions issued by SEBI.

10. In this regard, the provisions of Section 15HB of SEBI Act provides the
following:
Penalty for contravention where no separate penalty has been provided.
15HB. Whoever fails to comply with any provision of this Act, the rules or the
regulations made or directions issued by the Board thereunder for which
no separate penalty has been provided, shall be liable to a penalty which
may extend to one crore rupees.]

11. In this regard it is pertinent to note that the noticee vide his letter dated
January 19, 2006 interalia made the following submissions
a. He has not violated any of the provisions of law including Rules,
Regulations of SEBI.
b. In order to strictly comply with the directions as stated above, he
sought the following clarifications on the mechanism to be followed
for depositing the proceeds of the transaction in the escrow account
to be opened with a Nationalized bank :
1) In whose name the Escrow account is to be opened.
2) What would be the duration of the said account.
3) Who is to be appointed as the Escrow Agent.

4) What will be the conditions for opening /operating the Escrow

Account.
5) On what basis the amount in Escrow account will be released.

c. The noticee further requested for the clarifications at the earliest so

as to enable him to strictly comply with the directions as stated
hereinbefore.
d. The noticee further assured that he will, on receipt of the said
clarification, immediately deposit the amount that was in balance in
the bank account on the date of receipt of order, out of the amount
of consideration received from DLF Commercial Developers Ltd.
and deposit it in the bank account.

12. As stated in the preceding paragraphs of this order, the said order passed
by SEBI was challenged before the Honble Securities Appellate Tribunal.
The Honorable Tribunal vide its order dated May 10, 2006 allowed the
appeal setting aside the order passed by SEBI. The following observation
of the Honourable Tribunal is noted in this matter.

There is yet another direction which the board has issued in regard to
the sellers. Adjudication proceedings have been ordered against them
for their non-compliance of the directions issued by the ex-parte order
dated August 19, 2005. Since we have held that order to be beyond
the powers of the board and the same is illegal, we do not think that
adjudication proceedings should commence against the sellers for the
non- compliance of that order. That would result in grave injustice to
them.

13. In this regard, SEBI had filed Civil Appeal no- 2720/2006 in the matter of
SEBI Vs BFSL & ors. against the order passed by the tribunal before the
Honble Supreme Court. The Honble Supreme Court vide its order dated
25.8.06 has stayed the order passed by the tribunal.

14. Subsequently, the Honble Supreme Court of India in its order dated
December 15, 2008 vacated all interim orders passed by SEBI and also
held that Civil Appeal no- 2720/2006 stands dismissed as infructuous.

15. In view of the order passed by the Honble Supreme Court, the present
adjudication proceedings against the noticee have become infructuous
and hence the proceedings are disposed of accordingly.

16. In terms of the provisions of Rule 6 of the SEBI (Procedure for Holding
Inquiry and Imposing Penalties by Adjudicating Officer) Rules 1995,
copies of this order are sent to Shri Vivek Agarwal and also to Securities
and Exchange Board of India.

PLACE:

Mumbai

Biju. S

DATE:

December 24, 2008

Adjudicating Officer