Writ Petition-bank of Rajasthan-latest Modified (2) (2)

IN THE HIGH COURT OF DELHI AT NEW DELHI

INDEX

S. No.PARTICULARSPages

1.SYNOPSIS AND LIST OF DATES

2.WRIT PETITION WITH AFFIDAVIT

3.ANNEXURE P1: A COPY OF ORDER DATED MARCH 8 2010 ISSUED BY DR. K. M ABRAHAM, WHOLE TIME MEMBER OF SEBI

4.ANNEXURE P2: A COPY OF ORDER DATED MARCH 26 2012 ISSUED BY MR. PRASHANT SARAN, WHOLE TIME MEMBER OF SEBI

5.ANNEXURE P3: A COPY OF ORDER DATED 14TH FEBRUARY 2013 PASSED BY THE ADJUDICATING OFFICER OF SEBI

6.ANNEXURE P4: THE GAIN QUANTIFIED FROM THE ORDER OF THE SEBI AND THE MARKET RATES OF SHARES ON RELEVANT DATES

7.ANNEXURE P5: HISTORIC STOCK QUOTE OF ICICI BANK SHARES ON 27.03.2012

8.ANNEXURE P6: HISTORIC STOCK QUOTE OF ICICI BANK SHARES ON 14.02.2013

9.ANNEXURE P7: A COPY OF COMPLAINT FILED BY THE PETITIONER WITH CVC ON 12.10.2013

10.ANNEXURE P8: A COPY OF REPLY OF THE CVO TO THE PETITIONER DATED 25.11.2013

11.ANNEXURE P9: A COPY OF LETTER WRITTEN BY THE COMPLAINANT TO THE FINANCE MINISTER DATED 11.10.2014

12.ANNEXURE P10: A NOTE ON THE ROLE OF VARIOUS OFFICERS OF SEBI SUBMITTED BY THE PETITIONER

13.ANNEXURE P11: A NOTE REBUTTING ALL THE POINTS MENTIONED IN THE REPLY OF THE CVO CUM EXECUTIVE DIRECTOR (INVESTIGATION)

14.ANNEXURE P12: A COPY OF ARTICLE PUBLISHED IN THE LIVE MINT DATED MAY 18, 2013

15.ANNEXURE P13: A COPY OF ARTICLE PUBLISHED IN THE BUSINESS STANDARD DATED OCTOBER 16, 2014

SYNOPSIS

This Writ Petition has been filed in public interest on account of loss to the national exchequer over Rs. 500 Crores, which along with fine could have been Rs. 2000 Crores incurred at the time of amalgamation took place between Bank of Rajasthan with ICICI Bank in 2010. This loss, for reasons mentioned below, will become irreversible if the Appeal filed against the order of Securities Appellate Tribunal, by those who have profited is decided by this Honble Court.

On a reference made by RBI the Securities and Exchange Board of India conducted investigation into the affairs of Bank of Rajasthan Ltd for the Period June 2007 to December 2009. The investigation found that the promoters of Bank of Rajasthan had increased their stake in the Bank while they had given an undertaking to RBI to decrease their stake in line with the permitted shareholding of the promoter in a private bank. Further, the promoters deliberately declared in the quarterly filings that they had decreased their stake while they had been actually increasing their stake through entities funded by them.

On investigation by SEBI, the promoters were found to be in violation of various sections of Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market Rules. The profit made by the promoters/entities on the excess holding of 34.54% was over 500 crores. Under the law, this profit was to be disgorged and fine levied on it.

The loss occurred because SEBI deliberately did not quantify the gains made by the promoters/entities for violation of various sections of Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market Rules.

By not quantifying the gain, SEBI took the gain as zero and not as over Rs. 500 crores that it should have done. By taking the gain as zero SEBI was able to put a token fine of Rs. 30 crore which in appeal was reduced to Rs. 20 crores

The following paragraph of the order of the SEBI Adjudicating Officer dated 14.02.2013lies at the centre of the scam78. It is difficult, in cases of such nature, to quantify exactly the disproportionate gains or unfair advantage enjoyed by an entity and the consequent losses suffered by the investors. I have noted that the investigation report also does not dwell on the extent of specific gains made by the Noticees. However the manipulations as elaborated above are a threat to the safety and integrity of market and thus loss to the investors to that extent. I observe that the game plan of the Noticees continued for over a period of more than two years and hence was of a repetitive nature.

The gains could have been easily quantified from three different sources, namely the brokers who did the deal, the stock exchange on which the deals were done, the depositories which delivered the shares. All these three intermediaries are fully regulated by SEBI and are bound to provide the information to SEBI.

In fact, the gains made by the promoters/entities can be largely quantified from the Adjudication order of SEBI and the data required for calculating the gain is in the investigation report. The petitioner has been able to quantify the approximate gains with a reasonable amount is certainly which has been placed as an Annexure to the petition.

The gains made by the promoters/entities were to be dislodged under the following provisions of the SEBI Act with a penalty the penalty of three times the gains:

15HA.Penalty for fraudulent and unfair trade practices.-If any person indulges in fraudulent and unfair trade practices relating to securities, he shall be liable to a penalty of twenty-five Crore rupees or three times the amount of profits made out of such practices, whichever is higher.

The above provision of the law has also been referred to by the Adjudicating Officer. A reading of the 24 page interim order of the WTM(Whole Time Member) dated 8/3/2010 and the 54 page order of the Adjudicating Officer dated 14/2/2013 will confirm that in view of the meticulous investigation done by SEBI on other matters, the non-quantification of profits was a deliberate act designed to benefit the promoters by over Rs 500 crores.

By not quantifying the gains, SEBI collectively fined all the persons involved in the fraudulent trading by Rs. 30 crore which was reduced to Rs. 20 crore in appeal for SAT. The order of SAT has been appealed before this Honble Court by some of the affected parties bearing Civil Appeal number 4958 4959/14 and 5632 33/14. Hence, it is necessary for this Honble Court to know there was a scam in non-quantification of the gain and that the gain was over Rs 500 crores which was to be disgorged. Instead the matter was settled for a paltry Rs 30 crores.

The purpose of this Writ Petition is to determine as to whether the gains made by the parties involved in the scam could be determined or not and if it could be determined then what was the quantum of the gain. The quantification of the gain will show that there was corruption in passing largesse of Rs. 500 crores for which accountability needs to be fixed.

It may be mentioned that the order of SEBI in the above mentioned Bank of Rajasthan case has also been commented adversely by the financial print media and has led to the erosion of credibility of SEBI.

The reason for increasing their stake their stake in the bank was to profiteer from the increased stake as the promoters knew that when they sold their bank the price of the shares would double and they would make a killing from the increased stake. It was therefore, a case of insider trading which was a far more serious charge but for reasons best known was never investigated.

The fact that the existing officers of the first respondent were able to bestow a benefit of over Rs. 500 crores in spite of the complaint by the erstwhile WTM of SEBI who in a confidential letter written to the then Prime Minister had stated that he was approached by his superior for allowing the promoters of the Bank of Rajasthan to sell the shares is a sad commentary on the system. This complaint of the WTM was in the public domain much before the two orders of SEBI favouring the promoters/entities were passed.

LIST OF DATESPrior to 2010RBI refers to SEBI the matter of the Promoters of Bank of Rajasthan violating its Guidelines dated February 28, 2005 on Ownership and Governance in Private Sector Banks of promoters having a maximum holding of 10%.Promoters were to reduce their stake to 10% in accordance with the guideline and had given and undertaking to do so gradually. However, the promoters of BOR instead of decreasing their stake as per the RBI licensing norms and that the undertaking given were increasing their stake, through benami holdings and making quarterly false declarations, as required under law, of decreasing their stake.

08.03.2010Interim order of SEBI NoWTM/KMA/ISD/235/03/2010 of SEBI: SEBI investigates the matter referred to it by the RBI and finds that the promoters of BOR had made false declaration on the promoter holding. They had declared their holding to have decreased to 28.61%, from 44.71% while in reality they had increased their holding to 55.01% and in the process acted in violation of Prohibition of the Fraudulent and Unfair Trade Practices Relating to Securities Market and Takeover Regulation.

The then WTM of SEBI K M Abraham passes interim order freezing the sale of shares by the promoters illegally acquired and wrongly declared. The shareholding of 118 entities involved in the scam was frozen and directions to the concerned Depositories issued. This meant that the persons accused could not sell their shares.

18.05.2010ICICI Bank announces the buyout of Bank of Rajasthan through a share swap ratio of 4.72 shares of Bank of Rajasthan for one share of ICICI Bank. The buyout was at a price which was more than two times the current market price.

09.08.2010RBI writes to SEBI asking if its interim order dated 8/3/10 of freezing the promoters shares would affect the buyout of BOR by ICICI bank.

11.08.2010SEBI replies that the order would not affect the amalgamation of BOR into ICICI Bank but its order against the entities mentioned therein would apply to ICICI shares allotted to the entities in lieu of their BOR shares.

01.06.2011 The WTM of SEBI who had passed the interim order on 8/3/2010 and replied to RBI on 11/8/2010 ( see above dates) writes to the Prime Minister by ( letter no SEBI/KMA/2011/7495 dated 1/6/2011), wherein he stated that SEBI Chief wanted him to manage some cases before his tenure ended. (Para 10 of the letter). The WTM was more specific about Bank of Rajasthan in Para 14 of his letter he stated the following: He asked me to explore the possibility of allowing the promoters to sell the ICICI shares received by them. I explained to him, that the SEBI interim orders prohibiting market transactions cannot be selectively be waived for this. In Para 21 of the letter the WTM had undertaken to state the facts on oath on any administrative/judicial forum if required to do so.

26.3.2012Shri Prashant Saran, the WTM to whom the file was allotted after the earlier WTM completed his tenure at SEBI had left, allowed the promoters of BOR and other entities to sell their ICICI shares by blaming the RBI for giving the green signal for the amalgamation without providing for the caveats and concealing the fact that it was SEBI which had given the green signal and provided the caveats to the RBI. Mr Saran relied on the report of Investigation Department headed by R K Padmanabhan (who was also the CVO of SEBI) Refer para 5,7,1, 7Bc (The recommendation is to initiate adjudication proceedings which may result only in imposition of monetary penalty.) No disgorgement of profit was referred to while allowing the promoters to sell the shares. The promoters gain on the day of the order was over Rs 500 Crores on their 34.54 percent excess and illegal holding which was acquired by violating the PTUTP Rules.

14.02.2013The Adjudication officer imposes a token penalty of only Rs 30 Crores inspite of finding violation of Regulation 3(a), 3(b), 3(c), 3(d), 4(1) and 4(2)(f) of the SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIESMARKET) REGULATIONS,(Para 76 of the order) because the Investigation Department headed by the then CVO Mr R K Padmanabhan could not quantify the illegal gain- refer para 78 of the order (I have noted that the investigation report also does not dwell on the extent of specific gains made by the Noticees. )

12.10.2013Complaint filed by the Petitioner dated 12.10.2013 addressed to the Chief Vigilance Commission travels to Mr R K Padmanabhan, the Chief Vigilance Officer (CVO) at SEBI, via the Ministry.

25.11.2013The CVO who was also the Executive Director (Investigation) and was responsible for facilitating the largesse to the promoters making, vide his letter no SEBI/ED/RKP/30239/2013 dated 25/11/13 dismisses the complaint of the Petitioner by deliberately misstating that the complaint had stated that there was too much promptness shown by SEBI in disposing RBI letter dated 9/8/10 SEBI on 11/8/10 which was not the case. This reference to the promptness was used not to address the real issue of SEBI having given the green signal for the amalgamation of the Banks. This was done in order to pass the blame on to the RBI while it was SEBI which had cleared the deal. He also wrongly stated in the letter that the amount mentioned was sensational without referring to the fact that the loss had been quantified in the complaint on the basis of number of excess holding of shares, the price and the profit. He concealed the fact that his department had deliberately not quantified the loss when they were in a position to do so easily. He wrongly stated that the matter was of wrong disclosure under SAST while suppressing that the charge of violation of Regulation 3(a), 3(b), 3(c), 3(d), 4(1) and 4(2)(f) of the PFUTP Regulations and fraudulent trading had been proven. He wrongly stated that the ban related to trading in other shares when the entities were not traders. This was done to conceal the fact that the ban related to en-cashing the gain on the ill-gotten shares. The CVO cum ED (Investigation) concealed his conflict of interest role as Executive Director Investigation while replying to the complaint. The Ministry and the CVC dutifully accepted the recommendation of the CVO SEBI without applying their mind or reading the complaint or verifying that the alleged losses of Rs. 500 crores were real. They did not even care to ask the CVO to quantify the gain which he had described as sensational. The Ministry was aware that the appointment of the CVO by SEBI chairman and had not been approved by any other authority and that the appointment itself was irregular and was a conflict of interest situation. Further the handing over of the additional charge of lucrative assignment of Executive Director (Investigation) was in direct violation of CVC manual.

26.09.2014 CBI registers a complaint in the BOR case which is wrongly reported in the press as PE as clarified by the CBI on inquiries made by the Petitioner.

11.10.2014The Petitioner writes to the Finance Minister Shri Arun Jaitley on the cover up at SEBI/Finance Ministry and CVC and the involvement of SEBI Chairman, WTM and CVO/ED SEBI in the scam.

10.12.2014RTI application filed by the Petitioner with SEBI, for providing the inspection report and the gains made by the Promoter/entities in BOR case.

07.01.2015RTI application of the petitioner rejected on the grounds that the matter was pending before the Apex court and hence the information could not be provided as it would impede the process of investigation/apprehension/ prosecution of offenders.

IN THE SUPREME COURT OF INDIA(CIVIL ORIGINAL JURISDICTION)

Writ Petition (Civil) No. .................... Of 2015Public Interest Litigation

A WRIT PETITION IN PUBLIC INTEREST UNDER ARTICLE 32 OF THE CONSTITUTION OF INDIA FOR THE ENFORCEMENTS OF RIGHTS UNDER ARTICLES 14 AND 21 OF THE CONSTITUTION OF INDIA SEEKING A DIRECTION TO SEBI TO QUANTIFY THE GAINS MADE BY PROMOTERS OF BANK OF RAJASTHAN AND OTHER ENTITIES JOINTLY, AND DIRECT THE SEBI TO LEVY APPROPRIATE PENALTY ON THE VIOLATORS

In the matter of:

1) ARUN KUMAR AGRAWALT-8 EAGLETON GOLF RESORT 30 KM BANGALORE MYSORE HIGHWAY BAIDADI, BANGALORE SOUTH DISTRICTBANGALORE 562 109 Ph: 09845097444 Email: angrywal @ gmail.com The Petitioner

Versus

1) SECURITIES AND EXCHANGE BOARD OF INDIATHROUGH ITS CHAIRPERSONSEBI BHAVAN BANDRA KURLA COMPLEXBANDRA (EAST), MUMBAI-400051 Respondent No. 1

2) CENTRAL BEAURAU OF INVESTIGATIONTHROUGH ITS DIRECTORCGO COMPLEXNEW DELHI-110003 Respondent No.2

3) CHIEF VIGILANCE COMMISSIONThrough its Chief vigilance commissionerSATARKATA BHAVAN, A-BLOCKGPO COMPLEX, INANEW DELHI - 110 023 Respondent No.3

4) UNION OF INDIATHROUGHFINANCE SECRETARYMINISTRY OF FINANCE, DEPARTMENT OF ECONOMIC AFFAIRSNORTH BLOCK, NEW DELHI-110001 Respondent No.4

5)CHIEF VIGILANCE OFFICER,DEPARTMENT OF ECONOMIC AFFAIRSROOM NO. 67-BNORTH BLOCK, NEW DELHI 110001 Respondent No.5

THE HONBLE CHIEF JUSTICE OF INDIA AND HIS COMPANION JUDGES OF THE HONBLE SUPREME COURT OF INDIA

The Humble Petition of thePetitioner above-named

MOST RESPECTFULLY SHOWETH: -

1) That the petitioner is filing the instant writ petition in public interest under Article 32 of the Constitution for the enforcement of Rights guaranteed under Article 14 and 21 of the Constitution of India, on account of the inaction of the Respondents, Central Bureau of Investigation (CBI), Central Vigilance Commission of India (CVC), Ministry of Finance on a complaint by the Petitioner against the first respondent (SEBI) that has led to a financial loss of over Rs. 500 Crores. This loss was caused to the public exchequer because SEBI deliberately did not quantify the gains made by the Promoters of Bank of Rajasthan on the excess of 34.54% of the shares of the Bank held by them in violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 1995 (hereinafter referred to as 'PFUTP Regulations')and SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997(hereinafter referred to as SAST Regulations). The gain of over Rs 500 crores could have been very easily quantified but was deliberately treated as zero. Had the gains made by the promoters/entities been quantified, the unlawful profit would have to be disgorged under the existing law. There is sufficient evidence to show that the gain was not quantified in order to benefit the promoters of Bank of Rajasthan. The loss to the exchequer would be over Rs. 2000 Crores, if the penalty of three times the gain, as provided in section15 HA of the SEBI Act too had been levied.

The petitioner has no personal interest, or private/oblique motive in filing the instant petition. There is no civil, criminal, revenue or any litigation involving the petitioner, which has or could have a legal nexus with the issues involved in the PIL.

The petitioner has been an activist in financial area for the last 15 years unraveling scams in national interest. He has had successes and failures while agitating issues involving thousands of Crores of public money. Some of his successes relate to state of Karnataka abandoning the Cogentrix Power project which would have led to a loss of at least Rs 30,000 Crores, preventing the transfer of 290 MW Almatti Hydropower project to a private company, unraveling of telecast cricket scam as a Consultant to Prasar Bharati resulting in Doordarshan gaining 20 Crores, unraveling the 2G scam in respect of Swan Telecom which finds a mention in the judgment of this court, of taking up iron ore mining by the government of Karnataka on account of high profitability in the mining sector (still pending with Karnataka High Court). Petitioners annual income is Rs XYZ (PAN No. XYZ). His National UID No. is XYZ.

Though the petitioner has made several representations to the authorities which include complaint filed with CVC on 12.10.2013 (Annexure P7), complaint filed with the Finance Minister on 11.10.2014 (Annexure P9). Copies of the complaint were sent to Finance Secretary, Ministry of Finance, Dr. K. P. Krishnan, DG & AS, Department of Economic Affairs, Ms. Usha Titus, Joint Secretary/ Chief Vigilance Officer and Director CBI, but no action has been taken against the offenders till date.

The Case in Brief 2) Reserve Bank of India referred to SEBI the matter of the Promoters of Bank of Rajasthan violating its Guidelines dated February 28, 2005 on Ownership and Governance in Private Sector Banks of promoters having a maximum holding of 10%. Earlier the Promoters were directed by the RBI to reduce their stake to 10%. The RBI in its audit found that the promoters of BOR instead of decreasing their stake as per the RBI licensing norms were increasing their stake through benami holdings. 3) It also found that the promoters of Bank of Rajasthan had been deliberately making false quarterly declaration, mandated under the law, of having decreased their stake while in reality they had increased their stake. The matter was referred to SEBI by the RBI for further investigation. SEBI conducted investigations into the affairs of Bank of Rajasthan Ltd for the Period June 2007 to December 2009 and found that the RBI was right in concluding that the promoters had surreptitiously increased their stake instead of decreasing their stake.

5)The then Whole Time Member (WTM) of SEBI in his order number WTM/KMA/ISD/235/03/2010 dated 8/3/2010 found that while the promoters had stated that their holding in Bank of Rajasthan had decreased to 28.61%, from 44.71% while in reality they had increased their holding to 55.01% in December 2009, and had in the process acted in violation of Prohibition of Fraudulent and Unfair Trade Practices Regulations and Takeover Regulations. The order also stated that the promoters were repeat offenders. The WTM of SEBI, Shri K M Abraham, passed interim orders freezing the sale of shares by the 118 promoters/entities involved in acquiring the excess shares and appropriate directions to the concerned Depositories holding the shares were issued. This meant that the persons accused could not sell their shares. The order of the WTM is placed at Annexure P1.

Revocation of Interim Order by the subsequent WTM6)On 18/5/2010 the buyout of Bank of Rajasthan by ICICI Bank was announced and the amalgamation ratio of shares in effect doubled the price of the shares of Bank of Rajasthan. When the proposal of the amalgamation was put up to the RBI, the RBI by its letter dated 9/8/2010 made a reference to SEBI as to whether the interim order of SEBI would affect the amalgamation of the two banks. SEBI replied that the order would not affect the amalgamation of Bank of Rajasthan into ICICI Bank but its order against the entities mentioned therein would apply to ICICI shares allotted to the entities in lieu of their Bank of Rajasthan shares. In other words the 118 parties named in the interim order could not sell their Bank of Rajasthan shares which were to be converted to ICICI Bank shares. The letter of SEBI by WTM who had passed the interim order dated 26.03.2012 addressed to the RBI is placed at Annexure P2 and the relevant portion reproduced:

The ex parte ad interim order passed by SEBI on 08-March-2010 will not come in the way of the proposed merger of bank of Rajasthan Ltd with ICICI Bank Ltd. However, this order will continue to operate on the entities named in the order including the shareholders of bank of Rajasthan Ltd, who are likely to get the shares of ICICI Bank Ltd., arising out of the proposed merger, in respect of their operations in the securities market, as has been specified therein.

Thus the impounded shares of Bank of Rajasthan continued to be frozen when converted into ICICI bank shares.

7) Subsequently, the new chairman of SEBI apparently asked the WTM who had passed the interim order to find a way to allow the promoters to sell their ICICI bank shares and this request figured in a confidential complaint by the concerned WTM to the Honble Prime Minister. This complaint though confidential came into the public domain on account of an RTI application and was published on the Internet.

8)After the completion of the tenure of the WTM who had passed the interim order, the file was allotted to another WTM whose term was about to end but who had applied for another term. Though the earlier interim order had allowed the persons affected by the order to appeal against the order, none of them done so. The file was taken up without any of the parties appealing against the earlier interim order. The interim order of the earlier WTM was reversed to allow the promoters and other entities to sell the shares of ICICI Bank allotted to them and thereby encash a profit of over Rs. 500 crores on the 34.54% excess shares. While doing so the order did not state the percentage by which the promoters/entities had increase their stake nor attempted to identify the quantum of the profit that they would make. The interim order should not have allowed the release of the security at the centre of the scam without proper adjudication and it in effect took away the power to disgorge the illegal profit made by the promoters/entities from the Adjudicating Officer.

The interim order was flawed on various counts:The WTM in para 9 of the order stated:It would also be safe to presume that if the RBI itself had considered the conduct of the promoters extremely serious then either it would not have allowed the amalgamation or would have done so with required caveats for the promoters.

9)The WTM wrongly blamed the RBI for approving the amalgamation without providing for the caveats against the promoters while the truth was that the previous WTM of SEBI had provided the caveats to the RBI against the Promoters by making the order effective to the shares of ICICI Bank that was to be allotted on the Promoter /entities. (Refer Annexure P2). Neither the letter nor the contents of the letter at Annexure P2 were referred to in the order.

10)The order of the WTM also took shelter in the recommendation of the Investigation Authority (headed by the CVO) produced below for revoking the directions in the interim order and for sending the matter for adjudication.I have noted that the Investigation Authority has recommended initiation of adjudication proceedings against all the entities except the entities mentioned at Sr. No. 93 to 100 and revocation of Interim Order against all the aforesaid entities.( para 5)The Investigating Authority has recommended revocation of directions passed against the entities mentioned in the Interim Order. Before considering the recommendation, certain factors as mentioned below need to be taken into account..( para 7)xxxThe recommendation is to initiate adjudication proceedings which may result only in imposition of monetary penalty.( para 7Bc)

11)The recommendation of lifting the embargo on the sale of shares and sending the matter for adjudication for a penalty without quantifying the gain or dwelling on the disgorgement of the gain was made by a person who was also the CVO of SEBI and was in a huge conflict of interest situation. Approval of his appointment as CVO was not obtained from the CVC as SEBI was not notified under section 8 of the CVC Act. The CVO was appointed by the Chairman of SEBI and he was given the charge of Executive Director (investigation) by the Chairman of SEBI which was a huge conflict of interest position not permitted under the Vigilance Manual. The CVO though junior in rank to the WTM was later responsible for giving the final vigilance clearance for the reappointment of the WTM who had passed the order.

12)The order also stated the following to justify the lifting of the embargo on the sale of the ICICI shares:The second issue to be examined is whether any such attempt at camouflaging the real level of shareholding by promoters should be considered as a serious, very serious or fatal threat to the securities market. Again, as a baseline, the securities regulations are disclosure based and the securities market regulator does expect that all disclosures should be true and fair. I am of the opinion that such an offence would have been considered as very serious or fatal if the wrongful disclosures would have led genuine investors into trades that would eventually expose them to much greater risk. I have noted that there is no allegation as to any price or volume manipulation by the promoters. Therefore, I am of the opinion that purely from a securities market point of view, the severity of the offence could be considered not very grave. (Para 9,last para)

13)The Petitioner submits that the promoters had indulged in fraudulent and unfair trade practices and their dealings were fraudulent in terms of Regulation 2(1) (c),3(b), 3(c), 3(d), 4(1) and 4(2)(f) of the Securities and Exchange Board of Indian (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. Further, they had indulged in insider trading for profiteering on the sale of increased stake when the Bank was sold to another Bank (in this case ICICI Bank). Just because the stake was increased over a long period of time of two a half years and the fraud was committed at leisure without price manipulation does not mean that the fraud was not committed on the investors and the market. There are a lot of investors who buy and sell the shares of a company by taking a cue from the promoters. If the promoters increase their shareholding they buy, and if the promoters decrease their shareholding they sell. It is precisely these types of fraud that SEBI should be detecting and punishing the violators so that the investors believe in the credibility of the market and the regulator which oversees the market, supposedly in the interest of the investors. In fact the promoters should have been proceeded against under the IPC for committing fraud and cheating the investors by increasing their stake with the full knowledge that they were in negotiation for selling the bank.

14)The Petitioner submits that the WTM did not adjudicate the matter fully, constrained the adjudication by limiting it to imposition of fine and left the adjudication to another officer already appointed. The value of 34.54% excess shares illegally acquired, as stated above, was Rs. 1036 Crores on the date after the order was passed which the promoters could now encash.

Order of the Adjudicating Officer (AO hereinafter) of SEBI15)The WTM having released the ICICI shares and having sent the matter for adjudication only for the purpose of determining the penalty, the role of the Adjudicating Officer was a limited one. The order of the AO dated 14/2/2013 is placed at Annexure P3.Para 3 of the order of the AO states:I was appointed as the Adjudicating Officer, vide order dated January 25, 2012, under Section 15 I of the SEBI Act read with Rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995 (hereinafter referred to as the Rules) to inquire into and adjudge under Sections 15HA, 15H(ii), 15A(a) and 15A (b) of the SEBI Act for the alleged violations committed by the Noticees.

16)The appointment of the AO was on 25/1/2012 which was prior to the modification of the interim order by the WTM on 14/2/2012. As the AO was supposed to impose penalty under section 15 HA of the SEBI Act and the quantum of the penalty under section 15 HA was linked to the profit made by the promoter/entities it was not correct for the WTM and the Investigation Department to pre-empt the order of the AO by releasing the security and not quantifying the profits.

17)Para 35 of the order confirms that the promoters and Persons Acting in Concert (PACs) held 34.54% excess shares than that the declared by them. (63.15-28.61 = 34.54). The relevant portion of the para is reproduced:

35. As can be seen from the above table the shareholding of the promoters and PACs increased from 46.80% to 63.15% whereas the disclosure which was made to the stock exchange was shown as reduced from 44.18% to 28.61%. Thus, wrong disclosures were made to the stock exchange...

18)Para (78) of the order of the Adjudicating Authority is at the heart of the scam and once again it was the Investigation Department that was responsible for not quantifying the gain. The relevant paragraph of the order is being reproduced:

78. It is difficult, in cases of such nature, to quantify exactly the disproportionate gains or unfair advantage enjoyed by an entity and the consequent losses suffered by the investors. I have noted that the investigation report also does not dwell on the extent of specific gains made by the Noticees. However the manipulations as Bank of Rajasthan above are a threat to the safety and integrity of market and thus loss to the investors to that extent. I observe that the game plan of the Noticees continued for over a period of more than two years and hence was of a repetitive nature.

19)SEBI, the first Respondent could have quantified the gain through three different sources. The first source was the brokers through whom the purchase and sales of the shares took place, the second source was the stock exchange through in which the brokers traded the shares, and the third source was the depositories through which the shares were credited or debited at the time of purchase/sale. All these three intermediaries of the stock market are regulated by the first respondent and under the Act and rules are bound to provide the information whenever a stock market fraud takes place.( Refer section 11C(3) of the SEBI Act).

20)SEBI, the first respondent deliberately did not quantify the gains made by the promoters and various entities who were found violating of Section 12 A (a), (b) and (c) of the SEBI Act and Regulation 3(a), 3(b), 3(c), 3(d), 4(1) and 4(2)(f) of the Securities and Exchange Board of Indian (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. (para 76 of the order of the Adjudicating officer.)21)The data for the calculation of the illegal gains made by the promoters/entities is in the investigation report and almost 95% of the data for calculating the cost price of the excess shares is in the order itself. The calculation of the gains based on the ruling price of the ICICI shares on the date of the order has been calculated and enclosed as an Annexure referred to below.

After holding the Noticees in violation of various sections of PFUTP regulations in paragraph 76 of the order, section 15HA of the SEBI Act is also reproduced in paragraph 76 of the order which is as follows:

76. ..15HA.Penalty for fraudulent and unfair trade practices.-If any person indulges in fraudulent and unfair trade practices relating to securities, he shall be liable to a penalty of twenty-five crore rupees or three times the amount of profits made out of such practices, whichever is higher.

22)The gain made by the promoters was in the vicinity of over Rs. 500- 650 Crores. Further, just because the exact gains could not be quantified, it did not mean that the gains were to be treated as zero as was done in this case. SAT in other cases had upheld the disgorgement of profits based on estimates through notional gain which could have been done in this case, if required. The value of the ICICI shares with the Promoters/other entities on the day of the order Adjudicating Authority was Rs. 1329 Crores. The exact gain could have been very easily quantified given the powers vested in SEBI and for reasons mentioned above.

23)The Petitioner submits that reference has been made in para 78 of the order of the Adjudicating Officer refers to the report of the Investigation Department headed by the CVO. The report did not dwell on the gains made by the noticees. Under the circumstances, the gain made by the noticees was treated as zero and a collective token fine of Rs. 30 Crores was levied on the 118 noticees instead of disgorging the Rs. 500 crore gains along with three times the fine that could have been imposed.The Gains is Quantified :Rs. 650 croresSEBI had all the means to quantify the gains. However this was not done deliberately (Refer to in para 78 of the order of AO) 24)The Investigation department had all the means to find out as to on what dates and the price the shares of ICICI were sold. The information was available from multiple sources- the stock exchange, the depository, and the brokers-but did not do so deliberately. The excess shares involved were 34.54% as is evident from paragraph 35 of the order of the AO reproduced below:

35. As can be seen from the above table the shareholding of the promoters and PACs increased from 46.80% to 63.15% whereas the disclosure which was made to the stock exchange was shown as reduced from 44.18% to 28.61%. Thus, wrong disclosures were made to the stock exchange was shown as reduced from 44.18% to 28.61%. Thus, wrong disclosures were made to the stock exchange.

25)The information needed to calculate the gains on this 34.54% is there in the investigation report which SEBI refuses to share. In fact information relating to 95% of the purchase price of the excess shares is there in the order itself. The balance information will be in the investigation report.

26)The price at which the shares were actually sold was never enquired by SEBI as SEBI wanted the promoters/entities to make a gain of Rs. 500 crores and that is why they allow them to sell the shares before completing the adjudication. The gains were not quantified because they were difficult to quantify but because SEBI never intended to quantify the gains because by quantifying the gains they could not favour the promoters.

27)The gains could have been easily quantified through the brokers, the depositories, or the stock exchange. The price of ICICI bank shares at the time of the second order of the WTM when the ban on the sale of shares was lifted, and also the date on which the Adjudicating Officer passed the order are available from any number of sources which charts the daily share prices. The prevailing price on that day can be applied for the calculation of notional gains, a concept which has been upheld by Securities Appellate Tribunal. The Excess 34.54% holding worth Rs.1036 Crores on the day subsequent to the order of WTM and Rs. 1329 Crores on the day of the order of the Adjudicated Officer.Based on the principle of notional gains, the gain was around Rs. 650 crores at the time of the order of the WTM and around Rs. 950 crores at the time of the order of the Adjudicating officer. The detailed calculations are placed at Annexure P4. Historic Stock Quote of ICICI Bank Shares in NSE on 27.03.2012 collected from the website is placed at Annexure P5. Historic Stock Quote in NSE of ICICI Bank Shares on 14.02.2013 collected from the website is placed at Annexure P6.

28)The Petitioner submits that he has complained to every relevant authority in the country on the corruption involved, but no action has been taken so far. The Petitioner would have waited for some more time had he not been alerted by the Information Officer of SEBI that an appeal had been filed by the Promoters and other entities of Bank of Rajasthan against the order of the SAT which is pending before this Honble Court. The order of SEBI which had imposed a penalty of Rs. 30 crore is without quantifying the gain. This was reduced in the period to SAT to Rs. 20 Crores. It was therefore considered necessary to bring to the notice of this Honble Court that the gain was over Rs 500 Crores and the same had not been quantified by SEBI in its order on account of corruption.

29)The Petitioner had filed a complaint with the CVC dated 12/10/2013 and copies were marked various authorities in the Finance Ministry and the CBI. The complaint is placed at Annexure P7. The complaint was redirected to the Finance Ministry which in turn redirected the complaint to the CVO of SEBI. The Investigation Department was responsible for failing to quantify the gains of over Rs 500 Crores as mentioned in the order of the Adjudication Officer. The CVO cum ED (Investigations) disposed the complaint by ridiculing the petitioner that the gain stated by the Petitioner was without any basis and aimed at sensationalisation the gain. With all the staff at his command, the powers vested in him through various Acts and Rules, the very least that the CVO should have done was to proceed and quantify the gain and called of the bluff of the petitioner by showing that the gain was indeed insignificant and that the petitioner was a mere busybody. If the actual gain was indeed what has been described as sensational by the CVO, then that in itself suggests that the conclusion of the CVO was not an honest one and that he was covering up not only for SEBI but for himself as he had made the crucial recommendations to the authorities who wrote the interim and the final order and these authorities referred to the recommendations made by him as the Executive Director (Investigation). The CVO also did not claim that the gain could not be quantified. He also dismissed the letter to the RBI as being objected to by the Petitioner on grounds of early disposal. A copy of the letter of the CVO dated 25/11/2013 is placed at Annexure P8. A detailed rebuttal of the explanation given by the CVO is placed below as an Annexure written to the current Finance Minister.

30)Surprisingly, the letter of the CVO/Executive Director (Investigation) was accepted by one and all in the Ministry and the matter was treated as closed without any concern for the huge loss to the exchequer. It did not occur to any of the officers of the Ministry that there was an off chance, however remote, that the Petitioner could be right about the quantum of the gain. The petitioner was also not informed of the disposal of the complaint. While the Ministry was satisfied with the explanation offered by CVO of SEBI, the CVC after having referred the matter to the Ministry did not bother to follow up the matter with the Ministry any further. The casual manner in which complaints of over Rs. 500 crores are dealt with by various authorities was an eye-opener to the Petitioner.

31)The petitioners submits that while pursuing the fate of the complaint with the CVC and the appointment of the CVO of SEBI in conflict of the Vigilance Manual through RTI ACT, he also discovered that SEBI has not been notified under section 8 (2) of the CVC Act and there is little that the CVC could do but to refer the complaint to the Ministry. This too came as a shock to the petitioner as SEBI has been around for 25 years and CVC Act has been there from 1998 onwards.

32)The petitioners submits that he does not want to speculate as to why the CBI did not pursue the complaint though the above-mentioned complaint dated 12/10/2013 had been marked to the Director of CBI. As CBI is an exempt organisation under section 24 of the RTI Act there is no way to know the reasons for the CBI to drop the complaint at the initial stage.

33)The Petitioner submits that he filed two Right to Information appeals before the Ministry giving the details of the complaint referred to it by the CVO before it reluctantly made available the documents which led to the closure of the complaint filed by the Petitioner. The reply of the CVO placed at Annexure P7 is from the documents given to the petitioner on his RTI appeal.

34)The Petitioner on coming to know that the complaint had been given a decent burial by all the authorities concerned, complained to the Finance Minister by name by a letter dated 11/10/2014. A copy of the complaint is marked as Annexure P9. Copies of the letter were marked all the other authorities to whom the earlier complaint dated 12/10/2013 had been sent. A note on the role of the various officers of SEBI was also enclosed. The same is placed as Annexure P10. A note rebutting all the points mentioned in the reply of the CVO cum Executive Director (Investigation) was also enclosed and the same is placed as Annexure P11. A copy of the letter and the note was also sent to IG (anti-crime Branch) CBI, Mumbai.

Criticism of the order of the WTM in the media and the quantification of the gain by the media:35)The financial print media was highly critical of the order of the WTM on Bank of Rajasthan. One of the articles published in the MINT in the concluding paragraph rightly quantified the amount involved as a couple of thousand Crores and rightly wondered that such a fine would not be imposed when the matter was finally adjudicated. This article is placed as Annexure P12. Another Article published in the Business Standard on October 16, 2014 titled Sebi changed its mind on Tayals Bank of Rajasthan Shares after 2 years is placed as Annexure P13. Pending Appeals on the order of SAT:36)The quantification of the gain is also necessary and urgent as the order of the Adjudicated Authority of SEBI was appealed and SAT reduced the amount of penalty from Rs. 30 Crores to Rs. 20 Crores. The order of SAT has been appealed against by some of the promoters and entities and is pending before this Honble court. Some of these appeals have been numbered as Appeal Civil 4958 4959/14, 5632 33/14. If the matter is decided one way or the other it will attain finality and the promoters /other entities would have benefited by a huge amount at the expense of public exchequer as it will be difficult to reopen the case.

37)The petitioner has not filed any other petition or application or suit regarding the matter in dispute in this Honble Court or in any High Court or any other Court throughout the territory of India. The petitioner has no better remedy available.

GroundsA. The Petitioner submits that the promoters had indulged in fraudulent and unfair trade practices and their dealings were fraudulent in terms of Regulation 2(1) (c),3(b), 3(c), 3(d), 4(1) and 4(2)(f) of the Securities and Exchange Board of Indian (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.

B. That the non-quantification of the gain was not accidental but was the result of shrewd planning. The non-quantification of the gain was deliberate as SEBI had the details of the day and the rate at which the excess shares were acquired through off market trades and market trades (through purchases by brokers from the stock market). Further the gain made by the sale of ICICI shares could have been easily determined through the three intermediaries that function under it. The value of the shares on the day of the order of SEBI has been shown to be Rs1036 Crores and Rs. 1329 Crores respectively. If SEBI wanted it could have found out the day and the dates on which the ICICI bank shares were sold after the ban was lifted by the WTM.

C. That even if the exact amount of gain could not be quantified by the officers of SEBI, it could not have been the reason for treating the gain as zero as was done in the present case. The only reason why over Rs. 500 crore again was taken as zero was on account of corruption.

D. That the letter to the Prime Minister by the erstwhile WTM, the transfer of the file to a WTM whose tenure was coming to an end and had applied for a fresh five-year tenure, the omission of mention of the letter written by SEBI to RBI in the order of the WTM, the shifting of the blame to the RBI, the giving of the vigilance clearance to the WTM by the CVO of SEBI (the concerned officer being junior to the WTM), the WTM being given a further tenure of five years, the appointment of a CVO with additional charge of Executive Director (Investigation),the wrong recommendations made by the Investigation Department, the lifting of the embargo on the selling of the shares, ignoring the criticism in the media on the order passed by the WTM, the non-quantification of the gain made by the Promoters /other entities by the Adjudicating Officer, the report of the Investigation Department, treating the gain as zero while imposing a penalty, the subsequent cover-up by the CVO are all events which form a complete chain which shows that there was a criminal conspiracy to pass on a benefit of Rs. 500 Crores/Rs. 2000 Crores.

E. That the use of notional gain for the purpose of disgorgement has been done by SEBI and has been upheld by SAT. The same could have been applied in the present case but was not done.

F. That the Promoters were not charged with the offence of insider trading on account of knowledge of selling the Bank in the market leading to the increase in price of the share which led to their increasing their stake gradually and making the wrong disclosures.

G. That the offence of fraud and tampering with the integrity of the market is an offence to be taken seriously and not to be dismissed on the grounds that there was no of price manipulation and those specific investors were not defrauded. The fraud was established under the law and as the fraud had taken place over a long period of time, there was no need to manipulate the price. In creeping acquisition there is no price manipulation but the same is disclosed as and when the shares are acquired.

H. That there is no discretion in disgorging the illegal profit made and that is why the illegal profit was not quantified. As the illegal profit was over Rs. 500 Crores, there was sufficient incentive for not quantifying the illegal profit.

I. That the passing of an illegal benefit of Rs. 500 / Rs. 650 Crores at the expense of the exchequer is an offence under section 13 (1) (d)(iv) of the Prevention of Corruption Act, even if bribes and kickbacks are not proven or is absent.

J. That in spite of so much publicity given in the media on the allegations of the erstwhile WTM and the order of the subsequent WTM, SEBI still went ahead and passed an order favouring the Promoters shows the brazenness with which power was exercised for passing on a favour of Rs. 500 crores.

K. That unlike The Income Tax Department and the Central Excise Department where appeal against erroneous decisions at the stage of adjudication is possible, SEBI cannot and does not ever appeal against an erroneous decision of its Adjudication Officer.

L. That in the 25 years of existence of SEBI, though numerous scams have taken place on the Stock Market, the investors have been able to recover their losses only once. This fact alone itself speaks for itself.

M. That the right to the savings of a person is a fundamental right under Article 21 of the saver and he has full right to recover his money through information gathered by a state regulator like SEBI and therefore there is a need to make public the information gathered by the Investigation Department on the conclusion of the adjudication process and give investors a reasonable opportunity to appeal before the Appellate Authority which is SAT in this case.

N. That there is a need to make SEBI accountable and hence it is necessary that it should be notified under Section 8 (2) of the CVC Act, so that no cover up can take place and officers in conflict of interest position cannot be appointed. PrayerIn view of the facts & circumstances stated above, it is most respectfully prayed that this Honble Court in public interest may be pleased to: -a) Issue a writ of mandamus or any other appropriate writ directing the SEBI or any other body to quantify the gains made by promoters of Bank of Rajasthan and other entities jointly, and direct the SEBI to levy appropriate penalty on the violators. b) Issue a writ of mandamus or any other appropriate writ directing a Court monitored investigation by the CBI into the issue raised in this petition.

c) Issue a writ of mandamus or any other appropriate writ directing SEBI to make public its investigative report after the conclusion of the adjudication process in the matter of amalgamation of Bank of Rajasthan with ICICI Bank and the amount of profit made by Promoters of Bank of Rajasthan through illegal holding of shares.

d) Issue a writ of mandamus or any other appropriate writ directing that the appeal filed by the promoter and other entities before this Honble court may be decided in light of the facts urged in this writ petition including the amount of profits made by these entities.

e) Pass any other writ, direction or order as may be deemed fit and proper.Petitioner Through

PRASHANT BHUSHAN Counsel for the PetitionerDrawn & Filed On: March 2015New Delhi