Miscellaneous Order in the matter of Pine Animation Limited

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: S K MOHANTY, WHOLE TIME MEMBER MISCELLANEOUS ORDER IN THE MATTER OF PINE ANIMATION LIMITED

Under Sections 11, 11 (4) and 11B (1) of the Securities and Exchange Board of India Act, 1992

In Re: Representation/Application dated December 05, 2019 filed by Mrs. Kiran Toshniwal wife of Mr. Narayan B. Toshniwal

BACKGROUND

1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") has passed an order dated November 18, 2019 in the matter of Pine Animation Limited (hereinafter referred to as "the Final order").

2. In the final order, amongst other entities, one Mr. Narayan B. Toshniwal (Noticee no. 50), has been debarred from accessing the securities market and has further been prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of five (05) years from the date of the Final order.

3. Mrs. Kiran Toshniwal (hereinafter referred to as "the applicant"), wife of Mr. Narayan

B. Toshniwal (hereinafter referred as "Mr. Toshniwal"), has vide her letter dated December 25, 2019 (hereinafter referred to as "the representation/application"), sought defreezing of Demat account no. 10101010 (hereinafter referred to as "the said Demat account"), held jointly with Mr. Toshniwal, inter alia on the following grounds:

i. The Demat account of the applicant is frozen on the directions of SEBI passed in the matter of Pine Animation Limited.

ii. The applicant is not a Noticee is the said proceedings.

iii. The said Demat account is jointly held by the applicant as primary holder, with her husband, i.e., Mr. Toshniwal as the second holder.

iv. The said Demat account has been opened in joint holding only for future security purposes.

v. Due to the prohibition imposed vide Final order on Mr. Toshniwal, the said Demat account has also been frozen.

vi. All the transactions in the said Demat account have been done from the funds solely earned by the applicant.

vii. The details of holding of such shares as well as details of gains arising out of sale of such shares held in the said Demat account are duly mentioned in the Balance Sheets filed with the Income Tax Returns (ITR) of the applicant.

viii. Copy of Demat account statement furnished for the year ending on March, 2018 and March, 2019; copy of ITRs along with Balance Sheets for financial years 2017-18 and 2018-19, and a certificate of CA to show that the funds used for purchase of securities lying in said Demat account were purchased from the applicant’s own source only.

4. The applicant has also indicated in the application that her grievance would be addressed, if instructions for removal of name of Mr. Narayan B. Toshniwal, is given by SEBI, as an alternative to defreezing the said account.

5. After receipt of the application, through various communication, certain information/clarification and documents as were deemed necessary to decide the application, have been sought from the applicant. In reply thereto, the applicant submitted documents like certified copy of bank account statements, copy of ITRs of firms where the applicant is a partner, partnership deeds, certificate from the stock broker to the effect that only two bank accounts have been used for the purpose of pay-in obligations etc., and also provided clarifications to the queries that were posed to her.

6. In compliance with the principles of natural justice, an opportunity of personal hearing was granted to the applicant and on September 17, 2020, and on the said date the authorized representative of the applicant appeared before me through video conferencing.

7. During the personal hearing, the authorized representative was advised to file certain documents like Income Tax Returns along with Balance Sheets and computation of income, holding statements of the demat account etc., of Mr. Toshniwal and the said documents were filed by the applicant immediately.

8. After carefully considering the requests made by the applicant in the backdrop of the information and documents furnished by the applicant, the following facts emerge:

i. The applicant is holding the said Demat account in joint capacity with her husband Mr. Toshniwal and as per information furnished, following securities are being held in the said Demat account:

Table 1

ii. The bank accounts used for meeting the pay-in obligations are also jointly held between the applicant and Mr. Toshniwal. The applicant is the first holder in the said Demat account as well in the joint bank accounts.

iii. The applicant is an Income Tax assessee and has disclosed income from different sources inter alia rental income from property and also income from partnership in firms viz., M/s Tohsniwal Traders and M/s Foodbuzz.

iv. There are certain credit transactions in the joint bank account by way of fund transfer from the bank account of Mr. Toshniwal, which have been claimed to be in the nature of loan and the applicant has submitted documents to substantiate the claim of loan.

v. The stock broker has also certified that for the F.Y 2016-17, 2017-18 and 2018- 19, only two joint bank accounts (held jointly by the applicant and her husband) have been used to meet the pay-in obligations for acquiring securities in the said Demat account.

vi. Mr. Toshniwal individually holds another Demat account (Client Id: 10177704) and the securities lying in the said individual account are duly reflected in the balance sheet filed with the Income Tax Returns filed by Mr. Toshniwal.

9. I have carefully gone through the written and oral submissions made on behalf of the applicant and the documents filed in support thereto. In my view, the limited issue that arises out of the application is that whether the shares lying in the said Demat account [client id. 10101010] belong to the applicant alone or not?

10. The applicant is holding the said Demat account with her husband (Mr. Toshniwal), who has been debarred from dealing in securities by virtue of the final order dated November 18, 2019. However, it is noted that both the applicant as well as her husband Mr. Toshniwal have individual sources of income which are clearly demarcated and disclosed in their respective ITRs along with which, they have also filed Balance Sheets for the respective years detailing the list of securities that they own apart from disclosing other assets.

11. The said Demat account was in operation before the proceedings in the matter of Pine Animation were initiated, therefore, there does not seem to be any reason to apprehend that the said Demat account was opened in joint names with the motive of circumventing prohibitory directions.

12. Further, it is also pertinent to mention here that the applicant has already claimed the ownership of the shares lying in the said Demat account through her filings made before the Income Tax Department and all the shares held in the said Demat account, are duly listed out in the Balance Sheets filed by the applicant. The applicant in order to substantiate her claim of owning the securities lying in her above mentioned Demat account, has also submitted the ITRs of her husband showing that the same securities (already disclosed by her) have not been again disclosed by her husband in the returns filed by him before the Income Tax authority.

13. A scrutiny of the ITRs as well as the Balance Sheets filed on behalf of Mr. Toshniwal indicate a separate list of shares being held and claimed to be owned by Mr. Toshniwal. When the said list is matched with the list of securities mentioned in the Balance Sheet of the applicant, I find that both the individuals viz., Mr. Toshniwal and the applicant have disclosed separate and distinctive shares in their respective Balance Sheets. The said list of shares is matching with the holding statement of respective individuals and there is no case of same shares being claimed to be owned by both. Thus, the applicant has submitted before the tax authority claiming securities lying in above mentioned Demat account, which she held jointly with her husband as her own property and purchased out of income disclosed to the Income Tax Department from year to year, as she has been filing return for over 20 years.

14. Another pertinent factor that tilts the preponderance of probability of ownership of shares towards the applicant emanates from the contract notes submitted by her in the proceedings. Perusal of the contract notes reveal that the same have been issued in the name of the applicant and carries the PAN of the applicant only. I observe that the same is indicative of the fact that the trading account of the applicant alone has been used in order to purchase the securities that have been submitted to be lying in the said Demat account.

15. Under the circumstances, I observe that the application filed by the applicant has merit as the applicant has demonstrated successfully before me that the shares held in the said Demat account have been owned by her own source of funds and have been duly disclosed in her ITRs filed with Income Tax Authority for various successive years.

16. In the facts of the present case, taking into account the information submitted by the applicant, as discussed above, I deem it fit to pass the following directions, which in my view shall meet the ends of justice:

The applicant is allowed to transfer the securities held in the joint Demat account no. 10101010 (held jointly with Mr. Toshniwal) to a Demat account in her individual name (whether existing or to be opened new), within a period of three (03) months from this order.

17. The application/representation made by the applicant is disposed of in terms of the aforesaid directions.

18. It is clarified that the above relaxation has been given on the basis of documents filed by the applicant and appropriate actions would be initiated if it is found at any later stage that such documents or information was false.

19. The order shall come into force with the immediate effect.

20. A copy of this order shall be forwarded to the applicant, all the recognized Stock Exchanges, Depositories and Registrar and Transfer Agents for ensuring compliance with the above directions.

-Sd-