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Team: ___

BEFORE THE SECURITIES APPELLATE TRIBUNAL, MUMBAI

(FILED UNDER SECTION 15T OF THE SEBI ACT 1992)

IN THE MATTER OF

ANJALI ARORA & ORS.

(APPELANTS)
v.
SEBI (Through THE WHOLE TIME MEMBER OF SEBI)
(RESPONDENT)

MEMORIAL FOR THE APPLICANT

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MEMORANDUM for APPLICANT

ARGUMENTS ADVANCED

I. THE WHOLE TIME MEMBER OF SEBI WAS INCORRECT IN ORDERING THE

DISGORGEMENT OF RS. 1,90,00,00 ALONG WITH 12% INTEREST RATE BY THE
APPLICANT

It is humbly submitted by the Applicant that in the light of the legal principles enshrined
in the concept of disgorgement, she is not liable to disgorge any amount. Disgorgement
serves to remedy securities law violations by depriving violators of the fruits of their
illegal conduct.1 It is neither a fine nor a penalty or a forfeiture.2 In commercial terms,
disgorgement is the giving of profits obtained by illegal or unethical acts.3 Therefore, to
make the applicant liable for disgorgement it has to be mandatorily proved that the
applicant had committed an illegal work and made illegal gains or profits from the same.4
It is the humble submission herein, that the Whole Time Member of SEBI was incorrect
in ordering the disgorgement of Rs. 1,90,00,000 along with an interest rate of 12%
because [A.] the Applicant had not committed any illegal act amounting to fraud, [B.]
there is no proof of the Applicant’s active involvement in the alleged fraud, [C.] the
Applicant has made no illegal profit from the alleged fraud and [D.] levying an interest
rate of 12% on disgorgement is excessive, arbitrary and baseless.

[A]. THE APPLICANT HAS NOT COMMITTED ANY ILLEGAL ACT AMOUNTING TO FRAUD

1. Black’s Law Dictionary defines disgorgement as the act of giving up something (such
as profits illegally obtained) on demand or by legal compulsion. Disgorgement is an
equitable monetary remedy designed to deprive a wrongdoer of his unjust enrichment
and to deter others from future violations.5 It aims at ensuring that the person in
possession of the wrongful gains does not continue to enjoy them. Disgorgement is
imposed as a consequence of violating public laws that is a violation committed

1
SEC v. Fischbach Corp., 133 F.3d 170, 175 (2d Cir. 1997).
2
SEC v. Lorin, 869 F. Supp. 1117, 1121 (S.D.N.Y. 1994).
3
Karvy Stock Broking v. SEBI, 2008 SCC OnLine SAT 74.
4
NSDL v. SEBI, 2007 SCC OnLine SAT 108.
5
SEC v. First City Financial Corp., 890 F.2d 1215. 1230 (D.C. Cir.1989).

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MEMORANDUM for APPLICANT

against the state.6 Disgorgement is often recognized as a remedy.7

2. It is humbly submitted that in the context of securities law when a person or entity in
the securities market makes a profit by wrongful means, an order of disgorgement
can be issued against them only. Disgorgement is measured not by what the plaintiff
lost, but by what the defendant gained. It is a monetary equitable remedy that is
designed to prevent a wrongdoer from unjustly enriching himself as a result of his
illegal conduct.8
3. It is most humbly argued that a disgorgement order can only be issued against a
wrongdoer and no one else. In the present case, the Whole Time Member of SEBI
has imposed penalties on the applicant under Section 15HA and Section 15HB of the
SEBI Act, 19929 i.e., Penalty for Fraudulent or Unfair Trade Practices as well as
Penalty for contravention when no separate penalty is provided.10
4. In the decision-making process of the alleged misrepresentation of consolidated
profits, two opinions from the law firm LegalSense as well as Company Secretary
Mr. Nagarjuna were sought and formed the basis of the research done by the CFO of
Aglow, Mr. Sammeer Amal who intimated Mr. Pulkit, the chairman that as per IND
AS 110 Saundarya would no longer be treated as a subsidiary of Aglow and would
rather be treated as an Associate Company.11 The applicant, Ms. Anjali had no
involvement in these decisions and was acting in good faith when she offloaded her
shares. Thus, until and unless the applicant’s involvement in the alleged fraud is
proved, she cannot be said to have committed fraudulent or unfair trade practices and
thus, she shall not be made liable to disgorge any amount.

[B]. THERE IS NO PROOF OF THE APPLICANT’S ACTIVE INVOLVEMENT IN THE ALLEGED

FRAUD

5. It is submitted by the applicants that in the instant case, there has been no evidence
provided by SEBI to prove the active involvement of the applicant in the fraud

6
Huntington v. Attrill, 1892 SCC OnLine US SC 245; Kokesh v. Securities and Exchange Commission, 2017
SCC OnLine US SC 58.
7
SEC v. Texas Gulf Sulphur Co., $01 F 2d 833(1968); In re Roopalben N. Panchal, 2011 SCC OnLine SEBI
33 ..
8
Shadilal Chopra v. SEBI, 2009 SCC OnLine SAT 184.
9
Moot Proposition, Para 43.
10
Securities and Exchange Board of India Act 1992, Section 15HA; Section 15HB.
11
Moot Proposition, Para 9.

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MEMORANDUM for APPLICANT

committed. In the case of Bhanwar Lal Paliwal v. SEBI,12 it was held by the Hon’ble
SAT that there has to be substantial or clinching evidence to lead to the conclusion
that the applicant had indulged in fraudulent activities in the securities market.

6. It is the fundamental principle of law that proof of an allegation leveled against a

person may be in the form of direct evidence or, as in many cases, such proof may
have to be inferred by a logical process of reasoning from the totality of the attending
facts and circumstances surrounding the allegations/charges made and leveled. 13 The
evidence, direct or circumstantial, should be sufficient to raise a presumption in its
favor with regard to the existence of a fact sought to be proved.14
7. In the instant case, in fact, SEBI’s findings in the present matter were based on the
Forensic Audit Report submitted by the Auditor Mr. Pawan Gupta appointed by BSE
who was arrested for corruption in his audit made to some other company.15 Thus, his
Audit Reports are clearly unreliable and cannot be the basis of any proof in favor of
the applicant’s involvement in any fraud.
8. SEBI’s Show Cause Notice provides no proof that the applicant knowingly offloaded
her shares to benefit from Aglow’s allegedly misrepresented consolidated profits.16
However, the same allegations are used to impose penalties on the applicant by the
Whole Time Member of SEBI.
9. It is most humbly submitted that during its investigation, SEBI inspected various
documents but from a single document (Forensic Audit Report) relied upon by SEBI,
it cannot be inferred that the applicants were actively involved in the fraud.

[C]. THE APPLICANT HAS MADE NO ILLEGAL PROFIT FROM THE ALLEGED FRAUD

10. It is contended that the profits gained from violation have to be disgorged.17 In the
instant set of facts the Applicants have not made any illegal profits, hence they
cannot be disgorged for the alleged fraud. There is no hard and fast rule
regarding the calculation of the amount. But firstly, the gains are distinguished into
legal and illegal. Secondly, there must be a causal link between the illegal gains and
unlawful activities.

12
Bhanwar Lal Paliwal v. SEBI 2013 SCC OnLine SAT 101.
13
SEBI v. Kishore R. Ajmera, (2016) 6 SCC 368.
14
SEBI v. Rakhi Trading (P) Ltd., (2018) 13 SCC 753.
15
Moot Proposition, Para 11.
16
Moot Proposition, Para 32.
17
SEC v. Clark, 915 F.2d 439, 454 (C.A.9 1990).

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11. In the case of NSDL v. SEBI,18 the Hon’ble Securities Appellate Tribunal held that
“The board cannot direct the Applicants to disgorge the amount without first
determining their guilt and whether they made any illegal gains. Again, it is not that
every erring entity is held liable to disgorge the amount. Persons who have made
illegal or unethical gains alone could be asked to disgorge their ill-gotten profits.”

12. It is most humbly submitted that, in the present case, the applicant cannot be made
liable to disgorge to the tune of Rs. 1,90,00,000 as the legal principle surrounding the
concept of disgorgement states that there must be an illegal profit from any illegal act
and only then an order of disgorgement can be passed as held by the Court in the
case of Liu v. SEC,19 Applying the said dictum in the present case, no evidence has
been adduced by SEBI where it can be proved that the applicant was an active
participant in the alleged fraud committed. The applicant simply offloaded her shares
after the declaration of consolidated profit made by Aglow was made. 20 She was
acting in good faith and under the representation that Aglow’s stated consolidated
profit was true to her knowledge.

13. It is most humbly argued that to be liable for disgorgement there should be any ill-
received profit and the person who has got such ill-gotten profits can be made liable
to disgorge that amount only. In the instant case, when it is not proved that the
applicant had any profit from the alleged fraud, she cannot be made liable to disgorge
any amount.

[D]. LEVYING AN INTEREST RATE OF 12% ON DISGORGEMENT IS EXCESSIVE, ARBITRARY

AND BASELESS.

14. It is humbly submitted that in the case of SRSR Holdings Pvt. Ltd. V SEBI,21 it was
held that levying interest @12% is excessive, arbitrary, and not in line with the past
practice of SEBI in similar matters where it has levied a much lower rate of 4-6%,
and SEBI was urged to adopt similar yardsticks across classes of matters. While
observing that “especially when it has been urged that SEBI has been imposing a
lower rate of interest in a large number of matters”, SAT remanded the matter to
18
NSDL v. SEBI, 2007 SCC OnLine SAT 108.
19
Liu v. SEC 140 S. Ct. 1936 (2020).
20
Moot Proposition, Para 28.
21
SRSR Holdings (P) Ltd. v. Securities & Exchange Board of India, 2022 SCC OnLine SAT 2312.

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SEBI inter alia to re-consider all these issues.

15. It is humbly submitted that the Whole Time Member of SEBI also ordered the
applicant to disgorge an additional amount of 12% interest rate along with the
amount of Rs. 1,90,00,000 that the applicant allegedly received as ill-profit. Such an
imposition by SEBI is excessive, arbitrary, and not in line with the practice of SEBI.22
16. From the aforementioned arguments, it is humbly submitted that the applicant has not
committed any fraud in offloading her shares while acting in good faith and that there
is no proof of her involvement in the alleged fraud of misrepresentation of the
consolidated profit of Aglow as she was not involved in the decision of removing
Saundarya as a subsidiary of Aglow and rather an Associate Company. Subsequently,
she has also not received any ill-profit and thus shall not be held liable to disgorge
any amount, let alone to the tune of Rs. 1,90,00,000 or any interest rate of 12%.

22
Moot Proposition, Para 44.

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MEMORANDUM for APPLICANT

PRAYER

Wherefore, in the light of the issues raised, arguments advanced, reasons given, and
authorities cited, the Republic of Anamia respectfully requests the Securities Appellate
Tribunal, Mumbai to adjudge and declare that:

I. THE APPLICANT WAS NOT INVOLVED IN THE ALLEGED MISREPRESENTATION OF

THE CONSOLIDATED PROFIT OF AGLOW AND HAS NOT COMMITTED ANY FRAUD;

II. THE WHOLE TIME MEMBER OF SEBI WAS INCORRECT IN ORDERING THE

APPLICANT TO DISGORGE AN AMOUNT OF RS. 1,90.00.000 ALONG WITH 12%

INTEREST RATE.

And pass any such order or direction as the Securities Appellate Tribunal, Mumbai deems fit
and proper, for this the Applicant duty bound prays.

All of which is respectfully submitted.

Date: --/--/2023 Counsels for the Applicant

(S/d)

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7TH GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2023