Nizamuddin Khan vs Securities & Exchange Board Of India

Tarun Agarwala, Presiding Officer

The appellant is working as an Assistant Manager in United Media Services, UMS Group in Oman since 1992. He has a NRO Account in HDFC

Bank at Allahabad. In November 2019 he came to know that his bank account has been frozen. On November 22, 2019 he left for Oman and from

there he corresponded with the bank and also through his son, and came to know about an attachment order dated November 26, 2019 issued by the

Recovery Officer. After due enquiry, the appellant came to know that the Whole Time Member (‘WTM’ for short) of the Securities and

Exchange Board of India (‘SEBI’ for short) had passed an order dated October 23, 2017 under Section 11 and 11B of the SEBI Act, 1992

against M/s. Milan and Milan International Limited and its directors who were found guilty of issuing preferential shares without complying with the

SEBI Act and the Companies Act. In this order of October 23, 2017 the name of Noticee no. 5 is indicated as ‘Nizamuddin Khan’ having DIN

- 02982001 and PAN - EHYPK6797P. Based on this order, the Recovery Officer, on the basis of PAN, intimated all banks to freeze the accounts

and, consequently, on the basis of attachment order, the bank account of the appellant was frozen.

It is alleged that the appellant came back to India on December 18, 2020 and thereafter engaged an advocate and the appeal was filed on February

20, 2021 along with the application for condonation of delay and also an application for exemption from filing the certified copy of the impugned order

dated October 23, 2017 and the attachment notice dated November 26, 2019. For the reasons stated in the exemption application and in the application

for condonation of delay of 3 years and 72 days is condoned. We are satisfied that it is a case of mistaken identity and the appellant was not involved

in the proceedings under Section 11 & 11B of the SEBI Act. Both the applications are allowed.

We had directed the respondent to file a reply and intimate the Tribunal as to whether service was ever made upon the appellant in question or not

and whether he is the same person against whom proceedings were initiated under Section 11 & 11B of the SEBI Act. The respondent has filed a

reply admitting that the director of the Company Milan and Milan International Limited was one Nezamuddin Khan son of Naneh Khan and that

notices were sent to this gentleman at his Orissa address which was duly received. It was further stated that based on the service of the notice the

said gentleman replied and thereafter took no part in the proceedings and accordingly the impugned order was passed. The impugned order of October

23, 2017 was also served at the Orissa address which was duly received by that gentleman. It was contended that the PAN indicated in the impugned

order was not objected by that gentleman, the Recovery Officer, taking that PAN to be true, intimated all the banks to freeze the accounts having this

PAN.

It was also contended by the respondent that after the filing of the appeal, an enquiry was conducted and it was found that the director in Milan and

Milan International Limited had a different spelling name ‘Nezamuddin Khan’ whereas the appellant’s name is with the spelling

‘Nizamuddin Khan’. The respondent further realized that the address is different, the date of birth is different and father’s name is also

different and also realized that the PAN indicated in the impugned order is incorrect and does not belong to the original ‘Nezamuddin Khan’.

The respondent accordingly issued an order dated June 9, 2021 withdrawing the attachment order.

It was also stated that the name of the director, address etc. was taken from the MCA records and thereafter the same name, address etc. was

used and searched on the Income Tax website to obtain the PAN. It was contended that the PAN was obtained by them from the Income Tax

website.

We have heard Shri Uttam Dubey, the learned counsel for the appellant and Shri Suraj Chaudhary, the learned counsel for the respondent.

The learned counsel for the respondent contended that this is a case of mistaken identity and that the respondent acted in a good faith and therefore

could not be penalized in view of Section 23 of the SEBI Act which states that no suit, prosecution or legal proceedings can be taken up against the

Board for action which has been taken in good faith. In our view, this provision is not applicable in the instant case.

We find that that an ex parte ad interim order was passed on January 12, 2016 against the Company and its directors. The order indicates that

Noticee no. 5 Nizamuddin Khan had a DIN - 02982001 and no PAN was indicated. Thus, it is clear that PAN was obtained by the respondent at a

later stage when the final order was obtained. From the affidavit of the respondent it is clear that it is a mistake committed by them when they

searched PAN from Income Tax website without verifying the date of birth, address and the father’s name. All these facts are indicated in the

PAN as well as in the DIN. No effort appears to have been taken to verify that PAN was of the same person as indicated in the DIN. We are

further of the opinion that MCA website gives full details of the director’s name, permanent and current address, father’s name Aadhaar

number, driving license number as well as PAN. In fact DIR-3 is used under the Companies Act for the purpose of applying a DIN. Details as per

PAN are required to be given so that there is no mismatch. In fact, an application for DIN cannot be processed unless PAN is given. Thus there was

no requirement for the respondent to visit the Income Tax Department website.

Consequently, we are satisfied that due diligence was not made and by taking out a PAN of similar name and without verifying it further has

infringed upon the fundamental rights of the appellant by freezing his NRO account. The Recovery Officer has also not made out any effort to find

out as to why an account in Allahabad has been frozen when the actual director Nezamuddin Khan was living in Orissa.

In view of the aforesaid the impugned order dated October 23, 2017 is not related to the appellant and therefore no action can be taken against the

appellant. We, however, direct the respondent to rectify its order of October 23, 2017 and delete the PAN - EHYPK6797P which is indicated against

the name of Nizamuddin Khan, Noticee no. 5. In the circumstances of the case the appeal is allowed with costs. We find that admittedly the appellant

has incurred expenses in engaging an advocate and filing the appeal and also travelling to Mumbai for the said purpose. In addition, the appellant has

suffered the harassment of his account being frozen since November 2019 till June 9, 2021 which is more than one and half years. Considering the

aforesaid factor we are of the opinion that in the given circumstances the cost of Rs. 50,000/- would be appropriate. This amount shall be paid to the

appellant by the respondent within four weeks from today.

The present matter was heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor

a certified copy of this order could be issued by the registry. In these circumstances, this order will be digitally signed by the Private Secretary on

behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Parties will act on production of a digitally

signed copy sent by fax and/or email.