The Securities Appellate Tribunal on its last day before it shuts for vacation has allowed Avadhut Sathe Trading Academy to continue smooth operations of the academy, by passing an ad interim order maintaining status quo after Securities and Exchange Board of India (Sebi) had ordered impounding Rs 546 crore and barred the entity from the securities market earlier this month.
The tribunal presided by Justice PS Dinesh Kumar heard the appeal of Avadhut Sathe and his wife Gouri Sathe on Friday which had asked for the stay of the impugned Sebi order noting that there was no exigency justifying an order of such drastic nature without first issuing a detailed show cause notice and granting a hearing.
Lifeline for Monthly Operations
The SAT order on Friday disposed the urgency application and said: “In view of the intervening vacation, we direct that pending consideration of interim prayer, the bank/s shall permit the appellants to draw Rs. 2.25 Crores for this month’s expenditure. SEBI shall issue necessary instructions to the bank accordingly.”
SEBI, in its order had accused them of giving investment advice and research analyst services in the garb of running a trading academy. Senior counsel Janak Dwarkadas argued in the hearing that SEBI had passed an ex parte directing them to deposit Rs 546 crores within 15 days after freezing bank and Demat accounts and also pointed to the bench that of 3.5 lakh students, who have been imparted training at Avadhut Sathe Trading Academy, SEBI relied on complaints of only 12 students. He told the bench that ASTA had monthly expenses of Rs 5.25 crores and that with bank accounts frozen, they are unable to.
Chetan Kapadia, Senior Advocate, appeared for SEBI countered this claim and pointed out that of Rs 5.25 crores, a sum of around Rs 3 crores was towards advertisement and seminar expenses. He submitted that the first appellant is an unregistered investment advisor and therefore expenditure on those heads cannot be permitted.
Advertising vs. Academic Survival
Dwarkadas pointed out that as per SEBI act, a party has 45 days to file an appeal but SEBI had given ASTA mere 21 days to file a reply and only 15 days for depositing Rs 546 crores, while immediately freezing of bank accounts.
In its interim order, Sebi alleged that ASTA was providing unregistered investment advisory and research analyst services under the guise of “education” and “training”. Sebi investigation found that ASTAPL had collected around ₹600 crore from nearly four lakh participants for its “basic to uber” training programmes and a detailed probe revealed that 65% of students incurred net losses even after completing the courses.
SAT has ordered Sebi six weeks’ time to file reply and rejoinder, if any, be filed within three weeks thereafter.