2011 (3) TMI 1741 - AT - Companies Law

Summary

Issues Involved:
1. Allegation of collusion to create artificial volume in the scrip.
2. Validity of the show cause notices issued to the appellants.
3. Examination of the evidence and material collected during the investigation.

Summary:

1. Allegation of Collusion to Create Artificial Volume in the Scrip:
The appellants were accused of colluding with other entities to create volumes in the scrip of Oasis Media Matrix Ltd. and off-loading their shares in off-market transactions. The purchasers allegedly sold these shares in the market, leading to a spurt in volumes and price. The Securities and Exchange Board of India (SEBI) issued show cause notices to the appellants alleging violation of regulation 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.

2. Validity of the Show Cause Notices Issued to the Appellants:
The Tribunal found that the show cause notices were vague and did not make out a clear case of violation of regulation 4. For Appellant No. 1, the notice alleged collusion with other entities to create volumes but did not specify the entities involved. The notice also mentioned off-loading shares in the market, which by itself is not an irregularity. Similarly, for Appellant No. 3, the notice alleged that he sold shares in off-market transactions, which is permissible in law, and there was no clear connection to any fraudulent activity.

3. Examination of the Evidence and Material Collected During the Investigation:
The Tribunal examined the material collected during the investigation and found that the allegations did not substantiate a violation of regulation 4. The transactions conducted by the appellants were within legal bounds, and there was no evidence of fraudulent or unfair trade practices. The Tribunal emphasized the importance of precise and unambiguous notices, as highlighted by the Supreme Court in Canara Bank and Ors. v. Debasis Das and Ors. (2003) 4 SCC 557, stating that a party should be put on notice of the case before any adverse order is passed against them.

Conclusion:
The appeal was allowed, and the impugned order was set aside. The Tribunal concluded that the show cause notices were vague and did not establish a case of violation of regulation 4 against the appellants. The parties were directed to bear their own costs.