2013 (11) TMI 697 - AT - Companies Law

Violation of provisions of Regulations 3(a),(b),(c),(d), 4(1) and 4(2), (a) & (e) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 under Section 15HA of the SEBI Act, 1992 - Fraudulent and manipulative dealing in shares - Held that - Adjudicating Officer himself has not found two main charges against the Appellant sustainable. However, Appellant appears to be having some connection with some of the promoter group members and only for this the Appellant has been held to be guilty of violating the law in this regard - No legal infirmity in the order passed by the Respondent against the Appellant but keeping in view the totality of the facts and circumstances of the case and submissions made at the Bar, we reduce the penalty to Rs. 1 lac while upholding rest of the order against the Appellant - Decided partly against assessee.

Summary

Issues:
- Appellant challenging penalty imposed by SEBI for violating FUTP Regulations
- Allegations of fraudulent and manipulative trading in shares of a listed company
- Adjudicating Officer's decision to impose a penalty of Rs. 2 lac
- Appellant's defense and prayers in the appeal
- Reduction of penalty by the Appellate Tribunal to Rs. 1 lac

Analysis:
The judgment by the Securities Appellate Tribunal involved an appeal challenging a penalty imposed by the Securities and Exchange Board of India (SEBI) on the Appellant for violating the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. The investigation conducted by SEBI revealed fraudulent and manipulative trading activities by a group of clients, including the Appellant, in the shares of a listed company. The Adjudicating Officer, after considering the material collected during the enquiry, concluded that the Appellant had indeed violated the regulations and imposed a penalty of Rs. 2 lac on the Appellant.

During the appeal hearing, the Appellant's counsel argued that the trades were executed on a delivery basis at prevailing market prices without engaging in any unfair trade practices, except for two trades. The main prayers in the appeal were to set aside or reverse the impugned order and alternatively, to reduce the penalty imposed. The Adjudicating Officer did not find two main charges against the Appellant sustainable, but noted a connection between the Appellant and some promoter group members, leading to the Appellant being held guilty of violating the law in this regard.

The Appellate Tribunal, after hearing both parties and analyzing the facts and pleadings, upheld most of the Adjudicating Officer's order against the Appellant. However, considering the totality of the facts and circumstances, the Tribunal decided to reduce the penalty imposed on the Appellant from Rs. 2 lac to Rs. 1 lac. The appeal was ultimately dismissed, and the Appellant was directed to pay the reduced penalty within two months from the date of receipt of the order.