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Issues involved: Alleged violation of Regulation 4 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 through circular trading in two scrips on Bombay Stock Exchange and National Stock Exchange.
Summary: The judgment by the Securities Appellate Tribunal, Mumbai involved a trader who engaged in circular trading in two scrips, Allcargo Global Logistics Ltd. and Unity Infraprojects Ltd., listed on BSE and NSE. The appellant traded during the investigation period from April 1, 2008, to May 15, 2008, executing circular trades in both scrips on both exchanges. The adjudicating officer found the appellant guilty of circular trading and imposed a penalty of Rs. 3 lacs, leading to the appellant filing an appeal. Upon hearing arguments, the Tribunal confirmed the circular trades by the appellant and rejected claims of not being part of the trading group. The trades involved transferring shares within the group without beneficial ownership transfer, creating a false appearance of trading. Despite arguments of being misled by another individual, the Tribunal upheld the violation of regulation 4 due to engaging in unfair trade practices. Considering the appellant's limited trading period, lack of profit, and incurred losses, the Tribunal reduced the penalty to Rs. 1.5 lacs as a sympathetic measure, emphasizing it as a unique decision not setting a precedent. Ultimately, the Tribunal upheld the guilty verdict but reduced the penalty amount.
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