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2019 (9) TMI 1477 - AT - SEBIViolation of the SEBI Act and PFUTP Regulations - Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control - HELD THAT - Given the above provisions of the SEBI Act and PFUTP Regulations it is evident that the appellant, along with other entities in the Vishvas group have indulged in synchronized and circular trading and contributed substantially in raising the LTP. The exact figures relating to each category of trading and LTP contribution is given in the impugned order. What is disputed by the appellant is that she had no connection with the Vishvas group and synchronization / circularity happened just by chance. However, given the proximity of time between trading by these entities and the number of such instances of trades we are unable to appreciate this submission of the appellant. The contention of the appellant is that appellant was trading as a sub broker and the matter was remanded to SEBI by this Tribunal on April 29, 2016 mainly on this ground. As clearly demonstrated in the impugned order that the appellant could not produce any evidence relating to her contention that she was trading on behalf of a client, namely, Perfect Car Scanners Pvt. Ltd. Trading by the Vishvas Group as a whole and individually by the appellant was substantial quantity as explained in para 4 (supra) of this order and there were synchronized trades, reversal trades as well as manipulation of LTP. Therefore, the findings in the impugned order that the appellant has violated the stated provisions of SEBI Act and PFUTP Regulations 2003 cannot be faulted. The orders relied on by the appellant do not come to her help.he trading details, its nature, time etc. reveal the manipulation in the scrip of Gangotri. Apart from stating that that the appellant has no connection with the Vishvas group the appellant could not explain why and how so many of her trades were in the nature of synchronized and reversed trades and that too most of the times within a few seconds with trades of other entities in the Vishvas group. Such synchronization and reversal of trade is not possible without a prior meeting of minds as held in SECURITIES AND EXCHANGE BOARD OF INDIA VERSUS KISHORE R. AJMERA 2016 (2) TMI 723 - SUPREME COURT . The submission that the penalty imposed is too harsh also does not have any merit. On remand by this Tribunal and on reconsideration the AO of SEBI has reduced the amount of penalty from ₹ 60 lakh to ₹ 25 lakh. Further, the penalty imposable under Section 15HA of SEBI Act is three times the amount of profit or ₹ 25 crore whichever is higher. Therefore, while imposing an amount of ₹ 25 lakh only as penalty the AO has factored in all the mitigating circumstances including that the appellant might have made loss. Therefore, in the given facts and circumstances, we do not find any reasons to interfere with the amount of penalty imposed
Issues Involved:
1. Violation of SEBI Act and PFUTP Regulations. 2. Trading in the scrip of Gangotri Textiles Ltd. 3. Appellant's role as a sub-broker or client. 4. Imposition of multiple penalties for the same cause of action. 5. Legality of synchronized and circular trading. 6. Adequacy of evidence provided by the appellant. 7. Applicability of previous legal precedents. Detailed Analysis: 1. Violation of SEBI Act and PFUTP Regulations: The Securities and Exchange Board of India (SEBI) imposed a penalty of ?25 lakh on the appellant for violating Sections 12(A)(a), 12(A)(b), and 12(A)(c) of the SEBI Act, 1992, and regulations 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(a), and 4(2)(e) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations). The violations pertained to manipulative and deceptive trading practices. 2. Trading in the Scrip of Gangotri Textiles Ltd.: The impugned order concerns trading in the scrip of Gangotri Textiles Ltd. between April 7, 2005, and May 31, 2006. The appellant traded in this scrip through her broker, Parasram Holdings Pvt. Ltd. SEBI's investigation revealed that the appellant, along with other entities collectively called the Vishvas group, engaged in synchronized trades, circular trades, and reversal trades, significantly affecting the Last Traded Price (LTP) of Gangotri shares. 3. Appellant's Role as a Sub-broker or Client: The appellant argued that she traded as a sub-broker and not as a client. However, SEBI's investigation found that the appellant executed trades as a client of Parasram Holdings Pvt. Ltd., not as a sub-broker. The appellant failed to provide documentary evidence such as bank account transactions, demat account transactions, ledgers, and contract notes to support her claim. Furthermore, the broker confirmed that the trades were executed under the appellant's Unique Client Code (UCC), indicating her role as a client. 4. Imposition of Multiple Penalties for the Same Cause of Action: The appellant contended that she had already been penalized by a SEBI order dated April 13, 2016, which restrained her from dealing in the securities market for three years. She argued that imposing another penalty for the same cause of action was illegal. However, the tribunal found that SEBI is empowered to initiate multiple proceedings in the same matter, and the appellant's reliance on the Supreme Court's decision in Kunjan Nair Sivaraman Nair v. Narayanan Nair was not applicable. 5. Legality of Synchronized and Circular Trading: The appellant argued that synchronized trading per se is not illegal, citing the tribunal's decision in Ketan Parekh v. SEBI. However, the tribunal found that the nature and type of trading by the appellant demonstrated an intention to manipulate the market. The synchronized and circular trades, executed within seconds of trades by other entities in the Vishvas group, indicated prior coordination, which is not possible without a meeting of minds, as held by the Supreme Court in Securities and Exchange Board of India v. Kishore R. Ajmera. 6. Adequacy of Evidence Provided by the Appellant: The appellant failed to provide adequate evidence to support her claim that she was trading on behalf of a client. The tribunal noted that there was no tripartite agreement between the stock broker, the appellant, and her client, Perfect Car Scanners Pvt. Ltd. The appellant's application for registration with BSE, which was later withdrawn, further weakened her claim. 7. Applicability of Previous Legal Precedents: The appellant's reliance on previous legal precedents, including the Delhi High Court's decision in National Stock Exchange Member v. Union of India, was found to be inapplicable. The tribunal clarified that the cited case related to brokers, not sub-brokers, and that the appellant was trading as a client, not a sub-broker. Conclusion: The tribunal upheld SEBI's findings that the appellant violated the SEBI Act and PFUTP Regulations through manipulative trading practices. The appellant's arguments regarding her role as a sub-broker, the legality of synchronized trading, and the imposition of multiple penalties were rejected. The penalty of ?25 lakh was deemed appropriate, considering the mitigating circumstances, including the appellant's potential losses. The appeal was dismissed, and no order on costs was made.
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