2020 (2) TMI 1419 - AT - SEBI

Abnormal price rise in the scrip - off-market transfer - appellants, among others, have been restrained from dealing in the securities market, directly or indirectly, for a period of 4 years - HELD THAT - The impugned transactions, in the facts and circumstances of the matter, would fall in the realm of violations of PFUTP Regulations. Individual argument that each entity s trade is miniscule and only on a few days alone etc. is not sufficient to rebut the findings in the impugned order. The appellants have not given the details of their off-market transactions with an entity which is also found to be part of the group which manipulated the scrip of RMCL. The unwillingness of the appellants in giving the details of those off-market transactions and in turn placing buy orders above LTP in the market subsequently cannot be viewed in isolation. The argument submitted by appellants that no further connection has been established therefore has no merit in the totality of the facts and circumstances of the case. In such matters, the preponderance of probability based on the totality of circumstances, as held by the Apex Court in the matter of Kishore R. Ajmera 2016 (2) TMI 723 - SUPREME COURT squarely applies. We note from the impugned order that there has been a division of the noticees into two categories 12 of them have been imposed a restraint for 4 years while 7 of them have been let off with a warning. This is apparently based on the magnitude of trade and the contribution to the LTP. By the same reasoning we are of the view that the restraint imposed on Neetu Gupta cannot be sustained particularly when she was only a seller who traded only on two occasions. However, being part of the group and recipient of the off-market deal we do not propose to completely exonerate her. Similarly given the facts of the matter we are of the considered view that a uniform restraint of 4 years imposed on the appellants is harsh. We are of the considered view that a warning is sufficient to meet the ends of justice in respect of Neetu Gupta. For others we reduce the period of restraint from 4 years to 1 year and from 4 years to 2 years respectability. Directions in the impugned order are modified accordingly.

Summary

Issues:
Challenge to SEBI orders restraining dealing in securities market for 4 years based on abnormal price rise in a listed company's scrip. Connection between entities established through off-market transfers, directorships, and fund transactions. Contention of appellants regarding trading details, insignificance of their contributions to LTP, and comparison with other entities let off with a warning. SEBI's emphasis on off-market purchases, manipulation of scrip price, and seriousness of violations. Consideration of delay issue and merit of the matter in light of PFUTP Regulations. Division of noticees into two categories for restraint duration based on trade magnitude and LTP contribution. Modification of restraint periods for appellants based on individual involvement.

Analysis:
The judgment by the Securities Appellate Tribunal in Mumbai involved challenges to SEBI orders restraining dealing in the securities market for 4 years due to abnormal price rise in a listed company's scrip. The investigation revealed a significant price increase in the scrip during a specific period, leading to allegations of fraudulent practices. The connection between the entities was established through off-market transfers, directorships, and fund transactions, indicating a coordinated effort in the market manipulation.

The appellants argued that their trading activities were minimal, with insignificant contributions to the Last Traded Price (LTP). They compared their actions to other entities let off with a warning, questioning the severity of the imposed restraint. However, SEBI emphasized the off-market purchases by the appellants from the same party on the same day, suggesting a deliberate strategy in manipulating the scrip price.

The Tribunal considered the merit of the matter in light of SEBI's regulations, particularly the PFUTP Regulations. It noted the appellants' unwillingness to provide details of off-market transactions and their trading patterns, which raised suspicions regarding their involvement in the market manipulation scheme. The Tribunal also referenced previous judgments to support its decision.

Regarding the restraint duration, the Tribunal observed a division of noticees based on trade magnitude and LTP contribution. It modified the restraint periods for the appellants, reducing them based on individual involvement and the severity of their actions. Ultimately, the Tribunal concluded that a warning sufficed for one appellant, while reducing the restraint periods for others based on their specific roles in the scheme.

In conclusion, the Tribunal disposed of all appeals, modifying the directions in the impugned order. It highlighted the importance of considering individual involvement and severity of actions in determining the appropriate restraint periods, ensuring a fair and just outcome in line with securities market regulations.