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2019 (10) TMI 110 - AT - SEBIInsider trading - violation Securities and Exchange Board of India - PFUTP Regulations as well as Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 - HELD THAT - The trading pattern of the parties except Mr. R. Venkatachalam would show that these parties entered into buy and sell order of the shares in miniscule proportion for a price much lower than LTP on the given date within seconds to three minutes. Further, within seconds or minutes their orders matched. Three other persons had transacted only on four occasions out of 18 transactions. Appellant Mrs. Rajasekharan Devaki is the wife of appellant Mr. Rajasekharan and are admittedly connected to Mr. Venkatachalam. Though appellant Mr. Srivatsan has no direct connection it is a fact that not only he knew some friends of Mr. Venkatachalam, the trading pattern as detailed supra would on preponderance of probabilities, show that there was meeting of minds between the parties. The impugned order of the Adjudicating Officer in this regard therefore cannot be faulted with. As regards the violation of the PIT Regulations it is an admitted fact that the said regulation has been violated though for small quantity of shares. The Adjudicating Officer has taken note of this and therefore the penalty of ₹ 3 lakhs on this count was imposed. Considering all these facts on record we do not find any reason to interfere in the impugned order.
Issues Involved:
1. Penalties imposed by SEBI. 2. Violation of PFUTP Regulations. 3. Violation of PIT Regulations. 4. Allegations of price manipulation. 5. Allegations of insider trading. 6. Arguments and defenses of the appellants. 7. SEBI's findings and conclusions. 8. Penalties imposed by the Adjudicating Officer. 9. Arguments and counterarguments during the appeal. Detailed Analysis: 1. Penalties Imposed by SEBI: The appellants faced penalties ranging from ?3 lakhs to ?15 crores imposed by the SEBI Adjudicating Officer on 31st January 2018. 2. Violation of PFUTP Regulations: Appellants Mr. V. R. Venkatachalam and Mr. V. Rajasekharan were found to have violated the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulation, 2003 (PFUTP Regulations). The rest of the appellants were also found to have violated the PFUTP Regulations. 3. Violation of PIT Regulations: Mr. V. R. Venkatachalam and Mr. V. Rajasekharan were additionally found to have violated the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (PIT Regulations). 4. Allegations of Price Manipulation: The impugned order indicated that Mr. V. R. Venkatachalam, as the promoter of TCP Ltd., facilitated the purchase of 10,24,503 shares at depressed prices due to the trading activities of the other appellants. The trades involved minuscule quantities of one to six shares, executed within seconds to minutes, significantly lowering the Last Traded Price (LTP). 5. Allegations of Insider Trading: Mr. V. R. Venkatachalam admitted to not taking pre-clearance for opposite transactions executed within six months for 500 shares in January 2014, 200 shares in July 2014, and 214 shares in August 2014, aggregating to less than ?10 lakhs as per the Model Code of Conduct for Prevention of Insider Trading adopted by TCP. 6. Arguments and Defenses of the Appellants: - Mr. V. R. Venkatachalam: Argued that the shares were purchased from his brother-in-law as part of a family arrangement and that he would have waited for the price to fall further if there was an intention to manipulate prices. - Mr. V. Rajasekharan: Claimed that trading in minuscule quantities would not affect price movement and that trade logs were not initially provided. - Mr. Srivatsan: Stated he had no connection with other parties and traded out of curiosity. 7. SEBI's Findings and Conclusions: The Adjudicating Officer found that the trading pattern showed a coordinated effort to manipulate the price, benefiting Mr. V. R. Venkatachalam by ?13 crores. The argument that prices would have fallen further was dismissed, as the prior reduced price already benefited him. 8. Penalties Imposed by the Adjudicating Officer: Penalties were imposed as follows: - Mr. V. R. Venkatachalam: ?15 crores under Section 15HA and ?3 lakhs under Section 15HB of the SEBI Act, 1992. - Mr. V. Rajasekharan: ?1 crore under Section 15HA and ?3 lakhs under Section 15HB. - Mr. Srivatsan: ?1 crore under Section 15HA. 9. Arguments and Counterarguments During the Appeal: - Appellants' Counsel: Argued that the trades were part of a family arrangement and that minuscule trades could not manipulate prices. - SEBI's Counsel: Emphasized that the trading pattern indicated a coordinated effort to depress prices and that the family arrangement was an afterthought. Judgment: The tribunal upheld the Adjudicating Officer's findings, stating that the trading pattern indicated a meeting of minds among the parties, leading to price manipulation. The appeals were dismissed without any order as to costs, and all miscellaneous applications for interim relief were deemed infructuous and dismissed.
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