2019 (12) TMI 481 - AT - SEBI

Powers of Whole Time Member ( WTM ) of Securities and Exchange Board of India ( SEBI ) - order of debarment - restraining the appellants from accessing the securities market and further prohibiting them from buying selling or otherwise dealing in securities directly or indirectly or from being associated with the securities market in any manner whatsoever for a period of three years from the date of the order - contentions of the appellants are that the WTM committed a manifest error in holding that the appellants were guilty in manipulating the price of the scrips pursuant to the preferential allotment - HELD THAT - Order of debarment as per the impugned order is of three years. These three years have already been undergone by the appellant pursuant to the impugned ex parte order dated December 19 2014 restraining them from accessing the securities market etc. As on date four years and ten months have elapsed and the appellants are still debarred from accessing the securities market etc. We find that the WTM has not considered the period of debarment already spent from the date of the ex parte interim order till the date of passing of the order while considering the quantum of penalty. We are thus of the opinion that the debarment period spent by the appellants from the date of the ex parte impugned order till today is sufficient. Thus without going into the merits of the case and without considering the submissions of the counsel for the parties on merits we dispose of all the appeals holding that the restraint order restraining the appellants from buying selling or otherwise dealing in securities directly or indirectly or being associated with the securities market in any manner whatsoever will come to an end from today. Adjudication proceedings have been initiated by the Adjudicating Officer of SEBI and submitted that the findings given in the impugned order of the WTM would be relied upon by the AO. It was urged that the finding given in the impugned order should not be come in the way while considering the matter on merits by the Adjudicating Officer of SEBI. We make it clear that the Adjudicating Officer of SEBI will consider the matter on merits without being influenced by the findings given by the WTM of SEBI.

Summary

Issues:
1. Appeal against SEBI order restraining access to securities market.
2. Allegations of market manipulation and fraudulent scheme.
3. Duration of debarment and consideration of time already spent.
4. Adjudication proceedings initiated by SEBI's Adjudicating Officer.

Issue 1: Appeal against SEBI order restraining access to securities market
The appellants filed appeals against the order of the Whole Time Member (WTM) of SEBI, dated April 2, 2018, which restrained them from accessing the securities market and engaging in any securities-related activities for three years under the powers conferred by the SEBI Act. The appellants were initially restrained through an ex parte interim order in 2014, which was confirmed by subsequent orders. The WTM's order was based on a show cause notice indicating a fraudulent scheme aimed at making wrongful gains by manipulating the market integrity.

Issue 2: Allegations of market manipulation and fraudulent scheme
The WTM found the appellants guilty of manipulating scrip prices following a preferential allotment, leading to an abnormal rise in prices. The WTM held that the appellants executed a fraudulent scheme to make wrongful gains by manipulating the market. The appellants contested these findings, arguing against their involvement in the price manipulation. However, the tribunal decided to dispose of the appeals without delving into the merits of the manipulation allegations.

Issue 3: Duration of debarment and consideration of time already spent
The tribunal noted that the debarment period of three years had already been served by the appellants from the date of the initial ex parte order in 2014. Considering that almost five years had elapsed since the debarment began, the tribunal found that the WTM did not account for the time already spent when imposing the penalty. Consequently, the tribunal held that the debarment period already served was sufficient, leading to the disposal of the appeals and the end of the restraint order on the appellants from that day.

Issue 4: Adjudication proceedings initiated by SEBI's Adjudicating Officer
The appellants raised concerns about the findings of the WTM affecting the adjudication proceedings initiated by SEBI's Adjudicating Officer for the same offense. The tribunal clarified that the Adjudicating Officer should consider the matter on its merits independently, without being influenced by the findings of the WTM. The appeals were partly allowed based on the considerations mentioned, with each party bearing their own costs.

This comprehensive analysis covers the key issues involved in the legal judgment, detailing the background, arguments, tribunal's findings, and the implications for the appellants and SEBI's adjudication proceedings.