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2023 (11) TMI 67 - AT - SEBIShare manipulation - unlawful gains through disguised trading - transaction pursuant to the alleged SMS - synchronized trades, self-trades and reversal of trades thereby creating a false appearance of trading and manipulation of the trading volumes in the scrip in question - violation of Section 12A of the SEBI Act r/w Regulation 3 and 4 of the SEBI PFUTP Regulations - combined shareholding had triggered the requirement of making an open offer under Regulations 10 and 11 of the SAST Regulations as these 5 noticees were acting in concert and had failed to make an open offer thereby violating the said regulations - orders restraining the appellant from accessing the securities market for a period of four years and from associating himself with any listed Company as a Director HELD THAT - The finding that the modus operandi adopted by Arvind Babulal Goyal was to accumulate the shares and thereafter dispose off such shares pursuant to circulation of SMS is patently erroneous and against the material evidence on record. As upon perusal of the relevant documentary records, we find that the finding that the appellant was trading from the account of Abhay Javlekar is not based on proper appreciation of the documentary evidence. In the first instance, we find that the Know Your Client ( KYC ) document of Abhay Javlekar shows the email ID of Arvind Goyal and mobile number as given - WTM has presumed that the mobile no. is of Arvind Goyal. This number has been denied by the appellant. No effort was made by the investigating officer or by the WTM to find out as to who is the owner of this mobile no. quoted. Abhay Javlekar admits before the investigating officer that his DIS slip book and cheque book was issued to one Jayesh Solanki which statement is contrary to the stand which he now takes that Arvind Babulal Goyal had taken the DIS slip and cheque book for the purpose of trading. In our opinion, contradictory stand has been taken by Abhay Javlekar. Abhay Javlekar further admits that many trades were carried out without his knowledge by Pradeep Makhija of Yoke Securities. In the light of the aforesaid glaring evidence which is on record it is difficult to believe that Arvind Babulal Goyal was using Abhay Javlekar s trading account. Thus, the finding given by the WTM that Arvind Babulal Goyal was using Abhay Javlekar s account for trading purpose is not based on sound evidence. Similarly, the finding that Arvind Goyal was involved in manipulative and unfair trade practice by employing self-trades, synchronized and reversal trades thereby creating an artificial volume in the scrip in question is again erroneous and against the evidence in as much as no trades were carried out by Arvind Goyal or Pooja Goyal after the issuance of SMS. Since no trades were carried out by Arvind Goyal and Pooja Goyal pursuant to the alleged SMS the question of their trades being manipulative and adopting unfair trade practice does not arise. For the same reason, the violation of Regulations 3 and 4 of the PFUTP Regulations cannot be sustained as a result the order of disgorgement towards unlawful gain or loss averted cannot be sustained since we do not find any violation of the PFUTP Regulations. Order of disgorgement - We are of the opinion that the disgorgement amount has been crystalized under the show cause notice and therefore the said amount could only be considered by the WTM and the WTM could not consider the figures mentioned in the impounding order. We further find that the direction to pay 12% interest per annum on the disgorged amount could not have been issued as we find from a perusal of table 17 that the disgorged amount included the component of interest and, therefore, double interest cannot be charged. Since we have already held that Arvind Goyal had not traded from the trading accounts of Abhay Javlekar, the allegation that they were acting in concert is thus not proved. Arvind Babulal Goyal, Pooja Goyal and Abhay Javlekar in their own capacity had acquired the shares. Whether they individually crossed the trigger of 15% / 5% under Regulations 10 and 11 of the SAST Regulations is required to be considered afresh. The AO is required to see whether or not Arvind Babulal Goyal and Pooja Goyal collectively as husband and wife and Abhay Javlekar in his individual capacity had triggered the obligation to make an open offer under Regulations 10 and 11 of the SAST Regulations respectively and if they had triggered the requirement of making an open offer under Regulations 10 and 11 of the SAST Regulations then appropriate penalty commensurate with the acquisition should be levied. Appeal allowed.
Issues Involved:
1. Restraint from accessing the securities market and disgorgement orders. 2. Allegations of synchronized trades, self-trades, and reversal of trades. 3. Requirement of making an open offer under SAST Regulations. Summary: Issue 1: Restraint from accessing the securities market and disgorgement orders Five appeals were filed against different orders by the Whole Time Member (WTM) and the Adjudicating Officer (AO) concerning the same issue and facts. The WTM restrained Arvind Babulal Goyal from accessing the securities market for four years and directed him to disgorge Rs. 7,08,51,405/- along with interest. Similarly, Pooja Arvind Goyal was debarred for three years. The Tribunal found that the WTM's finding that Arvind Goyal accumulated shares through Abhay Javlekar's trading account and disposed of them after circulating misleading SMS was erroneous and based on conjectures. No evidence supported that Arvind Goyal had a modus operandi to accumulate shares or that he traded after the issuance of the SMS. Issue 2: Allegations of synchronized trades, self-trades, and reversal of trades The WTM alleged that Arvind Goyal was trading from the accounts of Abhay Javlekar and Pooja Goyal and engaged in synchronized trades, self-trades, and reversal of trades. However, the Tribunal found that the evidence did not support the claim that Arvind Goyal was trading from Abhay Javlekar's account. The Tribunal noted that the WTM relied on contradictory statements and did not properly verify the ownership of the mobile number used for trading. The Tribunal also found no connection between Arvind Goyal and the SMS sender, and BSE's investigation indicated no manipulative intent. Issue 3: Requirement of making an open offer under SAST Regulations The WTM concluded that Arvind Goyal, Pooja Goyal, and Abhay Javlekar acted in concert, triggering the requirement to make an open offer under Regulations 10 and 11 of the SAST Regulations. However, the Tribunal found that the combined holding was incorrectly considered and that the evidence did not support the claim of acting in concert. The Tribunal directed the AO to reconsider whether Arvind Babulal Goyal and Pooja Goyal collectively, and Abhay Javlekar individually, triggered the obligation to make an open offer and to impose appropriate penalties if necessary. Conclusion The Tribunal set aside the impugned orders against Arvind Babulal Goyal and Pooja Goyal, allowing their appeals. The appeals by Pooja Arvind Goyal, Arvind Babulal Goyal, and Abhay Dattatray Javlekar were also allowed, and the matters were remitted to the AO for fresh consideration. Each party was ordered to bear their own costs.
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