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SEBI - Case Laws
Showing 241 to 260 of 555 Records
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2020 (10) TMI 332
Interpretation of Statute - Whether Section 14 and 238 of IBC 2016 have an overriding effect on the provision of Section 28 of SEBI Act? - HELD THAT:- IBC which is a complete code in itself was enacted in the year 2016 and the law makers after considering the various acts prevailing at that time have framed the IBC to have a faster resolution process at par with developed countries with the primary objective of maximisation of value of assets to all stake holders. The preamble of IBC clearly mentions that the objective of the Code is maximisation of value of assets, to promote entrepreneurship, availability of credit and balance the interest of all stake holders in a time bound manner, whereas the primary object of SEBI is to protect the interest of the investors in securities market and to promote the development to regulate the securities and for matters connected therewith - it is evident that IBC is clearly a time bound action with a wider remit, whereas SEBI was given a broad mandate to protect the interest of investors and the IBC which had brought into force after considering various acts prevailing at that point of time must have also been considered SEBI Act and its implication in the corporate debtor and its operations. Therefore Section 14(1) in IBC which came into force after the enactment of IBC 2016 has precedence over Section 28A of SEBI Act.
It is pertinent to go through the judgment of the Hon'ble Supreme Court in Innoventive Industries. Vs. ICICI Bank and others [2017 (9) TMI 58 - SUPREME COURT] where Hon'ble Supreme Court shows the primacy of IBC over other Acts.
Thus, the issue framed in the instant application got an overwhelming affirmative answer that Sections 14 and 238 of IBC has an overriding impact on Section 28A of SEBI Act when an application is admitted under CIRP under Section 7, 9 or 10 of IBC - As both the Central Acts are having similar objectives, instead of clinging to over the supremacy of the Act the Recovery Officer appointed by the SEBI under Section 28A may cooperate with the Resolution Professional in protecting the interests of the investors as well as finding a quicker resolution in the instant application.
SEBI is suggested to direct their Recovery Officer to cooperate with the Resolution Professional and if required be a part of the CoC as an observer for a quicker resolution and maximisation of the value of the assets of the corporate debtor.
Thus, it is concluded that Section 14 and Section 238 of IBC 2016 has an overriding effect on Section 28A of SEBI Act. As such there is no need to modify our earlier order dated 18.9.2019 - SEBI is not barred from taking any action as it may deem fit, against the directors, shareholders and key management personnel of the Corporate Debtor for their fraudulent acts.
Application dismissed.
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2020 (9) TMI 1304
Ex-parte interim order passed by WTM - illegal gains made using unpublished price sensitive information - directing the Appellant to deposit a sum in an escrow account in a Nationalised Bank towards - WTM further directed the Banks to freeze all debits to the extent of the above amount till such time the escrow account is opened and the amount is transferred and directed the depositories to suspend all debits and, therefore, restrained the Appellants from disposing or alienating any assets or properties till such time the amount is credited in the escrow account - Appellant contented that there was no urgency in passing an ex-parte order with regard to the trades done by the Appellants
HELD THAT: In the instant case, we do not find that the matter is one of extreme urgency which requires passing of an ex-parte interim order. We find that the trades were done in the year 2017. Nothing has come on record as to when the Respondent became aware of these transactions. However, we find that the proceedings were initiated in February, 2019 which continued till 11th March, 2020 and, thereafter, it took the Respondents another 4 months to pass the impugned order.
This by itself indicates that there was no extreme urgency in passing the impugned order. We, therefore, are of the opinion that merely by arriving at a prima facie case that the Appellants were an insider as defined under the PIT Regulations, 2015 cannot be made the sole basis for passing the impugned order without considering the balance of convenience or irreparable injury.
Only reason given for passing the interim order has been provided in para 34 of the impugned order namely that the illegal gains should be impounded otherwise it would result in irreparable injury to the interest of the securities market and investors. In our view, illegal gains are yet to be adjudicated and, therefore, in the absence of adjudication it will not be proper to impound the so called illegal gains especially when there is no assertion that the Appellants are disposing of the property in question or they are obstructing or delaying the proceedings.
The impugned order in so far as it relates to the Appellants cannot be sustained and is quashed at the admission stage itself without calling for a reply except the show cause notice. The Appeal is allowed and the Misc. Application are accordingly disposed of.
We further direct the Appellants to file a reply to the show cause notice on or before 7th October, 2020. The Respondent will thereafter decide the matter finally after giving an opportunity of hearing to the Appellants either through physical hearing or through video conference within 6 months thereafter.
During the interim period, in order to safe guard the interest of the investors in the securities market and also to protect the integrity of the securities market, we direct the Appellants to provide a fixed deposit of Rs 2,60,93,085.85 in the name of SEBI for a period of one year, within two weeks from today. This fixed deposit receipt will be kept in the safe custody with the respondent and will not be encashed till three months after the passing of the final order by the respondent.
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2020 (9) TMI 1254
Penalty for violation of Regulations 3 and 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’) - trading activities in the illiquid Stock Options at BSE - non-genuine trades which was 81.38% of the total trades executed in the Stock Options Segment of BSE - HELD THAT:- As buying and selling of equivalent quantities within the day may not be illegal but if the trades were done with ulterior purposes then the same are non-genuine. In the instant case, we find that one party is making a profit and the other party is making a loss. In addition, there is proximity in the time of sell orders at a higher price and the same quantity is being reversed to the same party in a lower price within a fraction of seconds or few minutes. We find that contracts got matched between the same parties. We fail to understand as to why the Appellants who made the transactions repeatedly incurred substantial losses within a few minutes. Given the fact that there was proximity of time between buy and sell orders one can reasonably point to some kind of manipulative exercise with prior meeting of minds especially when one can see it plainly that it was a clear case of synchronised trading namely that a synchronised trade is one where the buyer and seller enter quantity and time of shares they wish to transact at the same time.
From the aforesaid cumulative analysis of the reversed transactions with the counter party, quantity, time and significant variation of the price clearly indicates that the trades were non-genuine and had only misleading appearance of trading in the securities market without intending to transfer the beneficial ownership. One finds it to be naive to presume that the perception of the two counter parties to a trade changed within few seconds/minutes and positions were interchanged and the contracts were changed where one party made profit and the other party ended up making losses every time without prior meeting of mind. It is not a mere coincidence that the Appellants could match the trades with the counter party with whom he had undertaken the first leg of respective trade. In our opinion, the trades were non-genuine trades and even though direct evidence is not available in the instant case but in the peculiar facts and circumstances of the present case there is an irresistible inference that can be drawn that there was meeting of minds between the Appellants and the counter parties, and collusion with a view to trade at a predetermined price.
As urged by the learned counsel for the Appellants that the penalty awarded is excessive and harsh and, therefore, prayed that in the event the order is affirmed the Tribunal may consider reducing the penalty amount taking into consideration the financial status of the Appellants and the negligible transactions executed by the Appellants.
We have perused the orders passed by the AO. We find that the AO has taken into consideration not only the factors contained in Sec. 15J of the SEBI Act but has also taken into consideration the number of total trades, the artificial volume generated, the loss incurred, etc while imposing the penalty. It may be stated here that the minimum penalty under Sec. 15HA is Rs.5Lacs and maximum penalty is Rs. 25 crores or three times the profit made. We find that the AO has excercised its discretion which is neither harsh nor arbitrary. We do not find any error in the quantum of penalty imposed by the AO.
We do not find any merit in the appeals and the same are dismissed with no order as to costs.
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2020 (9) TMI 1209
Seeking quashment of FIR at the investigation process - activities promising return of profits upon soliciting deposits in the form adviser fee / royalty - cognizable offence under the provisions of PID Act - HELD THAT:- The police in the present case has registered FIR not on the basis of complaint of a victim and now seeks to find whether there are any victims or not, which is absolutely against the ethos of investigative processes.
The provisions of IPC and PID Act are not attracted prima facie in this case, that there is an statutory bar against taking cognizance by Court for any such offence, which is in the domain of SEBI Act, 1992, which requires complaint to be filed by SEBI Board. This case is squarely relates to breach of provisions of SEBI Act, 1992 and SEBI Regulations, 2013 and only Special Court is empowered to take cognizance on the basis of complaint filed by SEBI Board. The police was not authorized to register an FIR in such case because there is a specific statutory bar in such matters.
What the police could have done was that bring to the notice of SEBI Board the alleged violation being committed by the applicant Company. After providing vital information and inputs to the SEBI Court, the matter would have been looked into by SEBI Board only and appropriate complaint could have been filed by SEBI Board before the competent Special Court - instead of doing so, the police has embarked upon registration of FIR in such a case and by doing so, has travelled beyond the scope of its competence and jurisdiction.
Application allowed.
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2020 (9) TMI 1170
Insider trading - Insiders and Connected Persons - Unpublished price sensitive information - Period of existence of the UPSI - loss incurred by the Company and a substantially fall in the net sales - HELD THAT:- Investigation has clearly brought out the trades done by the Noticees, who were insiders and also promoters of the Company, while in possession of the UPSI to the detriment of the public shareholders of the Company. The said promoters had virtually offloaded their entire unencumbered holding in the Company during this period. Given that the facts clearly make out a prima facie case of insider trading by the promoters of the Company, is of the considered view that the Non-interference by the Regulator at this stage would result in irreparable injury to interests of the securities market and the investors.
Section 11(4) of the SEBI Act casts an obligation on the Board, in appropriate cases, to impound and retain the proceeds of securities in respect of such transactions either pending investigation nor upon completion of such investigation. The facts in this case compels me to take urgent steps to impound and retain the proceeds of the notional loss avoided allegedly by the aforementioned insiders by invoking the powers under Section 11(4)(d) of the SEBI Act. Considering the facts and circumstances of the case, the balance of convenience lies in favour of SEBI.
Accordingly, as an interim measure, an Ad–Interim Ex–Parte Order for impounding such alleged unlawful notional loss avoided under Section 11(1) read with 11(4)(d) and 11B(1) of the SEBI Act read with Regulation 10 of the PIT Regulations needs to be issued against Rajeev Vasant Sheth, Aarti Sheth and Divya Sheth.
Individual amount of unlawful loss avoided is to be credited to an interest bearing Escrow Account [“Escrow Account in Compliance with SEBI Order dated September 04, 2020 – A/c (in the name of the respective person)”] created specifically for the purpose in a Nationalized Bank. The Escrow Account(s) shall create a lien in favour of SEBI and the monies kept therein shall not be released without permission from SEBI.
Banks are directed that no debits shall be made, without permission of SEBI, in respect of the bank accounts held jointly or severally by the persons mentioned under Table-11, except for the purposes of transfer of funds to the Escrow Account. Further, the Depositories are also directed that no debit shall be made, without permission of SEBI, in respect of the demat accounts held by the aforesaid persons. However, credits, if any, into the accounts maybe allowed. Banks and the Depositories are directed to ensure that all the aforesaid directions are strictly enforced. Further, debits may also be allowed for amounts available in the account in excess of the amount to be impounded. Banks are allowed to debit the accounts for the purpose of complying with this Order.
The persons mentioned under Table-11 are directed not to dispose of or alienate any of their assets/properties/securities, till such time the individual amount of unlawful loss avoided is credited to an Escrow Account except with the prior permission of SEBI. Further, on production of proof by the persons mentioned under Table-11 that the individual amount of unlawful loss avoided has been deposited in the Escrow Account, SEBI shall communicate to the Banks and Depositories to defreeze their respective accounts.
The persons mentioned under Table-11 are further directed to provide a full inventory of all their assets whether movable or immovable, or any interest or investment or charge in any of such assets, including property, details of all their bank accounts, demat accounts, holdings of shares/securities if held in physical form and mutual fund investments and details of companies in which they hold substantial or controlling interest immediately but not later than 7 working days of this Order.
Observations/findings contained in this Order are made on the basis of the Investigation conducted by SEBI in the matter. The findings in this order may be treated as allegations against the respective persons mentioned in Table-11 above for the purpose of show cause against them. Accordingly, the persons mentioned under Table-11 above are advised to show cause as to why suitable directions, including the following, should not be issued/imposed against them under Sections 11(1), 11(4)(d) and 11B(1) of the SEBI Act for the alleged violations of the provisions of Sections 12A(d) & (e) of the SEBI Act and Regulations 4(1) of the PIT Regulations:
a) Directing them to disgorge an amount equivalent to the unlawful loss avoided on account of insider trading in the shares of TJL along with interest;
b) Directing them to refrain from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period.
The persons mentioned under Table-11 are also called upon to show cause as to why appropriate directions for imposing penalty under section 11B(2) and 11(4A) read with Section15G and 15HB of the SEBI Act should not be issued against them for the alleged violations of the aforementioned provisions of SEBI Act and the PIT Regulations.
The persons mentioned under Table-11 may file their replies to SEBI within 30 days from the date of receipt of this Order. They may also indicate in their replies whether they wish to avail an opportunity of personal hearing in the matter.This Order shall come into force with immediate effect and shall be in force till further Orders.
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2020 (8) TMI 843
Violation of the provisions of PFUTP Regulations - trading dynamics as sufficient to establish PFUTP violations - how deceptive the nature of trading adopted by the Appellants are? - HELD THAT:- We are of the considered view that there are missing links in the investigation as brought out in the impugned order. While the trading pattern of both the Appellants; placing the buy orders for generally very small number of shares and the timing of the orders; all point towards possible violation of the provisions of PFUTP Regulations it is also possible that an investor through a thorough observation of the movement of the scrip could be placing orders in the system without any intention to manipulate the market.
Since the dividing line is very thin and blurred distinguishing both these categories is a difficult, if not impossible, task. Though the learned counsel shed some light on this ‘irrational behaviour’ some more analysis of the overall trading in the scrip during the investigation period would have been helpful since no connection have been established between the Appellants and the suspected/connected entities nor with the promoters or directors etc. of Mapro Industries.
The scrip of Mapro was not a miracle scrip, as reflecteded in its limited trading data given in the impugned order, for the Appellants to place their orders in the early morning itself, mostly just after 9 a.m. at prices higher than LTP by 2 to 4% as if this scrip had to be bought at any cost. If any investor takes such a stand, and if he/she is so convinced of the performance of the scrip, he/she would buy at least a reasonable quantity rather than placing a buy order for miniscule quantities of 1, 2, 5 or 10 shares etc as done by the appellants.
Nature and pattern of trading of the Appellants are violative of the stated provisions of PFTUP Regulations, 2003 but in the given facts and circumstances of the matter and in the absence of any effort in the impugned order towards connecting the dots in terms of relationship/connection/money transfer/even some interaction between the Appellants and other suspected entities or to the promoters of Mapro we are unable to uphold the penalty imposed on the two Appellants. A warning to the Appellants that repetition of trading of similar nature/pattern as the impugned ones will lead to penal consequences is sufficient to meet the ends of justice.
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2020 (8) TMI 427
Credit Rating Rationales - factors required to be considered by ICRA while deciding the rating - praying for a decree of declaration, declaring the Credit Rating Rationales dated 24th April, 2020 and 30th April, 2020 passed by the defendant or any other similar credit rating rationale downgrading the plaintiff’s credit rating from BBB+ (stable outlook) to BBB (negative outlook) as null, void, unenforceable and ineffective - also seeks decree of mandatory injunction directing the defendant to withdraw the said credit rating rationales from the physical as well as electronic records of the defendant including on the world wide web - charge of Violation of rating methodologies or the CRA Regulations or the Master Circular - Whether the defendant-ICRA has a right to publish the rating despite being objected to by the plaintiff/JPL?
HELD THAT:- Combined reading of SEBI CRA Regulations and RBI Master Circular clearly depict that as far as the initial rating is concerned, if the same is not accepted, then the same will not be published by the Credit Rating Agency however, once an initial credit rating is accepted and published based whereon a party seeks financial facility, during the pendency of the said financial facility, the Credit Rating Agency is mandated to conduct periodic surveillance and even if subsequent rating opined by the Credit Rating Agency during the period of surveillance is not accepted by the party, the same will still be disseminated by press release on the website of the Credit Rating Agency as also intimated to the Stock Exchange/Debenture Trustees.
Clause (B) of the agreement between JPL and ICRA clearly defines the scope of work and that once the initial credit rating is assigned and accepted, ICRA shall subject to clause (F) keep the rating under surveillance during the lifetime of the bank facility, that is, such time that any amount is outstanding against it or the sanction remains valid whichever is earlier. Once based on the credit rating a party seeks a bank facility it cannot thereafter want the Credit Rating Agency to not conduct periodic surveillance thereof and in case of a change therein not intimate the same to the concerned agency and the parties duly affected by the said Credit Rating. The interpretation as sought to be given by JPL would be contrary to the public policy and hence cannot be accepted.
As per the terms of the agreement between JPL and ICRA as also the CRA Regulations, Master Circular of RBI, the Credit Rating Agency, that is, ICRA was entitled to publish the initial rating once accepted, based whereon JPL took credit facility and thereafter ICRA is mandated to conduct periodic reviews/surveillance of the credit rating and publish the same in the best interest of the provider of the financial facility and the other parties.
What are the factors required to be considered by ICRA while deciding the rating and whether those factors have been considered by ICRA or the finding of ICRA is based on erroneous considerations? - Credit rating of the company is based on the futuristic position of the company to clear its debt liability and the same is not dependent merely on the fact that in the preceding year, debts had been cleared. The opinion of ICRA as primarily based on the fact that though in the previous year there were increased repayments of debt, however, the debt liability was still high coupled with the fact that JPL could not procure contract to optimally utilize its power generation and was utilizing power generation only to the extent of 1/3rd and that the primary client of JPL being TANGENDCO, the time for recovery of its dues was increasing as in the past thereby making the liquidity and debt paying capacity of JPL stretched.
As opinion of ICRA is rendered after taking into account all positive or negative factors and that it is an opinion rendered by experts in the field, this Court will not, unless the said opinion is perverse, arbitrary and mala fide, interfere in the same as a mathematical calculation of a credit rating is not possible. Therefore, as regards issue No.(ii) is concerned, this Court finds that the rating rationales depend from industry to industry and that ICRA has taken into account the relevant rating rationales, both positive and negative and based thereon rendered the opinion which is plausible on the facts and the said opinion being neither perverse nor arbitrary nor mala fide, this Court will not interfere therein by passing a decree declaring the same to be null and void.
Whether this Court can grant a mandatory injunction against ICRA directing it to review its ratings? - ICRA had downgraded the credit rating of JPL in the previous year also from AAA to BBB+ when neither JPL filed no suit raising objection to the downgrading or to the publishing of the credit rating. Credit rating having been utilized by JPL for receiving the financial facility, till the subsistence of the financial facility, JPL can neither seek setting aside of the said rating unless the same is irrational, arbitrary or mala fide and also cannot seek a decree that the said rating be not disclosed/published - Evidentiary value of opinion of an expert has to be decided on the basis of the credibility of the expert and the relevant facts supporting the opinion. Therefore, the emphasis has to be on the data on the basis of which opinion is formed. Further, if the opinion is intelligible, convincing, and based on reasoning, no decree declaring the said opinion as null and void, unenforceable and ineffective cannot be passed as is prayed by the plaintiff in prayer (a) of para 66 of the suit in respect of the Credit Rating Rationales dated 24th April, 2020 and 30th April, 2020 passed by the defendant. As the impugned Credit Ratings are surveillance ratings even if JPL objects to the same, no mandatory injunction can be granted to the defendant to remove the Grade Rating Rationales from the physical as well as electronic record of the defendant on the worldwide web, much less permanent injunction.
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2020 (8) TMI 83
Failure to close the trading window - provisions of Clause 4 of Minimum Standards for Code of Conduct to Regulate, Monitor and Report Trading by Insiders mentioned in Schedule B read with Regulation 9(1) of PIT Regulations, 2015 - As alleged that the acquisition of AIMIN by Ecap was a price sensitive information which had come into existence on January 25, 2017 upon signing of Term Sheet - HELD THAT:- Price movement of the scrip of EFSL at the relevant point of time. Corporate announcement was made on the platform of BSE at 18:56:48 hours on April 05, 2017 i.e. after the market had closed on the said day. The scrip of EFSL had closed at ₹ 167.90 on the said day. However, I note that the scrip had opened at ₹ 175.95 the next day. This shows that the price of the scrip of EFSL had registered a spike of 4.79% on April 06, 2017.
EFSL had made another announcement on April 06, 2017 wherein it had informed BSE and NSE that the Insurance Regulatory & Development Authority of India (“IRDAI”) had accepted the registration application form IRDA/R2 of Edelweiss General Insurance Company, a wholly owned subsidiary of EFSL, for carrying on business as a general insurance company in India (“IRDAI Approval”). The said information was disseminated on BSE at 13:40:34 on April 06, 2017. Therefore, the said information cannot be said to have had a role in price spike observed at the time the market opened. In light of this, I am of the view that the acquisition of AIMIN by Ecap was not only a price sensitive information but also was effective in pulling up the price of the scrip of EFSL. From this angle note that the announcement considered to be not UPSI is grossly misconceived.
Term sheet has fructified and transformed into a final transaction by way of an SPA. Therefore, hold it not incorrect to take the view that the UPSI had come into existence on the day of signing of Term Sheet itself. In spite of the above, note that the allegation in the present matter is non–closure of trading window which admittedly had not been closed, therefore, it seldom matters when the UPSI had actually begun.
There was certainly a duty cast upon the Noticee to close the trading window in view of the existence of UPSI which the Noticee had admittedly failed to comply with. Therefore, hold that the Noticee has violated the provision of Clause 4 of Minimum Standards for Code of Conduct to Regulate, Monitor and Report Trading by Insiders under Schedule B read with Regulation 9(1) of PIT Regulations, 2015.
Whether the Noticee is liable for penalty? - As established in the pre-paragraphs, the Noticee has violated the provision of Clause 4 of Minimum Standards for Code of Conduct to Regulate, Monitor and Report Trading by Insiders under Schedule B read with Regulation 9(1) of PIT Regulations, 2015.Therefore, the Noticee is liable for a penalty under Section 15HB of SEBI Act.
In view of the contentions of the Noticee regarding “technical violation” and mitigating factors as prescribed in Section 15J of the SEBI Act, 1992, it became necessary to understand the repetition, if any, of the violation committed by the Noticee. To ascertain the same, the Noticee was advised to furnish information on past closure of trading window since the commencement of PIT Regulations, 2015 when the onus of compliance shifted to the Compliance Officer.
The practice of merely making the relevant employees cognizant of their responsibilities does not tantamount to closure of trading window as has been expected in the law. If mere intimation of the people privy to the information is what is expected then the law would have been designed in such a fashion. Any short cut in the practices to a clearly laid down law is not acceptable - law casts a responsibility on the compliance officer to take a call on “Closure of trading window” and to disseminate the same to the stock exchanges. As incidentally note that the Noticee has admittedly begun intimating stock exchanges on trading window closure only from January 2019.
From the replies of the Noticee, find non-compliance on the part of the Noticee by failing to close trading windows when necessary as per law. Therefore, there were repeated instances wherein the Noticee had failed to close the trading window. In view of the above the argument of the Noticee that there was no repetition of violation is not acceptable. A repetitive violation, in disregard to the applicable provisions of law, cannot be construed to be a technical violation.
Material/facts on record, the reply submitted by the Noticee and also the factors mentioned in the preceding paragraphs, in exercise of the powers conferred upon me under Section 15-I of the SEBI Act read with Rule 5 of the Adjudication Rules, in exercise of the powers conferred upon me under Section 15-I of the SEBI Act read with Rule 5 of the Adjudication Rules, hereby impose a penalty of ₹ 5,00,000/- (Rupees Five Lakh only) on the Noticee. Said penalty is commensurate with the lapse/omission on the part of the Noticee.
Noticee shall remit / pay the said amount of penalty within 45 days of receipt of this order through online payment facility available on the website of SEBI - In the event of failure to pay the said amount of penalty within 45 days of the receipt of this Order, recovery proceedings may be initiated under Section 28A of the SEBI Act for realization of the said amount of penalty along with interest thereon, inter alia, by attachment and sale of movable and immovable properties.
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2020 (7) TMI 831
Fraudulent and manipulative trading in the scrips - illegal gains made by the Noticees through the fraudulent and manipulative trades - SEBI was directed by SAT to bring out the date-wise reversal of trades done by the trading Noticees and pass a fresh order within a period of three months after granting an opportunity of hearing - HELD THAT:- In securities market, ‘reversal trades’ are understood to be trades where the parties after executing a trade enter into a ‘reverse trade’ or opposite trade for similar quantities usually within a short time period. However, as held by the Hon’ble Tribunal in the matter of Anita Dalal, in a given case reversal transaction could also happen over multiple days. What is important is the intention of the parties to manipulate the scrip as can be noted from the nature of their trades across multiple days.
The Hon’ble Supreme Court in the matter of SEBI v. Rakhi Trading [2018 (2) TMI 580 - SUPREME COURT] had held that “Once the reversal transactions are shown to be non-genuine or shown to be fictitious creating a false or misleading appearance in the market for ulterior purpose and that the stock market was misused by such manipulative device, this is in clear violation of the provisions of PFUTP Regulations, 2003.”
In the present case, since it is established that all the Noticees were acting as a group and were engaged in manipulative trading in the scrip, have no hesitation in holding that the back and forth transaction in scrip between the Noticees have to be considered as reversal trades even though such trades happened across days.
Computation of the ill-gotten gains - Noticees have submitted that as per the data available from the BSE Price Volume Data in the scrip of Polytex, 75% of total trades had been marked delivery and 25% as intra-day during the investigation period. As can be noted from Table I, the cumulative buy value of the trades by the Noticees which have been taken for the purpose of calculating the ill-gotten gains was Rs. 2,28,90,79,601 and the sell value was Rs. 2,31,96,78,775. The STT and SEBI turnover fee paid at the applicable rates during the investigation period for such trades works out to Rs. 36,06,157.46. The ill-gotten gains made by the Noticees after excluding the eligible expenses would be Rs. 2,69,93,016.79.
Directions - As in exercise of the powers conferred upon me under section 19 of the SEBI Act, 1992 read with sections 11 and 11B of the SEBI Act, and Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 2003, confirm the computation of ill gotten gains made in SEBI order dated January 31, 2019 and hereby direct the Noticees to jointly and severally, disgorge an amount of Rs. 2,69,93,016.79, as ascertained along with interest calculated at the rate of 12% per annum from 17 December, 2012 onwards, till the date of payment. The above payments shall be made by the parties in the manner provided in the SEBI order dated January 31, 2019.
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2020 (7) TMI 386
Unpublished price sensitive information being shared on a messaging platform 'Whatsapp' - whether the appellant is entitled for inspection and for supply of all the documents in possession of the adjudicating authority including those documents upon which no reliance has been placed by the Adjudicating Officer ('AO') of the Securities and Exchange Board of India ('SEBI' )? - HELD THAT:- Concept of fairness and principles of natural justice are in-built in Rule 4 of the Rules of 1995 and that the AO is required to supply the documents relied upon while serving the show cause notice. This is essential for the person to file an efficacious reply in his defence.
The contention that the appellant is entitled for copies of all the documents in possession of the AO which has not been relied upon at the preliminary stage when the AO has not formed any opinion as to whether any inquiry at all is required to he held cannot be accepted. A bare reading of the provisions of the Act and the Rules as referred to above do not provide supply of documents upon which no reliance has been placed by the AO, nor even the principles of natural justice require supply of such documents which has not been relied upon by the AO. We are of the opinion that we cannot compel the AO to deviate from the prescribed procedure and supply of such documents which is not warranted in law. In our view, on a reading of the Act and the Rules we find that there is no duty cast upon the AO to disclose or provide all the documents in his possession especially when such documents are not being relied upon.
Practice of filing a compilation of judgments without citing during the course of arguments is not an accepted practice and consequently we are not required to consider such decisions which were no cited at the Bar.
The request of the appellant for supply of the documents in possession of the authority is misconceived and cannot be accepted. Prima facie, the only object in making such demand is to obstruct the proceedings. We accordingly do not find any merit in the appeal and is dismissed.
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2020 (7) TMI 324
Guilty of causing false media report causing the rise in the price of the scrip - temporary prohibitory order - WTM directing the present appellants to disgorge an amount of ₹ 22,69,461/-along with interest at the rate of 12% per annum from December 22, 2008 - HELD THAT:- Appellants submitted that there is a delay in the proceeding, the documents filed by the appellants themselves would show that before the WTM they were pressing time and again for more documents from the respondents before filing reply to the show cause notice. Even though a compact disk was supplied to them the demand continued which ultimately led to filing of reply belatedly. Though the practice of keeping temporary prohibitory order continuing for a long period cannot be accepted, it is to be noted that ultimately the said order is revoked. Therefore, the issue does not survive.
WTM had taken into consideration the earlier dealing of the appellants in the scrip of PSTL wherein the appellants were charged for last traded price manipulation. The appellants and deceased noticees were exonerated from the charges and only charge remained for trading of the appellants and deceased noticees for a period from December 17 to 22, 2008.
The trading of period of December 16 is also taken into consideration by the WTM. However, finding that there was sudden increase in purchase of the shares of PSTL by the appellants and the deceased noticees during December 17-19, 2008 as detailed and off-loading of all those shares on December 22 before 10:30 am the order was passed.
It is an admitted fact that Nirmal Kotecha had close relations with the appellants. Many business transactions as well as gratuitous transactions of advancing interest free loan between them is an admitted fact. Out of interest free loan granted by Nirmal Kotecha to the appellants, admittedly appellants utilized some portion for the business purpose. Admittedly, they always had telephonic conversation. Admittedly, the appellants form a family group as further explained in the paragraph 1 of the synopsis itself. The appellants had pleaded before the WTM that the proceedings against them be kept in abeyance till the proceedings against Nirmal Kotecha would come to an end i.e. appeal filed by Nirmal Kotecha in this Tribunal is decided. Judicial notice can be taken that the appeal filed by Nirmal Kotecha, is finally dismissed by this Tribunal on merit holding him guilty of causing false media report causing the rise in the price of the scrip.
In the circumstances, the findings recorded by the learned WTM needs no interference.
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2020 (7) TMI 238
Acquisition of the shares by promoters - increase in the collective shareholding of all the appellants - the promoters, from 29.42% to 61.10% which was more than threshold limit of 5% - no public announcement was made - violation of provisions of Regulation 3(2) read with Regulation 13(1) of the SAST Regulations, 2011 - HELD THAT:- There should be common objective of purchase of shares or voting rights amongst the members to make them persons acting in concert. In the present case, while two promoters had an objective to dispose of their shares, the appellant No. 1 Susheel Somani had an objective to acquire the shares. This itself would show that there was no common cause between the appellant No. 1 Susheel Somani and the two transferors. Therefore, though the promoter group holdings in the company remained constant, the same would be irrelevant as observed by the AO. The order to that extent cannot be faulted with.
Whether the appellants were exempted from making a public announcement? - It is an admitted fact that the appellants have made requisite disclosures on 7th day as against the provisions of Regulation 29(3) that the disclosures are required to be made within two working days. Thus, technically the appellants were not exempted from making public announcement and, thus, are in violation of the relevant regulations. The AO has observed that as the condition of making disclosures within two working days is not fulfilled, the act was not fit for grant of exemption. In the circumstances, the penalty was imposed.
Quantum of penalty - AO took into consideration the mitigating factors that the interest of the shareholders of the target company is not jeopardized and the penalty of ₹ 15 lacs was imposed.
AO has not considered the fact that the appellants made the disclosures though belatedly after five days as required by Regulation 29 of the SAST Regulations. Thus, it was a technical breach and, therefore, in our view instead of imposing a penalty of ₹ 15 lacs, a penalty of ₹ 5 lacs would have been just and sufficient.
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2020 (7) TMI 167
Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market - Monetary penalties imposed on them under section 15HA of the SEBI Act, 1992 - HELD THAT:- SEBI was doing investigation during the interim and some delay though has happened on account of change in the AO.
Though the impugned order deals with trading in the name of the minor, no action has been rightly contemplated against the minor. As regards the other noticees/appellants on appeal before us we note that though their relationship through common address, common mobile numbers etc. are matters of record and proved no motive has been attributed to their trading pattern.
New LTP, NHP and a few first trades in the scrip have been created/done by these appellants which would prima facie points towards a manipulative effort. It is on record that the scrip was progressively doing well during the investigation period with substantial increase in both prices and volumes. No connection with the promoters of the Company or with the Company itself has been attributed to the appellants.
There is no evidence or even any discussion on any fund transfer between the appellants or the appellants with any other entities in the absence of which motive for a collusive or manipulative effort becomes blunt. When a group of 16 entities themselves becomes parties to each other's trade in a circular fashion, though to a limited extent, the net amount of profits or losses also become negligible and only to the extent of their trades getting matched with entities outside the group.
Looking at the trading pattern of the appellants; the LTP, NHP, first trades etc. it may be possible to arrive at a prima facie conclusion regarding violation of PFUTP Regulations. However, in the facts and circumstances of the matter, particularly the fact that the scrip involved was reasonably liquid and continued to become more liquid and hence increase in volume and prices and with no evidence of any fund transfer, motive for manipulation etc. we are of the considered view that no penalty can be imposed on the appellants.
Without any other evidence, we are constrained to give some weight to the submissions of the appellant that they were trading in the scrip in a normal way because of the scrip itself being attractive through various public announcements supported by the fact of increase in volume of trading and rise in prices. Therefore, given these factors imposing a penalty becomes too harsh. At the same time since the trading behavior exhibited by these appellants is not normal and is amenable to invoking suspicion of a PFUTP violation, we would warn the appellants from indulging in similar trading practices in future.
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2020 (7) TMI 90
Inordinate delay in the issuance of the show cause notice for violation of Section 12(A)(a), (b) and (c) read with Regulations 3(a),(b),(c) & (d) and 4(1), (4(2)(a) and (g) of PFUTP Regulations - delay of 7 years in issuing the show cause notice - HELD THAT:- There has been an inordinate delay in the issuance of the show cause notice. Even though there is no period of limitation prescribed in the Act and Regulations in the issuance of a show cause notice or for completion of the adjudication proceedings the authority is required to exercise its powers within a reasonable period as held recently in Adjudicating Officer, Securities and Exchange Board of India v. Bhavesh Pabari [2019 (3) TMI 197 - SUPREME COURT]. In the instant case, we are of the opinion that the power to adjudicate has not been exercised within a reasonable period and therefore no penalty could be imposed.
Without going into the merits of the case, we find that on account of the inordinate delay in the initiation of the proceedings by issuance of a show cause notice, the penalty order cannot be sustained.
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2020 (7) TMI 60
Collective Investment Schemes - show cause as to why the Yatra Art Fund should not register itself with SEBI in the prescribed corporate form, as otherwise the collective investment scheme carried out by the Trust would be illegal - SCN also mentioned that all amounts collected should be refunded within a period of 30 days from the said show cause notice - HELD THAT:- The statutory scheme is that, if a collective investment scheme, as defined, is to be floated by a person, it could only be done in the form of a collective investment management company and in no other form. This is the reason why Section 11AA uses the expression "company" in sub-Section (2) and not the word "person" (as the CIS Regulations of 1999 had come into force on 15-10-1999; Section 11AA being enacted and coming into force on 22-2-2000).
Once the statutory scheme becomes clear, it is clear that the collective investment scheme that was being carried on by the appellants in the form of a private Trust would be in the teeth of the Statute read with the CIS Regulations and would thus be illegal.
This being the case, it is difficult to upset any part of SEBI's order that remains after the penultimate part of the order was set aside by the Appellate Tribunal.
This litigation has been going on for an extremely long period of time and instead of remanding the matter to SEBI to decide the refund issue afresh, we order as follows:
The principal amount repayable to each investor of both the Schemes shall be paid back within a period of six months from today in the following manner:
We are informed that so far as the first Fund is concerned, 81.32 per cent of the total principal sum of ₹ 10.95 crores has been repaid.
Insofar as Fund No. 2 is concerned, we have been informed that 50 per cent of the principal amount of ₹ 21.92 crores has been repaid.
The balance owing to the 50 investors of Fund No. 1 and to the 132 investors of Fund No. 2 be therefore, repaid within six months from the date of this judgment.
So far as the interest at the rate of 10 per cent is concerned, this amount will be paid on the principal outstanding amount from the date on which it becomes due to each such member, till the date on which each Fund came to an end, i.e., insofar as Fund No. 1 is concerned till 15-9-2011 and so far as Fund No. 2 is concerned till 31-1-2012. The aforesaid interest shall be paid within nine months from the date of this judgment.
Once the amounts are actually paid within the time period specified, compliance report be filed with SEBI in this behalf.
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2020 (7) TMI 31
Restrained orders from accessing the securities market or dealing with the securities market directly or indirectly - BSE Limited ('BSE') was directed to appoint an independent auditor/audit firm for conducting a detailed forensic audit of the books of account of Ricoh India Limited - prima facie suspicion and vicarious liability attributable to a MD/CEO - HELD THAT:- The impugned order (quoted at paragraph 5 and 6 of this order) bring out only a suspicion about the role of the appellants. Moreover, we note that though the submissions of the appellants have been noted in detail in the impugned order they have not been dealt with appropriately.
Question before us is how long the appellants would be kept out of the market through directions contained in an interim order and confirmatory order which are based on only a prima facie suspicion and vicarious liability attributable to a MD/CEO. This question becomes more relevant particularly in the facts of the case where we are told that the Company Ricoh itself is under liquidation and the appellants are not in-charge of the said Company and therefore not in a position to influence the decisions of the Company. Moreover, we also note that the submissions made by the appellants have not been dealt with in the impugned order in any meaningful manner thereby effectively confirming the interim directions without taking into account the submissions and the documents made available by the appellants. Given these factors we find it difficult to sustain the impugned order qua the appellants.
Both the appeals succeed and the impugned order is quashed qua the appellants. However, SEBI is at liberty to issue a fresh show cause notice and proceed in the matter in case evidence against the appellants are available through the forensic audit report or through SEBI's own investigation
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2020 (7) TMI 7
Insider trading - circumstantial evidence as to whether a person is guilty of insider trading - HELD THAT:- Appellant had passed on the price sensitive information regarding the open offer to the Tippees. Such inference taken from the immediate and proximate facts and circumstances surrounding the events is reasonable and logical which any prudent man would arrive at such a conclusion. The Supreme Court in Kanhaiyalal Patel [2017 (9) TMI 1269 - SUPREME COURT] held that an inferential conclusion from proved and admitted facts would be permissible and legally justified so long as the same is reasonable.
In the light of the aforesaid, the decisions cited by the learned counsel for the appellant on the issue that a person cannot be held guilty only on the strength of proximity of relationship with the Tippee are distinguishable on facts and are not applicable in the instant case. We find from the record that there is ample evidence to draw a reasonable inference that the appellant had passed on the price sensitive information to the Tippees and, consequently, we are of the opinion that the order of the AO does not suffer from an error of law.
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2020 (6) TMI 778
Petition for transfer of all matters to the Delhi High Court - HELD THAT:- As pointed out at the Bar that against the order of the learned Single Judge impugned in this Letters Patent Appeal, one of the parties has approached the Supreme Court and the matter is listed today. It is further stated that other matters relating to the same issue having been filed in different High Courts, there is a petition for transfer of all matters to the Delhi High Court which is also listed today before the Supreme Court. As agreed by the learned counsel for the parties, let this matter be posted on Tuesday i.e. 23.06.2020
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2020 (6) TMI 742
Ex-parte order passed by the Whole Time Member (“WTM‟) of Securities and Exchange Board of India (“SEBI‟) - direction to deposit a sum plus interest till date in an Escrow Account towards notional loss - Using unpublished price sensitive information - Direction that the bank accounts / demat accounts of the appellant shall remain frozen till such time the amount is not deposited - HELD THAT:- There is no finding that the appellant will remove the property or will dispose of all the property or that he would obstruct the proceedings or that he would delay the proceedings pursuant to the show cause notice. In the absence of any such finding, the ex-parte interim order cannot be sustained especially when the trades were of 2016 and from 2016 till the date of the impugned order there is no evidence to show that the appellant was trying to divert the alleged notional gain/loss
As held in North End Foods Marketing Pvt. Ltd. [2019 (4) TMI 800 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] there is no real urgency in the matter to pass an ex-parte interim order especially during the pandemic period. There is no doubt that SEBI has the power to pass an interim order and that in extreme urgent cases SEBI can pass an ex-parte interim order but such powers can only be exercised sparingly and only in extreme urgent matters. In the instant case, we do not find any case of extreme urgency which warranted the respondent to pass an ex-parte interim order only on arriving at the prima-facie case that the appellant was an insider as defined in the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations‟ for short) without considering the balance of convenience or irreparable injury.
The impugned order cannot be sustained and the same is quashed at the admission stage itself without calling for a counter affidavit except the show cause notice. The appeal is allowed. We further direct that the appellant to file a reply to the show cause notice within four weeks from today. The respondent will decide the matter finally after giving an opportunity of hearing to the appellant either through physical hearing or through video conference within six months thereafter. During the interim period, in order to safeguard the interests of the respondent and more particularly the interest of the investors in the securities market and also to protect the integrity of the securities market, we direct the appellant to give an undertaking to the respondent within four weeks from today that he will not alienate 50% of his total shareholdings of the company DTL held as on date, as stated by the learned counsel for the appellant.
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2020 (6) TMI 693
Orders for release of securities - learned senior counsel sought intervention of this Tribunal to stay such orders as well as to allow the appellant to dispose of the securities worth ₹ 21.62 crores and thereafter releasing the remaining securities given by Respondent No. 2 to the appellant - HELD THAT:- We pass the following interim directions - The parties shall appear before NSE, either physically or through Video Conference, on June 24, 2020. NSE shall give the contact details and arrangements for the said meeting to the parties at least one day in advance.
(b) Based on the database of NSE and other parties rights in respect of the securities in question shall be reconciled/determined within one week thereafter.
(c) This Tribunal will hear the matter further on Friday, July 03, 2020. In the interim status quo shall be maintained by the parties i.e. there shall be no transfer of securities as directed in the impugned orders nor the appellant shall alienate any of the securities in question.
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