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SEBI - Case Laws
Showing 361 to 380 of 555 Records
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2019 (9) TMI 246
Manipulative transactions - artificial trades - violation of SEBI Act and PFUTP Regulations - penalty imposed - HELD THAT:- Volume of trading, percentage of the market share traded by the appellants, timing of trades etc. are so glaring to ignore the manipulative nature of transactions concerned.
The appellant and another Noticee No. 3 were the major traders on the market wherein substantial trades matched between them and sizable quantity of self-trades also happened. Though, the appellant had traded in some other time slot as well in moderate quantity as contended, substantive volume of trade was carried out during the closing half an hour of trading clearly demonstrate that the objective was in manipulating the volume and prices though the rise in prices happened to be moderate (1.21%). In any case, volume manipulation is also a market manipulation under PFUTP Regulations, 2003. So the appellant (along with Noticee No. 3) had bought a total of 26.05 lakh shares and sold 20.73 lakh shares between 15:04 and 15:06 hours on August 23, 2010 and matched 78% of buy quantity and 100% of sell quantity of appellant with Noticee No. 3. Such a huge matching cannot happen without prior meeting of minds. Therefore, the contention that appellant had no connection with Noticee No. 3 does not have any merit.
Similarly, in the case of Green Field Infrastructure Pvt. Ltd. apellant along with other two appellants in the same appeal and Noticee No. 1 had taken large positions in call options on the same day i.e. April 28, 2010 with a total quantity exercised as 37,73,000 and an amount of ₹ 1,90,65,200 profit made. The submission by appellant in Sandeep Paul & Ors. that appellant Sandeep Paul was abroad and not even in India and it is the broker misusing the power of attorney that the impugned trades have been conducted is without any merit since the appellant had not taken any action on the issue. On the contrary, we note that the appellant had continued to deal with the same broker for almost a month thereafter and the appellant also availed the payouts credited to his account.
In any case, the responsibility of giving a power of attorney lies with the person who gives the same and in this case we notice that it was a blank power of attorney which was given and that too along with an advance credit amount of ₹ 5 crores.
As regards the alleged manipulation in the price volumes of MTNL substantial volume of trading between these entities happened between 15:29:24 and 15:58:25 hours. Therefore, the same set of buyers and sellers who were repeatedly buying and selling and creating artificial volumes without even changing the beneficial ownership. Such artificial trades is clearly violation of PFUTP Regulations, 2003.
Trading of this nature and in such huge volumes could not have happened between the parties at such short time intervals of just a few seconds without some prior meeting of their minds. In view of this, we cannot find fault in the findings in the impugned order that the appellants in these appeals have violated Section 12A (a), (b), (c) of the SEBI Act, 1992 and various stated provisions of PFUTP Regulations, 2003.
17. Accordingly, penalty is imposed on Appellants in all these Appeals under Section 15HA of SEBI Act, 1992 for violation of Section 12A (a),(b),(c) of SEBI Act read with various provisions of PFUTP Regulations, 2003. The penalty imposable under Section 15HA of the SEBI Act, 1992 for violations relating to fraudulent and unfair trade practices at the relevant time was twenty-five crore rupees or three times the amount of profits made out of such practices, whichever is higher. In the instant matters wherever there is findings to the effect that profits are made a higher penalty has been imposed while in other cases a lower/ nominal penalty has been imposed by taking the mitigating factors under Section 15J of the SEBI Act into account. Therefore, the submission that the penalties imposed are too harsh also has no merit.
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2019 (9) TMI 228
Application for settlement rejected on the ground of delay which is not condoned - eligible reasons for delay - Contravention of non-disclosure of tax demand - violation of certain provisions of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 alleging certain non-disclosures - HELD THAT:- Sufficient grounds were made out for condonation of delay. It may be that from the date of second show-cause notice, the period of delay was substantial. Mere number of days of delay would not decide the sufficiency of cause made out by the applicant for condonation of delay.
In the present case, it was pointed out that there was legal doubt whether once the company has been visited with penalty, subsequently show-cause notice can be issued against the directors of the company. Keeping the said legal dispute aside, it was decided to offer the settlement which would bring an early end to the dispute. The decision to offer settlement was, therefore, taken for saving time, cost and to bring early end to the litigation. The Board summarily rejected the said application by recording one line reason that the panel of whole time members did not find the reasons sufficient.
So is the case with the second application for condonation of delay dated 16.8.2017. In this application, the petitioner had made out further elaborate grounds. It was pointed out that upon receipt of the show-cause notice alleging certain non-disclosures, the petitioner began to verify whether all disclosures were duly made or not. These non-disclosures pertained to December, 2007, April, 2008, March, 2010 and March, 2011. Since the records were old, verification exercise took considerable time. Attempt was made to trace out documents of disclosure and despatch made to NSE and BSE. This caused further delay. It was further stated that even at present, the petitioner was not fully confident whether all disclosures were duly made or not. It is possible that though disclosures may have been made, documents are not immediately traceable since various officers in charge have changed from time to time. The petitioner was also additionally seeking legal advice on various aspects. Considering such facts and also looking to the fact that the adjudication proceedings have not commenced, the petitioner had in order to save time, cost and to curtail litigation, decided to apply for settlement.
The grounds made out for condonation of delay were elaborate and sufficient. Such grounds were rejected with one sentence that they were not found sufficient. In this case also, in our opinion, the Board has committed a serious error.
In both the cases, it was specifically stated by the petitioner and not refuted by the Board that at the time of making the settlement application, adjudication proceedings (of second and third show-cause notices) had not yet commenced. No progress at all in the show-cause notices had, therefore, been made. The petitioner had not benefited out of delay. The applications for condonation of delay at exhibit M and exhibit P stand allowed.
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2019 (8) TMI 1887
Jurisdiction of the Special Court treating offences committed territorially under the SEBI Act - scope of proceedings after the amendment of the SEBI Act 2014 and offences under the SEBI Act committed prior to the 2002 amendment - revisionist would argue that no part of the cause of action in the original complaint that was adjudicated by SEBI arose in Kolkata and the entire proceedings were initiated at Mumbai in which the revisionist was penalised as said first proceeding was carried in appeal to the Securities Appellate Tribunal at Mumbai, which affirmed the order of the Adjudicating Officer - HELD THAT:- As in the case of Securities and Exchange Board of India –Vs.- Classic Credit Limited [2017 (8) TMI 869 - SUPREME COURT] related to a trial and not enforcement of a final order passed by the Adjudicating Officer. Since the final order of the Adjudicating Officer has been upheld all the way to the Supreme Court. The issue as to the person to whom the penalty should be paid can no longer be reopened. The impugned proceedings are for failure on the part of the Revisionist to repay the amount of the order of the Adjudicating Officer to the Regional Manager of the SEBI at Kolkata. The principle to be followed in this regard is that an executing court cannot go behind the original order that is sought to be executed.
This Court finds no infirmity in the proceedings and, therefore, the revisional application must fail and hereby dismissed.
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2019 (8) TMI 1474
Violation of SEBI (Listing and Disclosures Requirements) Regulations, 2015 - inordinate delay the initiation of proceedings by issuance of the show cause notice which culminated into a penalty order - Directors sold the shares during investigation period proposal for change in management of the company was moved through postal ballot for approval of members on July 22, 2010 but no corporate announcement was made to the Exchange regarding the Board Meeting - HELD THAT:- There has been an inordinate delay on the part of the respondent in initiating proceedings against the appellants for alleged violations. Much water has flown since the alleged violations and at this belated stage the appellants cannot be penalized. It is alleged that disclosure under PIT Regulations was not made but similar disclosure was made by the appellant under SAST Regulations. Therefore, information was available on the Stock Exchange and therefore it cannot be said that the respondents were unaware of the alleged violations. Further, the purpose of disclosure was to make the market aware of the change of shareholding of the shareholders. When a disclosure was made by the company under SAST Regulations the investors became aware of the change in the shareholding. The non-compliance of Regulation 13 if any becomes technical in nature.
We are of the opinion that there has been an inordinate delay in the issuance of the show cause notice and for completion of the adjudication proceedings. Since the power to adjudicate has not been exercised within a reasonable period no penalty could have been imposed for the alleged violations - on account of inordinate delay the initiation of proceedings by issuance of the show cause notice which culminated into a penalty order cannot be sustained.
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2019 (8) TMI 1441
Public issue of securities without complying with the provisions of the Companies Act, 1956 - Liability of director - WTM has held that the Company has violated provisions of Section 73(2) of the Companies Act and has therefore in the same breadth has booked all the Directors to be responsible for the day today affairs of the Company - HELD THAT:- This approach as stated earlier was wholly incorrect. Section 73(2) of the Companies Act makes it apparently clear that if in the first instance it was the Company which was liable to repay the monies received from the investors and if the Company failed to repay the amount then the amount would be recovered jointly and severally from every Director of the Company as an officer in default. Therefore, where the Company is the offender vicarious liability of the Directors cannot be imputed automatically.
WTM was required to arrive at a specific finding that a Director or Directors were responsible for the acts of the Company. The mere fact that a person is a Director would not make him automatically responsible for refund of monies under Section 73(2) of the Companies Act.
WTM has given a categorical finding that Shri Shib Narayan Das was responsible for the affairs of the Company. It was not open for the WTM to pass further orders on the other Directors, namely, the appellant especially when there is no finding nor there is a shred of any evidence to indicate that the appellant was also responsible for the affairs of the Company.
Thus, the direction of the WTM against the appellant that she is also liable to refund the monies collected by the Company during the respective period of Directorship of the appellant along with interest cannot be sustained. The impugned order to that extent cannot be sustained and is quashed.
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2019 (8) TMI 1307
Conversion/sale/ encashment of the mutual funds - Interim protection with regard to payment under the option contract may be granted till the first hearing by the Appellate Authority - HELD THAT:- The National Security Clearing Corporation Limited will honour F & O Segment contract which had matured on 27th June, 2019 and has not been paid in view of the interim order passed by this Court [2019 (6) TMI 1388 - SUPREME COURT] The interim order is vacated, clarifying that the payments would be without prejudice to the rights and contentions of all the parties and subject to the final outcome and directions that this Court would pass.
Option is given to Novjoy Emporium Private Limited, OCL India Limited and Dalmia Cement East Limited to ask for conversion/sale/ encashment of the mutual funds which were purportedly furnished as a security by Allied Financial Services Private Limited. Similar option is also given to 44 parties who had preferred Appeal [2019 (6) TMI 1386 - SECURITIES APPELLATE ] before the Securities Appellate Tribunal, Mumbai.
On the option being exercised, IL & FS Securities Services Limited shall convert/encash the mutual funds, and the amount realised would be deposited in a fixed deposit in a Nationalised Bank for a period of six months to earn maximum interest. The deposit would be in the name of IL & FS Securities Services Limited and abide by further orders/directions of this Court.
The question of jurisdiction of Securities and Exchange Board of India, Securities Appellate Tribunal and the plea of IL & FS Securities Services Limited relying upon clause(5) of Chapter VII of the Bye-Laws framed by the National Security Clearing Corporation Limited are left open and would be decided at the time of final hearing.
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2019 (8) TMI 1143
Running a Collective investment scheme [CIS] without obtaining the certificate of registration - order of refund of the monies collected illegally under the CIS Scheme - direction of WTM directing refund of the monies collected under the CIS - appellant seeking to circulate the information memorandum under Regulation 73 to its investors - HELD THAT:- Regulation 73 is not applicable in the instant case in as much as it was not an existing scheme as on the date of incorporation of the Regulations which came into effect on January 25, 1995. The appellant’s CIS scheme came into effect much after 2005.
In SEBI vs. Gaurav Varshney and Ors. . [2016 (7) TMI 642 - SUPREME COURT] has categorically held that an existing collective investment scheme within the meaning of Section 12(1B) as also within the meaning of collective investment regulations, comprise of only such collective investment scheme which has come into existence prior to January 25, 1995. In the instant case, the appellant’s scheme came into existence much after January 25, 1995 and, thus, Regulation 73 of the CIS Regulations is not applicable.
Once there is an order to refund the money collected by the appellant under the scheme, the question of circulating the information memorandum to the contributories under Regulation 73(6) and requiring the contributors / investors to give their consent under Regulation 73(7) does not arise. Such exercise would be defeating the order of refund of the monies collected illegally under the CIS Scheme.
Merely quoting a wrong provision of the Statute while exercising power under an Act would not invalidate the order passed by the authority if it is shown that such order could be passed under other provisions of the Statute
When there was a clear cut direction of WTM directing refund of the monies collected under the CIS, the question of continuing with the scheme by distribution of information memorandum under Regulation 73 does not arise. The application of the appellant seeking to circulate the information memorandum under Regulation 73 to its investors was patently misconceived and was rightly rejected.
Request for extension of time to refund the monies, we are of the opinion that the WTM rightly rejected the application. Enough latitude has been given to the appellant to refund the amount. More than five years have elapsed and the order of SEBI dated June 21, 2013 is yet to be implemented in full.
Upon consideration of the material that has been brought on record, we find that even though the independent auditor was appointed on August 6, 2015, for almost three months, the appellant did not schedule a meeting with the auditor. As a result, the auditor had to intimate SEBI that they were unable to continue with the audit on account of non-cooperation by the appellant. Based on this non-cooperation, a show cause notice dated November 20, 2015 was issued to show cause as to why the order dated May 27, 2015 should not be revived. In this show cause notice, it was categorically indicated that the auditor had made request on September 2, 2015, October 6, 2015, October 20, 2015 and November 2, 2015 for holding a meeting which the appellant failed to adhere. The record also indicates that the audit recommenced on March 21, 2016 and inspite of auditor taking a sample of 49282 out of 257477 investors, the company failed to provide the necessary certificates and only provided 8471 certificates and that too without providing the bank statements for cross verification.
Appellant resorted to all kinds of dilatory tactics in not getting the repayments verified, namely, whether the appellant had actually refunded the amount to the investors. WTM also took note of the income tax report in which it was indicated that monies have not been refunded to the investors and have been diverted to a sister company of the appellant. In the light of the conduct of the appellant, we are of the opinion that admittedly the entire amount has not been repaid to the investors and whatever has been alleged by the appellant to have been repaid has not been verified. The appellant is guilty of adopting dilatory tactics in getting the repayments verified.
Thus, we are of the opinion that the application for extension of time to refund the amount was rightly rejected. It may be stated here that more than ₹ 1900 crores were collected which till date has not been refunded inspite of the order being passed by SEBI on June 21, 2013. Thus, no relief can be granted to the appellant.
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2019 (8) TMI 974
Buyback of shares at a grossly understated valuation - breach of the minimum public share holding requirement as specified in Rule 19(2) and Rule 19 (A) of the Securities Contracts (Regulations) Rule 1957 - grievance of the petitioners that the process of buyback is being undertaken when investigation in respect of the promoters of respondent No.2 is pending - Whether the Circular dated July 25, 2017 issued by the SEBI is non-est in law? - HELD THAT:- Vide the said circular SEBI permitted a Company to buy-back the shares so as to provide an exit to the public shareholders. At the outset, it must be stated that the circular has been challenged after two years of its coming into existence. Within these two years, it has been made operational / implemented.
It is quite late in the day for the petitioners to challenge the circular on the ground that the company cannot be allowed to buy back shares. Even otherwise, the impugned circular has to be read in conjunction with Section 68 of the Companies Act as it stipulates buyback of shares in a particular manner. Any reading of the circulars in the manner stated by the petitioners shall be in violation of the Companies Act creating an anomalous situation whereby the buy-back of shares while the Company is on the Dissemination Board shall be contrary to the Companies Act which allows buy-back as a legitimate and legal corporate action. Having said that, this court proceeds to deal with the submissions of the counsel for the parties on the premise that the company can buy back shares.
The exit circulars nowhere expressly state that all the public shareholders need to be given complete exit. The reliance was placed on the words “number of outstanding public shareholders” in clause (VII) of Annexure A of 2016 circular. The words have to be read in the context when exit offer is given an escrow account shall be opened in favour of the valuer / designated stock exchange wherein, deposit of the amount on the basis of exit price and number of outstanding public shareholders shall be made. This is keeping in view, all the public shareholders shall be given option to sell their share but it is not necessary all the public shareholders shall opt to sell their shares. It was rightly pointed out by Mr. Sethi that shareholder is also free to reject the buy-back offer and continues to be a shareholder. So, it follows the circulars do not contemplate the exit of all public shareholders.
The plea of Mr. Vashisht that the impugned circular does not give timelines and road map is concerned, the same is also without merit. Also the plea that the impugned circular does not protect the interest of the investors is concerned, as stated above there is no compulsion for the investors to sell or not to sell his share. So, it cannot be said that the petitioners’ interest has been put in jeopardy.
The issue of identifying the promoters has no effect on a company giving an exit to its public shareholders, as the option to buy back the shares of the public shareholders is available through a promoter or through the company itself.
It is the case of the respondent no.2 BNL that it has no promoters and it has decided to buy-back the shares itself. Assuming promoter / promoter groups are identified, then also the discretion / right of the company to buy-back shares cannot be interdicted / curtailed as is clear from the impugned circular which provides for such an option to a Company. This conclusion also answer the plea of Mr. Vashisht that failure on the part of the promoters to give full and fair exit to public shareholders shall entail penalties as being without merit inasmuch as, when there is no obligation, there is no question of penalties.
Circular of 2016 stipulates action against a company, its director on their failure to provide exit to the shareholders, which includes the action stated therein. It is not the case of the petitioner that respondent no.2 company has failed to provide exit to its shareholders. So, it follows, the postal ballot dated July 13, 2019 is in that direction, which cannot be faulted.
One of the pleas of Mr. Vashisht was that the price offered for share is not the fair value, and amongst other factors, market value of investments made by the respondent No.2 have not been considered and even the valuation report dated June 6, 2019 issued by Corporate Professionals Capital Private Limited does not reveal the fair value of the shares of the Respondent No.2 and in fact admits lack of information and documents, is concerned, if the petitioners are not satisfied with the valuation, they are within their right not to accept the offer of buy-back at that rate. I note, respondent no.2 has justified share value by stating that under Section 68 (2)(c) of the Companies Act, 2013, a company can buy-back 25% of the Company’s full paid up equity share capital and free reserves and as per the last unaudited stand alone financial statements for the year ending March, 2019, the aggregate paid up share capital and free reserves of the company amounted to ₹ 97,87,99,681/- and 25% of the amount would be ₹ 24.46 Crores and with each share valued at ₹ 11,229/-, the total number of shares that would be offered is 21,791/- equity shares. If that be so, there is some justification of the respondent no.2 to value the share @ ₹ 11,229/-. In any case, this court does not have necessary wherewithal to determine the share value and surely the determination shall be beyond the scope of judicial review.
We agree with the submission made by Mr. Sethi that Prayer (2) of the writ petition challenging the Postal Ballot and Notice and PA of the respondent no.2, shall not be maintainable as their issuance is purely an action of the company incorporated under the Companies Act. It is not the case of the petitioners that the same have been issued contrary to the circulars issued by SEBI or provisions of the Companies Act. That apart through this writ petition, the petitioners who are two shareholders holding a miniscule number of shares cannot interdict the process of buy back.
Viability of buy-back needs to be decided through the special resolution, passed at the general meeting of the company through the postal ballot, wherein it is clearly mentioned that a shareholder can vote for or against the resolution.
This court is of the view that the impugned circular dated July 25, 2017 is in accordance with the law and the prayer made at serial no.2 of the writ petition cannot be granted as being not maintainable. In so far as the prayer no.3 is concerned, there is no dispute that the SEBI is investigating the issue of breach of MPS norms by respondent no.4, which has no connection with the issue of buy back of shares by the Company.
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2019 (8) TMI 589
Disclosure by company to stock exchanges - consequences of non disclosures - Violation of Section 23A of the Securities Contracts (Regulation) Act, 1956 (“SCRA”) - violation of Section 23E of the SCRA for failure to comply with Clause 36 of the Listing Agreement - penalties under Section 15A(b) of the SEBI Act, 1992 as well as under Section 23A(a) and Section 23E of the SCRA for violation of Regulation 13(6) of SEBI (Prohibition of Insider Trading) Regulations read with Clauses 2.1 and 7.0(ii) of Schedule II for Code of Corporate Disclosure Practices for Prevention of Insider Trading specified in Schedule II read with Regulation 12(2) of PIT Regulations as well as violation of Clause 36 of the Listing Agreement - HELD THAT:- Guidance Note indicates that the listed company is required to consider the impact of such disclosure on legal/ court proceedings while making the disclosure and if the listed entity is of the opinion that making any such disclosure was not in the interest of the listed entity then such disclosure may be limited to the extent of stating the occurrence of the event. Thus, a discretion was given to the Company to decide whether full disclosure should be made to the Exchange and where such information was not in the interest of the listed entity, then limited disclosure should be made. Further, the Guidance Note clearly indicates that the listed entity was required to notify the Stock Exchange where such assessment, etc. had a material impact and shall continue to inform the Stock Exchange till the cessation/conclusion/settlement of the event/dispute.
In the light of the above, we find that the assessment order and the demand raised pursuant thereto is a “material event” and had a “material impact” on the profitability / financials of the company. It has come on record that the networth of the company was ₹ 365 crores and a demand of ₹ 450 crores was made in the assessment order. Such demand which eats away the networth of the company is in our opinion a material event and the assessment order had a “material impact” which the company was required to report to the Exchange “promptly” and which was required to be made public “immediately”.
We also find that in the instant case a conscious decision was taken by the management of the company not to disclose the said information under Clause 36 of the Listing Agreement. In fact, when clarification was sought by the Stock Exchanges it is only then the information was provided at a belated stage on May 26, 2014 and May 29, 2014 after more than 3 months of the final assessment order dated February 21, 2014. Thus, we are of the opinion, there was gross failure on the part of the appellant in not making the disclosure under Clause 36 of the Listing Agreement. The contention that the information was supplied belatedly is misconceived and an afterthought. No such stand was taken before SEBI and the appellant cannot be allowed to change its stand at this stage.
Under Section 23A, a penalty of ₹ 25,00,000/- (Rupees Twenty Five Lakhs only) has been imposed for failure to furnish the information within the time specified. In the instant case, there has been a gross failure to furnish the information and, in our opinion, there was a total non-disclosure on the part of the appellant in furnishing the information. A penalty of a maximum of ₹ 1 crore could have been imposed for such failure but the AO considering all aspects of the matter has imposed a penalty of ₹ 25,00,000/- (Rupees Twenty Five Lakhs only) which is just and fair and, is neither arbitrary, nor is unreasonable. We thus do not find any error in the quantum of penalty.
Under Section 23E of the SCRA the penalty is a minimum of ₹ 5 lakh upto a maximum of ₹ 25 crores. We find that in the instant case, the appellant failed to comply with the listing conditions and considering the factors the AO imposed a penalty of ₹ 1,75,00,000/- (Rupees Once Crore Seventy Five Lakhs only). We do not find any reason to hold that the said quantum was unreasonable or arbitrary. In our opinion, considering the material event which was not disclosed we are of the opinion, that the penalty imposed is just and proper in the circumstances of the case.
The contention that Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 2005 was not taken into consideration while adjudging the quantum of penalty is wholly erroneous. The factors contemplated under Rule 5 of the Rules 2005 are the same as factored in Section 23J of the SCRA. These factors were duly considered based on which the authority has not imposed the maximum penalty. Thus, the contention that the factors were not taken into consideration is patently erroneous.
Appeal filed by the Company NDTV, its Directors and Compliance Officer - non-disclosure of ₹ 450 crores demand raised by the Income Tax Department under Clause 36 of the Listing Agreement as well as delayed disclosure by the Appellant No. 1 under PIT Regulations and non-compliance by all the appellants under Clauses 2.1, 3.2 and 7.0 (ii) of Schedule II for Code of Corporate Disclosure Practices for Prevention of Insider Trading read with Regulation 12(2) of SEBI (Prohibition of Insider Trading) Regulations (“PIT Regulations” for convenience) Regulations - HELD THAT:- No error in the finding given by the AO that the appellant company had violated Regulation 13(6) and Clauses 2.1, 3.2 and 7.0 (ii) of Schedule II for Code of Corporate Disclosure Practices for Prevention of Insider Trading read with Regulation 12(2) of PIT Regulations.
no such disclosure has been filed to show that a particular authority was nominated for such purpose. On the other hand the stand of the appellants was that a conscious decision was taken by the management not to disclose the material event.
Imposition of ₹ 2 lakh upon the Compliance Officer for violation of Clause 36 of the Listing Agreement was unjustified. The Compliance Officer works under the direction of the Board of Directors of the Company. It was not open to the Compliance Officer to comply with Clause 36 of the Listing Agreement. At the end of the day, the Compliance Officer is only an employee of the Company and works on the dictates and directions of the management of the Company. Thus, when the entire management is being penalized, it was not open to the AO to also book the Compliance Officer for the said fault. We accordingly, hold that the imposition of penalty of ₹ 2 lakh on the Compliance Officer cannot be sustained and, to that extent, the order cannot be sustained. The Compliance Officer was however liable to comply with the disclosure under Regulation 13(6) and Clauses 2.1, 3.2 and 7.0 (ii) of Schedule II for Code of Corporate Disclosure Practices for Prevention of Insider Trading read with Regulation 12(2) of PIT Regulations and, to that extent, the penalty imposed by the AO is affirmed.
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2019 (7) TMI 1910
Documents necessary for the purpose of filing an appropriate reply to the show cause notice - Application filed praying for inspection of documents on the ground that it will have a material bearing for the purpose of filing the reply to the show cause notice - HELD THAT:- Having heard the learned counsel for the parties and having perused the list of documents so required for inspection we are of the opinion that the documents sought for is nothing but a roving and fishing enquiry. We accordingly do not find any merit in the submission of the learned counsel for the appellant that these documents are essential for the purpose of filing an appropriate reply.
If any document is relied by the respondent while disposing of the matter such document should be made available to the appellant. The appeal is accordingly disposed of.
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2019 (7) TMI 1894
Guilty of indulging in financial irregularities and misconduct in conduct of business - fine/penalty of ₹ 10 lakhs with suspension from trading membership of the appellant for five trading days came to be imposed - As submitted that the decision of the DAC of NSE is in violation of NSE Circular dated June 27, 2013, because, as per that circular suspending the trading is not contemplated for the violations allegedly committed by the appellant - HELD THAT:- Appellate Tribunal, has not examined this contention but proceeded to reject the appeal on the specious ground that the penalty imposed by the appropriate authority cannot be said to be unreasonable or excessive. The argument of the appellant was that even though the appropriate authority can suspend the trading membership of the member indulging in misconduct, it can be resorted to only when it falls within the concerned Bye-law such as Bye-law 8(a) relied upon by the respondent - which envisages that the trading member must conduct business “in a manner prejudicial to the Exchange” etc.
The penalty could not have exceeded an amount of ₹ 1 lakh or 0.1% of the value of misuse, whichever is higher. These arguments have not been dealt with by the Appellate Tribunal at all.
Resultantly, we deem it appropriate to set aside the impugned order and relegate the appellant before the Appellate Tribunal by restoring appeal No. 53 of 2017 to the file of the Securities Appellate Tribunal, Mumbai for reconsideration only on the issue of quantum of punishment awarded to the appellant. Indeed, while passing the final order, it will be open to the Tribunal to pass appropriate order with regard to the amount deposited by the appellant pursuant to order dated 27.02.2017 passed by this Court.
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2019 (6) TMI 1572
Admissibility of petition - Appellant submitted that ‘Securities and Exchange Board of India’ having already taken action against the ‘Corporate Debtor’, the application u/s 7 was not maintainable - whether contesting Respondent is ‘Financial Creditor’ or not - Section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Resolution professional may continue to perform his functions. Only grant stay of the direction of the NCLT in so far as it has directed SEBI to hand over the title deeds to the resolution professional. It is further made clear that the SEBI shall not in any manner create any encumbrance on the properties held by them by virtue of the title deeds.
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2019 (6) TMI 1388
Interim protection with regard to payment under the option contract may be granted till the first hearing by the Appellate Authority - Learned Solicitor General appearing for the Securities and Exchange Board of India (SEBI) has submitted that the order dated 24.06.2019 is not appealable. HELD THAT:- Keeping in view the limited prayer made by the applicant/appellant, we dispose of the present application by directing that the applicant/appellant may file/prefer, in terms of the statement made, proceedings challenging the order dated 24.06.2019 on or before 27.06.2019 with an application for stay in accordance with law. There would be stay of payment obligation under the option contract till the first date of hearing before the relevant Forum/Court. We further clarify that in case the applicant/appellant delays or otherwise there is delay in listing of the matter, it will be open for the respondents to point this out to the appropriate Forum/Court and ask for vacation of stay. We clarify that we have not expressed any opinion on the merits and all questions are left open. It will be open to the Forum/Court to vacate, extend or modify the stay of payment order passed by us.
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2019 (6) TMI 1386
Illegal transfer of securities - clearing the trades of other parties - HELD THAT:- While the matter was being heard, we directed the learned counsel appearing for SEBI to seek necessary instructions as to how the appellants are to be protected, if they are found to be genuine investors.
When the matter was again taken up after lunch a submission was made by the learned senior counsel that they need further time to seek complete instructions in the matter and requested that the matter may be taken up tomorrow.
We adjourn the matter today and the same would be taken up tomorrow i.e. on June 26, 2019 as the first case at 10.30 a.m. We make it clear that the complete instructions be obtained from SEBI, namely, as to how the appellants and other concerned entities would be protected under the SEBI Act if they are found to be genuine investors at the end of the day.
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2019 (6) TMI 1030
Ex-parte ad-interim order - Appellant has been prohibited from buying, selling or dealing in securities, directly or indirectly - seeing vacation of the ex-parte order - HELD THAT:- When an ex-parte interim order is passed and a party approaches the authority for vacation of the ex-parte order, the authority is required to act prudently especially when the party approaches the authority immediately for its vacation which in the instant case was done within three days from the passing of the exparte order. The appellant filed its reply as early as on November 3, 2017.
Ex-parte interim order continued till the confirmatory order was passed on October 30, 2018. In our opinion, apart from the delay in disposal of the matter, the ex-parte order was confirmed mechanically without any application of mind and without considering the relevant documents. In our opinion, there was no shred of evidence to come to a prima-facie conclusion that the appellant was indulging in unfair trade practices with a manipulative intent to manipulate the price.
The appellant has stated on affidavit before SEBI on December 23, 2017 that he has no other source of income except trading in shares and that as a result of the ex-pate order, his broker prematurely closed his trading positions which the appellant had taken in F&O segment resulting in a loss of ₹ 50 lacs. This aspect has not been considered by the WTM.
Whenever an ex-parte order is granted, an endevour should also be made to dispose of the matter as expeditiously as possible no sooner when the party appears. In the instant case, the ex-parte order was passed on November 1, 2017 and the appellant filed his replies on November 3, 2017, November 28, 2017 and December 23, 2017. WTM almost a year to dispose of the application. We find that at this late stage there was no real urgency to continue with the restraint order. Passing a confirmatory order virtually puts a stoppage on the appellant’s right to trade which in the instant case is based on non-consideration of evidence and, in our opinion, is harsh and unwarranted. In our opinion, for the aforesaid reasons, the appellant is, thus entitled to get costs from the respondent.
Ex-parte ad-interim order as confirmed by the confirmatory order cannot be sustained and are quashed in so far as it relates to the appellant. It would be open to SEBI to pass a fresh order in accordance with the principles of natural justice if and when fresh evidence comes before it. In the circumstances of the case, the appellant is entitled to get costs and is computed at ₹ 50,000/- (Rupees Fifty Thousand Only) which shall be paid by the respondent to the appellant within four weeks from today. Proof of compliance will be intimated to the Registrar of this Tribunal.
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2019 (6) TMI 968
Sham loan transaction - violation of the SEBI laws - whether the loan agreement, in fact, wrested control of NDTV to VCPL? - Whether call option gives an unfettered right of controlling the company without exercising the right of call option? - HELD THAT:- Upon the interpretation of the loan agreement at this stage, we are of the opinion that these agreements have remained in existence for the past 10 years. The loan agreements were executed in the year 2009 and 2010. Whether there was a violation of the SEBI laws including the PFUTP Regulations are all required to be considered. At this stage, prime-facie, we are of the opinion that a listed company which is managed by the appellants holding more than 61% of the total shares cannot remain headless. The impugned order has been passed restraining the appellants, Dr. Prannoy Roy and Ms. Radhika Roy from occupying a position as a Director or in any Key Managerial personnel in NDTV for a period of two years. Such orders prima facie would not be in the interest of the shareholders of the NDTV or for that matter the investors at this stage.
We accordingly, grant the respondent six weeks time to file a reply from today. Three weeks thereafter to the appellants to file a rejoinder. The matter would be listed for admission and for final disposal on September 16, 2019.
Even though the prayer for an interim stay was strongly opposed by the learned senior counsel for the respondent, considering the aforesaid, we stay the effect and operation of the impugned order dated June 14, 2019 till the next date of hearing. However, the appellants shall not alienate or create any encumbrance on their shareholding in NDTV till further orders.
It is essential for SEBI to supply a copy of the impugned order to the aggrieved party, namely, the appellants. An adjudication proceeding had been initiated by SEBI by issuance of the show cause notice. The appellants thus have the first right to be supplied a copy of the impugned order from SEBI.
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2019 (6) TMI 843
Annulment of certain trades executed in NIFTY Options Contract - order of the Independent Oversight Committee of the National Stock Exchange of India Limited challenged - HELD THAT:- All trading members who were doing the trades at the relevant time, therefore, were expected to be aware of the possibility of prices moving within these ranges. We are also told that along with the best five prices shown on the trading screen the quantities on offer are also available against those best prices. So traders wanting to trade in large quantities had to be conscious of the possibility of matching their trades at prices substantially varying from the five best prices shown on the screen. It is not for this Tribunal to get into the issue of how prices can vary suddenly from ₹ 100 to ₹ 10 or even ₹ 1 within a fraction of a second except restating that the automated trading system of a highly liquid options market is so complex and fast changes in prices based on various factors are expected in milliseconds or even microseconds. In a liquid market, the market moves even within the time when an order is placed and a huge order itself will move prices are known to all experienced traders like the appellant.
It is an admitted fact that the traders of the appellant did not use the limit order route. It is also an admitted fact that a large quantity of NIFTY Options were placed for sell in the last few minutes of the closure of the trading day which was also the expiry day of the contract. It is also a generally known fact that on the expiry day of a contract prices tend to fall and, therefore, executing large orders will invariably gravitate towards lower prices.
Here the price range was set by the Black-Scholes methodology and in the range of ₹ 0.05 to ₹ 570.10 for NIFTY put Options ₹ 6000 and between ₹ 0.05 to ₹ 687.45 for NIFTY call Options ₹ 5700. When a methodology was known to the market participants and as per the methodology price range was set we cannot interfere with such a system in arbitrarily deciding what should be far away prices from the intrinsic value. There were 101 counter parties who all were aware of the applicable price ranges and placed orders at different prices.
Bye-law 5 of the Exchange NSE is essentially about upholding the sanctity of trade since it is on “inviolability of trade”. Accordingly, we agree with the contention that annulment of trade should be resorted to only in extreme cases as specified under this bye-law. We do not agree with the contention of the appellant that it was a material mistake from the side of the trader / dealers of the appellant and, therefore, we do not agree that the impugned trades are liable to be annulled.
Exchange was not very clear when they issued advisories to the trading members that they should not be placing orders at far away prices. It is also noted that such advisories were issued even on August 14, 2013. Similarly, the Circulars dated November 16, 2010 and April 24, 2012, the issue of price range and flexing of price range from ₹ 1 to ₹ 3 etc. is ambiguous. Regulatory instruction, particularly relating to trading and settlement matters should be clear and unambiguous and also clearly stating the consequences of violations. Such violations, if any, also need to be dealt with appropriately. However, we refrain from issuing any directions to NSE in this regard at this time since by the Circular dated April 11, 2014 greater clarity and certainty have been brought in clearly stating the range within which only trading is possible in the options segment as well.
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2019 (6) TMI 823
Non disclosure of material information to the shareholders of NDTV about loan agreements entered into by promoters as well as directors of NDTV with Vishvapradhan Commercial Private Limited ( “VCPL”) - RRPR Holdings Pvt. Ltd. (“RRPR/Noticee no. 1”) which is one of the promoters of NDTV, Dr. Prannoy Roy ( “Noticee no. 2”) and Ms. Radhika Roy (“Noticee no. 3”), who are promoters as well as directors of NDTV, have violated the provisions of “SEBI Act” - irregular and fraudulent conduct of the promoters - HELD THAT:- As Noticees have contended that Clause 49(I)(D) of the Equity Listing Agreement came into effect only from the year 2014, therefore, in the year 2009, there was no requirement of making disclosures in respect of the loan agreements made earlier to that year. It is noted that Clause 49 of the Listing Agreement was first introduced through Circular dated February 21, 2000 and was thereafter amended from time to time. Therefore, the contention of the Noticees that Clause 49(I)(D) of Equity Listing Agreement came into effect only from the year 2014, is factually not correct.
Noticees entered into three loan agreements, one with ICICI and two with VCPL. These loan agreements contained material and price sensitive information, in as much as action/decision on many important matters pertaining to NDTV were made subject to prior written consent of the ostensible lender and without the knowledge of the minority shareholders of NDTV. Under the VCPL agreements and the two call option agreements executed as supplementary to the said loan agreements, beneficial interest in 30% shares of NDTV was effectively vested in VCPL. All these information were profoundly material and price sensitive information which would have influenced the investment decision of the investors in the shares of NDTV, had they been made aware of these information at that time. Terms of the loan agreements were devised to affect the interest of shareholders of NDTV. Although various clauses in the loan agreements deceitfully created a binding obligations on NDTV, Noticees have consented to such clauses behind the back of the shareholders of NDTV to further their own private interests. Having held the dominant position and being majority shareholders of NDTV, Noticees have manifestly assured VCPL to ensure swift compliance of such clauses of the loan agreements pertaining to NDTV, thereby taking all other shareholders for granted and also compromising the interest of shareholders of NDTV.
In order to conceal the said information from the investors so that the investors continue to trade in the shares of NDTV blissfully ignorant of the fact that the promoters of the company have already vested their voting rights to the extent of 30% in favour of a third external party, Noticee no. 2 and 3 have chosen to act in flagrant breach of Code of Conduct of NDTV. If the said information regarding loan agreements had been disclosed by the Noticee no. 2 and 3 to the Board of Directors of NDTV, then the company was bound to intimate the same to the stock exchanges which in turn, would have disseminated such information on their websites for information of general public.
The loan agreements were unmistakably structured as a scheme to defraud the investors by camouflaging the information about the adversarial terms and conditions impinging upon the interest of NDTV’s shareholders, thereby inducing innocent investors to continue to trade in the shares of NDTV oblivious to such adversarial developments in the shareholding of NDTV.
Noticees i.e. the promoters and Directors of NDTV have been found to have indulged in fraudulent acts wherein they have bartered away the interests of NDTV by making them subject to prior written consent of ICICI/VCPL without disclosing the same to the company (NDTV). Noticee no. 2 and 3 have also opted to violate the Code of Conduct of NDTV which they were supposed to abide by, being the Chairman and Managing Director of the company. Noticee No. 2 and Noticee No. 3 have consciously taken such a position under the loan agreements which was directly inconsistent with their role as Chairman and Managing Director. Noticee No.1, Noticee No.2 and Noticee No.3 are grossly in violation of the provisions of Section 12A (a), (b), (c) of SEBI Act read with Regulations 3 (a), (b), (c), (d) and 4 (1) PFUTP Regulations. Further, as pointed out above, Noticee no. 2 and 3 are also in violation of Clause 49 (1)(D) of Equity Listing Agreement read with Section 21 of SCRA.
Directions:
(i) Noticee no. 1, 2 and 3 are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of two (2) years. It is also clarified that during the said period of restraint/prohibition, the existing holding, including units of mutual funds, of the Noticees shall remain frozen;
(ii) Noticee no. 2 and 3 are restrained from holding or occupying position as Director or any Key Managerial personnel in NDTV for a period of two (2) years; and
(iii) Noticee no. 2 and 3 are restrained from holding or occupying position as Director or any Key Managerial personnel in any other listed company for a period of one (1) year.
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2019 (6) TMI 640
Failure to make disclosures under Regulations 13(3), 13(4A) read with 13(5) of SEBI 'PIT Regulations' and ‘SAST Regulations’ - appellant sold 6,00,000 shares without requisite disclosures - as contented the physical share certificates had been lost or misplaced and were not traceable - penalty imposed - HELD THAT:- We find that the consistent stand of the appellant was that he had never sold the shares and that the physical shares were misplaced or lost and were not traceable. In order to verify this aspect the Registrar Transfer Agent was called who produced the share transfer forms as well as the original certificates which showed the signatures of the appellant. The signatures of the appellant matched with the specimen signatures kept with the Company. The contention of the appellant that the expert opinion provided by the appellant with regard to his signatures was not taken into consideration is patently misconceived.
AO considered the expert opinion and found that it was not necessary as there were ample evidence to show that the signatures on the share transfer forms were that of the appellant. We are further of the opinion that no attempt was made by the appellant to get the signatures appended in the share transfer form compared with the specimen signatures kept with Company. Verifying and comparing the signatures of the appellant on the share transfer forms with the signatures of the appellant on other documents like PAN Card, Passport, Bank signatures are immaterial when specimen signatures of the appellant are kept with the Company. The primary evidence for comparing the signatures is the specimen signatures kept with the Company.
Allegation that no opportunity was given to the appellant to cross-examine the Registrar and Transfer Agent is patently erroneous and an afterthought. No such stand was taken by the appellant before the AO in this regard nor any such application was made to this effect. The fact that the transfers were made at various places in Gujarat is immaterial. What is material is the signature of the appellant on the shares transfer certificates.
The contention that the signatures of the witness are different in the share transfer forms cannot be accepted at this stage. Such stand was not taken before the AO nor any ground has been taken before us in this appeal. Such arguments cannot be made without there being a ground in the appeal.
The contention that the physical shares of ₹ 10/- each could not have been transferred unless the split share certificates were given is patently erroneous. The Companies Act did not at any stage prohibit the transfer of pre-split shares to the transferee. The contention raised does not have any merit.
Thus, the contention of the appellant that he had never sold the shares cannot be believed in as much as the signatures of the appellant on the share transfer form was duly verified from the specimen signatures kept with the Company. The contention that the signatures on the share transfer forms were forged was rightly disbelieved.
Imposition of penalty is grossly disproportionate to the violation committed by the appellant. Further, the factors contemplated under Section 15J have not been considered. We affirm that part of the order of the AO holding that the appellant had violated the provisions of Regulations 13(3), 13(4A), and 13(5) of the PIT Regulations and Regulations 29(2), 29(3), 30(2) and 30(3) of the SAST Regulations and to that extent the order of the AO is affirmed. We, however, do not agree with the order of the AO imposing a penalty of ₹ 4 crores and to that extent the order of the AO cannot be sustained and is set aside. The appeal is consequently, partly allowed. The matter is remitted to the AO to re-decide only the quantum of penalty, in the light of the observations made above after giving an opportunity of hearing to the appellant.
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2019 (5) TMI 2003
Market manipulation - violations of the provisions of SEBI Act and SEBI-PFUTP Regulations - off-market transaction - pattern of buying at a higher price on subsequent days was repeated throughout its trading in the scrip during patch-1 with the connected entities - Whether the Noticees by trading with connected entities have manipulated the price in the scrip of TEL during the period October 18, 2012 to June 17, 2013? - HELD THAT:- sell order quantity was known to Kingfisher but Kingfisher did not buy all the available quantity at the prevailing price. Kingfisher bought only a part of the available quantity and then on subsequent trading days bought more shares at a much higher price. For instance, on February 13, 2012, Kingfisher bought 250 shares at ₹ 381.5/- when the available quantity was 8,000 shares. Then on the next trading day, Kingfisher bought 12,500 shares at an average price of ₹ 392.16/-. This pattern of buying at a higher price on subsequent days was repeated throughout its trading in the scrip during patch-1 with the connected entities. Kingfisher's first trade in the scrip during the patch was for ₹ 381.5/- and with the exception of 3 trades, which were executed at ₹ 375/- (all trades were executed on one day), all its other trades with the connected entities during the patch were within the range of ₹ 393.3/- to ₹ 496/-. Thus, if the Kingfisher was a genuine buyer, it would not have bought shares consistently at higher prices than its previous buy, over a period of four months. It is also noted from the order log trade log that during the entire investigation period of 27 months that Kingfisher had executed 1 sell trade in the scrip. This when seen in light of the fundamentals of the company, does not justify its buying pattern in the scrip.
Taking support of the observations of Hon'ble Apex Court in Kishore R Ajmera matter [2016 (2) TMI 723 - SUPREME COURT] we note that in cases of market manipulation, admittedly, no direct evidence would be forthcoming / available. Manipulative transactions are to be tested on the conduct of parties and abnormality of practices which defy normal logic and laid down procedures. What is needed, is to prove that in a factual matrix, preponderance of probabilities indicate a fraud.
In the instant matter, the findings that have been gathered from various circumstances for instance connection between the Noticees and the counter parties, overall trading in the scrip before the Noticees started trading during patch-1, particulars of the buy orders and sell orders, absence of any explanation from the Noticees for behaving opposite to that of a reasonable buyer who buys the scrip at a low price, lack of fundamentals of the company etc., leads to the conclusion that the trades executed by the Noticees with the connected entities, are manipulative in nature. In view of the significant positive LTP contribution by the aforesaid 9 Noticees by trading with the connected entities, it is concluded that the said 9 Noticees have manipulated the price of the scrip by contributing to the price rise.
Whether the Noticees have violated the provisions of PFUTP Regulations? - In view of the conclusion arrived at paragraph 22 wherein it has been held that the trades executed by the 9 Noticees with the connected entities has contributed significantly to the positive LTP in the scrip are manipulative in nature, it is also held that such trades are fraudulent in nature and would operate as deceit upon any person trading in the extant scrip.Therefore, find that Radison Properties Private Limited, Natural Housing Private Limited, Topwell Properties Private Limited, South Asia Portfolios Private Limited, Kingfisher Properties Private Limited, Janvi Tanvi Share Traders Private Limited, Safed Sales Private Limited, Shivkhori Construction Private Limited and Spice Merchants Private Limited have violated Regulations 3(a), (b), (c), (d) and Regulations 4(1), 4(2) (a) and (e) of PFUTP Regulations.
Directions, to be issued against the Noticees - Section 11 of SEBI Act casts a duty on the Board to protect the interests of investors in securities and to promote the development of and to regulate the securities market. For achieving such object, it has been authorised to take such measures as it thinks fit. Thus, power to take all measures necessary to discharge its duty under the statute which is a reflection of the objective disclosed in the preamble has been conferred in widest amplitude. Pursuant to the said objective, PFUTP Regulations have been framed. The said Regulations apart from other things aims to preserve and protect the market integrity in order to boost investor confidence in the securities market. By executing manipulative trades, as has been executed by the aforesaid 9 Noticees in the instant matter, the price discovery system itself is affected. It also has an adverse impact on the fairness, integrity and transparency of the stock market. In view of the same and considering the violations committed by the said 9 Noticees, as find that it becomes necessary for SEBI to issue appropriate directions against them.
In exercise of the powers conferred upon me in terms of Section 19 read with Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992, hereby restrain Radison Properties Private Limited, Natural Housing Private Limited, Topwell Properties Private Limited, South Asia Portfolios Private Limited, Kingfisher Properties Private Limited, Janvi Tanvi Share Traders Private Limited, Safed Sales Private Limited, Shivkhori Construction Private Limited and Spice Merchants Private Limited from accessing the securities market for a period of seven years from the date of this order and further prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of seven years, from the date of this order. Needless to say, in view of prohibition on sale of securities, it is clarified that during the period of restraint, the existing securities holding, including units of mutual funds, of the aforesaid entities shall remain frozen.
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