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SEBI - Case Laws
Showing 461 to 480 of 555 Records
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2014 (12) TMI 1419
Manipulative, fraudulent and unfair trade practices - Shares allotted on preferential basis - 46 allottees made a collective profit of ₹313.01 Crore on their total investment of ₹12.99 crore, a substantial return of approximately 2309 % on their investment in a period of 18 months (including the lock in period) - entire modus operandi of allotting preference shares at a premium, announcing a stock split and then bringing in connected entities to provide exit was a scheme devised to rake in ill-gotten gains
HELD THAT:- Preferential allotment was used as a tool for implementation of the dubious plan, device and artifice of Radford Group & Suspected Entities and preferential allottees.
The manipulation in the traded volume and price of the scrip by a group of connected entities has the potential to induce gullible and genuine investors to trade in the scrip and harm them. As such the acts and omissions of Radford Group & Suspected Entities and allottees are ‘fraudulent’ as defined under regulation 2(1)(c) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (‘PFUTP Regulations’) and are in contravention of the provisions of regulations 3(a), (b), (c) and (d) and 4(1), 4(2)(a), (b), (e) and (g) thereof and section 12A(a), (b) and (c) of the SEBI Act, 1992.
As directors of Radford during the relevant time (i.e. Prakash Bhawarlal Biyani, Manish Nareshchandra Shah, Rajesh Kumar Maheshwari and Nitin Shivratan Murarjka), being in control of the day to day affairs of Radford, had the knowledge of its acts and omissions. They were also under an obligation to ensure that acts and transactions of Radford were not in violation of any of the applicable provisions of SEBI Regulations or other applicable laws. Therefore, prima facie find that these directors were responsible for Radford 's acts and omissions in this case.
A detailed investigation of the entire scheme employed in this case is necessary to find out the role of any other entity therein including LTP contributors, Suspected entities, connection amongst the concerned entities and the ultimate owners of funds used for manipulating the price of the scrip. Therefore, while SEBI would investigate into the probable violations of the securities laws, the matter may also be referred to other law enforcement agencies such as Income Tax Department, Enforcement Directorate and Financial Intelligence Unit for necessary action at their end as may be deemed appropriate by them.
SEBI strives to safeguard the interests of a genuine investor in the Indian securities market. The acts of artificially increasing the price of scrip mislead investors and the fundamental tenets of market integrity get violated with impunity due for such acts. Under the facts and circumstances of this case, I prima facie find that the acts and omissions of Radford Group & Suspected Entities and allottees as described above is inimical to the interests of participants in the securities market. Therefore, allowing the entities that are prima facie found to be involved in such fraudulent, unfair and manipulative transactions to continue to operate in the market would shake the confidence of the investors in the securities market.
Considering these facts and the indulgence of a listed company in such a fraudulent scheme, plan, device and artifice as prima facie found in this case, this is a fit case where, pending investigation, effective and expeditious preventive and remedial action is required to be taken by way of ad interim ex -parte in order to protect the interests of investors and preserve the safety and integrity of the market.
In view of the foregoing, in order to protect the interest of the investors and the integrity of the securities market, in exercise of the powers conferred upon me in terms of section 19 read with section 11(1), section 11 (4) and section 11B of the SEBI Act, 1992, pending inquiry/investigation and passing of final order in the matter, hereby restrain the named persons/entities from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner, till further directions.
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2014 (3) TMI 1172
SEBI Violation - price escalation of scrips - appellant was found guilty of manipulating the price of the scrip - imposed a monetary penalty of ₹ 5 lac under Section 15HA of the SEBI Act for violation of Regulation 4(1) and 4(2)(e) of the FUTP Regulations - HELD THAT:- The appellant executed trades during the period December 2003 to January 2004 whereas AIL’s annual results came out only after March 2004, and the December 2003 quarterly results were published only on January 2004 as has been noticed by the adjudicating officer in paragraph 21 of the impugned order. From the nature of the trading, it is clear that the appellant has sought to create a misleading impression that a large number of persons were trading in the scrip. This lends support to the finding of the adjudicating officer in paragraph 20 of the impugned order.
It must not be forgotten that every trade establishes the price of the scrip and the noticee’s trading at higher than LTP resulted in the price of the scrip going up and were done with a view to set the price at a desired level and thereby influencing the innocent/gullible investors. By purchasing at a higher price in most of his trades, the noticee had given the wrong impression about the price of the scrip in the market.
It is an accepted state of affairs that in cases of manipulation of the volume and / or price of a particular scrip, it is usually an arduous task to obtain direct evidence. However, the analysis of the trade and order logs as undertaken hereinabove, establishes the malafide intention of the appellant.
Therefore, in view of the above factual position, we do not find any merit in the appeal and the same is dismissed.
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2014 (3) TMI 1153
Non closing the trading window prior to the meeting of the Board of Directors of the appellant company - penalty imposed upon the appellant under Section 15HB of the SEBI Act, 1992 - HELD THAT:- Show cause notice was in fact issued to the Compliance Officer of appellant, however, in that show cause notice issue relating to failure on part of Compliance Officer in not closing the trading window has not been raised. However, in the impugned order it is held that alleged violation recorded in the show cause notice against Compliance Officer does not stand established.
While holding that in the facts of present case, Compliance Officer is liable for not closing the trading window, in fact it is held that Compliance Officer has not violated any of the regulations. In these circumstances, making the appellant company liable for not closing the trading window cannot be sustained.
Accordingly, impugned order which purports to hold appellant company liable for not closing the trading window prior to the meeting of Board of Directors held on April 30, 2009 and November 27, 2009 is quashed and set aside.
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2014 (2) TMI 1406
Violation of SEBI Act - violations committed by promoters of BoR under SEBI Act - Dilution of shareholding - Deceptive mechanism adopted by Promoter group in collusion with persons acting in concert ('PAC' for short) with various group entities - Penalty imposed under Section 15HA and under Section 15A(a) of SEBI Act - HELD THAT:- Where violations committed by any person fall within the domain of two authorities constituted under two statutes, then both authorities would be justified in initiating action against that person. In such a case, if one authority for any reason does not initiate proceedings, then, inaction by one authority would not vitiate proceedings initiated by another authority. In the present case, RBI noticed that Promoter group of BoR together with connected entities had violated RBI Guidelines (within the domain of RBI), and referred it to SEBI to consider as to whether promoters of BoR had violated SEBI Act and Regulations framed thereunder. SEBI conducted further investigation and on receipt of investigation report initiated adjudication proceedings and imposed penalty on all entities including appellant herein.
While arguing the matter on demurrer that is, assuming that the appellant is guilty of making representation which is not true, appellant would not be justified in contending that no penalty should be imposed under SEBI Act on ground that RBI has not initiated any action against appellant, because liability to pay penalty for violating SEBI Act and regulations made thereunder is not dependent on RBI initiating proceedings and imposing penalty for alleged violations of RBI guidelines.
SEBI as capital market regulator and RBI as banking sector regulator operate in different fields and therefore, fact that RBI has not initiated proceedings against appellant for the alleged violations of RBI guidelines would not absolve appellant from his liability to pay penalty when appellant is found to have violated SEBI Act and regulations made thereunder.
Argument that AO has failed to consider findings of WTM in his order dated March 26, 2012 that violations committed by promoters are not grave is without any merit, because, firstly, observations made by WTM in his order dated March 26, 2012 are only prima-facie observations made in the context of continuing ex-parte ad-interim order after completion of investigation. Secondly, WTM himself has categorically recorded in his order that AO shall pass final order without being influenced by observations made by WTM in his order dated March 26, 2012. Therefore, argument that in view of prima facie observations of WTM no penalty could be imposed upon appellant is without any merit and hence liable to be rejected.
Fact that RBI has permitted merger of BoR with ICICI Bank cannot be a ground for appellant to escape penal liability for violating SEBI Act and regulations made thereunder, because permission granted by RBI for merger of BoR with ICICI Bank was not in lieu of offences committed by appellant under SEBI Act and regulations made thereunder. In other words, having violated SEBI Act and regulations made thereunder, appellant cannot avoid penal liability merely because, subsequent to such violations RBI has permitted merger of BoR with ICICI Bank.
There is nothing on record to suggest that camouflaging real level of shareholding by promoters of BoR including appellant has led genuine investors to trade in shares of BoR, cannot be a ground for appellant to escape penalty even after violating SEBI Act and regulations made thereunder, because SEBI Act does not contemplate imposition of penalty on a person violating SEBI Act only if investors suffer on account of such violations. That may be a factor to be taken into account by AO while determining the quantum of penalty. Therefore, fact that there is no evidence to show that any investor has suffered cannot be a ground to escape penalty even after violating SEBI Act and regulations made thereunder.
Penalty of ₹ 4 crore has been imposed under Section 15HA of SEBI Act without considering provisions contained in Section 15J of SEBI Act is also without any merit because, Section 15HA provides that a person indulging in fraudulent and unfair trade practices relating to securities shall be liable to a penalty of ₹ 25 crore or three times the amount of profits made out of such practices, whichever is higher. Assuming that actual profits made by promoters including appellant on account of violation of PFUTP Regulations, 2003 are unascertainable, AO, after considering all mitigating factors has imposed penalty of ₹ 4 crore as against penalty of ₹ 25 crore imposable under Section 15HA of SEBI Act which cannot be said to be arbitrary or unreasonable.
Parliament by inserting Section 15HA to SEBI Act with effect from 29.10.2002, has prescribed penalty not less than ₹ 25 crore upon a person indulging in fraudulent and unfair trade practices relating to securities. In the present case, it is not in dispute that Promoter group controlled by Tayal family including appellant have represented to the investors that they have reduced their shareholding in BoR during the investigation period from 44.18% to 28.61%. However, it is found that contrary to the representation made, shareholding of promoters along with PAC's has gone up to 63.15% during the investigation period. In such a case, representation made to investors constitutes fraud for which penalty imposable is not less than ₹ 25 crore. However, taking into consideration, all mitigating factors, AO has imposed penalty of ₹ 4 crore on appellant. In these circumstances, discretion exercised by AO in imposing penalty of ₹ 4 crore as against penalty of ₹ 25 crore imposable under Section 15HA of SEBI Act cannot be said to be unjustified or unreasonable.
Appellant is also saddled with penalty of ₹ 1 crore under Section 15A(a) of SEBI Act for non-compliance of summons issued to appellant. Summons in this case was issued on May 26, 2011 calling upon appellant to appear before investigating officer on May 31, 2011 with documents specified therein. By letter dated May 30, 2011 appellant informed the investigating officer that above summons has been received on May 28, 2011 and it would not be possible to appear with documents on May 31, 2011 and requested for another date for appearance and production of documents.
Without considering merits of above request and without giving any opportunity for production of documents or appearance, show cause notice was issued and by impugned order penalty of ₹ 1 crore has been imposed upon appellant by AO under Section 15A(a) of SEBI Act for non-compliance of summons issued to appellant. Since dispute in this case related to 2007-2009 period and since summons was issued in May 2011, it would have been just and proper for the investigating officer to consider reasonable request of appellant and fix another date for appearance/production of documents, especially when appellant had agreed to appear and produce documents on the next date fixed by investigating officer. Since reasonable opportunity for production of documents was not given to appellant, we deem it proper to set aside penalty of ₹ 1 crore imposed upon appellant under Section 15A(a) of SEBI Act. Accordingly, we uphold penalty of ₹ 4 crore imposed under Section 15HA and set aside penalty of ₹ 1 crore imposed under Section 15A(a) of SEBI Act.
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2013 (11) TMI 1808
Issues Involved:
1. Applicability of Takeover Regulations, 1997 vs. 2011.
2. Determination of the trigger date for public announcement.
3. Interpretation of 'acquirer' and 'acquisition' under the Takeover Regulations.
4. Validity of the impugned order directing public announcement and interest payment.
Summary:
1. Applicability of Takeover Regulations, 1997 vs. 2011:
The appellants argued that the Takeover Regulations, 1997 should apply since they agreed to acquire shares on June 23, 2010. They contended that they became 'acquirers' upon subscribing to the warrants, not on the conversion date of December 19, 2011. The Tribunal, however, noted that the Takeover Regulations, 2011 were in force at the time of the actual allotment of equity shares, thus applicable.
2. Determination of the trigger date for public announcement:
The appellants claimed that the trigger date should be the date of subscription to the warrants, not the conversion date. They relied on the case of Sharad Doshi vs. The Adjudicating Officer and Ors., which emphasized transparency and shareholder benefit. The Tribunal, referencing previous judgments, held that the trigger date for the Takeover Code is the date of conversion of warrants into equity shares, not the date of subscription.
3. Interpretation of 'acquirer' and 'acquisition' under the Takeover Regulations:
The Tribunal reiterated that an 'acquirer' is defined as a person who acquires or agrees to acquire shares or voting rights. The acquisition of voting rights is crucial for invoking the Takeover Code. The Tribunal cited previous cases, including Shri Ch. Kiron Margadarsi Financiers vs. Adjudicating Officer, SEBI, and Mr. Sohel Malik vs. SEBI & Anr., to support the stance that the acquisition of voting rights occurs on the conversion date.
4. Validity of the impugned order directing public announcement and interest payment:
The Tribunal upheld the impugned order dated July 8, 2013, which directed the appellants to make a combined public announcement to acquire shares and pay interest to shareholders. The Tribunal found no fault in the order, noting that the appellants' collective shareholding increased significantly upon conversion of warrants, thus triggering Regulation 3(2) of the Takeover Regulations, 2011. The Tribunal also dismissed the appellants' request for a monetary penalty instead of a public announcement, distinguishing the present case from Sunil Khaitan vs. SEBI due to the promptness of the proceedings.
Conclusion:
The appeal was dismissed with no order as to costs, affirming the requirement for the appellants to make a public announcement and pay interest as directed by the impugned order.
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2013 (11) TMI 1787
Issues Involved: Challenge to show cause notice u/s 11B of the Securities and Exchange Board of India Act, 1992.
The High Court of Karnataka dismissed the petitions challenging the show cause notice dated 15-2-2011 issued by the third respondent u/s 11B of the Securities and Exchange Board of India Act, 1992. The court noted that the petitioners had not replied to the show cause notice but had directly filed the writ petitions. The court held that the show cause notice was issued to safeguard the interest of investors, and it was within the authority of the third respondent to do so. The petitioners were given the opportunity to reply to the notice within two weeks, and their response would be considered in accordance with the law. Therefore, the petitions were dismissed.
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2013 (11) TMI 1753
The Supreme Court of India issued an order on 28.10.2013 directing the Sahara Group of Companies to not dispose of any assets and the alleged contemnors to not leave the country without court permission. The case is listed for further arguments on 11.12.2013 at 2:00 P.M.
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2013 (10) TMI 1562
Issues Involved:
1. Whether the impugned letter is a direction or mere comments/advice.
2. Alleged violations of regulation 10 of SAST Regulations, 1997 by Mr. Akshay S. Pitti in 2006 and 2007.
3. Applicability of the principle of "persons acting in concert" under SAST Regulations, 1997.
4. Procedural fairness and principles of natural justice.
Summary:
1. Nature of the Impugned Letter:
The Tribunal disagreed with the Respondent's claim that the impugned letter was merely advisory. It held that the language of regulation 18(2) of the Takeover Regulation, 1997 is mandatory, requiring changes to the letter of offer when suggested by the Respondent. As such, the directions in the letter are binding and appealable under Section 15T of the SEBI Act.
2. Alleged Violations of Regulation 10:
The Appellants challenged the Respondent's comments regarding alleged violations of regulation 10 by Mr. Akshay S. Pitti in 2006 and 2007. The Tribunal noted that the Respondent did not issue any Show Cause Notice or provide an opportunity for the Appellants to be heard, violating principles of natural justice. Furthermore, the Tribunal found that the shareholding of Mr. Akshay S. Pitti should be considered collectively with the promoter group, which had already exceeded the 15% threshold before the acquisitions in question.
3. Persons Acting in Concert:
The Tribunal emphasized that the concept of "persons acting in concert" under the SAST Regulations, 1997 requires the collective shareholding of the group to be considered. It held that once individuals act as part of a group with the intention of acquiring shares, their individual identities merge into the group's collective identity. Thus, the 15% threshold under regulation 10 should apply to the group's combined shareholding, not to individual members.
4. Procedural Fairness:
The Tribunal criticized the Respondent for not following due process, including failing to conduct a proper investigation into the past allotments and not issuing a Show Cause Notice. The Tribunal reiterated that any adverse findings must follow the due process of law, including giving the concerned parties an opportunity to be heard.
Conclusion:
The appeal was allowed, permitting the Appellants to continue with their offer without incorporating the Respondent's impugned directions related to the acquisitions by Mr. Akshay S. Pitti in 2006 and 2007. The Tribunal underscored the importance of procedural fairness and the collective nature of shareholding when determining compliance with the SAST Regulations, 1997.
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2013 (10) TMI 1539
Issues Involved:
The judgment involves the imposition of a monetary penalty under section 15HA of the Securities and Exchange Board of India Act, 1992, based on an enquiry conducted under Rule 5 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995. The key issues revolve around alleged trading irregularities, including synchronized trading, in the equity shares of a company during a specific investigation period.
Details of the Judgment:
1. The appellant challenged the order imposing a penalty of Rs. 4 lakh under section 15HA of the Act. The investigation period spanned eight months, during which the appellant traded for a short period, contributing 0.89 percent to the total traded volume.
2. The respondent alleged that the appellant, along with a group of clients and brokers, traded significantly in the company's shares on multiple days. The appellant was accused of being involved in synchronized trading, leading to the creation of trading volumes.
3. The appellant denied collusion with other parties, emphasizing that the trading volume was minimal and without any proven nexus. He also raised concerns about the delay in initiating disciplinary proceedings, which impacted the availability of relevant documents.
4. The Tribunal scrutinized the evidence and found no conclusive proof of the appellant's involvement in manipulating the market equilibrium through synchronized trading. The appellant's trading activity, though minor, did not establish a violation of relevant regulations.
5. The Tribunal referenced previous judgments to highlight that synchronized trading, in itself, is not illegal unless it aims to manipulate the market or create false volumes. Without concrete evidence linking the appellant to such activities, the penalty imposed could not be sustained.
6. Citing precedents, the Tribunal emphasized that synchronization of trades is not inherently illegal and must involve a mischievous intent among parties to be objectionable. Lack of clear evidence of connivance led to the quashing of the impugned order.
7. The judgment reiterated that synchronized trading, without evidence of wrongdoing, does not constitute a violation. The appeal was allowed, and the impugned order was set aside with no costs imposed.
Separate Judgment:
No separate judgment was delivered by the judges in this case.
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2013 (10) TMI 1532
Issues Involved:
1. Violation of principles of natural justice.
2. Delay in passing the impugned order.
3. Relationship between broker and client.
4. Evidence of synchronized circular trades.
5. Impact of the appellant's overall turnover on penalty imposition.
Summary:
Violation of Principles of Natural Justice:
The appellant argued that the impugned order violated principles of natural justice as the entire investigation report was not furnished, and there was no opportunity to examine the client Mr. Heerachand Salecha. The Tribunal found no merit in these contentions, stating that the documents relied upon by SEBI were supplied to the appellant and that the appellant did not demonstrate how the non-furnishing of the entire report caused prejudice. Furthermore, the Tribunal noted that the appellant's own trading records established the facts, making the examination of Heerachand Salecha unnecessary.
Delay in Passing the Impugned Order:
The appellant contended that the order was passed after an inordinate delay of 12 years, contrary to Regulation 28(2) of the Intermediaries Regulations. The Tribunal acknowledged the delay but held that it did not justify quashing the order. The Tribunal emphasized that a person who has violated SEBI regulations cannot escape liability merely due to the delay in the proceedings.
Relationship Between Broker and Client:
The appellant claimed that there was no relationship beyond that of a broker-client and thus should not be held liable for the client's manipulative trades. The Tribunal rejected this argument, noting that the appellant's trading pattern demonstrated a nexus with the client and other brokers within the group, indicating coordinated manipulative activities.
Evidence of Synchronized Circular Trades:
The Tribunal reviewed the evidence and found that the appellant engaged in synchronized circular trades, creating artificial volumes in the market. The Tribunal cited instances where trades were matched within seconds, indicating pre-arranged trading patterns. The Tribunal concluded that the appellant was part of a group executing circular trades to manipulate the price of the SIL scrip.
Impact of the Appellant's Overall Turnover on Penalty Imposition:
The appellant argued that the turnover in the SIL scrip was minuscule compared to its overall turnover, suggesting that the penalty was unwarranted. The Tribunal dismissed this argument, stating that penalties for violating SEBI regulations are not contingent on the violator's total turnover. The Tribunal held that even if the turnover in the specific scrip was small, the appellant must face penalties for the violations.
Conclusion:
The Tribunal dismissed the appeal, upholding the SEBI order prohibiting the appellant from taking up any new assignments for two weeks. The Tribunal found no merit in the appellant's contentions regarding natural justice, delay, broker-client relationship, and the impact of overall turnover on penalty imposition.
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2013 (10) TMI 1527
Issues involved: Contempt of court, submission of original title deeds of unencumbered properties to SEBI, permission to leave the country.
Contempt of Court: Mr. C.A. Sundaram, representing respondent No.5, informed the court about a letter from the Managing Director and CEO of PNB Investment Services Limited. The letter stated that the alleged contemnors are willing to provide SEBI with original title deeds of unencumbered properties valued at Rs. 20,000 crores within three weeks. SEBI will review the documents and respond, with the court considering the matter further at the next hearing. Until SEBI is satisfied with the submission, the respondents are prohibited from leaving the country without the court's permission.
Submission of Title Deeds to SEBI: The alleged contemnors, as per the submission made by Mr. Sundaram, have agreed to present the original title deeds of unencumbered properties worth Rs. 20,000 crores to SEBI within three weeks. This submission is subject to SEBI's evaluation and response, which will be reviewed by the court in the upcoming hearing scheduled for November 20, 2013, at 2:00 p.m.
Permission to Leave the Country: The court has directed that the alleged contemnors (respondents) are not allowed to leave the country without the court's permission until SEBI is content with the submission of the original title deeds and valuation reports of the properties. The next hearing on this matter is set for November 20, 2013, at 2:00 p.m.
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2013 (10) TMI 1520
Issues Involved:
1. Connection of appellant with Mehta group entities.
2. Allegations of circular, reversal, synchronized, and structured trades.
3. Violation of PFUTP Regulations.
4. Quantum of penalty under Section 15HA of SEBI Act.
5. Analysis of findings by Adjudicating Officer (AO).
Summary:
1. Connection of appellant with Mehta group entities:
The appellant was alleged to be connected with the Mehta group entities through Sunil Mehta, who opened the appellant's account with Triveni. The appellant denied any connection with other entities in the Mehta group except for Sunil Mehta, who was a friend of his son.
2. Allegations of circular, reversal, synchronized, and structured trades:
The appellant was accused of engaging in circular/reversal synchronized trades with the Mehta group, which created artificial volume and influenced the price of ASCL's scrip. The investigation revealed that the appellant's trades were synchronized and structured, contributing to 2.9% of the market volume.
3. Violation of PFUTP Regulations:
The appellant was found to have violated Regulations 3(a), (b), (c) & (d) and 4(1), 4(2)(a), (b), (e) & (g) of PFUTP Regulations. The trades executed by the appellant were not isolated incidents but part of a repeated pattern of manipulation over a period of time, leading to artificial price rise and volume in the scrip of ASCL.
4. Quantum of penalty under Section 15HA of SEBI Act:
The AO imposed a penalty of Rs. 5,00,000 u/s 15HA of SEBI Act, 1992, considering the repetitive nature of the default and the impact on market integrity. The Hon'ble Supreme Court in SEBI v. Shri Ram Mutual Fund emphasized that penalty is attracted as soon as the contravention is established, irrespective of the intention.
5. Analysis of findings by Adjudicating Officer (AO):
The Tribunal noted that the AO adopted a generic approach in dealing with all entities of the Mehta group, which was not appropriate. The appellant, a 73-year-old retired individual, claimed ignorance of the trades executed in his account and did not report unauthorized trading by Sunil Mehta. The Tribunal concluded that there was no substantial evidence of the appellant's direct involvement in manipulating the scrip of ASCL. The appeal was allowed, and the impugned order was set aside.
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2013 (9) TMI 1278
Issues Involved:
1. Price manipulation in the scrip of Aditya International Ltd (AIL).
2. Violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations).
3. Violation of Code of Conduct prescribed for Sub Brokers under SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 (Sub Broker Regulations).
Summary:
Issue 1: Price Manipulation in the Scrip of AIL
The Bombay Stock Exchange Ltd. (BSE) investigated the scrip of Aditya International Ltd (AIL) due to unusual price movements between December 18, 2003, and February 13, 2004. The price of the scrip increased from Rs. 65 to Rs. 307 and then fell to Rs. 25.70 by June 1, 2004. During the investigation period, ASE Capital Markets Ltd., Galaxy Broking Ltd., and Grishma Securities (P) Ltd. had significant concentrations in gross and net purchases. SEBI ordered an investigation to determine the motive behind these concentrated purchases and any potential nexus between the buyers and the company/promoters.
Issue 2: Violation of PFUTP Regulations
An Adjudicating Officer (AO) was appointed to investigate violations of Regulations 4(1) and 4(2)(e) of PFUTP Regulations and Clauses A(1), A(2), D(1), D(4), D(5) of the Sub Broker Regulations by M/s. Rajesh N. Jhaveri. A Show Cause Notice (SCN) alleged that the appellant was involved in price manipulation by placing orders at prices higher than the Last Traded Price (LTP) and influencing the scrip price in multiple instances. Despite multiple opportunities for a hearing, the appellant either requested more time or did not attend. The appellant denied the charges, claiming that all transactions were at market rates, delivery-based, and within regulatory limits.
Issue 3: Violation of Code of Conduct for Sub Brokers
The AO concluded that the appellant was involved in price manipulation, citing that 52.17% of the appellant's trades were higher than LTP. The AO referenced the Securities Appellate Tribunal's order in Shailesh Jain vs. SEBI, emphasizing the appellant's conscious manipulation. The appellant's arguments that small trades could not influence the market were dismissed due to the illiquid nature of the scrip. The AO found that the appellant's actions gave a false impression of liquidity and manipulated the scrip price, violating Regulations 4(1) and 4(2)(e) of PFUTP Regulations and the Code of Conduct for Sub Brokers.
Conclusion:
The appellant's appeal was allowed, and the impugned order was quashed. The Tribunal noted several inconsistencies and lack of concrete evidence in SEBI's investigation. It was highlighted that another entity, Jhaveri Trading & Investment Pvt. Ltd., involved in similar transactions, was let off with a caution, indicating potential discrimination. The Tribunal concluded that the appellant's trades were genuine, based on the belief in the company's strong fundamentals, and did not substantiate the allegations of market manipulation or violation of the Sub Broker Regulations.
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2013 (9) TMI 1243
Issues Involved:
1. Maintainability of appeal against SEBI's rejection of the complaint.
2. Alleged failure to disclose material information in the letter of offer.
3. Consideration of the complaint by SEBI.
Summary:
1. Maintainability of Appeal:
The primary issue is whether an appeal against SEBI's rejection of a complaint alleging fraud and misrepresentation in the letter of offer by the Acquirer is maintainable u/s 15T of the SEBI Act, 1992. The Tribunal held that an investor whose complaint is rejected without considering the allegations is a "person aggrieved" and entitled to file an appeal u/s 15T of the SEBI Act. The Tribunal dismissed the preliminary objections raised by the respondents regarding the maintainability of the appeal, stating that SEBI's rejection of the complaint constitutes an order prejudicially affecting the investor's interests.
2. Alleged Failure to Disclose Material Information:
The appellant's complaint alleged that the Acquirer and the Manager failed to disclose material information in the letter of offer dated 12th March 2008, violating Regulation 16(v) of the SAST Regulations, 1997, and Clauses 4.1.5 and 4.1.8 of the standard letter of offer as per SEBI's circular dated 8th March 2004. The specific allegations included:
- Non-disclosure of Sycamore Ventures' control over IndiaStar Fund L.P.
- Suppression of the association of Ravi Pratap Singh with Sera Nova Inc, Dahava Resources Ltd., and Silverline Technologies Ltd.
The Tribunal found that SEBI's impugned communication dated 8th June 2012 did not adequately address these grievances. The reasoning provided by SEBI did not consider whether the failure to disclose Sycamore Ventures' control over IndiaStar Fund L.P. and the association of Ravi Pratap Singh with the mentioned companies caused prejudice to the appellant.
3. Consideration of the Complaint by SEBI:
The Tribunal held that SEBI is obligated to consider the allegations in the complaint and pass appropriate orders. The rejection of the complaint without considering the alleged violations resulted in a miscarriage of justice. The Tribunal emphasized that it is SEBI's duty to enforce compliance with the regulations and protect investors' interests.
Conclusion:
The Tribunal set aside the impugned order dated 8th June 2012 and directed SEBI to reconsider the appellant's complaint dated 16th January 2012 afresh and pass appropriate orders. The Tribunal clarified that it had not expressed any opinion on the merits of the case and disposed of the appeal with no order as to costs.
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2013 (6) TMI 917
Issues Involved:
1. Whether the appellants should be treated as a single unit/group for the purpose of regulation 10 of the SAST Regulations, 1997.
2. Whether there was a violation of the norm of creeping acquisition of 5% additional voting rights prescribed in Regulation 11(1) of the SAST Regulations, 1997, and the appropriate penalty for any such violation.
Summary:
Issue 1: Regulation 10 of the SAST Regulations, 1997
The appellants, part of the promoter group of the Company, were alleged to have violated regulation 10 of the SAST Regulations, 1997, which deals with the acquisition of 15% or more of the shares/voting rights of any company. The Respondent argued that KLL's individual shareholding increased from 10.52% to 17.16% on March 12, 2007, necessitating a public announcement. However, the Tribunal held that KLL acted in concert with the other appellants, and thus, the collective shareholding should be considered. Since the collective shareholding of the promoter group had always been more than 15%, there was no violation of regulation 10. The Tribunal noted that the SAST Regulations, 1997 allow persons/entities to act in concert and that specific provisions making an individual liable for a public offer in case of increased individual shareholding were absent in the 1997 regulations but included in the SAST Regulations, 2011. Therefore, the finding against KLL was set aside.
Issue 2: Regulation 11(1) of the SAST Regulations, 1997
Regulation 11(1) pertains to creeping acquisition, allowing an acquirer with persons acting in concert to acquire shares in the range of 15% to 55% of the shares/voting rights in a company, with a limit of 5% per financial year. The Tribunal found that the appellants' shareholding increased by 8.38% on March 12, 2007, due to two separate transactions, violating regulation 11(1). However, considering the appellants' bona fide actions and the inordinate delay of about 5 years by the Respondent in issuing the show cause notice, the Tribunal deemed a public announcement at this stage would be superfluous. Instead, a monetary penalty of Rs. 25 lac was imposed on the appellants for the breach of regulation 11(1) on March 12, 2007. The appellants were directed to deposit the penalty amount with the Respondent within six weeks from the date of the order.
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2013 (6) TMI 905
Issues Involved:
1. Unauthorized use/misuse of clients' shares kept as margin for pledging.
2. Non-compliance with the requirement of periodical settlement of client accounts.
3. Inter-client adjustments for the purpose of settlement of running accounts.
4. Determination of monetary penalty under Section 15HB of SEBI Act and Section 23 H of SCRA.
Summary:
Issue 1: Unauthorized Use/Misuse of Clients' Shares
SEBI's inspection revealed that the Noticee, M/s. Sharewealth Securities Ltd. (SSL), had pledged clients' securities without their knowledge, even when clients had credit balances or had not traded during the pledge period. SSL argued that pledging was done with clients' written consent for margin exposure, and no undue benefit was derived. The Adjudicating Officer found insufficient evidence of misutilization and gave SSL the benefit of doubt.
Issue 2: Non-Compliance with Periodical Settlement of Client Accounts
The Noticee was found to have settled accounts for only about 20 out of 25,000 clients and engaged in inter-client adjustments for running account settlements. SSL admitted procedural errors and delays in implementing SEBI's quarterly settlement instructions but claimed to have rectified these issues. The Adjudicating Officer concluded that SSL failed to comply with SEBI's procedures, exhibiting low standards of integrity and fairness, thus violating Clause A (1) of the Code of Conduct under Schedule II of Regulation 7 of the SEBI (Stock brokers and Sub brokers) Regulations, 1992.
Issue 3: Inter-Client Adjustments
SSL admitted to making inter-client adjustments with clients' consent to avoid pledging and unpledging charges. The Adjudicating Officer noted that SSL's actions violated SEBI Circular No. MIRSD/SE/Cir-19/2009 dated December 03, 2009, which mandates periodic settlement of client accounts and prohibits inter-client adjustments for running account settlements.
Issue 4: Determination of Monetary Penalty
Under Section 15HB of SEBI Act, 1992, the Adjudicating Officer considered factors under Section 15J, including the absence of quantifiable gain or investor loss and the non-repetitive nature of defaults. A penalty of Rs. 50,000 was imposed on SSL, deemed commensurate with the default.
Order:
The Noticee is directed to pay the penalty amount through a demand draft in favor of "SEBI-Penalties Remittable to Government of India" within 45 days of receipt of the order. Copies of the order are sent to the Noticee and SEBI.
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2013 (5) TMI 1045
Issues involved: Stay of further proceedings in multiple appeals and writ petition pending before different courts.
The Supreme Court, comprising Hon'ble Mr. Justice Jagdish Singh Khehar, ordered a stay on all further proceedings in Appeal Nos. 42/2013, 48/2013, 49/2013, and 50/2013, as well as in Writ Petition No. 2088/2013. The Court decided to examine whether the respondents had complied with the conditions specified in a previous judgment dated 31st August, 2012. The stay was granted to assess the compliance with the said conditions.
The Court directed that the proceedings in various appeals and the writ petition be stayed until the question of compliance with the conditions outlined in the previous judgment is determined. This decision was made to ensure a thorough examination of whether the respondents had adhered to the conditions set forth in the Court's earlier ruling from August 2012. The stay was deemed necessary to evaluate the level of compliance with the specified conditions.
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2012 (10) TMI 1259
Issues Involved:
1. Double jeopardy under Article 20 of the Constitution of India.
2. Applicability of Section 11B of the SEBI Act to investors.
3. Delay in initiating and completing disgorgement proceedings.
4. Merits of the case regarding the consideration for shares.
5. Charging of interest from January 2000.
Summary:
Issue (i): Double Jeopardy
The appellants argued that the Board's direction for disgorgement amounts to double jeopardy as they were already restrained from accessing the securities market for two years u/s 11B of the SEBI Act. The Tribunal held that the principle of double jeopardy is not applicable as these are civil actions for regulatory violations, not criminal proceedings. Disgorgement is not a penal action but a monetary equitable remedy to prevent unjust enrichment from unlawful conduct. The Tribunal cited previous cases to support this view and rejected the argument.
Issue (ii): Applicability of Section 11B to Investors
The appellants contended that they are merely investors and not intermediaries or persons associated with the securities market as defined u/s 12 of the SEBI Act. The Tribunal referred to the High Court of Gujarat's decision in Karnavati Fincap Ltd. v. SEBI, which held that "persons associated with the securities market" includes all who have dealings in the securities market, including investors. Therefore, the Tribunal rejected this argument.
Issue (iii): Delay in Disgorgement Proceedings
The appellants argued that the delay of 8 years in issuing the show-cause notice for disgorgement was unreasonable and barred by limitation. The Tribunal acknowledged the importance of expeditious proceedings but noted that the disgorgement order could only be passed after establishing the violation of the regulatory framework. The Tribunal found that the delay was not fatal given the seriousness of the charge and rejected the argument.
Issue (iv): Merits of the Case
The appellants claimed that they had borrowed money for the investment and that the transaction was complete with consideration. They also argued that they only earned Rs. 69,393 each from the sale of shares. The Tribunal held that in disgorgement proceedings, the merits of the case cannot be reexamined as the earlier order under Section 11B had acquired finality. The Tribunal found no fault with the Board's finding that the appellants had made unlawful gains of Rs. 60,72,000 each.
Issue (v): Charging of Interest
The appellants argued that charging interest from January 2000 was arbitrary since the show-cause notice was issued in February 2008. The Tribunal agreed, stating that interest should only be charged from the date the disgorgement amount became payable, i.e., after the expiry of 45 days from the date of the impugned order. The Tribunal modified the order to this extent.
Conclusion:
The appeal was partly allowed, modifying the interest charge to commence 45 days after the impugned order, with no order as to costs.
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2012 (10) TMI 1221
Issues Involved:
1. Violation of Regulation 3 and 4 of SEBI (Prohibition of Insider Trading) Regulations, 1992.
2. Imposition of penalty u/s 15G of the SEBI Act, 1992.
3. Alleged violation of principles of natural justice.
Summary:
1. Violation of Regulation 3 and 4 of SEBI (Prohibition of Insider Trading) Regulations, 1992:
The appellants were accused of violating Regulation 3 and 4 by trading based on Unpublished Price Sensitive Information (UPSI). The Board alleged that Mr. Manoj Gaur, Executive Chairman of the company, was in possession of UPSI regarding the company's financial results for the quarter ending September 30, 2008, which he communicated to Mrs. Urvashi Gaur and Mr. Sameer Gaur. Both traded in the company's shares based on this information before it was made public on October 21, 2008.
2. Imposition of penalty u/s 15G of the SEBI Act, 1992:
Show cause notices were issued to the appellants, and a penalty of Rs. 10 lakhs each was imposed for violating the insider trading regulations. The appellants contended that the financial results were not known until October 17, 2008, and challenged the presumption that the closure of the trading window on October 11, 2008, indicated the existence of UPSI.
3. Alleged violation of principles of natural justice:
The appellants argued that they were not provided with the investigation report, which was a violation of natural justice. The Tribunal noted that regulation 9(1) only requires the findings of the investigation report to be communicated, which was done. Therefore, there was no violation of natural justice.
Findings:
The Tribunal upheld that Mr. Manoj Gaur was in possession of UPSI on October 11, 2008, based on the company's admission that trial balances were available by that date. However, it found no direct or circumstantial evidence that Mr. Manoj Gaur passed on this information to Mrs. Urvashi Gaur or Mr. Sameer Gaur, or that their trading was based on UPSI. The trading patterns and the small quantities traded suggested that the trades were made in the normal course of business.
Conclusion:
The impugned order was set aside, and all three appeals were allowed, with no order as to costs.
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2012 (7) TMI 1145
Issues Involved:
1. Violation of regulation 11(1) read with regulation 14(1) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
2. Justification of the penalty of Rs. 1.87 crore imposed u/s 15H of the Securities and Exchange Board of India Act, 1992.
Summary:
Issue 1: Violation of Regulation 11(1) and 14(1) of the Takeover Code
The appellant, a company engaged in the business of builders and developers, was allotted 28,25,000 shares on a preferential basis, increasing its shareholding in the target company from 36.62% to 42.87%. This increase of 6.25% triggered regulation 11(1) of the takeover code, requiring an open offer within four working days as per regulation 14(1). The appellant argued that the overall promoter group shareholding increased by only 4.97%, thus not triggering regulation 11(1). However, the Board contended that the individual increase of more than 5% necessitated compliance with regulation 11(1) and 14(1). The Tribunal upheld the Board's view, referencing the Supreme Court's interpretation in Swedish Match AB vs. SEBI, which mandates a public announcement if an acquirer's voting rights increase by more than 5%, regardless of the total promoter group's shareholding.
Issue 2: Justification of the Penalty Imposed u/s 15H of the Act
The appellant argued that the penalty of Rs. 1.87 crore was excessive and not in line with Section 15H(ii) of the Act, especially since no unfair gain was made, and the loss to investors was notional. The Board maintained that the penalty was calculated based on the notional loss to investors. The Tribunal acknowledged the violation but considered mitigating factors, such as the appellant's bona fide actions based on previous Board interpretations and the lack of actual loss to investors. Consequently, the penalty was reduced to Rs. 10 lakh, emphasizing that while regulatory violations must be penalized, the quantum should reflect the specific circumstances and mitigating factors.
Conclusion:
The Tribunal upheld the finding of violation of regulation 11(1) read with regulation 14(1) of the takeover code but reduced the penalty from Rs. 1.87 crore to Rs. 10 lakh, considering the mitigating factors and the absence of actual unfair gain or loss to investors.
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