2020 (5) TMI 564 - AT - SEBI

Period of limitation to initiate proceedings - proceedings were launched by respondent SEBI after a period seven years - Manipulation of scrips - Shares were either sold in off-market or through market to the connected entities in order to create a volume manipulation in the said scrips - HELD THAT - Power to initiate the proceedings must be exercised by the authorities within a reasonable time. This would depend upon the facts and circumstances of the case, nature of the default / statute and prejudice caused to the noticee. In the present case, the appellant neither put a plea of prejudice before the AO nor before us. It was simply stated that since the proceedings were launched by respondent SEBI after a period seven years, the same should be quashed on the ground of delay. The record would show that all the documents concerning the defense of the appellant were filed by her before the AO. Therefore, for want of any prejudice the proceedings cannot be quashed simply on the ground of delay in launching the same. Further, as explained by the learned counsel for the respondent as recorded in paragraph No. 6.4 above, large numbers of entities and transactions were analyzed by SEBI which took some time. Appeal dismissed.

Summary

Issues:
1. Imposition of monetary penalty by SEBI for violation of Regulations.
2. Allegations of volume manipulation in trading of a specific scrip.
3. Delay in initiating proceedings and its impact on the case.

Analysis:
1. The appellant challenged a penalty imposed by SEBI for violating various regulations related to fraudulent and unfair trade practices. The appellant bought shares off-market and sold them in the market, contributing to volume manipulation in the scrip of a company. The appellant claimed innocence, stating she acted on advice and was not involved in managing the portfolio. The AO found the appellant guilty and imposed a penalty, leading to the appeal.

2. SEBI investigated trading activities involving multiple entities connected to each other, focusing on the scrip of a specific company. The appellant was found to have bought shares from a connected entity and sold them to other connected entities, significantly impacting the market volume. The appellant's defense of acting on stockbroker advice was dismissed, and the connections between the entities were established, leading to the penalty.

3. The appellant argued for exoneration based on the delay in initiating proceedings, citing previous tribunal decisions. However, SEBI contended that no prejudice resulted from the delay, as all transactions were disclosed by the appellant. The tribunal dismissed the appeal, emphasizing that the power to initiate proceedings must be exercised within a reasonable time, considering the facts and circumstances of each case. Since no prejudice was demonstrated, the delay alone was not sufficient to quash the proceedings.

This detailed analysis covers the issues of penalty imposition, trading manipulation allegations, and the impact of delay on the case, providing a comprehensive overview of the judgment delivered by the Securities Appellate Tribunal.