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TMI Blog2019 (9) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... and Exchange Board of India ("SEBI" for short) dated April 24, 2015. By the said order 14 entities, including the appellants in these appeals, have been directed to pay varying amount of penalties for violation of Section 12A (a),(b),(c) of the SEBI Act, 1992 read with various provisions of (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ("PFUTP Regulations" for short). Since all these appeals challenge the same impugned order they are decided together by this common order. 2. Facts relevant to all the matters are the following:- SEBI conducted an investigation into trading in the scrip of four companies by a group of entities collectively called Shyam Sunder Gupta and related/ connected entities as follows:- Name of the Scrip Period of Investigation Areva T&D India Ltd. July 28- 29, 2010 Tata Teleservices (Maharashtra) Ltd. August 23, 2010 Power Grid Corporation of India Ltd. April 28, 2010 Mahanagar Telephone Nigam Ltd. July 28-29, 2010 During this investigation, based on trading in cash segment of the National Stock Exchange of India Limited ("NSE" for short), it was noticed that the prices of these s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Noticee No. 12 had a sell order for 5 lakh shares at a limit price of Rs. 119.95 and thus 1,26,425 shares got matched. d) Further, as the trigger price (i.e., Rs. 119.65) of the earlier order (i.e., of 7 lakh shares) which was pending in the system with a limit price of Rs. 120 at 15:29:03 got triggered, this buy order swept all the available sell orders at price of Rs. 120 or less during that instance and a total of 7, 00, 000 shares were traded between 15:29:03 to 15:29:08. In this case also Noticee No. 12 had sell order for remaining shares of 3,73,505 shares at a limit price of Rs. 119.95 and thus these orders were matched. e) It is evident from the above, that the trading done by Noticee No.12 resulted in the price of the scrip moving from Rs. 108.50 to Rs. 120. The closing price of the scrip (average of the last half an hour trading prices) due to the aforesaid price rise was Rs. 114.90. Excluding the aforesaid buy and sell trades of the client in the last half an hour, the close price would have been Rs. 111.14 and if the markets had closed at 15:29:00 (15:29:01 is the time when first trade of Noticee No. 12 was executed during the last half hour) the closing pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulative trades in the scrip of Power Grid. In short it was the broker who took advantage of the power of attorney when the appellant was not in the country and possibly traded in the manner as alleged and the appellants had no role in this matter. Appeal No. 396 of 2015 (Symphony Merchants Pvt. Ltd.) An analysis of the orders placed by Noticee Nos. 3 and 10 (Appellant in this Appeal) on August 23, 2010 in Tata Teleservices (Maharashtra) Ltd. ("Tata Tele" for short) reveals the following:- a) Noticee No. 10 placed a stop loss buy order for 10 lakh shares at 14:56:28 at a limit price of Rs. 25 with a trigger price of Rs. 24.95 when the Last Traded Price (LTP) was Rs. 24.50. b) Subsequently, Noticee No. 10 placed three sell orders, for 1 lakh shares at 14:57:13, 8 lakh shares at 15:00:00 and 2 lakh shares at 15:00:05 at a limit price of Rs. 24.95. c) At 15:04:32 Noticee No. 10 placed a buy order for 3.50 lakh shares at a limit price of Rs. 24.95 when the LTP was Rs. 24.65. This buy order cleared the available sell orders at price of Rs. 24.95 or less and a total of 3.50 lakh shares were traded. d) Since the LTP reached the threshold of Rs. 24.95, the buy order of 10 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010 and that too in the post closing session. Noticee Nos. 10 and 11 have not traded in this scrip in the derivatives segment also between January 1, 2010 and July 28, 2010. 8. On July 29, 2010, between 15:29:00 to 15:29:30 Noticee Nos. 10 and 11 sold 2,50,000 shares and 1,50,000 shares respectively in the cash segment. Counter parties to their trades were Noticee Nos. 3, 5 and 6 in the group. On the same day, Noticee Nos. 10 and 11 bought the same quantity of shares from these entities in the post closing session. 9. Appellant bought 2,50,000 shares of MTNL on July 28, 2010, trading for the first time in the scrip of MTNL since January 2010. Thereafter they sold 2,50,000 shares to other Noticees Nos. 3, 5 and 6 on July 29, 2010. On the same day, Appellant once again bought 2,50,000 shares from other Noticee Nos. 3, 5 and 6 in the post closing session. The inter-se transfer of shares on July 29, 2010 between the aforesaid entities show that there was no change in beneficial ownership of the shares, which were bought and sold between them. 10. Shri Vinay Chauhan, learned counsel for the appellant submitted that appellant had no connection with other entities in the so called g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder; 3. Prohibition of certain dealings in securities No person shall directly or indirectly- (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akh 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. 14. Similarly, in the case of Green Field Infrastructure Pvt. Ltd. (Appellant No. 3 in Appeal No. 418 of 2015 and Noticee No. 12), and Noticee No. 1 were the top clients on gross and net sell basis between 15:28:59 and 15:29:09 on April 28, 2010 during which the price in the scrip of Power Grid increased from Rs. 108.10 to Rs. 120.50 (i.e. 11% in 10 seconds) during which 17.06 lakh shares were traded which were 34% of the days total market volume. Appellant 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 Rs. 1,90,65,200 profit made. The submission by appellant in Appeal No. 418 of 2015 (Sandeep Paul & Ors.) that appellant Sandeep Paul was abroad and not even in India and it is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in other noticees were instrumental in creating artificial volumes and at times prices also involving synchronized trading and self trades in these three scrips (Tata Tele, MTNL and Power Grid) cannot be faulted. Given the magnitude of the volumes during the few seconds before closing time and the magnitude of matched trade and self trades in all these three scrips between parties are clear evidences of manipulation in trade/ market. Therefore, the submission that some of the entities are not known or related to others lack any merit, because, substantial evidence is so overwhelming. 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 provision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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