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TMI Blog2019 (11) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... rue that synchronized trades or self trades in itself without any motive may not be called manipulative trade practices. In the present case, however the pattern as highlighted above would go to show that the present appellant Tarun Kumar with a view to gain, indulged into trading in a fraudulent manner as detailed supra. In our view the order of the Adjudicating Officer in this regard therefore cannot be faulted. Acquisition of shares accounted for 16.77% of the total shareholding - The case of all the appellants in this regard is that they had not acquired shares. - They executed agreement for pledge of the shares with these two appellants as a security towards finance to be raised. - Held that:- Regulation 7 provides for disclosures even in case of pledge to private individual, the transaction in question for public in general and market was change in the shareholding pattern. The term pledge was nowhere put either in the transfer account of the promoters or depository account. In that view of the matter, the violations of the Regulations is clearly ruled. As regards the quantum of penalty the learned counsel for the appellant submits that the magnitude of the offenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Takeovers) Regulations, 1997 (hereinafter referred to as SAST Regulations ) and Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (hereinafter referred to as PIT Regulations ) alongwith Appellant no.1 Tarun Kumar and rest of the appellants in Appeal no.260 of 2017. Appellant Tarun Kumar is solely found violating Regulations 3, 4 (2) (a), (b), (e) and (g) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as PFUTP Regulations ). Thus, two distinct facts are involved in the common impugned order passed by the respondent Securities and Exchange Board of India (hereinafter referred to as SEBI ). It would be worthwhile first to take for consideration the case of violation of PFUTP Regulations by appellant Tarun Kumar Brahambhatt. 2. The proceedings were initiated against the appellant Tarun Kumar alongwith other noticees no.3 to 7 (not before us) for manipulating the prices of Rajratan Global Wire Ltd. (hereinafter referred to as Rajratan ). The Adjudicating Officer found that the other noticees trade was mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only. Once that order got executed then he used to sell his stock at a higher price. The Adjudicating Officer therefore concluded that appellant Tarun Kumar had entered into manipulative orders in a short time which cannot be called a genuine trade except with manipulative intention behind such trade. So far as trades of others noticees are concerned, no connection was found in trading. They were not counter parties to the transactions of the appellant. However finding the above trading pattern of the appellant Tarun Kumar, he was found to have violated the provisions of the PFUTP Regulations as detailed supra. 5. The submissions of the appellant before the Adjudicating Officer as well as the submissions of the learned counsel for the appellant are that the appellant in fact traded within the circuit limit fixed by the stock exchanges. The appellant has traded between 22nd February, 2010 to 8th July, 2010 by which time the price of the shares had already increased from ₹ 73 to ₹ 170. The net effect of the trading of the appellant is merely ₹ 28.28 increase which is negligible. No uniform unidimensional pattern of trading of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Regulation 10 of the SAST Regulations. Therefore the public disclosure was required to be made under Regulation 10 of the SAST Regulations. It also invoked the provisions of the PIT Regulations. 8. The case of all the appellants in this regard is that they had not acquired shares. Promoters of Velan Hotels Ltd. namely Mr. Muthukumaran Ramalingam and Mr. M.R. Gautam were in need of funds for establishing a shopping mall project. Therefore they approached appellants Tarun Kumar and Jinesh for finance. They executed agreement for pledge of the shares with these two appellants as a security towards finance to be raised. Accordingly, 13,60,000 shares were transferred in off market transaction by the said promoters to these two appellants as well as other appellants. However, because of various reasons the funds could not be raised by these appellants. In the circumstances 4,25,166 shares were returned to the promoters from the account of the appellant Tarun Kumar and his wife Prarthana Brahambhatt. Further, they were not persons acting in concert as per the definition of SAST Regulations. As no acquisition of shares has taken place, SAST Regulations as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company, in any manner whatsoever, shall disclose at every stage the aggregate of his shareholding or voting rights in that company to the company and to the stock exchanges where shares of the target company are listed. ( 1A) Any acquirer who has acquired shares or voting rights of a company under sub-regulation (1) of regulation 11, shall disclose purchase or sale aggregating two per cent or more of the share capital of the target company to the target company, and the stock exchanges where shares of the target company are listed within two days of such purchase or sale along with the aggregate shareholding after such acquisition or sale. Explanation.-For the purposes of sub-regulations (1) and (1A), the term acquirer shall include a pledgee, other than a bank or a financial institution and such pledgee shall make disclosure to the target company and the stock exchange within two days of creation of pledge. (Emphasis supplied) 9. As regards the violation of Regulation 10 the issue for consideration is as to whether the transfer was pledge or acquisition of shares. The learned counsel for the appellant submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be branded as criminal case. He points to the reasoning forwarded by the Adjudicating Officer in the impugned order in this regard. He submits that the fraudulent practices of appellant Tarun Kumar in trading the shares of Rajratan and not making disclosure as well as nondisclosure of acquisition of shares of Velan Hotels Ltd. and public announcement to acquire the shares would amount to deprivation of fair treatment of the shareholders who are affected by the change in control. In the circumstance, he submitted that the penalty of ₹ 15 lakhs imposed upon appellant Tarun Kumar for violation of PFUTP Regulations, ₹ 25 lakhs on the appellants jointly and severally for violation of Regulation 10 read with Regulation 14 of the SAST Regulation and of ₹ 6 lakhs on appellant Tarun Kumar and Jinesh for violation of Regulation 13(1) of PIT Regulations and Regulation 7(1) of the SAST Regulations was justified. He further supports the penalty imposed upon the appellant Jinesh of ₹ 4 lakhs for violation of Regulations 13(3) and 13(5) of the PIT Regulations. Considering all the material on the record, in our view the discretion exercised b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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