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TMI Blog2020 (9) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... of such investigation. The facts in this case compels me to take urgent steps to impound and retain the proceeds of the notional loss avoided allegedly by the aforementioned insiders by invoking the powers under Section 11(4)(d) of the SEBI Act. Considering the facts and circumstances of the case, the balance of convenience lies in favour of SEBI. Accordingly, as an interim measure, an Ad Interim Ex Parte Order for impounding such alleged unlawful notional loss avoided under Section 11(1) read with 11(4)(d) and 11B(1) of the SEBI Act read with Regulation 10 of the PIT Regulations needs to be issued against Rajeev Vasant Sheth, Aarti Sheth and Divya Sheth. Individual amount of unlawful loss avoided is to be credited to an interest bearing Escrow Account [ Escrow Account in Compliance with SEBI Order dated September 04, 2020 A/c (in the name of the respective person) ] created specifically for the purpose in a Nationalized Bank. The Escrow Account(s) shall create a lien in favour of SEBI and the monies kept therein shall not be released without permission from SEBI. Banks are directed that no debits shall be made, without permission of SEBI, in respect of the bank accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unlawful loss avoided on account of insider trading in the shares of TJL along with interest; b) Directing them to refrain from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period. The persons mentioned under Table-11 are also called upon to show cause as to why appropriate directions for imposing penalty under section 11B(2) and 11(4A) read with Section15G and 15HB of the SEBI Act should not be issued against them for the alleged violations of the aforementioned provisions of SEBI Act and the PIT Regulations. The persons mentioned under Table-11 may file their replies to SEBI within 30 days from the date of receipt of this Order. They may also indicate in their replies whether they wish to avail an opportunity of personal hearing in the matter.This Order shall come into force with immediate effect and shall be in force till further Orders. - - - - - Dated:- 4-9-2020 - G. Mahalingam, J IMPOUNDING ORDER UNDER SECTION 19 READ WITH SECTIONS 11(1), 11(4)(D) AND SECTION 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT,1992 READ WITH REGULATION 10 OF SEBI (PROHIBITION OF INSIDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NA (foreign national) Independent Director 10/02/2017 13/08/2018 Priyanka Agarwal BVOPA8391Q Independent Director 29/11/2017 30/05/2018 Note The company has gone under liquidation with effect from July 30, 2019 4. The shareholding pattern of TJL for quarters prior to and during the investigation period is as under: (Source: BSE Website) Table-2 : Shareholding Pattern as on quarter ended Type of shareholder Quarter ending Sep. 2017 Quarter ending Dec. 2017 Number of shares Shares as a percentage of total number of shares Number of shares Shares as a percentage of total number of shares Promoters (A) 1,47,79,998 60.03 96,56,118 39.22 Public Shareholding(B) 98,42,852 39.97 1,49,66,732 60.78 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he financial results of the company for quarters prior to and during the investigation period is as under: (Source: BSE Website) Table-4 : Financial Results of TJL (Amount in Rs. Crore) Description Quarter Ended Mar. 2017 Jun. 2017 Sep. 2017 Dec. 2017 Net sales 307.85 227.04 70.31 70.77 Other Income 1.42 2.21 2.14 1.42 Total Income 309.27 229.25 72.45 72.19 Profit/loss after tax -8.93 -6.62 -166.80 -201.18 8. It can be noted that the company had incurred loss of ₹ 166.80 crores during the quarter ended September 30, 2017 as compared to a net loss of ₹ 6.62 crores during the quarter ended June 30, 2017 i.e. an increase in the net loss by more than 25 times between the two con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unpublished price sensitive information means any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the following:- (i) financial results; 12. The definition of the term Unpublished Price Sensitive Information under the PIT Regulations includes financial results of the company and, therefore, the quarterly financial results of the company for the Quarter ended September 30, 2017, prior to disclosure by the Company on the stock exchanges is being considered UPSI. Period of existence of the UPSI 13. As noted in para 8, there was a significant increase in the loss incurred by the Company and a substantially fall in the net sales during the quarter ended September 30, 2017. It is noted from the financial statements of the Company that an exceptional item of ₹ 124.48 Crores was written down during Q2 FY2018. The exceptional item included writing down of inventories to their net realisable value as estimated by the manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended September 30, 2017. 17. The information mentioned above were some of the key drivers of financial results of the company and such details amount to material information having substantial impact on the price of the scrip. 18. In view of the above, it is alleged that Rajeev Vasant Sheth was in possession of UPSI regarding poor financial results of TJL for the quarter ended September 30, 2017 atleast as of October 02, 2017 (First Monday post quarter ended September 30, 2017). 19. The UPSI came into the public domain when TJL disclosed the same to the stock exchanges post trading hours on November 29, 2017 at 21:18 hrs on NSE and 21:21 hrs on BSE via corporate announcement. 20. Therefore, the UPSI Period has been determined as from October 02, 2017 (First Monday post quarter ended September 30, 2017) to November 29, 2017. Insiders and Connected Persons: 21. The term Insider as defined in Regulation 2 (1) (g) the PIT Regulations is as follows: insider means any person who is: (i) a connected person; or (ii) in possession of or having access to unpublished price sensitive information; 22. In terms of Regulation 2 (1) (d) of the PIT Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined from the exchanges is as under,- Table-7 : Trading history of Rajeev Vasant Sheth, Aarti Sheth and Divya Sheth in the shares of TJL Pre UPSI Period (01/07/2017 to 30/09/2017) Date Buy Qty. Wt. Avg. Buy Price (in Rs.) Buy Value (in Rs.) Sell Qty. Wt. Avg. Sell Price (in Rs.) Sell Value (in Rs.) Rajeev Vasant Sheth, Aarti Sheth and Divya Sheth NIL During UPSI Period (01/10/2017 to 29/11/2017) Date Buy Qty. Wt. Avg. Buy Price (in Rs.) Buy Value (in Rs.) Sell Qty. Wt. Avg. Sell Price (in Rs.) Sell Value (in Rs.) Rajeev Vasant Sheth 09-Oct-2017 - - - 2,40,000 28.99 69,57,406.80 10-Oct-2017 1,12,000 30.49 34,15, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - 35,000 22.07 7,72,300.00 20-Nov-2017 - - - 79,440 22.03 17,50,215.40 Total 1,14,440 - 25,22,515.40 Divya Sheth 09-Oct-2017 - - - 1,14,440 28.61 32,73,748.70 Post UPSI Period (30/11/2017 to 31/03/2018) Date Buy Qty. Wt. Avg. Buy Price (in Rs.) Buy Value (in Rs.) Sell Qty. Wt. Avg. Sell Price (in Rs.) Sell Value (in Rs.) Rajeev Vasant Sheth 19-Dec-17 - - - 4,66,185 19.32 90,06,106.10 20-Dec-17 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssession of the UPSI with a view to avoiding the losses. 31. The summary of the trades carried out by the insiders in the shares of TJL during the UPSI Period is given below: Table-8 : Dealings of Rajeev Vasant Sheth, Divya Sheth and Aarti Sheth in the shares of TJL during the UPSI period Entity Name/ PAN Exchange Gross Buy Gross Sell Net Qty (sell) Rajeev Vasant Sheth (PAN - AAFPS7760Q) BSE 12000 11,64,063 (11,52,063) NSE 1,00,000 20,41,435 (19,41,435) Total 1,12,000 32,05,498 (30,93,498) Aarti Sheth (PAN - AAGPS3762H) BSE - 96,500 (96,500) NSE 17,940 (17,940) Total 1,14,440 (1,14,440) Divya Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PAN - AAFPS7760Q) BSE 11,52,063 1 24.30 20.25 2,79,91,987.30 1 2,33,29,275.75 46,62,711.55 NSE 19,41,435 2 24.32 20.20 4,72,13,756.95 2 3,92,16,987.00 79,96,769.95 Total 30,93,498 - - 7,52,05,744.25 6,25,46,262.75 1,26,59,481.50 Aarti Sheth (PAN - AAGPS3762H) BSE 17,940 22.15 20.25 3,97,401.50 3,63,285.00 34,116.50 NSE 96,500 22.02 20.20 21,25,113.90 19,49,300.00 1,75,813.90 Total 1,14,440 - - 25,22,515.40 23,12,585.00 2,09,930.40 Divya Sheth (PAN - AAHPS8431L) NSE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NSE 10/10/2017 1,00,000 27.50 27,50,000.00 1,00,000 30.70 30,70,443.20 (3,20,443.20) BSE 10/10/2017 12,000 28.36 3,40,270.59 12,000 28.74 3,44,888.75 (4,618.16) TOTAL 1,12,000 30,90,270.59 1,12,000 34,15,331.95 (3,25,061.36) 41. In view of the above, the investigation alleges that Rajeev Vasant Sheth by executing contra trades within 6 months, has violated the provisions of the Code of Conduct for Prevention of Insider Trading formulated by the Company in pursuance of Sub-Regulation (1) and sub-Regulation (2) of Regulation 9 of the PIT Regulations. 42. The code of conduct for prevention of insider trading of TJL, also provided that all Specified Persons, who intend to deal in the securities of the Company when the trading window is opened and if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded under Section 11(1) read with 11(4)(d) and 11B(1) of the SEBI Act read with Regulation 10 of the PIT Regulations needs to be issued against Rajeev Vasant Sheth, Aarti Sheth and Divya Sheth. ORDER: 46. In view of the foregoing, I, in exercise of the powers conferred upon me in terms of Section 19 read with Section 11(1), 11(4)(d) and 11B(1) of the SEBI Act read with Regulation 10 of the PIT Regulations, hereby issue the following directions: 47. I, hereby, impound from the below mentioned persons the alleged unlawful notional loss avoided, on account of trades carried out during the UPSI Period, as mentioned against their respective names in below table: Table-11 Name PAN Number Unlawful loss avoided (in Rs.) Rajeev Vasant Sheth AAFPS7760Q 1,26,59,481.50 Aarti Sheth AAGPS3762H 2,09,930.40 Divya Sheth AAHPS8431L 9,62,060.70 48. The persons mentioned in Table-11 above are also directed that above mentioned individual amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the respective persons mentioned in Table-11 above for the purpose of show cause against them. Accordingly, the persons mentioned under Table-11 above are advised to show cause as to why suitable directions, including the following, should not be issued/imposed against them under Sections 11(1), 11(4)(d) and 11B(1) of the SEBI Act for the alleged violations of the provisions of Sections 12A(d) (e) of the SEBI Act and Regulations 4(1) of the PIT Regulations: a) Directing them to disgorge an amount equivalent to the unlawful loss avoided on account of insider trading in the shares of TJL along with interest; b) Directing them to refrain from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period. 53. The persons mentioned under Table-11 are also called upon to show cause as to why appropriate directions for imposing penalty under section 11B(2) and 11(4A) read with Section15G and 15HB of the SEBI Act should not be issued against them for the alleged violations of the aforementioned provisions of SEBI Act and the PIT Regulations. 54. The persons mentioned under Table-11 may file thei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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