9911796707
TMI Blog2021 (8) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... 018, 9 of 2018 and 10 of 2018 which is against the order dated November 22, 2017 passed by the Whole Time Member (hereinafter referred to as 'WTM') of Securities and Exchange Board of India (hereinafter referred to as 'SEBI') by which the appellants were restrained from buying, selling or dealing in the securities market for a period of five years. Further, the appellants in these appeals were directed to disgorge an amount of Rs. 95,77,614/- alongwith interest at the rate of 12% p. a. with effect from May 27, 2010 onwards to be paid jointly and severally. The second set of appeals are appeal Nos. 250 of 2020, 261 of 2020, 262 of 2020 and 263 of 2020 which is against the order dated May 29, 2020 passed by the Adjudicating Officer (hereinafter referred to as 'AO') imposing a penalty of Rs. 3 crore to be paid by the appellants jointly and severally. Since the facts and issues involved are common, all the appeals are being taken up together. For facility, the facts as enumerated in the appeal No. 11 of 2018 Rohitkumar Gupta vs. SEBI (hereinafter referred to as 'Rohit Gupta') is being taken into consideration. 2. SEBI conducted an investigation in the scrip of Bank of Rajasthan for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Board of Directors were to convene urgently on the same date for considering the proposed merger. 5. It was alleged that the appellant Rohit Gupta purchased 1,40,000 shares of BoR on 17th and 18th May 2010 for Rs. 1,28,77,324.83 and sold the shares on 25th, 26th and 27th of May 2010 and earned a profit of Rs. 95,77,614/-. It was alleged that the appellant Rohit Gupta had insider information and was in possession of UPSI in connivance with Sanjay Tayal, noticee No. 2 (now deceased), Navin Tayal and Jyotika Tayal, noticee nos. 3 and 4 respectively. 6. The show cause notice further alleged that the appellant Rohit Gupta was funded by Advik Textiles and its directors Kulwinder Nayyar and Azam Shaikh, noticee Nos. 5 and 6 respectively. The show cause notice, thus, alleged that all the noticees, namely, noticee Nos. 1 to 7 had violated Section 12A(d) and (e) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act') as they were engaged in insider trading and were dealing in securities while in possession of material price sensitive information. It was alleged that Advik Textiles had violated Regulation 3A read with Regulation 4 of the PIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. They contended that they were not the directors of Advik Textiles and, therefore, Advik Textiles cannot be deemed to be a connected person under Regulation 2(h)(ix) of the PIT Regulations. Further, Sanjay Tayal nor Navin Tayal were shareholders in this Company though it has come on record that Navin Tayal was a director from June 2, 2008 till March 2, 2010 and, therefore, continued to remain an authorized signatory of the bank accounts of the Advik Textiles. The Tayal family contended that they were not in possession of any UPSI and, in any case, the information was available in the public domain and, therefore, the question of existence of a price sensitive information did not arise. 10. The noticee Nos. 5, 6 and 7, namely, Advik Textiles and its two directors submitted that it was a business deal for purchase of four shops and they had paid Rs. 116.44 lac as an advance towards 2/3rd of the sale consideration. It was also contended that subsequently, the agreement was terminated on June 3, 2010 and the money was refunded on June 17, 2010. It was contended that the directors of Advik Textiles were not privy to any UPSI. 11. The WTM after considering the material evidence on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vin Tayal and Jyotika Tayal again became directors holding 100% shares of Advik Textiles from September 5, 2012. On the basis of this shareholding pattern, the WTM found that even though Navin Tayal and Jyotika Tayal had relinquished the directorship during the UPSI period in question, nonetheless, they still controlled the Company as Navin Tayal continued to remain as the authorized signatory of the Company. 14. Further, the WTM found that the address of Advik Texiles was as under :- C/o. Elemento Lifestyle Pvt. Ltd. Raghuvanshi Mansion, 11, Senapati Bapat Marg, Lower Parel, Mumbai 400 013. 15. This is the same address as of BoR. Further, it was found that the appellant Rohit Gupta, was the Managing Director in Elemento Lifestyle Pvt. Ltd. since 2005. Thus, there is a direct connection of the appellant Rohit Gupta with Advik Textiles and with the Tayal family and, therefore, the WTM came to a conclusion that the Advik Textiles was connected to Tayal as well as to Rohit Gupta. The WTM further came to the conclusion that the agreement for sale dated May 1, 2010 executed between Rohit Gupta and Advik Textiles was only a sham transaction to cover up the scheme of insider tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reponderance of probability. In this regard, the learned counsel for the appellant had relied upon a decision of this Tribunal in Dilip S. Pendse vs. SEBI Appeal No. 80 of 2009 decided on November 19, 2009, wherein this Tribunal has held as under :- "13. The charge of insider trading is one of the most serious charges in relation to the securities market and having regard to the gravity of this wrong doing, higher must be the preponderance of probabilities in establishing the same. In Mousam Singha Roy v. State of West Bengal (2003) 12 SCC 377, the learned judges of the Supreme Court in the context of the administration of criminal justice observed that, "It is also a settled principle of criminal jurisprudence that the more serious the offence, the stricter the degree of proof, since a higher degree of assurance is required to convict the accused." This principle applies to civil cases as well where the charge is to be established not beyond reasonable doubt but on the preponderance of probabilities. The measure of proof in civil or criminal cases is not an absolute standard and within each standard there are degrees of probability. In Hornal v. Neuberger Products Ltd. (1956) 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his aspect of the matter earlier in our order and we cannot agree with the findings recorded in this regard. As already observed, the trades may have been contrary to the Bye-laws of the Exchange but it cannot be said that the contract was not completed in September, 2000. If the sale did not take place in September, 2000 then what was the Broker reporting to the stock exchange as per its letter dated September 16, 2000. We have already noticed that the Bombay Stock Exchange had acknowledged the receipt of this letter from the Broker in its letter of November 26, 2002. In this view of the matter, the charge must fail. Accordingly, we answer the question posted in the opening part of our order in the negative and hold that the appellants are not guilty of insider trading." 21. It was urged by Rohit Gupta that he was not privy to the transfer of funds by Advik Textiles to the appellant as he did not authorize the said transfer. It was contended that the appellant was a man of means and had a credit balance of Rs. 116.43 lacs in his account between May 5, 2010 to May 10, 2010 which would show that there was no need for any transfer of funds by Advik Textiles for the purpose of buying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esult of their illegal act(s) could be asked to do so. Since the chief purpose of ordering disgorgement is to make sure that the wrongdoers do not profit from their wrongdoing, it would follow that the disgorgement amount should not exceed the total profits realized as the result of the unlawful activity. In a disgorgement action, the burden of showing that the amount sought to be disgorged reasonably approximates the amount of unjust enrichment is on the Board." 23. In addition to the aforesaid, reliance was placed on another decision in S.E.C. v. Patel 61 F.3d 137 (2d Cir. 1995) decided on July 24, 1995, wherein it was held "where stock is purchased on the basis of inside information, the proper measure of damages is the difference between the price paid for the share at the time of purchase and the price of the shares shortly after disclosure of the inside information". 24. On the aforesaid basis of the two decisions, it was urged that the calculation made by the WTM on the basis of the difference between the price of the shares purchased and the price of share sold was arbitrary and requires reconsideration. 25. It was also contended that the interest charged at the rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment is made" are conspicuous by their absence in the order dated 21-7-2009. In the circumstances, we are of the view that Shri Subramonium Prasad is correct in his submission. If there is default in payment of Rs. 6 crores within the stipulated time, no future interest is payable inasmuch as a much severer penalty of being debarred from the market for 7 years was instead imposed." 26. Reliance was also made on a decision of this Tribunal Shailesh S. Jhaveri vs. SEBI Appeal No. 79 of 2012 decided on October 4, 2012. 27. It was urged that the rate of interest at the rate of 12% p.a. was wholly excessive and was not in consonance with the interest rate prevailing at the time of either when the impugned order was passed or at the time when the alleged transactions took place. In the end, it was urged that there has been an undue delay of seven years in the issuance of the notice. It was contended that the proceedings initiated were wholly belated. The alleged transaction is of the year 2010 whereas the show cause notice was issued after seven years on October 18, 2017. No reason has been given as to why the proceedings could not be initiated earlier and, therefore, on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 17th & 18th May 2010 and sold on 25th and 27th May 2010 and made a profit of Rs. 95,77,614/- on 18th and 19th May 2010. Rohit Gupta received Rs. 116.44 lac from Advik Textiles. This amount was utilized to purchase the shares. The proceeds of the sale made by Rohit Gupta was deposited in his account on June 2, 2010 and on the very next day i.e. June 3, 2010, the sale agreement between Rohit Gupta and Advik Textiles was terminated and the alleged amount of advance given to Rohit Gupta pursuant to this agreement was refunded on June 17, 2010. Further, at the time when the trades were executed by Rohit Gupta on 17th and 18th May 2010, he had a balance of Rs. 1,32,747.78 in his bank account which was insufficient to pay the purchase price of the shares which he had executed on 17th and 18th May 2010. Advik Textiles was closely connected with the Tayal Group. Further, Rohit Gupta was not a regular trader in the securities market. 29. In order to fulfill the mandate to protect the interest of the investors in the securities market, SEBI is empowered to lift the corporate veil and find out the truth whenever the interest of the investors are likely to be affected otherwise SEBI would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t we are governed by the "rule of law". Fraud, deceit, artificially, SEBI should ensure, have no place in the securities market of this country and "market security" is our motto. People with power and money and in management of the companies, unfortunately often command more respect in our society than the subscribers and investors in their companies are thriving with investors' contributions but they are a divided lot. SEBI has, therefore, a duty to protect investors, individual and collective, against opportunistic behavior of Directors and insiders of the listed companies so as to safeguard market's integrity." "43. Print and electronic media have also a solemn duty not to mislead the public, who are present and prospective investors, in their forecast on the securities market. Of course, genuine and honest opinion on market position of a company has to be welcomes. But a media projection on company's position in the security market with a view to derive a benefit from a position in the securities would amount to market abuse, creating artificially. SEBI has the duty and obligation to protect ordinary genuine investors and SEBI is empowered to do so under the SEBI Act so as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, in our opinion, there is no inordinate delay in the initiation of the proceedings. The contention raised on this aspect is accordingly rejected. 33. Before we deal on the question whether Rohit Gupta was an insider or not, it would be appropriate to peruse a few provisions of the relevant Regulations, namely, the PIT Regulations as hereunder : "2(c). "connected person" means any person who- (i) is a director, as defined in clause (13) of section 2 of the Companies Act, 1956 (1 of 1956), of a company, or is deemed to be a director of that company by virtue of sub-clause (10) of section 307 of that Act or (ii) occupies the position as an officer or an employee of the company or holds a position involving a professional or business relationship between himself and the company [whether temporary or permanent] and who may reasonably be expected to have an access to unpublished price sensitive information in relation to that company: [Explanation :-For the purpose of clause (c), the words "connected person" shall [mean] any person who is a connected person six months prior to an act of insider trading;] "2(e). "insider" means any person who, (i) is or was connected wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... periodical financial results of the company; (ii) intended declaration of dividends (both interim and final); (iii) issue of securities or buy-back of securities; (iv) any major expansion plans or execution of new projects. (v) amalgamation, mergers or takeovers; (vi) disposal of the whole or substantial part of the undertaking; (vii) and significant changes in policies, plans or operations of the company." "2(i) "relative" means a person, as defined in section 6 of the Companies Act, 1956 (1 of 1956)" "2(k) "unpublished" means information which is not published by the company or its agents and is not specific in nature. Explanation.-Speculative reports in print or electronic media shall not be considered as published information." 34. The aforesaid provisions have been explained in various decisions. For facility, the relevant paragraphs of various decisions are extracted hereunder. 35. In SEBI vs. Kishore R. Ajmera [(2016) 6 SCC 368], the Hon'ble Supreme Court has held as under :- " 26. It has been vehemently argued before us that on a screen based trading the identity of the 2nd party be it the client or the broker is not known to the first party/client or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would show a deliberate intention to play the market. The dividing line has to be drawn on the basis of the volume of the transactions and the period of time that the same were indulged in. In the present cases it is clear from all these surrounding facts and circumstances that there has been transgressions by the respondents beyond the permissible dividing line between negligence and deliberate intention." "30. We disagree with the above contention. The stage at which the monetary penalty was imposed on the two other brokers indulging in circular trading is prior to any determination of liability of the said two brokers who did not contest the charges. In the case of M/s Monarch Networth Capital Limited the stage has advanced far beyond the above and had culminated in operative findings against the said subbroker. The imposition of monetary penalty in the case of M/s. Ess Ess Intermediaries Pvt. Ltd., M/s. Rajesh N. Jhaveri and M/s. Rajendra Jayantilal Shah [second category] for violation of the FUTP Regulations cannot be a basis for alteration of the punishment of suspension imposed on M/s. Monarch Networth Capital Limited to one of monetary penalty. In this regard, provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge Act of 1934, Section 10(b) as amended 15 U.S.C.A. Section 7j(b)." "58. Adverting to the facts of the present case if the information with regard to acquisition of shares by M/s Passport India was parted with by Dipak Patel to Kanaiyalal Baldevbhai Patel and Anandkumar Baldevbhai Patel and the latter had transacted in huge volume of shares of the particular company/scrip mentioned by Dipak Patel as little while before the bulk order was placed by M/s Passport India and the said persons had sold the same a short while later at an increased price, such increase being a natural consequence of a huge investment made in the particular scrip by M/s Passport India, surely, it can be held that by the conduct of Dipak Patel, Kanaiyalal Baldevbhai Patel and Anandkumar Baldevbhai Patel were induced to deal in securities. A natural and logical inference that would follow is that the aforesaid two latter persons would not have entered into the transactions in question, had it not been for the information parted with by Dipak Patel. The track record of earlier trading of the two persons concerned does not indicate trading in such huge volumes in their normal course of business. Such an inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been held at para 25 : (SCC p. 383) "25. The SEBI Act and the Regulations framed thereunder are intended to protect the interests of investors in the Securities Market which has seen substantial growth in tune with the parallel developments in the economy. Investors' confidence in the capital /securities market is a reflection of the effectiveness of the regulatory mechanism in force. All such measures are intended to pre-empt manipulative trading and check all kinds of impermissible conduct in order to boost the investors' confidence in the capital market. The primary purpose of the statutory enactments is to provide an environment conducive to increased participation and investment in the securities market which is vital to the growth and development of the economy. The provisions of the SEBI Act and the Regulations will, therefore, have to be understood and interpreted in the above light." In this case, it was also held that in the absence of direct proof of meeting of minds elsewhere in synchronized transactions, the test should be one of preponderance of probabilities as far as adjudication of civil liability arising out of the violation of the Act or the provision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clarified, invokes consensual bargaining involving synchronising of buy and sell orders which will result in matching thereof but only as per permissible parameters which are programmed accordingly. 30. It has been vehemently argued before us that on a screen-based trading the identity of the second party be it the client or the broker is not known to the first party/client or broker. According to us, knowledge of who the second party/client or the broker is, is not relevant at all. While the screen-based trading system keeps the identity of the parties anonymous it will be too naïve to rest the final conclusions on said basis which overlooks a meeting of minds elsewhere. Direct proof of such meeting of minds elsewhere would rarely be forthcoming. The test, in our considered view, is one of preponderance of probabilities so far as adjudication of civil liability arising out of violation of the Act or the provisions of the Regulations framed thereunder is concerned. Prosecution under Section 24 of the Act for violation of the provisions of any of the Regulations, of course, has to be on the basis of proof beyond reasonable doubt. 31. The conclusion has to be gathered from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that trades were not synchronised but it was only a coincidence in some cases. Theoretically this is OK. But when parties decide to synchronise the transaction the story is different. There are many transactions giving an impression that these were all synchronised, otherwise there was no possibility of such perfect matching of quantity, price, etc. As the respondent rightly stated it is too much of a coincidence over too long a period in too many transactions when both parties to the transaction had entered buy and sell orders for the same quantity of shares almost simultaneously. The data furnished in the show cause notice certainly goes to prove the synchronised nature of the transaction which is in violation of Regulation 4 of the FUTP Regulations. The facts on record categorically establish that BEB had indulged in synchronised trading in violation of Regulation 47of the FUTP Regulations. In a synchronised trading intention is implicit." "67. In the quasi-judicial proceeding before SEBI, the standard of proof is preponderance of probability. In a case of similar synchronized trading involving same set of brokers emphasising that the standard of proof is "preponderance of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions, etc. Several circumstances of a determinative character coupled with the inference arising from the conduct of the parties in a major market manipulation could reasonably lead to conclusion that the Broker was responsible in the manipulation. The evidence direct or circumstantial, should be sufficient to raise a presumption in its favour with regard to the existence of a fact sought to be proved. As pointed out by Best in "Law of Evidence", the presumption of innocence is no doubt presumptio juris; but everyday practice shows that it may be successfully encountered by the presumption of guilt arising from circumstances, though it may be a presumption of fact. Since it is exceedingly difficult to prove facts which are especially within the knowledge of the parties concerned, the legal proof in such circumstances partakes the character of a prudent man's estimate as to the probabilities of the case. Hon'ble Securities Appellate Tribunal (SAT) has observed in the matter of Ketan Parekh v SEBI : (SCC OnLine SAT para 20) '20. ..Whether a transaction has been executed with the intention to manipulate the market or defeat its mechanism will depend upon the intention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the absence thereof the Courts cannot be helpless. It is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded and to reach what would appear to the Court to be a reasonable conclusion therefrom. The test would always be that what inferential process that a reasonable/prudent man would adopt to arrive at a conclusion." 39. In Utsav Pathak vs. SEBI Appeal No. 430 of 2019 decided on June 12, 2020, the Tribunal has held as under :- "19. The contention of the learned counsel for the appellant that the inference of providing sensitive information by the appellant to the Tippees was not inferred from any foundational facts is patently erroneous. In this regard, we may note that it is a fundamental principle of law that proving of an allegation levelled against a person can be derived either from direct substantive evidence or can be inferred by a logical process of reasoning from the totality of attending facts and circumstances surrounding the allegations made and levelled. The Supreme Court in SEBI vs. Kishore Ajmera (2016) 6 SCC 368 held that in the absence of direct evidence, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it immediately after announcement of the open offer without any plausible cause is suspicious. H. The Tippees were also charged for insider trading and violation of the PIT Regulations. The Tippees filed a Settlement Application which was allowed on payment of an amount. 22. From the aforesaid foundational facts, the circumstantial evidence or on a preponderance of probability by a logical process of reasoning from the totality of the attending facts and circumstances as stated aforesaid, an irresistible inference can be drawn that the appellant had passed on the price sensitive information regarding the open offer to the Tippees. Such inference taken from the immediate and proximate facts and circumstances surrounding the events is reasonable and logical which any prudent man would arrive at such a conclusion. The Supreme Court in Kanhaiyalal Patel (supra) held that an inferential conclusion from proved and admitted facts would be permissible and legally justified so long as the same is reasonable. 23. In the light of the aforesaid, the decisions cited by the learned counsel for the appellant on the issue that a person cannot be held guilty only on the strength of proximity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k and, therefore, the information being in the public domain could no longer be considered as an UPSI. In this regard, Regulations 2(k) of the PIT Regulations clearly indicates that news report cannot be treated as a published information. Thus, reliance on newspaper reports cannot be taken to mean that the UPSI was now in the public domain. Even otherwise, the appellant Rohit Gupta has relied upon the newspaper report dated May 6, 2010 which suggests that differences had arisen between parties as a result of the proposed merger which was unlikely to take place. Therefore, this news report of May 6, 2010 cannot be considered as the news of the merger taking place. Further, reliance on a newspaper report dated May 18, 2010 in the Live Mint was erroneous in as much as the said news report was published on 11 P. M. on May 18, 2010 after more than 12 hours of the trades made by Rohit Gupta. Thus, the trades made by Rohit Gupta on 17th and 18th May 2010 cannot be based on the news report either of May 5, 2010 or of May 18, 2010. 43. The contention that the appellant was a man of substantive means and did not require funds from Advik Textiles to trade is patently erroneous. At the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Ltd. vs. SEBI Appeal No. 6 of 2007 decided on May 2, 2008, wherein the principle of disgorgement was propounded in paragraph 5 which is extracted hereunder :- "5. Before we deal with the contentions of the parties, it is necessary to understand what disgorgement is. It is a common term in developed markets across the world though it is new to the securities market in India. Black's Law Dictionary defines disgorgement as "The act of giving up something (such as profits illegally obtained) on demand or by legal compulsion." In commercial terms, disgorgement is the forced giving up of profits obtained by illegal or unethical acts. It is a repayment of ill-gotten gains that is imposed on wrongdoers by the courts. Disgorgement is a monetary equitable remedy that is designed to prevent a wrongdoer from unjustly enriching himself as a result of his illegal conduct. It is not a punishment nor is it concerned with the damages sustained by the victims of the unlawful conduct. Disgorgement of illgotten gains may be ordered against one who has violated the securities laws/regulations but it is not every violator who could be asked to disgorge. Only such wrongdoers who have made gains as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nlawful gains in 2010 and have earned interest on it, and therefore, the authority was justified in imposing interest on the disgorged amount from the date of the cause of action and not from the date of the order. Further, nothing has been brought of record to indicate that in 2010, the rate of interest was lower than what has been levied in the impugned order. Consequently, in the absence of any documentary evidence, no latitude can be given to the appellants on this aspect. 48. It was contended that Navin Tayal and Jyotika Tayal had no role in the merger discussions and, therefore, cannot be held to have inside information merely because Navin Tayal was the brother of Sanjay Tayal or Jyotika Tayal was the wife of Sanjay Tayal. It was contended that there was no evidence to show that the appellants circulated an UPSI to Rohit Gupta nor were these appellants had any role in the transfer of funds by Advik Textiles as they were not directors of the company at that moment of time. It was urged that Navin Tayal and Jyotika Tayal were not shareholders of Advik Textiles nor were directors during the period in consideration and there was nothing to show that they had inside information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be accepted. Reliance in the case of Mahavir Chauhan vs. SEBI Appeal No. 393 of 2018 decided on October 18, 2019 is distinguishable. The findings of this Tribunal in the case of Mahavir Chauhan (supra) was based on the fact that the WTM had in that case separately quantified the profit made by each of the noticees and consequently, in that context this Tribunal held that there cannot be the order for joint and several liability. On the other hand, in the case of Dhaval Mehta vs. SEBI Appeal No. 155 of 2008 decided on September 8, 2005, this Tribunal has held as under :- "This brings us to the directions issued in the impugned order requiring the appellant to disgorge a sum of Rs. 72 lacs. The whole time member has found that the appellant and the finance company have jointly made unlawful gains by cornering shares meant for the retail investors. Since the appellant and the finance company were hand in glove and no record was produced to show the actual amount of unlawful gains received by the appellant, the whole time member worked out the illegal gains as the difference between the issue price and the price at which the shares were sold in the market after they were listed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ud. Joint and several liability was inappropriate, he added, because it was clear to whom the proceeds went after the sale of shares and because there was no evidence of a close relationship or collaboration beyond the one transaction between Cahill and the Whittemore defendants, id. at 30, 32-33. Whittemore, on the other hand, argued that the record contained no evidence that he ever received the proceeds from the IOLTA account into which Cahill had placed the money. The Commission responded that it did not know what had happened to the money after Cahill transferred it: "[W]e don't know what happened to the money after that. We don't know how much of it made a round trip back into Mr. Cahill's pocket." Id. at 48. The district court ordered Cahill to disgorge the gross proceeds of his sales of Triton stock and imposed joint and several liability with the Whittemore defendants." "Accordingly, we affirm the order of disgorgement." 51. In addition to the aforesaid, the Hon'ble Supreme Court in the case of Chintalapati Srinivasa Raju vs. SEBI [(2018) 7 SCC 443] has held :- "17. An instructive judgment of Lord Halsbury is contained in Dovey and the Metropolitan Bank v. John Cory [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vey, it was held: "In this state of the evidence, my Lords, I ask whether the course of business at the board meetings, as described by the respondent, was a reasonable course to be pursued by the respondent and other directors, or whether the knowledge which might have been derived from a careful and comparative examination of the weekly states and quarterly returns from the different branches of the bank ought to be imputed to the respondent, or (alternatively) whether he was guilty of such neglect of his duty as a director as would render him liable to damages. I do not think that it is made out that either of the two latter questions should be answered in the affirmative. I think the respondent was bound to give his attention to and exercise his judgment as a man of business on the matters which were brought before the board at the meetings which he attended, and it is not proved that he did not do so. But I think he was entitled to rely upon the judgment, information, and advice of the chairman and general manager, as to whose integrity, skill, and competence he had no reason for suspicion. I agree with what was said by Sir George Jessel in Hallmark's Case, and by Chitty J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich indicates that Kulwinder Nayyar and Azam Shaikh were closely associated with the Tayal's and they were directors in 14 companies possessed by the Tayal group. These appellants have contravened Section 12A(d) of the SEBI Act and, therefore, the order of the WTM cannot be faulted. 53. In so far as the appeals against the order of the AO is concerned, we find that the show cause notice dated July 31, 2018 was served on all the noticees, in spite of which they failed to appear and did not file their responses. Accordingly, by the impugned order dated May 29, 2020, the AO imposed a penalty of Rs. 3 Crore to be paid by all the noticees jointly and severally. 54. The contention of the appellants is that adequate opportunity was not provided and that they had asked for time to inspect the documents and to adjourn the date of hearing in spite of which their application remained unattended and the AO proceeded arbitrarily and had passed an ex-parte order against them. It was urged that the impugned order is violative of the principles of natural justice. 55. It was urged that the notice dated December 27, 2019 intimating the appellants that the inspection of the documents can be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of the appellants dated February 11, 2020 seeking further time to inspect the documents and for adjournment and for reschedulement of the hearing was never received and the appellants were put to strict proof. In rejoinder, the appellants admitted that the notice dated December 27, 2019 was received on January 17, 2020 but was not placed before the appellants and, therefore, could not appear for inspection of documents. It was also stated that on account of personal exigency, the appellants could not attend the date fixed for hearing. No proof have been filed by the appellants with regard to the service of letter dated February 11, 2020. 59. In view of the aforesaid narration of the facts, it is apparently clear that the appellants were duly served with the notice. Adequate opportunity was provided to inspect the documents and appear on the date fixed for hearing. The appellants chose not to inspect the documents nor appeared personally nor appeared through their authorized representative on the date fixed for hearing. Consequently, we are of the opinion that the principles of natural justice was fully complied with. The appellants deliberately chose not to participate in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
