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TMI Blog2021 (10) TMI 1321X X X X Extracts X X X X X X X X Extracts X X X X ..... in possession of both the UPSI, meaning thereby that those UPSI were disseminated to the appellants by Late Padam Chand Gupta and Mr. Balram Garg - HELD THAT:- The facts as highlighted by the Ld. WTM would show that though there was a family arrangements within the family on two occasions there was no estrangement, as can be seen from the facts highlighted by Ld. WTM - Additionally, in our view, the very fact that appellant Shivani had authorized her cousin brother-in-law i.e appellant Amit to trade on her behalf, would belie the case of the appellants that family settlements means family estrangement. It cannot be gainsaid that the appellants are residing at the same address and even appellant Mr. Balram Garg‟s address is the front side‟ of the premises. The trading pattern of the concerned appellants i.e. withholding of the selling of trade once buy-back talk started within the Company and then again selling spree the shares by them once the buy-back offer was made public till the rejection of the proposal by the State Bank of India was made known to the public, would clearly show that the concerned appellants were aware of both the UPSI. It is true that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to disgorge an amount from Appellants in Appeal no. 376 of 2021 as detailed in the impugned order with a direction to credit the said amount into Investor Protection and Education Fund (IPEF) of the respondent SEBI. 2. In nutshell, the allegations against the appellant Ms. Shivani Gupta and other appellants in Appeal no. 376 of 2021 is that they being insider to two Unpublished Price Sensitive Informations ( UPSI‟ for short) regarding the buy-back of it‟s share by the Company and had traded in the shares while holding theses informations. 3. The informations relate to the buy-back of the shares by the Company which later on was withdrawn. It is alleged that since these appellants were privy to the information of impeding decision of buy-back of the shares at the rate of ₹ 350/-, the appellants withheld selling of the scrip at the prevailing less price which otherwise they had started. Secondly, when the lending bank refused to accede to the proposal of buy-back, till this next information was disseminated by the Company to the Stock Exchanges, they sold the shares at a higher price. 4. Insofar as appellant Mr. Balram Garg is concerned during the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Bank of India was requested to issue no objection certificate. On the same date State Bank of India communicated it‟s refusal. Thereafter, on July 10, 2018 meeting of the independent directors and officials was held to discuss further course of action. On July 12, 2018 Chief Finance Officer of the Company met State Bank of India officials requesting to reconsider the bank‟s refusal. Ultimately, on July 13, 2018 the board has approved the withdrawal of the buy-back offer and the same was informed to the Stock Exchanges. Thus, the discussion leading to the decision of making a buy-back offer, according to respondent SEBI was UPSI-I till it was disseminated to the Stock Exchanges. Further, the communication from State Bank of India refusing to grant no objection certificate on July 7, 2018 was UPSI-II till the Company disseminated the information of withdrawal of buy-back to the Stock Exchanges on July 13, 2018. 9. In this situation, respondent SEBI collected the information regarding the trading of these appellants in Appeal no. 376 of 2021. It was gathered that prior to the UPSI-I appellant Mr. Shivani Gupta her husband Mr. Sachin Gupta and Mr. Sachin‟s brot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him he died on January 20, 2019. Said Late Padam Chand Gupta, appellant Mr. Balram Gupta and father of appellant Mr. Amit Garg, namely, Mr. Amar Chand Garg were the brothers. While Late Padam Chand Gupta was the Chairman of the Company, appellant Mr. Balram Garg was the Managing Director during the relevant period. Their brother Mr. Amit Garg was the Ex-Vice Chairman of the Company. All of them were the promoters of the Company. Before the decision regarding the buy-back was taken i.e. between April 2, 2018 to April 20, 2018 Late Padam Chand Gupta gifted 1.03 crore shares of the Company to his daughter-in-law i.e. appellant Ms. Shivani Gupta. All of them were residing at a common address. Appellant Mr. Amit Garg was authorized by appellant Ms. Shivani Gupta to trade on her behalf in respect of her trading account maintained with stock broker Karvy Stock Broking Ltd. Appellant Mr. Sachin Gupta was authorized to trade on her behalf from the trading account maintained with stock broker SS Corporate Securities Limited. In all these circumstances along with their relationship with appellant Quick Developers Private Limited as detailed (supra) respondent SEBI concluded that UPSI on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the shares of the Company during this period. 14. The learned counsel for the appellants in Appeal no. 376 of 2021 vehemently submitted that appellant Ms. Shivani Gupta, Mr. Sachin Gupta and appellant Mr. Amit Garg cannot be called as connected persons merely because appellant Mr. Shivani Gupta and Mr. Sachin Gupta were immediate relative of Late Padam Chand Gupta. It should, however, be noted that though in the show cause notice they were termed as connected persons and insider, the Ld. WTM considering the ingredients of the definition of connected person as found in PIT Regulations 2015 ultimately held that they cannot be treated as connected persons. As regards the facts as to whether all the appellants in Appeal no. 376 of 2021 were insiders within the meaning of definition. It would be fruitful to advert to the definition as found in Regulation 2(g) of the PIT Regulations which reads as under:- (g) Insider means any person who is; i) a connected person; or ii) in possession of or having access to unpublished price sensitive information; NOTE : Since generally available information is defined, it is intended that anyone in possession of or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of Late Padam Chand Gupta even after the separation and till the death of Late Padam Chand Gupta. The Ld. WTM was aware that the appellant was successor of Late Padam Chand Gupta but he pointed out that nomination is a position of a trust and responsibility and in case there is an estrangement between the families this trust would not have been reposed by Late Padam Chand Gupta upon appellant Sachin, as he also had an option to nominate his another son Mr. Nitin Gupta or his wife Smt. Krishna Devi. Further, the Ld. WTM took note that all these appellants share same residential address though they reside in separate dwelling units. (ii) The trading pattern of the appellants during the relevant period as detailed (supra) was also taken into consideration vide the tables placed by the Ld. WTM in paragraph 23 of the impugned order. From the said trading pattern the Ld. WTM observed that appellant Ms. Shivani Gupta had 100% concentration in trading in the scrip of the Company only during pre-UPSI Period I UPSI II. Further, she was gifted shares of the Company through off market transfer of shares from Late Padam Chand Gupta on April 2, 2018. She continued to trade in that sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Private Limited was nothing but a front entity of Appellant no. 3 Mr. Amit Garg for trading in the securities market including trading in the scrip of the Company. In the circumstances the Ld. WTM found that Appellant no. 4 Quick Developers Private Limited was a wholly owned and controlled by appellant Amit. (v) The Ld. WTM further found that Appellant no. 4 had 100% concentration in the scrip Futures trading of the Company during UPSI II. He inferred that when this appellant squared-off short positions on July 11, 2018 i.e. during UPSI period II it avoided loss of ₹ 89.82 lakh. Further, during UPSI-II this appellant opened another short position of ₹ 3 lakh futures of the Company ( which trader normally does when he anticipates fall in the price) on July 13, 2018 and by squaring-off the aforesaid short position on July 20, 2018, this appellant had made a profit of ₹ 133.04 lakh. (vi) As regards appellant Mr. Balram Garg in Appeal no. 375 of 2021 it was noted that he was the Managing Director of the Company. The chronology of events as detailed (supra) would show that he was insider and the relationship between the parties, their residence at the same plac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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