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TMI Blog2022 (8) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly, for a period of four years from the date of the order. 2 On 17 March 2020, the adjudicating officer exercised their powers under Section 15 I and imposed a mandatory penalty of rupees fifteen lakhs; Rupees ten lakhs under Section 15HA for violation of the provisions of Sections 12A(a),(b) and (c) of the SEBI Act read with Regulations 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations 2003[4] and Rupees five 5 lakhs under Section 15 HB of the SEBI Act for violating the Code of Conduct for Stock Brokers read with the SEBI (Stock Brokers and Sub Brokers) Regulations 1992. 3 During the pendency of the proceedings before the Securities Appellate Tribunal[5], the appellant was directed to deposit an amount of rupees two crores with SEBI, conditional upon which the order dated 28 February 2020 passed by the WTM was directed to remain stayed. 4 The WTM arrived at a finding that the appellant had engaged in manipulative trades as a consequence of which the share price of a company by the name of Gujarat NRE Coke Limited came to be manipulated. Out of 5,041 self-trades between 15 December 2011 and 24 February 2012, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingle share buy order placed by MBL got matched with the already available large sell order of MBL at a price higher than the last traded price thereby establishing the higher LTP. Further, such order placement pattern of MBL were observed in large number of MBL self-trades and the same were repetitive in nature. I note that due to such trading pattern, MBL had positive LTP contribution of Rs. 289.35 through 5,041 self-trades. Further, I also note the observation of Hon'ble Securities Appellate Tribunal (SAT) in order dated February 25, 2020 in the matter of Mrs. Kalpana Dharmesh Chheda and others Vs. SEBI that ".... when the appellants were holding a large number of shares, their selling miniscule quantity of one share each on more than four dozen occasions is nothing but a strategy of manipulation and unfairly benefiting by offloading the entire shareholding after raising the price to considerable levels.....". Though the said observation of the Hon'ble SAT was rendered in the context of manipulative trading pattern adopted by single share transaction, the same equally holds good in the present factual matrix of the case as well, in respect of manipulative self-trades thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the WTM, it has been urged, is distinct from the penalty which has been imposed by the adjudicating officer. In the present case, it has been submitted that the trades, as noted in the order of the WTM, were carried out from the same terminal ID and there is also a finding of fact that the trading was done manually and not electronically. Hence, it has been observed that there was an intentional manipulation in the price of the company in question. This court, it has been urged, ought not to interfere with a penalty so long as it is not disproportionate or arbitrary, as the precedents of this court indicate. Analysis 9 In the present case, the order of the WTM as well as of the SAT notes that the modus operandi of the appellant was to place a huge sale order at a price higher than the last traded price of the company and thereafter to make a self-trade of only one share for that higher price, thus, establishing a new higher LTP. This has been depicted in the following table, which is contained in the order of the WTM and in the impugned order of the SAT: "Sr. No. Date Order Type Order No. Order Time (LM) Order Qty Trade Time Trade Qty. Trade Price Diff. In LTM (In R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manipulation. While dealing with this aspect, the WTM has observed that the manipulation of the price of scrips seriously impinges upon other counter parties in the securities market. In other words, the impact of a manipulation which is carried out by a participant in the securities market cannot be assessed only in terms of the gain which has been caused to the participants themselves, but in terms of the wider consequences of the action on the securities market. 13 In N. Narayanan v. SEBI (2013) 12 SCC 152, this Court observed that Section 12-A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations specifically aim to curb market manipulations which can have an adverse effect on investor confidence and the healthy growth of the securities market. This Court made the following observations: "33. Prevention of market abuse and preservation of market integrity is the hallmark of securities law. Section 12-A read with Regulations 3 and 4 of the 2003 Regulations essentially intended to preserve "market integrity" and to prevent "market abuse". The object of the SEBI Act is to protect the interest of investors in securities and to promote the development and to regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder; (b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed to be listed on a recognised stock exchange; (c) engage in any act, practice, course of business which 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; ...." [7] Regulation 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 def ..... X X X X Extracts X X X X X X X X Extracts X X X X
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