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TMI Blog2021 (2) TMI 1382X X X X Extracts X X X X X X X X Extracts X X X X ..... n the price offered through pending buy orders on the exchange platform. Thereafter those shares were sold on miniscule proportion on the platform of SEBI for a higher price though buy orders for this higher price used to be in existence and sufficient share were available to sell, thus substantially contributing to the Last Traded Price (LTP). Tables no. 3 and 4 of the impugned order shows that they had contributed to 70.96 % of the total trades during the period in question. While some of the appellants like Kusum Devi Baid, Kamal Baid, Dev Kishan Mal, Kuldeep Singh, Devindar Kumar, Rachana Atal, Debashish Chowdhary did not explain before the Adjudicating Officer by failing to file reply to the show cause notice, some of the appellant though filed reply were unable to explain as to why they put sell order on miniscule quantity when a comparatively large buy orders were pending for the price which was more than price they purchased. They simply defended their action by replying that selling of shares in miniscule quantities is not illegal. It is true that no direct connection between the seller and the buyer is established in the present case. We do not have material to find out w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove. In the circumstances in my view the appeals deserve to be dismissed without any order as to costs. The appeals are accordingly dismissed. Misc. Application is also accordingly disposed of. In view of the majority opinion, the impugned order cannot be sustained and is quashed in so far as the appellants are concerned. - TARUN AGARWALA, J. (PRESIDING OFFICER), DR. C.K.G. NAIR, MEMBER AND M.T. JOSHI, J. (MEMBER (J)) ORDER TARUN AGARWALA, J. (PRESIDING OFFICER) 1. All the appeals are against a common order and raises the same issue. Accordingly all the appeals are being decided together. By an order dated 9th January, 2020 the Adjudicating Officer ('AO' for short) has passed an order against 29 entities imposing a cumulative penalty of Rs. 1,83,00,000 against the appellants for violation of Regulations 3 and 4 of the 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, 2003). 2. The facts leading to the filing of the present appeal is, that the investigation in the scrip of Dhanleela Investments and Trading Company Ltd. was conducted for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as to why miniscule trades were being made. 5. We have heard Mr. Saurabh Bachhawat, Advocate assisted by Mr. Amit Gupta and Mr. Jaikishan Lakhwani, Advocates for the Appellants and Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms. Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b. Vidhii Partners for the Respondent. 6. The grounds urged is, that there is an inordinate delay in the issuance of the show cause notice. The finding that the appellants had violated Regulations 3 and 4 of the PFUTP Regulations, 2003 is patently erroneous since the appellant alone cannot be penalized without there being collusion with the alleged buyer. In the instant case, there is neither any charge nor any finding that the appellant had colluded with the buyer. It was further contended that miniscule trades were executed. It was contended that in the case of Amaresh Pathak only 12 trades were executed wherein only 2 trades contributed to the positive LTP and the remaining did not and whereas the appellant has earned only a few thousands of rupees for which the penalty has been imposed. The learned counsel has relied on the decision of this Tribunal in Appeal no. 97 of 2019 Nishith M. Shah HUF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of any collusion with the buyer or promoter/director of the Company. One has to establish a connection between a buyer and with the seller in order to infer a manipulation in the price of the scrip. (g) The authorities have misread and misapplied the decision of the Supreme Court in Ajmera's case (supra). In this regard Paragraph 27 of the judgment is extracted here under:- 27. Let us apply the aforesaid test to the facts of the present cases before us wherein admittedly there is no direct evidence forthcoming. The first relevant fact that has to be taken note of is that the scrips in which trading had been done were of illiquid scrips meaning thereby that such scrips though listed in the Bombay Stock Exchange were not a matter of everyday buy and sell transactions. While it is correct that trading in such illiquid scrips is per se not impermissible, yet, voluminous trading over a period of time in such scrips is a fact that should attract the attention of a vigilant trader engaged/engaging in such trades. The above would stand fortified by the note of caution issued by the Bombay Stock Exchange in the form of a notice/memorandum alerting its members with regard to the nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e price, he thereby automatically induces the innocent investors in the market to buy/sell the stocks. The buyer or the seller is invariably influenced by the price of the stocks and if that is manipulated the person doing so is necessarily influencing the decision of the buyer/seller thereby inducing him to buy or sell. This is what Regulation 4 of the PFUTP Regulation speaks of. Inducement to any person to buy or sell securities leads to manipulation in the price of the scrip. If the factum of inducement is established, it will necessarily follow that a fraud has been played and there has been a manipulation. 12. Taking the aforesaid as a consideration the inducement in the instant case has been caused by the buyer. The buyer has placed the buy order above the LTP. The buyer is inducing the seller to sell at a higher price. The buyer is thus manipulating the price and is playing a fraud on the system. 13. There is no direct evidence of collusion between the appellant and the buyer. The only indirect evidence is that the appellants have sold miniscule quantities leading to an increase in the price of the scrip. One can infer manipulation but such trading cannot happen unilaterally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chud in the case of Narayan Ganesh Dastane ... Vrs .. Sucheta Narayan Dastane (A.I.R. 1975 Supreme Court 1534) as under :- The normal rule which governs civil proceedings is that a fact is said to be established if it is proved by preponderance of probabilities. Under s.3 of the Evidence Act a act is said to be proved when the court either believes it to exist or if considers its existence so probable that prudent man ought, in the circumstances, to act upon the supposition that it exists. The first step in this process is to fix the probabilities. the second to weigh them. The impossible is weeded out in the first stage, the improbable in the second. Within the wide range of probabilities, the Court has often a difficult choice to make but it is this choice which ultimately determines where the preponderance of probabilities lies. While some judges try to formulize this exercise as of finding 51% probabilities , to borrow the inimitable Lord Dennings terminology from Miller ...Vrs... Minister of Pensions (1947) 2, ALL ER 372 it would be simply as more probable than not . 18. Given the above principle, in my view the present appeal cannot be decided one way or the other merely on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not whether there is a legal requirement of establishment of connection/nexus or prosecution of the counterparty to the trades, but inter alia, whether in a given case on facts these factors assumes greater importance. 19. Though in view of the fact that the order of Whole Time Member restraining the present appellants from trading in the securities is not challenged and therefore the findings therein has attained finality, in view of the draft order of the Honble Presiding Officer on merit I alternatively propose to deal with the case on merit. In view of the above proposition, it is necessary to appreciate all the proved/admitted material on record of the present case, to weed out firstly the impossible, improbable secondly and peruse the material through the lens of a prudent man. If this exercise brings us to conclude that case of SEBI is more probable, the charge should be sustained, else the appeals will have to be allowed. To reiterate the present case poses before us the task of appreciation of evidence simplicter and no more, which I propose to undertake hereinafter. 20. Admitted facts of the case are that the trading in the scrip of Dhanleela Investment and Trading Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 55.60 was pending. Regarding rest of the off market transfer similar pattern is discerned. 24. The explanation of the transferors is that they were required to sell the shares in off market in view of urgency of fund. However on the stock exchange platform already buy orders for a higher price were pending. 25. So far as the appellant who had purchased shares at a lower price from the above appellants, admittedly they had later on put 1 to 10 shares for sale on the stock exchange platform though buy orders for more share for higher price were pending and further though they had purchased the shares in off market transaction as detailed above for a lower price. They could not explain the reasons for the same. 26. The percentage of the trade of the appellant along with the details are tabulated in summary manner regarding these patches of investigation separately in the impugned order as under: 27. The pattern thus would reveal that while some buyers had placed a buy order for a higher price on larger scale, the relevant appellant/notices who purchased the shares in off market for lower price, used to put sell orders on miniscule quantities between 1 to 10 which get matched with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Tribunal has to consider all the probabilities either favouring or against the premise and to repeat, if majority of probabilities points toward the existence of fact in issue, then the premise/ the charge will have to be upheld. 31. To sum up, we find that trading in the scrip of Dhanleela was suspended on the stock exchange platform for a period of six years. After revocation of the suspension there was no trade at all for a period of 10 months. It was thus a highly illiquid stock. Thereafter the trade opened at Rs. 17.50. During patch one investigation period i.e. from 26th February, 2013 to 9th October, 2013 it reached to 427.85. The appellant and the other notices were the major contributors to this fact through abnormal transactions. Their sell on the exchange platform created a picture of rosy picture of large scale trade quantities through miniscule sale of shares. Thereafter in patch 2 investigation period i.e. from 10th October, 2013 to 5th December, 2013 the price showed the same trend with the same modus operandi. The fundamentals of the company however did not match with this price swing. These appellants had no shares with them before these transactions. They ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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