Securities Appellate Tribunal
Jatin Manubhai Shah & Others vs Sebi on 7 March, 2008
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 189 of 2007
Date of decision : 7.3.2008
1.Jatin Manubhai Shah
2. Manubhai Shah
3. Varsha Shah ...... Appellants Versus Securities and Exchange Board of India ...... Respondent Mr. Umesh Ved Practicing Company Secretary for the Appellants. Mr. Siraz Rustomjee Advocate with Mr. Ravi Hegde and Ms. Dhwani Mehta Advocates for the Respondent.
Coram : Justice N.K. Sodhi, Presiding Officer
Arun Bhargava, Member
Per : Justice N.K. Sodhi, Presiding Officer (Oral)
All three of us had heard this case partly on February 22, 2008 when it was adjourned for today. Since one of us (Shri. Utpal Bhattacharya) is not available in the post lunch session when the case has been taken up, we have heard the learned counsel for the parties at length.
The main charge that has been levelled against the appellants is that they acquired a large number of shares of Oasis Media Matrix Limited and transferred them to Vasant C. Shah, Nirav Pandya, Asif Chappa, Rupesh Hasmukhlal Shah and Navinbhai Shah (hereinafter collectively described as the transferees). The transferees are alleged to have further transferred the shares to Rajesh Kantilal Shah, Ramesh Jain, Deepak D. Vyas, Shree Gayatri Shares & Services Private Limited and some others (hereinafter collectively called the clients) who sold them in the market through synchronized trades and otherwise thereby creating artificial volumes and manipulating the price of the scrip. Jatin Manubhai Shah Appellant no.1 is alleged to have used the aforesaid entities to manipulate the market. A show cause notice was issued to as many as 18 entities including the appellants herein making the aforesaid allegations. They were alleged to have violated Regulations 4(1) and 4(2) of the Securities and Exchange 2 Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (for short the regulations) and were called upon to show cause why action be not taken against them by issuing directions under sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 (for short the Act). We are not concerned with the other entities in this appeal as they have not come up in appeal. The appellants filed their reply which appears to be quite evasive and on a consideration of the relevant material on the record and the submissions made by the appellants, the whole time member by his order dated July 31, 2007 restrained, among others, the three appellants herein from buying, selling and dealing/accessing the securities market in any manner for a period of two years. It is against this order that the present appeal has been filed by the three appellants.
We have heard the learned representative of the appellants and the learned counsel appearing for the Board at some length. We are satisfied that the charge as levelled against the appellants has not been established on the basis of the findings recorded in the impugned order. The case against the appellants has not been properly dealt with. The learned counsel for the respondent has produced before us some additional material in support of the findings and the charges levelled against the appellants to contend that appellant no.1 had actually used the other entities to acquire the shares which were then transferred to the transferees who in turn passed them on to the clients who eventually sold them in the market through synchronized trades and otherwise. According to the respondent Board, these fictitious trades not only created artificial volumes but also manipulated the price of the scrip. The material that has now been shown to us has not been discussed by the learned whole time member in the impugned order. The stand taken by the appellants also does not throw any light on any of the issues that arise for our consideration. While going through the record and the statements of the transferees and the clients, we find that Appellant no.1 had also appeared before the investigating officer and had undertaken to produce the details of the financiers and others from whom money had been borrowed and he undertook to furnish those details. He had also undertaken to furnish the details of the persons to 3 whom the shares had been transferred. Admittedly, this was not done. We wonder why the Board could not have insisted upon the appellants to furnish the said information. The Board could also have collected further material / information from the company to find out the names of the transferees if the shares in the physical form had been transferred off market. In this view of the matter, we are clearly of the opinion that the impugned order cannot be sustained and that a fresh enquiry needs to be undertaken by the Board issuing a fresh show cause notice to the appellants. We, therefore, set aside the impugned order qua the appellants only and remand the case back to the Board to serve a fresh show cause notice to the appellants and thereafter proceed against them in accordance with law. There is no order as to costs.
Sd/-
Justice N.K. Sodhi Presiding Officer Sd/-
Arun Bhargava Member 7.3.2008 bk/-