Securities Appellate Tribunal
Pooja Vinay Jain vs Sebi on 17 March, 2020
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Hearing : 07.01.2020
Date of Decision : 17.03.2020
Appeal No. 152 of 2019
Pooja Vinay Jain
House No. A-3, Dunhill Castle,
Opp. ICICI Bank, Hanuman Road,
Vile Parle (E),
Mumbai - 400 057. ..... Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mr. Vikas Bengani, Advocate for the Appellant.
Mr. Vishal Kanade, Advocate with Mr. Vivek Shah, Mr. Abhiraj
Arora, Advocates i/b ELP for the Respondent.
CORAM : Justice Tarun Agarwala, Presiding Officer
Justice M. T. Joshi, Judicial Member
Per : Justice M. T. Joshi, Judicial Member
1. Aggrieved by the imposition of a monetary penalty of Rs. 3
lacs by the Adjudicating Officer (hereinafter referred to as 'AO') of
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respondent Securities and Exchange Board of India (hereinafter
referred to as 'SEBI') for violation of provision of Regulations 3(a),
(b), (c), (d), 4(1), 4(2)(a) and (g) 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'), the present appeal is preferred.
2. Respondent SEBI had investigated in the trading of the scrip
of Mindvision Capital Ltd. (formerly known as Kailash Ficom Ltd.)
(hereinafter referred to as 'MCL') during the period June 17, 2009 to
February 8, 2010. It was found that in all 72 entities were connected
with each other. Out of those entities, 50 entities had bought shares
in the off-market from 22 entities and thereafter, those shares were
either sold in off-market or through market to the connected entities
in order to create a volume manipulation in the said scrips.
So far as the present appellant is concerned, during the period
August 11, 2009 to February 4, 2009, the appellant has bought 30000
shares of MCL in off-market transaction from one of the connected
entity, namely, Dadima Capital (P) Ltd. (Dadima Capital) and sold
the same by using the platform of the market to other entities,
namely, Nilesh Krushna Palande (Nilesh), Universal Credit &
Securities Ltd. (Universal Credit) and Fast Track Entertainment Ltd.
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(Fast Track Entertainment). The table given below paragraph 29 of
the impugned order would show that on the given days these trades
were from 32% to 55% of the total market volume of all the trading
in the scrip of MCL. It was alleged that all the above four entities
were connected with each other and with the appellant. In the
circumstances, a show cause notice was issued on November 20,
2017.
3. The appellant has replied as under :-
1. From 2007 onwards, she acquired shares of various listed
companies including the shares of MCL on the advice of
the some personnel.
2. The shares were purchased through the stock broker.
3. She is not aware that the shares were purchased for her /
stockbroker off-market / online.
4. She was simply bonafide investor and has no say in the
management of the portfolio.
She therefore sought exonerated from the proceedings.
4. From the impugned order, it appears that none of the noticees
either replied to the show cause notice or appeared in the proceedings
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except the appellant. The appellant also did not attend respondent
SEBI for personal hearing. The AO, inter-alia, held the present
appeal guilty of the violation and imposed the monetary penalty as
detailed (supra). Hence, the present appeal.
5. The learned counsel for the appellant Mr. Vikas Bengani
submitted before us that no circular trading is made out by the
respondent SEBI in the impugned order. There were no reversal
trades. The record would show that only 30000 shares of MCL were
purchased by the appellant off-market and the same were sold in the
market. While the transactions are of the year 2009-10, the show
cause notice was issued on September 20, 2017. There was an
inordinate delay in initiating the proceedings and, therefore, on this
sole ground the appellant is entitled for exoneration. In support, the
learned counsel for the appellant relied on the decisions of this
Tribunal in the cases of Monika Jain vs. SEBI [Appeal No. 4 of
2011 decided on February 11, 2011] and Ashok Shivlal Rupani &
Anr. vs. SEBI [Appeal No. 417 of 2018 decided on August 22,
2019].
6. On the other hand, the learned counsel for the respondent
SEBI Mr. Vishal Kanade submitted as under :-
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1. The appellant did not take any plea of delay in launching
the proceedings or the delay resulting into some prejudice
to the appellant, before the AO.
2. Suddenly during the appeal, the said plea is raised.
3. The reply to the show cause notice would show that the
appellant herself has annexed the copies of all the
transactions with the reply. This would show that the
appellant was not anyway prejudiced due to delay, if any,
in initiating the proceedings.
4. He submitted that since large numbers of entities were
involved in the off-market as well as market transactions,
the analysis of the same took some time due to which no
prejudice was caused to any of the noticees including the
appellant.
5. It was further submitted that transaction with the connected
entities is clearly borne out of the record and, therefore,
merely because there was no circle of trades the appellant
cannot be exonerated.
7. Upon hearing both the sides, in our view, the appeal is liable to
be dismissed for the following reasons.
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8. It is an admitted fact that during the relevant period, the
appellant has purchased 30000 shares off-market of MCL from one
Dadima Capital and sold the same through market to four entities
during the relevant period. Paragraph Nos. 25 and 26 of the
impugned order would show that the very same Dadima Capital has
sold 7500 shares of MCL on July 25, 2009 to one Mangilal
Chandanmal Doshi who eventually sold the same on July 27, 2009 to
Universal Credit and Nilesh, the very entities who had purchased the
shares from the appellant. Besides this, this Universal Credit is
connected with Dadima Capital through one common director
Narendra Shah. Further, Nilesh is also connected with one
Tribhuvan Housing Ltd. as he shares a common address with
Narendra Shah. So far as Fast Track is concerned, Narendra Shah is
again connected to it through one of its director Pralhad Panchal.
9. The record would show that the stock in question was illiquid
stock and, the transaction between the parties was in large percentage
of the total market trades as detailed (supra). The only plea of the
appellant is that she acted on the advice of the stock broker and,
therefore, not aware of any of the transactions is not supported by
any material. In the circumstances, the plea of the appellant cannot
be accepted.
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10. In the case of Monika Jain (supra) cited by the appellant,
this Tribunal came to the conclusion that the alleged facts of circular
trade was proved as the circle got completed. It was argued that in
the present case no circle was completed. It is, however, to be noted
that in the present case there is no allegation of circular trade but of
false trades between the connected parties which is borne out of the
fact. Therefore, the ratio in the case of Monika Jain is not applicable
in the present case.
11. On the issue of delay, in the case of Ashok Rupani (supra),
this Tribunal, inter-alia, noted the ratio in the case of Mr. Rakesh
Kathotia and Ors. vs. SEBI [Appeal No 7 of 2016 decided on May
27, 2019]. Paragraph No. 7of the case of Ashok Rupani Judgment is
as under :-
"7. In Mr. Rakesh Kathotia & Ors. vs. SEBI (Appeal No.
07 of 2016 decided by this Tribunal on 27.05.2019)
proceedings were quashed on account of inordinate
delay. The said decision is squarely applicable to the
instant case. For facility, the relevant paragraph of the
order is extracted hereunder:
"23. It is no doubt true that no period of
limitation is prescribed in the Act or the
Regulations for issuance of a show cause
notice or for completion of the adjudication
proceedings. The Supreme Court in
Government of India vs, Citedal Fine
Pharmaceuticals, Madras and Others, [AIR
6 (1989) SC 1771] held that in the absence of
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any period of limitation, the authority is
required to exercise its powers within a
reasonable period. What would be the
reasonable period would depend on the facts
of each case and that no hard and fast rule
can be laid down in this regard as the
determination of this question would depend
on the facts of each case. This proposition of
law has been consistently reiterated by the
Supreme Court in Bhavnagar University v.
Palitana Sugar Mill (2004) Vol.12 SCC 670,
State of Punjab vs. Bhatinda District Coop.
Milk P. Union Ltd (2007) Vol.11 SCC 363
and Joint Collector Ranga Reddy Dist. &
Anr. vs. D. Narsing Rao & Ors. (2015) Vol. 3
SCC 695. The Supreme Court recently in the
case of Adjudicating Officer, SEBI vs.
Bhavesh Pabari (2019) SCC Online SC 294
held:
"There are judgments which hold that when
the period of limitation is not prescribed, such
power must be exercised within a reasonable
time. What would be reasonable time, would
depend upon the facts and circumstances of
the case, nature of the default/statute,
prejudice caused, whether the third-party
rights had been created etc."
12. The decision would show that the power to initiate the
proceedings must be exercised by the authorities within a reasonable
time. This would depend upon the facts and circumstances of the
case, nature of the default / statute and prejudice caused to the
noticee.
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13. In the present case, the appellant neither put a plea of
prejudice before the AO nor before us. It was simply stated that
since the proceedings were launched by respondent SEBI after a
period seven years, the same should be quashed on the ground of
delay. The record would show that all the documents concerning the
defense of the appellant were filed by her before the AO. Therefore,
for want of any prejudice the proceedings cannot be quashed simply
on the ground of delay in launching the same. Further, as explained
by the learned counsel for the respondent as recorded in paragraph
No. 6.4 above, large numbers of entities and transactions were
analyzed by SEBI which took some time. In the result, the following
order :-
ORDER
14. The appeal is hereby dismissed without any order as to costs.
Sd/-
Justice Tarun Agarwala Presiding Officer Sd/-
Justice M. T. Joshi Judicial Member 17.03.2020 Prepared & Compared by PTM