Securities Appellate Tribunal
In The Matter Of Appeal No. 1030 Of 2022 ... vs Sebi on 6 November, 2023
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Hearing : 01.11.2023
Date of Decision : 06.11.2023
Misc. Application No. 1578 of 2022
And
Appeal No. 1030 of 2022
Manjulaben Bhaveshkumar Rangee
810/4, Hajim Gali, Marvadi Street,
Azad Street, Gheekanta G. P.
Ahmedabad - 380001. ..... 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. Jitendra Sharda, Advocate for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Ravishekhar Pandey, Ms. Shefali
Shankar, Ms. Rasika Ghate, Mr. Amarpal Singh Dua, Advocates i/b.
MDP & Partners for the Respondent.
CORAM : Justice Tarun Agarwala, Presiding Officer
Ms. Meera Swarup, Technical Member
Per : Justice Tarun Agarwala, Presiding Officer
2
1.The appellant, being noticee nos. 10 has filed the present appeal against the order dated July 29, 2022 passed by the Adjudicating Officer (hereinafter referred to as 'AO') of Securities and Exchange Board of India (hereinafter referred to as 'SEBI') imposing a penalty of Rs. 5 lakh 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').
2. The facts leading to the filing of the present appeal is, that SEBI conducted an investigation in the trading activities of certain entities in the scrip of Ejecta Marketing Ltd. (hereinafter referred to as 'Ejecta') on account of circulation of SMS giving buy recommendations in the scrip in question.
3. During the course of investigation, it was observed that several SMS were circulated on May 14, 2018 and May 15, 2018 giving buy recommendation in the scrip of Ejecta. Because of these SMS, there was a major spurt in the trade volume in the scrip in question and it was, prima-facie, observed that SMS had been circulated to provide exit to certain entities. The investigation identified 34 entities and it was observed that 25 out of 34 suspected entities in group 1 traded among themselves and contributed 42.33% 3 of the gross trading volume. It was observed that suspected entities executed trades among themselves which were synchronised and circular trades. Accordingly, a show cause notice was issued to 11 entities to show cause as to why an enquiry should not be made against them and why penalty should not be imposed for violation of Section 12A of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act') and Regulations 3 and 4 of the PFUTP Regulations.
4. The charge against the 11 noticees is that the noticee nos. 1, 2 and 3 were involved in the synchronised trading and noticee nos. 4 to 11 were involved in the synchronised trading alongwith circular trading.
5. The appellant, noticee nos. 10, has been charged with synchronised and circular trading alongwith noticee nos. 4, 5, 6, 7, 8, 9 and 11. The AO found two instances of circular and synchronised trading on May 14, 2018. The AO also found that all these noticees were connected to each other and after observing that the trades were carried out almost simultaneously and that the time gap between order time of buyer and seller was within one minute, the AO held that the said trades were synchronised trades and were only carried out for the purpose of increasing the volume which was manipulative 4 and violative of Regulations 3 and 4 of the PFUTP Regulations. The AO accordingly imposed a penalty of Rs. 5 lakh.
6. We have heard Mr. Jitendra Sharda, the learned counsel for the appellant and Mr. Sumit Rai, the learned counsel with Mr. Ravishekhar Pandey, Ms. Shefali Shankar, Ms. Rasika Ghate, Mr. Amarpal Singh Dua, the learned counsel for the respondent.
7. We find from perusal of paragraph nos. 21 of the impugned order that there were two instances of synchronised and circular trading on May 14, 2018. We find that noticee nos. 6, 8, 9 and 10 are alleged to have indulged in the circular trading in the first instance whereas noticee nos. 4, 5, 7 and 11 are alleged to have indulged in the circular trading in the second instance. Thus, the charge against the appellant noticee nos. 10 is confined to the alleged circular and synchronised trading of the first instance on May 14, 2018. The circular trading of the first instance indicate that 14,999 shares got transacted from Krunal Bhupendrabhai Makwana noticee nos. 8 to Jay Kamleshbhai Bhavsar noticee nos. 6 to the appellant noticee nos. 10 to Narendrabhai Jayantibhai Rupera noticee nos. 9 and back to Krunal Bhupendrabhai Makwana noticee nos. 8. The AO found that all the noticees i.e. noticees nos. 1 to 11 were connected to each other as per the show cause notice and as held them to be connected in 5 paragraph nos. 32 of the impugned order. The details of the connection have also been given in the chart depicted in paragraphs nos. 23.
8. From a perusal of this chart one finds that the appellant is connected to Kirtikumar Popatlal Rangee who is admittedly her brother-in-law. Apart from this connection, there is no direct connection with noticee nos. 6, 8 and 9. The AO held that the appellant's brother-in-law was connected to noticee nos. 8 on the basis of a common mobile number. Apart from this indirect connection, there is no direct or indirect connection of the appellant with noticee nos. 6 and 9 and, in our opinion, the indirect connection of the appellant with noticee nos. 8 is insufficient to prove that there was a meeting of mind or common intention to do synchronised and circular trading.
9. The mere fact that the trades were executed between the appellant and the other noticees within a span of a few minutes can at best create a suspicion as there was only one incident of trading but cannot lead to a conclusion that the appellant was connected with noticee nos. 6, 8, and 9 nor can it lead to a conclusion that the appellant was connected with the other noticees. 6
10. One instance of trading cannot lead to a conclusion of meeting of mind or hatching a scheme with a common intention to increase the volume or provide exit to certain entities. We also find that the appellant was not only buying but was also selling the shares.
11. In the light of the aforesaid, we are of the view that the charge of synchronised and circular trades against the appellant is not proved and, consequently, the penalty imposed cannot be sustained. The impugned order is quashed in so far as it relates to the appellant. The appeal is allowed with no order as to costs.
Justice Tarun Agarwala Presiding Officer Ms. Meera Swarup Technical Member 06.11.2023 PRAMILA by PRAMILA Digitally signed PTM TANAJI TANAJI MISAL Date: 2023.11.06 MISAL 16:20:43 +05'30'