Securities Appellate Tribunal
Saurin Jayantilal Shah vs Sebi on 22 February, 2023
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision: 22.02.2023
Misc. Application No. 157 of 2023
And
Misc. Application No. 158 of 2023
And
Appeal No. 201 of 2023
Ashlesh Gunvantibhai Shah HUF
9, Amramanjri Bunglows,
Gala Gymkhana Road,
Beside Celebration Centre,
South Bopal, Ahmedabad- 380 058,
Gajarat ...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
Ms. Rinku Valanju, Advocate i/b R V Legal for the Appellant.
Mr. Ravishekhar Pandey, Advocate with Mr. Nishit Dhruva,
Ms. Shefali Shankar and Ms. Rasika Ghate, Advocates i/b.
MDP & Partners, Advocates for the Respondent.
WITH
Appeal No. 202 of 2023
Saurin Jayantilal Shah
401, Devansh Apartment,
Opp. Pritam Nagar Akhada Paldi,
Ahmedabad- 380 007,
Gajarat ...Appellant
Versus
2
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 i/b R V Legal for the Appellant.
Mr. Ravishekhar Pandey, Advocate with Mr. Nishit Dhruva,
Ms. Shefali Shankar and Ms. Rasika Ghate, Advocates i/b.
MDP & Partners, Advocates for the Respondent.
CORAM: Justice Tarun Agarwala, Presiding Officer
Ms. Meera Swarup, Technical Member
Per: Justice Tarun Agarwala, Presiding Officer (Oral)
1.The present appeal has been filed against a common order dated November 28, 2022 passed by the Adjudicating Officer ("AO" for convenience) of the Securities and Exchange Board of India ("SEBI" for convenience) imposing a penalty of Rs. 5 lakhs to be paid jointly and severally by the appellants.
2. The facts leading to the filing of the present appeal is, that SEBI conducted an investigation in respect of alleged manipulation in the scrip of Interactive Financial Services Limited ("the Company" for convenience) for the period November 01, 2020 to December 15, 2020. Based on the investigation, a show cause notice dated August 24, 2022 was 3 issued. The charge levelled against the appellant and 5 other noticees were that noticees no. 1 to 3 who were the promoters/ directors of the Company along with noticee no. 4 who was an ex-employee of the Company orchestrated a scheme to manipulate the price in the scrip wherein noticees no. 5 & 6 who are the appellants in the present appeal manipulated the price of the scrip of the Company by increasing the Last Traded Price ('LTP') and establishing New High Price ('NHP') by executing first trades and that noticee no. 7 circulated bulk SMS recommending buying in the scrip of the Company, thus generating volume in the scrip of the Company. This provided an exit opportunity to noticees no. 1 to 4 who sold their shares at high price during Short Message/Messaging Service ('SMS') period. The show cause notice thus alleged that noticees no. 1 to 7 violated the provisions of Regulation 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ("PFUTP Regulations" for convenience) read with Section 12A of the SEBI Act.
3. The AO after considering the material evidence on record found that the appellants, being noticees no. 5 and 6, had manipulated the price in the scrip by increasing the LTP and establishing a NHP and executed first trades and, therefore, 4 found the appellants to have violated Regulations 3 and 4 of the PFUTP Regulations and accordingly imposed penalty of Rs. 5 lakhs to be paid jointly and severally.
4. We have heard Ms. Rinku Valanju, the learned counsel and Shri Vikas Bengani, the learned counsel for the appellants and Shri Ravishekhar Pandey, the learned counsel for the respondent.
5. We find from a perusal of paragraph 23 and 43 of the impugned order that the basic charge levelled against all the 7 noticees has not been proved. A categorical finding has been given by the AO in paragraph 23 of the impugned order that no connection has been established between noticees no. 1,2,3 and 4 with noticees no. 5 and 6 i.e. the appellants. In paragraph 43 the AO found that noticee no. 7 has not circulated bulk SMS recommending buying of shares of the Company and there was no connection of noticee no. 7 with noticees no. 1, 2, 3 and 4. In paragraph 44 of the impugned order the AO has given a finding that in the absence of material evidence that noticees no. 1, 2, 3 had devised a scheme to sell the shares at higher prices, the AO accordingly gave the noticees no. 1,2,3 and 4 a benefit 5 of doubt and exonerated them of the charge of Regulations 3 and 4 of the PFUTP Regulations.
6. The main plank in the show cause notice was that noticees no. 1, 2 and 3 along with 4 had devised a scheme to manipulate the price of the shares of the Company through noticees no. 5 and 6 and that noticee no. 7 issued SMS to gullible investors to trade in the shares and during the period of SMS noticees no. 1,2,3 and 4 sold their shares and earned profits. This basic charge has not been proved. No connection has been found between noticees no. 1,2,3, and 4 with the appellants. There is no finding that the noticees no. 1, 2,3 and 4 have gained by selling their shares at higher prices. Once this finding has been given, the question of the appellants being charged for manipulating the price for the benefit of noticees no. 1,2,3 and 4 thus does not survive. If noticees no. 1, 2,3 and 4 by selling their shares have not gained materially nor have been found to have devised a scheme then the question of holding the appellants guilty of manipulating the price for the benefit of noticees no. 1,2,3 and 4 fails.
7. In the light of the aforesaid, the impugned order in so far as it relates to the appellants cannot be sustained and is quashed. 6 The appeals are allowed with no order as to costs. Misc. Applications are disposed off accordingly.
8. This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges.
Justice Tarun Agarwala Presiding Officer Ms. Meera Swarup Technical Member 22.02.2023 PRERNA by PRERNA Digitally signed PK MANISH MANISH KHARE Date: 2023.02.24 KHARE 10:51:35 +05'30'