Securities Appellate Tribunal
Asha Sharma vs Sebi on 21 September, 2022
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Hearing : 24.06.2022
Date of Decision : 21.09.2022
Appeal No. 318 of 2021
Comfort Intech Ltd.
A-301, Hetal Arch, Opp. Natraj
Market, S .V. Road, Malad (West),
Mumbai - 400 064. .... Appellant
Versus
Securities & Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mr. Prakash Shah, Advocate with Mr. Kushal Shah, CA i/b Prakash
Shah & Associates for the Appellant.
Mr. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Binjal Samani,
Ms. Aditi Palnitkar, Ms. Moksha Kothari, Advocates i/b Vidhii
Partners for the Respondent.
With
Appeal No. 319 of 2021
Manju Khandelia
B-3002, Oberoi Esquire, Oberoi Garden
2
City, Off Western Express Highway,
Goregaon (East), Mumbai - 400 063. .... Appellant
Versus
Securities & Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mr. Prakash Shah, Advocate with Mr. Kushal Shah, CA i/b Prakash
Shah & Associates for the Appellant.
Mr. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Binjal Samani,
Ms. Aditi Palnitkar, Ms. Moksha Kothari, Advocates i/b Vidhii
Partners for the Respondent.
With
Appeal No. 320 of 2021
Jugal Chandrakant Thacker HUF
A/1801, Shiv Shrushti Apartment,
Link Road, Mahavir Nagar, Kandivali,
Mumbai - 400 067. .... Appellant
Versus
Securities & Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mr. Jugal Chandrakant Thacker, Appellant in person.
3
Mr. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Binjal Samani,
Ms. Aditi Palnitkar, Ms. Moksha Kothari, Advocates i/b Vidhii
Partners for the Respondent.
With
Misc. Application No. 55 of 2022
And
Appeal No. 66 of 2022
Jugal Chandrakant Thacker HUF
A/1801, Shiv Shrushti Apartment,
Link Road, Mahavir Nagar, Kandivali,
Mumbai - 400 067. .... Appellant
Versus
Securities & Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mr. Jugal Chandrakant Thacker, Appellant in person.
Mr. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Binjal Samani,
Ms. Aditi Palnitkar, Ms. Moksha Kothari, Advocates i/b Vidhii
Partners for the Respondent.
With
Misc. Application No. 69 of 2022
And
Misc. Application No. 617 of 2022
4
And
Appeal No. 67 of 2022
Comfort Intech Ltd.
A-301, Hetal Arch, Opp. Natraj
Market, S .V. Road, Malad (West),
Mumbai - 400 064. .... Appellant
Versus
Securities & 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 Ms. Kinjal Patel, Advocate for the
Appellant.
Mr. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Binjal Samani,
Ms. Aditi Palnitkar, Ms. Moksha Kothari, Advocates i/b Vidhii
Partners for the Respondent.
With
Misc. Application No. 68 of 2022
And
Appeal No. 78 of 2022
Mrs. Manju Khandelia
B-3002, Oberoi Garden City,
Off Western Express Highway,
Mohan Gokhale Road,
Goregaon (East), Mumbai - 400 063. .... Appellant
5
Versus
Securities & Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Ms. Rinku Valnju, Advocate i/b Mr. Sumit Yadav, Advocate for the
Appellant.
Mr. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Binjal Samani,
Ms. Aditi Palnitkar, Ms. Moksha Kothari, Advocates i/b Vidhii
Partners for the Respondent.
With
Misc. Application No. 305 of 2022
And
Appeal No. 123 of 2022
Madan Lal
13, Gram Siroli Sampuran,
Siroli, Jaipur, Rajasthan - 303 012. ..... Appellant
Versus
Securities & Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mr. J. M. Bhalgat, Advocate for the Appellant.
6
Ms. Nidhi Singh, Advocate with Ms. Binjal Samani, Ms. Aditi
Palnitkar, Ms. Moksha Kothari, Advocates i/b Vidhii Partners for the
Respondent.
With
Misc. Application No. 302 of 2022
And
Appeal No. 124 of 2022
Vandana Sharma
119, Angira Nagar, Jhotwara,
Jaipur, Rajasthan - 302021. ..... Appellant
Versus
Securities & Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mr. J. M. Bhalgat, Advocate for the Appellant.
Ms. Nidhi Singh, Advocate with Ms. Binjal Samani, Ms. Aditi
Palnitkar, Ms. Moksha Kothari, Advocates i/b Vidhii Partners for the
Respondent.
With
Misc. Application No. 304 of 2022
And
Misc. Application No. 537 of 2022
And
Appeal No. 125 of 2022
7
Asha Sharma
68, Gram Siroli, Sampuran,
Siroli, Jaipur, Rajasthan - 303 012. ..... Appellant
Versus
Securities & Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (East),
Mumbai - 400 051. ... Respondent
Mr. J. M. Bhalgat, Advocate for the Appellant.
Mr. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Binjal Samani,
Ms. Aditi Palnitkar, Ms. Moksha Kothari, Advocates i/b Vidhii
Partners for the Respondent.
CORAM : Justice Tarun Agarwala, Presiding Officer
Justice M. T. Joshi, Judicial Member
Per : Justice M. T. Joshi, Judicial Member
1. All the present appeals have arisen out of the tradings carried
by the present appellants in the scrip of Rutron International Ltd.
(hereinafter referred to as 'Rutron or the company'). According to the
respondent Securities and Exchange Board of India (hereinafter
referred to as 'SEBI'), the present appellants had traded in the scrip in
violation of Regulation 3(a), (b), (c), (d) and Regulation 4(1), 4(2)(a)
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and (e) 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. Two separate proceedings were initiated. First was under
Section 11(1), 11(4) and 11B(1) read with Section 19 of the Securities
and Exchange Board of India Act, 1992 (hereinafter referred to as
'SEBI Act') was initiated before the learned Whole Time Member
(hereinafter referred to as 'WTM') who upon hearing the present
appellants and other noticees by an order dated February 15, 2021
restrained the present appellants from accessing the securities market,
in any manner, for a period of six months from the date of the order
and for freezing of the securities held by them.
3. Aggrieved by the said order, appellant Comfort Intech Ltd.
(hereinafter referred to as 'Comfort'), appellant Ms. Manju Khandelia
(hereinafter referred to as 'Manju') and appellant Jugal Chandrakant
Thacker HUF (hereinafter referred to as 'Jugal HUF') filed the appeal
nos. 318, 319 and 320 of 2021 respectively.
4. Second proceeding before the learned Adjudicating Officer
(hereinafter referred to as 'AO') for imposing a penalty was launched
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by respondent SEBI. After hearing the parties, the learned AO vide
order dated December 24, 2021 imposed different quantum of
penalties on each of the noticees therein. Aggrieved by the said order,
appellant Comfort preferred appeal no. 67 of 2022, appellant Manju
preferred appeal no. 78 of 2022 while appellant Jugal HUF preferred
appeal no. 66 of 2022. Besides these appellants, this AO's order is
challenged by appellant Madan Lal vide appeal no. 123 of 2022
(hereinafter referred to as 'Madan'), appellant Vandana Sharma vide
appeal no. 124 of 2022 (hereinafter referred to as 'Vandana') and
appellant Asha Sharma vide appeal no. 125 of 2022 (hereinafter
referred to as 'Asha').
5. The facts of all the cases are common, all these appeals were
heard together and are being decided by the present common order.
For the sake of convenience, the facts stated in the order of the learned
WTM dated February 15, 2021 are taken into consideration.
6. The trading in the scrip of Rutron was suspended with effect
from November 15, 1999 for non-compliance of Listing Agreement.
The said suspension was revoked with effect from July 1, 2011.
Thereafter, till May 2, 2012 only 50 shares were traded on the
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exchange platform. However, thereafter sudden spurt in the trading
and phenomenon rise in the price of the scrip was noted by SEBI.
Therefore, investigation was carried in the trading. The investigation
period was divided by SEBI into three patches which are as under :-
Patch - 1 : Price Rise (Rs. 5.25 to Rs. 214.45) May 03,
2012 to Feb. 11, 2013.
Patch - 2 : Price Rise (Rs. 218.60 to Rs. 243) Feb. 12,
2013 to Nov. 21, 2013.
Patch - 3 : Price Fall (post-split) : (Rs. 24.45 to
Rs. 7.30) Nov. 22, 2013 to Nov. 28, 2014.
7. SEBI also found great variance in volume of the trading.
During patch - 1, the daily average number of shares traded was 46.
It rose to 46,191 during patch - 2 and 3,76,781 during patch - 3.
During investigation, various entities were found to be connected by
SEBI on the basis of their common address, common email address,
financial transactions relations, etc. In the circumstances, SEBI issued
notices to 14 entities including the present appellants. The order came
to be passed against all these 14 noticees out of which the present
appellants have preferred the appeals. All these appellants put their
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case before SEBI in both the proceedings explaining their role.
However, neither the learned WTM nor the learned AO agreed with
their submissions, therefore, the impugned order came to be passed
against them. Hence the present appeals.
8. We have heard Mr. Prakash Shah, Mrs. Rinku Valanju, Mr. J.
M. Bhalgat, the learned counsel for the appellants with Mr. Jugal
Chandrakant Thacker, appellant in person and Mr. Sumit Rai, the
learned counsel with Ms. Nidhi, Singh, Ms. Binjal Samani, Ms. Aditi
Palnitkar, Ms. Moksha Kothari, the learned counsel for the
respondent.
9. As detailed earlier, in patch - 1, the price of the scrip of Rutron
rose from Rs. 5.25 to Rs. 214.45. During this patch, appellants
Vandana, Madan and Asha had sold 866 shares of Rutron in 116
trades. They had contributed Rs. 209.20 towards market positive Last
Traded Price (hereinafter referred to as 'LTP'). It constituted 96.49%
of the contribution to the net positive contribution. The trading
pattern of these appellants was to place sell orders for miniscule
quantity between only 5 to 10 shares on a repeated basis always at a
price higher than the LTP which would match to the pending buy
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orders. They had substantial holding of the shares but despite this
they traded in the above fashion. SEBI, therefore, inferred these
appellants by acting in concerted manner manipulated the price of the
scrip.
10. These appellants contended before SEBI that their contribution
to the LTP was miniscule. They were not connected with any of the
noticees. The counter parties who bought the shares were let free by
SEBI and substantially on this ground, they sought exoneration from
the proceedings.
11. The learned counsel for the respondent pointed out that all
these appellants had acquired the shares in off-market on the same day
i.e. on May 18, 2012 and thereafter they started releasing the shares in
small quantities as detailed (supra). It was further pointed out that the
connection of these appellants with various noticees is already given
in the impugned order. This material would show that the appellant
Vandana and appellant Madan bought the shares on same day from
one Heet P. Shah and Piyush Shah who shared a common address.
12. Upon hearing both the sides, in our view, since these
appellants i.e. Vandana, Madan and Asha have not challenged the
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order of the learned WTM dated February 15, 2021, the findings
recorded by the learned WTM therein has attained finality and there is
no need to go further into the details of the transactions of these
appellants. Thus, the appeals of these appellants are liable to be
dismissed without any order as to costs.
13. In so far as the appellants Manju, Comfort and Jugal HUF are
concerned, it would be fruitful to first advert to the connection
between themselves, and with other noticees, if any. Karta of
appellant Jugal HUF was an independent director of appellant
Comfort. In so far as appellant Manju is concerned, she is shown in
the category of promoter and promoter of group company of appellant
Comfort. Besides, her brother Anil Agarwal is also promoter in
appellant Comfort and Anil Agarwal had fund transaction with noticee
nos. 3 Padma Impex Pvt. Ltd. (hereinafter referred to as 'Padma
Impex'). This Padma Impex, noticee nos. 3 had several transactions
with Rutron besides the appellant Manju.
14. It was contended by these appellants Jugal i.e. Karta of Jugal
HUF was an independent director of the appellant Comfort and was
not involved in the day to day management or business decision of
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appellant Comfort. Besides this, the fund transaction happened on
December 24, 2010 between Anil Agarwal and Padma Impex towards
the repayment of loan taken by Anil Agarwal in his personal capacity
and Comfort was not privy and was not a party to the same. It was
also submitted that the loan was refunded much prior to investigation
period i.e. May 3, 2012.
15. As regards the connection of Mr. Anil Agarwal with Jugal
HUF, it was submitted that this appellant has executed transactions
during two different patches i.e. patch - 2 and patch - 3 and said Anil
Agarwal is not a co-noticee in the show cause notice.
16. The nature of the transactions between these appellants are
impugned by SEBI. By establishing these transactions and
connections respondent SEBI only wants to show that these appellants
are inter connected with each other and as such they in collusion with
each other transacted in the scrip of Rutron which is detailed
hereinafter. This connection is an additional factor to show that these
appellants were hand in glove while trading in the scrip of Rutron on
the stock exchange platform which occurs in faceless manner.
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17. Appellant Manju and appellant Jugal HUF had traded during
patch - 2 which had also seen further price rise as detailed (supra). In
this patch - 2, SEBI had found a pattern between the trading. Noticee
nos. 1, 2, 3 and 9 were acting as buyers while the present appellants
i.e. Manju and Jugal HUF were found to be regularly sellers, in such a
manner that it would contribute to the positive LTP in the scrip of
Rutron during that period. It was found that in 64 trades, this group
had contributed positive LTP to the tune of Rs. 16.85 which was
5.26% of total positive LTP.
18. The learned counsel for the appellant Manju submitted that
she has sold 5,00,000 shares on 115 trading days during patch 2. Her
trades were genuine and finding the buyers for a higher price since she
sold the shares.
19. So far as the appellant Jugal HUF is concerned who has traded
during the same patch - 2, it was submitted that it had sold 200 shares
wherein contribution of only 0.10% to the LTP was made which was
very miniscule i.e. 0.08% of the total positive LTP contributed during
the period.
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20. Upon hearing both the sides, in our view, it is established that
these two appellants had regularly released shares contributing to the
positive LTP without any justifiable reason, vide the trades to which
the other connected noticees were also regular buyers. These
connected noticees were nothing but noticee nos. 3 Padma Impex
about which we have already referred above. The rest of the noticees
i.e. noticee nos. 1 and 2 HS Tradecom Pvt. Ltd. (hereinafter referred
to as 'HS Tradecom') and Dhanlakshmi Brokers Pvt. Ltd. (hereinafter
referred to as 'Dhanlakshmi') were also connected with Padma Impex
vide fund transactions and sharing common director, common address
as given in the impugned order. We, therefore, find no force in the
submissions of these two appellants. Their appeals also deserve to be
dismissed. We may state here, that whereas individual contribution to
the LTP may be miniscule, nonetheless, the trading pattern in
collusion with other noticees leads to a contribution of positive LTP of
Rs. 16.85% or 5.26% of total positive LTP which in our opinion is
sustainable and cannot be ignored.
21. So far as the appellant Comfort is concerned, it has traded in
the patch - 3 which has seen the fall of the price. The appellant has
sold 3000 shares to noticee nos. 6 Ramdut Infraprojects Pvt. Ltd.
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(hereinafter referred to as 'Ramdut') causing negative LTP and
helping a price fall. SEBI had identified noticee nos. 3 Padma Impex,
noticee nos. 5 Ranisati Dealer Pvt. Ltd. (hereinafter referred to as
'Ranisati'), noticee no. 6 Ramdut, noticee nos. 7 Astabhuja
Construction Pvt. Ltd. (hereinafter referred to as 'Astabhuja') and
noticee nos. 10 Helpful Investment Advisory Pvt. Ltd. (hereinafter
referred to as 'Helpful Investment') acting in concert with each other
while trading in the scrip causing the fall.
22. The connection of these noticees is also made out. While we
have already seen the connection of this noticee nos. 3 Padma Impex,
so far as noticee nos. 5 Ranisati is concerned, it was a shareholder in
Padma Impex and also had bank transaction with common entity. So
far as noticee nos. 6 Ramdut is concerned, it also shared a common
address and one common director, namely, Bhavna Manish Trivedi.
So far as noticee nos. 7 Astabhuja is concerned, it had purchased 1100
shares when noticee nos. 5 Ranisati was the seller. It has also
common director one Mr. Narendra Joshi who was connected to four
other connected noticees as given in the annexure - 2 of the show
cause notice.
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23. The learned counsel for the respondent additionally submitted
before us that in fact preferential allotments were made to 48 allottees
by Rutron on December 5, 2011. The appellant Manju was the
recipient of 5,00,000 shares which she has sold in the market in the
manner as described above. Thereafter, preferential allotment was
made on March 1, 2012 to 47 allottees which was at one year lock-in
till February 28, 2013. It was submitted that when the suspension of
the trading was revoked during July 28, 2011 to May 2, 2012 only 50
shares were traded through the BSE platform and thereafter all these
manipulations started from May 3, 2012 as detailed (supra). He
further submitted that during the patch - 3 after stock split, the trading
by the appellant Comfort alongwith noticees in fact had caused price
fall with high volume as detailed in paragraph no. 5
(h) to (j) of the WTM order.
24. Considering all the facts on record as detailed above, in our
view, these inter connected appellants had participated in the trading
of the shares in a deceptive manner and, therefore, the appeals are
liable to be dismissed.
25. Hence, the following order :-
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ORDER
26. All these appeals are hereby dismissed without any order as to costs.
27. 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 Justice M. T. Joshi RAJALA Digitally signed Judicial Member by RAJALAKSHMI 21.09.2022 KSHMI H HDate:
NAIR 2022.09.27 NAIR 10:39:50 +05'30' PTM