Synchronized trading and natural justice in market manipulation cases: unproven collusion and withheld documents vitiated the restraint order.

Synchronized trading and artificial volume creation were not proved because the material showed no cogent evidence of collusion or meeting of minds; common address or group connection alone was insufficient, and synchronized trading is not unlawful without illegitimate concert. The proceedings were also vitiated because relied-upon trade logs and investigation material were not supplied properly, impairing the defence, and because an unexplained delay of more than a decade between the trades, notice and final order caused prejudice. On both grounds, the restraint order could not be sustained and the matter was decided in favour of the appellants.

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Issues: (i) whether the allegation of synchronized trades and creation of artificial volumes in the scrip was proved on the evidence, and (ii) whether the proceedings were vitiated by non-supply of relied-upon documents and inordinate, unexplained delay in initiation and conclusion.

Issue (i): whether the allegation of synchronized trades and creation of artificial volumes in the scrip was proved on the evidence.

Analysis: The charge of price manipulation had already failed on the material placed before the authority. On the remaining allegation, the volume pattern was found to show similar fluctuations even during periods when the appellants did not trade. The Tribunal also noted that synchronized trading is not per se illegal and becomes actionable only when supported by evidence of illegitimate collusion or a meeting of minds. There was no cogent material showing connivance with the counterparty, and the counterparty had itself been exonerated. Mere common address or group connection was held insufficient to sustain the charge.

Conclusion: The allegation of synchronized trading and artificial volume creation was not proved and was decided in favour of the appellants.

Issue (ii): whether the proceedings were vitiated by non-supply of relied-upon documents and inordinate, unexplained delay in initiation and conclusion.

Analysis: The relied-upon trade and order logs, investigation material and other crucial documents were not supplied in time or in legible form, despite repeated requests. The Tribunal held that the burden to supply material forming the basis of the allegations rested on the authority and that failure to do so impaired the right of defence and violated natural justice. The proceedings were also marked by an unexplained delay of more than a decade between the alleged trades, the show cause notice, the hearing and the final order. The Tribunal held that such delay caused definite prejudice and justified interference.

Conclusion: The proceedings were vitiated by breach of natural justice and inordinate delay, and this issue was decided in favour of the appellants.

Final Conclusion: The impugned restraint order could not be sustained, as the substantive allegations were unsupported and the adjudicatory process was unfair and delayed.

Ratio Decidendi: A charge of synchronized trading or market manipulation requires cogent evidence of collusion and cannot be sustained on coincidence or group association alone, and proceedings based on withheld foundational material and unexplained inordinate delay are liable to be set aside for violation of natural justice.

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