2015 (7) TMI 58 - AT - Companies Law

Appeal dismissed; fresh evidence barred; routing of IPO proceeds through connected entities obscuring sources violates Section 12A; penalties 15HA/15HB affirmed

AT upheld the Ld. A.O.'s findings and dismissed the appeal, holding that fresh submissions and documents not placed before the Ld. A.O. cannot be ... Penalty under Section 15HA and 15HB of SEBI Act, 1992 - Wide fluctuations in price of script on and around listing day - Notice served for violation of Section 12(A)(a), (b) and (c) of SEBI Act read with Regulations 3(a), (b), (c), (d), 4(1), 4(2)(a), (d) and (e) of PFUTP Regulations - Held that:- Tribunal cannot consider the submissions of Appellant nor look at the documents produced before this Tribunal, since these were not made available or produced before Ld. A.O., despite being provided ample opportunities and since fresh submissions and documents cannot be accepted in Appeal as these were not made or produced before Ld. A.O. Tribunal accepts the conclusions drawn by Ld.A.O., since these are based on material, evidence before him which has been considered logically and conclusions drawn, in which no infirmity is evident. Accordingly, this Tribunal upholds the decision of Ld. A.O. that IPO money was routed by RDB, through a web of inter-connected entities to make the transactions look complex and hide the actual sources of money, in order to enable Appellant to make payment to its stock-broker, as per T+2 settlement mechanism. - Decided against the appellants. Issues: (i) Whether the Appellants violated provisions of the SEBI Act and SEBI (PFUTP) Regulations by receiving routed IPO proceeds through a web of connected entities to meet pay-in obligations and thereby engaged in fraudulent or manipulative trading; and whether the penalty and orders passed by the adjudicating authority should be upheld.Analysis: The Tribunal examined the material placed before the adjudicating officer and declined to admit documents produced for the first time on appeal. The factual matrix relied upon by the adjudicating officer included unusually large trading volumes on listing day, identical large purchase timings and counterparties for the Appellants, evidence of fund transfers from the issuer through a chain of related entities ultimately to finance the Appellants' trades, and absence of credible contemporaneous loan documentation or proof of independent funding. The Appellants did not file replies or avail personal hearings before the adjudicating officer; the Tribunal therefore decided the matter on the existing record. The Tribunal found the adjudicating officer's conclusions logical and supported by material, and applied the relevant statutory provisions including Sections 15HA, 15HB, Section 12A provisions of the SEBI Act and Regulations 3 and 4 of the PFUTP Regulations; the Tribunal also considered principles applicable to quantification of penalty under Section 15J.Conclusion: The Tribunal held that the charge against the Appellants is proved and that the impugned orders of the adjudicating authority are to be upheld; the appeals are dismissed and the penalty and orders challenged are maintained (decision adverse to Appellants and in favour of the Respondent).