2020 (1) TMI 1487 - AT - SEBI

Tribunal overturns 6-year ban for market manipulation due to lack of collusion

The Tribunal overturned the order imposing a 6-year ban on market access and trading activities for alleged market manipulation. The appellant's trading ... Unfair trade practices - Ingenuine trading of shares - Manipulation of price scrip - charge of raising price artificially - violation of Regulations 3 and 4 of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 - orders restraining the appellant from accessing the securities market - miniscule shares were being sold by the appellant when there was demand for more shares and the appellant had a substantial holding in that share and thus the motive was to increase the price of the scrip - charge leveled against the appellant is, that it had contributed to the positive last traded price (LTP) as a seller and that the trades made by the appellant were not genuine which resulted in manipulation in the price of the scrip known as Jolly Plastic Industries Ltd. thereby creating misleading appearance of trading in the scrip of the Company - HELD THAT:- We are of the opinion that controversy involved in the present case is squarely covered by the decision of this Tribunal in Appeal no.97 of 2019 Nishith M. Shah HUF vs. SEBI [2020 (1) TMI 1485 - SECURITIES APPELLATE TRIBUNAL MUMBAI] We are of the opinion that against the charge of raising price artificially one has to establish the element of collusion between the buyer and the seller which in the instant case is absent. On a query raised by us we were informed that only one buyer had been prosecuted but we had been further informed that the said buyer did not purchase it from the appellant. Thus, there is no connection between the appellant as a seller with any buyer. In the absence of element of collusion between the buyer and the seller the charge cannot be established - orders restraining the appellant from accessing the securities market cannot be sustained. - Appeal allowed. Issues:1. Allegations of market manipulation and violation of securities regulations leading to a ban on market access.2. Interpretation of trading patterns and motive behind trading activities.3. Application of legal precedents to determine the validity of charges.4. Examination of collusion between buyers and sellers to establish market manipulation.Analysis:1. The appeal challenged an order imposing a 6-year ban on accessing the securities market and trading activities due to alleged market manipulation. The appellant was accused of contributing to the positive last traded price (LTP) as a seller, creating a misleading appearance of trading in a specific company's scrip.2. The Whole Time Member found the appellant's trading behavior suspicious, selling miniscule shares during high demand despite holding a substantial share, indicating a motive to increase the scrip's price. Citing the Supreme Court's decision in SEBI vs. Kishore R. Ajmera, the Member concluded that the trading pattern amounted to manipulation, violating relevant regulations.3. The Tribunal analyzed the case in light of a previous judgment (Appeal no.97 of 2019) involving similar issues. It emphasized the necessity of establishing collusion between buyers and sellers to prove artificial price inflation. In this case, the absence of collusion between the appellant and any buyer led to the conclusion that the charges could not be substantiated.4. Ultimately, the Tribunal quashed the impugned order, citing the lack of evidence connecting the appellant as a seller with any colluding buyer. Relying on the precedent set in Nishith M. Shah HUF vs. SEBI, the Tribunal allowed the appeal, emphasizing the importance of proving collusion to establish market manipulation. The decision highlighted the need for concrete evidence to support allegations of fraudulent trading practices.