Securities Appellate Tribunal overturns SEBI's four-year market ban finding insufficient evidence of share manipulation through disguised trading

Securities Appellate Tribunal Mumbai allowed the appeal, overturning SEBI's order that had restrained appellant from securities market for four years. The tribunal found that allegations of share manipulation through disguised trading and SMS-based transactions were not supported by evidence. Key findings included that appellant did not trade from another person's account as alleged, no manipulative trades occurred pursuant to SMS, and the disgorgement order was improper. The tribunal remanded the matter to examine whether parties individually triggered open offer requirements under SAST Regulations, directing fresh consideration of penalties if applicable.

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Issues Involved:
1. Restraint from accessing the securities market and disgorgement orders.
2. Allegations of synchronized trades, self-trades, and reversal of trades.
3. Requirement of making an open offer under SAST Regulations.

Summary:

Issue 1: Restraint from accessing the securities market and disgorgement orders
Five appeals were filed against different orders by the Whole Time Member (WTM) and the Adjudicating Officer (AO) concerning the same issue and facts. The WTM restrained Arvind Babulal Goyal from accessing the securities market for four years and directed him to disgorge Rs. 7,08,51,405/- along with interest. Similarly, Pooja Arvind Goyal was debarred for three years. The Tribunal found that the WTM's finding that Arvind Goyal accumulated shares through Abhay Javlekar's trading account and disposed of them after circulating misleading SMS was erroneous and based on conjectures. No evidence supported that Arvind Goyal had a modus operandi to accumulate shares or that he traded after the issuance of the SMS.

Issue 2: Allegations of synchronized trades, self-trades, and reversal of trades
The WTM alleged that Arvind Goyal was trading from the accounts of Abhay Javlekar and Pooja Goyal and engaged in synchronized trades, self-trades, and reversal of trades. However, the Tribunal found that the evidence did not support the claim that Arvind Goyal was trading from Abhay Javlekar's account. The Tribunal noted that the WTM relied on contradictory statements and did not properly verify the ownership of the mobile number used for trading. The Tribunal also found no connection between Arvind Goyal and the SMS sender, and BSE's investigation indicated no manipulative intent.

Issue 3: Requirement of making an open offer under SAST Regulations
The WTM concluded that Arvind Goyal, Pooja Goyal, and Abhay Javlekar acted in concert, triggering the requirement to make an open offer under Regulations 10 and 11 of the SAST Regulations. However, the Tribunal found that the combined holding was incorrectly considered and that the evidence did not support the claim of acting in concert. The Tribunal directed the AO to reconsider whether Arvind Babulal Goyal and Pooja Goyal collectively, and Abhay Javlekar individually, triggered the obligation to make an open offer and to impose appropriate penalties if necessary.

Conclusion
The Tribunal set aside the impugned orders against Arvind Babulal Goyal and Pooja Goyal, allowing their appeals. The appeals by Pooja Arvind Goyal, Arvind Babulal Goyal, and Abhay Dattatray Javlekar were also allowed, and the matters were remitted to the AO for fresh consideration. Each party was ordered to bear their own costs.

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