TaxTMI 
TaxTMI 
2013 (8) TMI 1056
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....ies market, whatsoever, directly or indirectly for a period of two years. With consent of the learned counsel for the parties concerned, these three appeals were, therefore, heard together and are being disposed of by this common order. For the sake of convenience, facts of Appeal no. 114 of 2012 (HB Stockholdings Ltd. vs. SEBI) have been taken as lead case. Appellant in Appeal no. 114 of 2012, namely, HB Stockholdings Ltd. (for short "HB") is in the sole business of investment in and sale/purchase of securities in the capital market and its shares are listed on the National Stock Exchange of India Ltd. (NSE) and the Bombay Stock Exchange Ltd. (BSE). Appellant in Appeal no. 160 of 2012, namely, Alaknanda Capital Services Pvt. Ltd. (for short "Alaknanda") is carrying on the business of dealing in securities and the Appellant in Appeal no. 165 of 2012, namely, Har Sai Investments Ltd. (for short "Har Sai") is a public limited company, incorporated on January 2, 1995, and carrying on the sole business of sale and purchase of securities in the capital market. As part of their normal business activities and also as part of investment of funds available with them, the Appellants traded i....
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....ated to each other. It is further asserted that there was some abnormal price movement in the Company's scrip during the period in question and on analysis of volume, an irregular pattern was noted. Further, the time gap between the buy and sell orders placed by one Appellant and the counter parties were of a mere few seconds to few minutes, in some cases. Similarly, the price and quantity of shares placed by parties in the transactions concerned was also the same, in most cases. Moreover, orders were placed on a consistently higher price than the previous day's closing price. Therefore, it was alleged that the Appellants had acted with the mala fide intention of creating a false market for the Company's scrip. 5. The Appellant states that it requested the Respondent for supply of documents which formed the basis of the SCN vide letter dated September 26, 2005, and some of the documents were provided to it and on the basis of the available material supplied by the Respondent, a reply to the SCN was submitted by the Appellant vide letter dated December 10, 2005. A personal hearing also took place before the learned Whole Time Member (WTM) on October 27, 2006 during wh....
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....01 to July 2002. xi. Complete Log Book of DSE for the period August 1999 to July 2000, December 2000-July 2001 & November 2001 to July 2002 including details such as high or low price, transaction time, order placing time, quantity of order placed, purchase & selling broker and dealer details, traded quantity, delivery taken/given, settlement no. etc. xii. Complete Log Book of NSE for the period August 1999 to July 2000, December 2000-July 2001 & November 2001 to July 2002 including details such as high or low price, transaction time, order placing time, quantity of order placed, purchase & selling broker and dealer details, traded quantity, delivery taken/given, settlement no. etc. xiii. Complete Log Books (NSE, DSE) of all transactions alleged to be synchronized/structured including details regarding time of placing order, time of execution, order price etc. Only extracts (NSE) were supplied for the first time vide letter dated May 10, 2011. xiv. Details of persons who have been induced to sell/purchase the scrip due to the trading of the Noticee. xv. Details of such transactions which are alleged to have been influenced by the change ....
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....incomplete records, no reasonable person would hold the Appellant guilty of volume creation. 11. Lastly, it was vehemently argued by Mr. Rohit Kapadia and Mr. P.N. Modi, learned senior counsel, that there is a long unexplained delay in initiation as well as completion of proceedings against the Appellants. The period of alleged manipulations pertains to the year 2000, when the alleged trades were executed by the Appellant. Admittedly, the SCN was issued after a lapse of more than five years on September 2, 2005 and the hearing took place on October 26, 2006, after which the Respondent did not take any further step to bring the proceedings to their logical conclusion for years together. After a lapse of more than four years from the personal hearing conducted on October 27, 2006, a final hearing was granted to the Appellant on April 25, 2011. The Appellant again demanded crucial and extremely relevant documents like trade and order logs of the stock exchanges and the investigation report, but nothing was supplied. It was only after the final hearing that some of the documents and a few legible copies of certain documents were provided on May 10, 2011 and the Appellants submitted ....
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....2009 decided by this Tribunal on January 1, 2010; xvi. B.D. Gupta vs. State of Haryana, (1973) 3 SCC 149; xvii. Nasir Ahmad vs. Assistant Custodian General and Evacuee Property, U.P., Lucknow and Anr. (1980) 3 SCC 1. 13. Mr. Kumar Desai, learned counsel for the Respondent, has argued that the primary charge of price manipulation undoubtedly goes but the charge of the creation of artificial volumes by the Appellant still remains. Regarding non-supply of all relevant materials relied upon by the Respondent for issue of the SCN, Mr. Desai stated that trade and order logs could have been obtained by the Appellant from other sources like the stock exchanges. Mr. Kumar Desai also submits that the Appellants have acted as a group in collusion with each other to commit the objectionable acts in question. One of the Appellants is also seen to have committed two or three self-trades. The submission of Mr. Kumar Desai is that some 50-60 trades could not have coincided without mischievous design on part of the Appellants. According to the Respondent, the fact that the Appellants have taken delivery and made payments for the trades in question as required by law is not rele....
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....tment Limited has already been exonerated by the Respondent. Moreover, no cogent and convincing reasons are forthcoming from a reading of the SCN or the impugned order to sustain such a charge of synchronization or creation of artificial volumes against the Appellants. In this connection, we may also pertinently note that the mere factum of one or two Appellants sharing common address or one of the Appellants being the promoter of the other group at some point in time are not in themselves sufficient to bring home the residual charge against the Appellants. There has to be sufficient evidence on record to clearly prove connivance on the part of the Appellants with a counter party to prove the charge in question against the Appellants. In the absence of any such evidence and unambiguous findings by the learned WTM to this effect, we have no option but to quash the impugned order in question. 17. Next, the Appellants have brought on record certain circulars and extracts from the Joint Parliamentary Report presented to the Parliament on December 19, 2002 which, inter alia, clearly state that:- SEBI has also stated that in second interim report of Decembe....
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....pondent and no one else. This factor in itself amounts to gross violation of the principles of natural justice in conducting the proceedings against the Appellants. Undoubtedly, once such documents form the basis of allegations and the subsequent punishment, the same should be supplied to the Appellants in all fairness and also in consonance with the principles of natural justice. 19. Lastly, we turn to the submissions of Mr. Rohit Kapadia and Mr. P.N. Modi, learned senior counsel for the Appellants, regarding delay of more than 11 to 12 years in completion of the proceedings against the Appellants. At the outset, we make it clear that delay in itself may not be fatal in each and every case. At the same time, if it is a case of unnatural and unexplained delay, the Tribunal would be well within its right to interfere with the matter on this count as well. In the instant case admittedly the alleged trades took place in the year 2000. The first show cause notice itself was issued by the Respondent on September 2, 2005 i.e. after a period of more than five years had already lapsed. There is not even a whisper in the impugned order to explain away such a long delay in issuing the SCN....
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....ulations of 2003 not only for procedural matters but applied substantive portions of the amended Regulations for holding the Appellant guilty of the charge against them, which in itself is incorrect as far as substantive law is concerned. Similarly, Section 11(4)(b) of SEBI Act, 1992 was amended in the year 2002 and brought into force w.e.f. October 29, 2002. This section did not exist when the alleged trades took place in the year 2000. Thus, the existence of unnatural and unexplained delay of more than a decade and prejudice caused due to such undue delay is writ large in the matter. Therefore, the impugned order deserves to be quashed on this ground as well. 21. At this stage, we would like to deal with some of the important judgments cited by all the learned counsel appearing in the matter. We refer to the judgment cited by the Appellants in support of their case in the matter of Subhkam Securities Private Limited vs. SEBI decided by this Tribunal on July 25, 2012, in which Subhkam was accused of creating artificial volumes in the scrip of Mascon Global Limited, thereby manipulating the price of the same. A show cause notice was issued on October 20, 2008 for trades execu....
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..... 23. We now deal with the judgment in the case of Viram Investment Pvt. Ltd. vs. SEBI, cited by the Appellant and decided by this Tribunal on February 11, 2005. SEBI passed impugned order dated September 8, 2004 against Viram forbidding it from accessing the securities market for a period of 6 months holding it guilty of executing synchronized trades in collusion with a broking firm, OHM Stock Brokers Private Limited, with respect to shares of M/s. Intellivision Software Limited. This Tribunal while allowing the appeal held that executing trades calculated to create a false or misleading appearance of trading in the securities market would be objectionable acts calling for interference of SEBI. When the intent is not to artificially influence the market and induce investors to buy or sell shares on the basis of artificial transactions no wrongdoing can be established against any entity even if it is proved that it indulged in synchronized trading. 24. In another judgment delivered by this Tribunal on October 31, 2003 in the case of Nirmal Bang Securities Pvt. Ltd. vs. SEBI, relied upon by the Appellant, the impugned order dated July 30, 2002 held the appellant in the matter ....
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....ies, thereby influencing the price of the scrip of Kopran Limited causing it to rise without there being any fundamental technical factors for the occurrence of such price rise. The appellant was also alleged to have gained wrongfully at the expense of its clients by not informing them of the execution of the cross deals in question. A show cause notice was finally issued almost 6 years later on June 16, 2006, and after conducting an enquiry the impugned order came to be passed in January 2012. The Tribunal took cognizance of the delay of 12 years on the part of SEBI as a mitigating factor and held that the punishment was not in consonance with the violation. It observed that proceedings before the SEBI require finalization within a reasonable period of time. 27. We may refer to the judgment cited by Mr. Kumar Desai in support of the Respondent's case in the case of H.J. Securities Pvt. Ltd. vs. SEBI, Appeal no. 76 of 2012 decided on May 11, 2012. The appellant company was a stock broker and had executed one-third of the total trades in respect of the scrip of EdServ Softsystems Ltd. between March 2-9, 2009. Investigation was immediately conducted not only by SEBI but also b....
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....graph 9 of M/s. Rajesh N. Jhaveri's judgment it becomes clear that the appellant in that case was duly given trade logs relating to the transactions in the NSE. En bloc supply of trade logs was rightly considered irrelevant by the Respondent in that case. In the case in hand, however, the Respondent has not supplied even the trade logs relating to the transactions undertaken by the Appellants on various days and only a statement prepared by the Respondent on their own, without disclosing the source or basis of the same has been supplied to the Appellant at the fag-end of the enquiry proceedings after a lapse of almost 10 to 11 years of the incident. Therefore, the facts or ratio of the case of M/s. Rajesh N. Jhaveri (supra) is not attracted in the case in hand to help the Respondent advance its case. 29. Mr. Kumar Desai further referred to the case of Anita Dalal vs. SEBI, Appeal no. 211 of 2011 decided by this Tribunal on December 3, 2012. In this case the appellant was an individual investor and also a trader in the securities market. We note that in the case of Anita Dalal (supra), the appellant therein had acted through Mr. C.J. Dalal, who happened to be her husband and ....
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....ice of the scrip of Lupin had substantially moved up in a short span of time accompanied with the creation of large volumes in the trades which convinced the Tribunal of the guilt of the Appellants, since this phenomenon was considered unusual as compared to the trends during the same period in other pharmaceutical companies like Ranbaxy, Glaxo, Novartis and Cipla etc. Thus, the main charge in Ketan Parekh regarding price manipulation and circular trading by repeatedly placing orders at a price higher than the last traded price by Ketan Parekh and his own companies, in league with each other, was proved on the basis of ample evidence on record. There were favourable admissions by senior officers of the companies in which Ketan Parekh was director. Moreover, the floating stock i.e. public shareholding of Lupin was very small, therefore, Ketan Parekh could achieve his ill-conceived design in the matter of manipulation of the price of the scrip of Lupin. Any one big order, in Ketan Parekh's case, had the potential of upsetting the market. Further, the element inducing, which is an important ingredient of Regulation 4(a) of FUTP Regulations 1995 had also been proved in that case of....