TaxTMI 
TaxTMI 
TaxTMI 
2020 (6) TMI 284
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....ugned order, along with interest @ 12% p.a. from December 17, 2012 till the date of payment. 2. Appeal No. 205 of 2019 is filed by four appellants, namely, Hemant Sheth, Prem Parikh, Ankit Sanchaniya and Shree Shagun Financial Services. Remaining 11 appeals, except Appeal No. 356 of 2019 by Ashika Stock Broking Ltd., are also filed by different entities covered by the impugned order. Appeal No. 356 of 2019 is filed by a broker who claims to be prejudiced by the impugned order though directly not a party to the matter. Two of the entities against whom directions have been passed in the impugned order, namely, Oliwonders Financial Services Pvt. Ltd. ('Oliwonders' for short) and Neevan Capital Markets Pvt. Ltd. ('Neevan' for short) are no more 'alive' since their names have been struck off from the list of companies by the Registrar of Companies (RoC) In short, 11 appeals are filed by 14 of the entities against whom the impugned order is passed and one appeal is filed by an entity which is not directly impacted by the order. Since the impugned order is common all these appeals are heard together and decided by this common decision. 3. Common facts relating to....
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....ree scrips and made unlawful gain while dealing in the scrips of Polytex which is liable to be disgorged. 6. Thereafter, after providing an opportunity of hearing, replies and written submissions, etc. on various dates to various appellants/noticees the impugned order was passed on January 31, 2019. Aggrieved by the same these 12 appeals have been filed. Appeal No. 205 of 2019:- 7. Appellants No. 1, 2 and 3 in this appeal were investors and Appellant No. 4 is a partnership firm where Appellant No. 1, Hemant Sheth and Bhavesh Pabari (Appellant in Appeal No. 438 of 2019) are the partners. The ad-interim ex-parte order passed by SEBI on May 10, 2013 against 11 entities included Appellant No. 4, namely, Shree Shagun Financial Services thereby preventing Appellant No. 4 from accessing securities market directly or indirectly. 8. It is the contention of the learned Authorised Representative Dr. S.K. Jain appearing on behalf of the these appellants that SEBI did not provide the complete documents while issuing the SCN; data provided as annexure to SCN as KYC documents were either not legible nor having the same details as stated in the SCN. Accordingly, it was contended that by not pr....
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....oach in finally taking only the scrip in which the entities have allegedly made profits. Such an approach, it was contended, would lead to over estimation of profits as in the scrips other than that of Polytex the noticees have made losses as given in a table at Page 281 of the appeal memo which shows that 9 of the trading entities made a combined losses of Rs. 66 lakh (approximately). The appellants also claim that these figures have been worked out from the trade and order logs data provided by SEBI. It was further contended that the appellants brokers had won arbitral awards against them because of non-payment of dues which also show that losses had been incurred in the course of trading by the trading noticees. Further it was contended that the promoters of the companies whose shares were alleged to be manipulated for increasing its price did not sell their holding and hence for whose benefit or what is the motive behind such alleged manipulation is not proved in the impugned order. 13. Appellant No. 1, 2 and 3 were not part of the ad-interim ex-parte/confirmatory order or the investigation report. Their names got added, based on an internal note approved by the WTM which is b....
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.... to this effect has been handed over to the Bench during the course of hearing stating that the same is compiled from the trade logs given by SEBI to the appellant but subsequent to the proceedings. The said table also states that in respect of 7 out of 9 entities the net LTP contribution is negative. 17. In Appeal No. 206 of 2019 filed by Janak Dave, the learned counsel for the appellant contended that the appellant is charged with only reversal trades but the same charge is absurd since the reversal trade has been calculated for the entire investigation period in terms of total buys and sells which is not how reversal trade is defined. For a trade to be considered as reversal trade, the learned counsel for the appellants contended, both the buy and sell part of the trade have to take place within a few minutes or atleast within the same trading day itself which is not the case in the instant matter. The appellant traded on a number of days during the investigation period, some of them were buy trades and some of them were sell trades and at the end of the period the total quantity purchased was 591428 and the total quantity sold was 560947 which SEBI is considering as reversal t....
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....ord at pages 69 to 73 of the appeal memo. Subsequently, on different dates the appellant had persuaded SEBI to give them permission to liquidate the shares in the margin account with correspondence on record of upto February 1, 2019. It was further contended that only when Jigar Ghogari gave an application on May 29, 2018 SEBI sought details from the appellant about the value of securities maintained in the account of Ghogari and the outstanding amount due. The appellant replied on July 6, 2018 stating that the (then) current value of the holding of the client was Rs. 29,79,845/- and the ledger balance due from the client including levy of delayed payment charges comes to Rs. 37,00,210/-. Still todate SEBI has not given permission to the appellant to sell the said shares maintained in the margin account of Ghogari. 21. We have been told by the learned counsel for SEBI that no such permission was needed for the appellant to dispose of the shares of Ghogari lying in the margin account upto the amount of the debit on account of that client and in respect of several other appellants (trading members) are concerned their brokers had in fact sold the shares in the respective margin acco....
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....documents the learned counsel for the respondent SEBI fairly submits that some of the documents were given after the closing arguments and details regarding disgorgement in respect of two entities were not given to the parties though full inspection of all the documents were given. It was also contended by the learned counsel that incurring losses by some of the appellants does not mean no manipulation as held in the case of Master finlease Ltd. (supra)and the buy - sell position may not be always matching while trading in the market as held in Anita Dalal (supra). 25. Having heard the learned counsel for the parties in great detail and after perusing the various documents produced before us we are of the view that the appellants in 11 of the 12 appeals (except Appeal No. 356 of 2019) have violated the provisions of SEBI Act and PFUTP Regulations. 26. In respect of these 11 appeals we are of the considered view that violations have been established through connection, fund transfers, the nature and magnitude of trading, contribution to LTP etc. However, it is an admitted fact that document relating to two entities regarding the detailed calculation of the disgorgement amount were....
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....s of Neevan. Striking down of the names of these two companies by the Registrar for non-compliance of the provisions of the Companies Act, 2013 does not alleviate the statutory liabilities of these two entities. 30. The submission of the appellants regarding merger of the two investigation period in respect of Polytex rather than parallel proceedings does not have any merit in view of the fact that the number of entities and number of scrips involved in one period is distinct from the number of entities and number of scrips in the other. While the impugned order herein deals with three scrips and 16 entities, the proceedings vide show cause notice dated February 26, 2016 is in respect of only one scrip (Polytex) and 10 entities. Therefore, we do not find any deficiency in SEBI proceedings with another investigation in one of the scrips involved in this impugned order for another distinct period. 31. The contention of the appellant that the losses dealing in the scrip of Gemstone/KGN should have been set off with the profits made while dealing in the scrip of Polytex does not have any merit as unlike tax rules where such set off is allowed for normal business profits and losses th....
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....rs or on more days or some indulged in synchronized reversal and self trade while others did only one of those types do not cast away their violations. However, we agree with the contention of Dave that more disaggregated details are needed to prove reversal trade and in the impugned order only aggregates are given though we do not agree with their submission that reversal trade done on the same trading day only can be treated as reversal trades. 33. It is an admitted fact and borne out from SEBI's record that detailed calculations regarding profits made by the trading entities in respect of two entities were not given to the appellants (Page 176 to 178 - the e-mail message on Page 176 of the appeal memo states that gain calculation shows in respect of 7 entities have been attached while the attachment at Page 177 gives 9 names and the attachment at Page 178 gives 8 names. Hence, the inconsistency). We also note that there is considerable discrepancy between the profits as calculated by the appellants themselves as well as SEBI as given in the impugned order though the appellants claim that those calculations are based on the trade logs given by SEBI. In order to harmonize the....