TaxTMI 
TaxTMI 
2021 (8) TMI 1299
X X X X Extracts X X X X
X X X X Extracts X X X X
....st set are appeals Nos. 11 of 2018, 8 of 2018, 9 of 2018 and 10 of 2018 which is against the order dated November 22, 2017 passed by the Whole Time Member (hereinafter referred to as 'WTM') of Securities and Exchange Board of India (hereinafter referred to as 'SEBI') by which the appellants were restrained from buying, selling or dealing in the securities market for a period of five years. Further, the appellants in these appeals were directed to disgorge an amount of Rs. 95,77,614/- alongwith interest at the rate of 12% p. a. with effect from May 27, 2010 onwards to be paid jointly and severally. The second set of appeals are appeal Nos. 250 of 2020, 261 of 2020, 262 of 2020 and 263 of 2020 which is against the order dated May 29, 2020 passed by the Adjudicating Officer (hereinafter referred to as 'AO') imposing a penalty of Rs. 3 crore to be paid by the appellants jointly and severally. Since the facts and issues involved are common, all the appeals are being taken up together. For facility, the facts as enumerated in the appeal No. 11 of 2018 Rohitkumar Gupta vs. SEBI (hereinafter referred to as 'Rohit Gupta') is being taken into consideration. 2. SEBI conducted an investigat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on May 18, 2010 at 17:12:24 hours to the effect that the Board of Directors were to convene urgently on the same date for considering the proposed merger. 5. It was alleged that the appellant Rohit Gupta purchased 1,40,000 shares of BoR on 17th and 18th May 2010 for Rs. 1,28,77,324.83 and sold the shares on 25th, 26th and 27th of May 2010 and earned a profit of Rs. 95,77,614/-. It was alleged that the appellant Rohit Gupta had insider information and was in possession of UPSI in connivance with Sanjay Tayal, noticee No. 2 (now deceased), Navin Tayal and Jyotika Tayal, noticee nos. 3 and 4 respectively. 6. The show cause notice further alleged that the appellant Rohit Gupta was funded by Advik Textiles and its directors Kulwinder Nayyar and Azam Shaikh, noticee Nos. 5 and 6 respectively. The show cause notice, thus, alleged that all the noticees, namely, noticee Nos. 1 to 7 had violated Section 12A(d) and (e) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act') as they were engaged in insider trading and were dealing in securities while in possession of material price sensitive information. It was alleged that Advik Textiles had viola....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reply. During the pendency of the appeal, Sanjay Tayal died. They contended that they were not the directors of Advik Textiles and, therefore, Advik Textiles cannot be deemed to be a connected person under Regulation 2(h)(ix) of the PIT Regulations. Further, Sanjay Tayal nor Navin Tayal were shareholders in this Company though it has come on record that Navin Tayal was a director from June 2, 2008 till March 2, 2010 and, therefore, continued to remain an authorized signatory of the bank accounts of the Advik Textiles. The Tayal family contended that they were not in possession of any UPSI and, in any case, the information was available in the public domain and, therefore, the question of existence of a price sensitive information did not arise. 10. The noticee Nos. 5, 6 and 7, namely, Advik Textiles and its two directors submitted that it was a business deal for purchase of four shops and they had paid Rs. 116.44 lac as an advance towards 2/3rd of the sale consideration. It was also contended that subsequently, the agreement was terminated on June 3, 2010 and the money was refunded on June 17, 2010. It was contended that the directors of Advik Textiles were not privy to any UPS....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs each from March 2, 2010 to September 10, 2010 and thereafter Navin Tayal and Jyotika Tayal again became directors holding 100% shares of Advik Textiles from September 5, 2012. On the basis of this shareholding pattern, the WTM found that even though Navin Tayal and Jyotika Tayal had relinquished the directorship during the UPSI period in question, nonetheless, they still controlled the Company as Navin Tayal continued to remain as the authorized signatory of the Company. 14. Further, the WTM found that the address of Advik Texiles was as under :- C/o. Elemento Lifestyle Pvt. Ltd. Raghuvanshi Mansion, 11, Senapati Bapat Marg, Lower Parel, Mumbai 400 013. 15. This is the same address as of BoR. Further, it was found that the appellant Rohit Gupta, was the Managing Director in Elemento Lifestyle Pvt. Ltd. since 2005. Thus, there is a direct connection of the appellant Rohit Gupta with Advik Textiles and with the Tayal family and, therefore, the WTM came to a conclusion that the Advik Textiles was connected to Tayal as well as to Rohit Gupta. The WTM further came to the conclusion that the agreement for sale dated May 1, 2010 executed betwee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to establish the charge of trading against the appellant and has been found guilty only on the basis of preponderance of probability. In this regard, the learned counsel for the appellant had relied upon a decision of this Tribunal in Dilip S. Pendse vs. SEBI Appeal No. 80 of 2009 decided on November 19, 2009, wherein this Tribunal has held as under :- "13. The charge of insider trading is one of the most serious charges in relation to the securities market and having regard to the gravity of this wrong doing, higher must be the preponderance of probabilities in establishing the same. In Mousam Singha Roy v. State of West Bengal (2003) 12 SCC 377, the learned judges of the Supreme Court in the context of the administration of criminal justice observed that, "It is also a settled principle of criminal jurisprudence that the more serious the offence, the stricter the degree of proof, since a higher degree of assurance is required to convict the accused." This principle applies to civil cases as well where the charge is to be established not beyond reasonable doubt but on the preponderance of probabilities. The measure of proof in civil or criminal cases is not an absolute....
X X X X Extracts X X X X
X X X X Extracts X X X X
....contract was completed in September, 2000 and has concluded that the sale of the shares took place in March, 2001. We have already dealt with this aspect of the matter earlier in our order and we cannot agree with the findings recorded in this regard. As already observed, the trades may have been contrary to the Bye-laws of the Exchange but it cannot be said that the contract was not completed in September, 2000. If the sale did not take place in September, 2000 then what was the Broker reporting to the stock exchange as per its letter dated September 16, 2000. We have already noticed that the Bombay Stock Exchange had acknowledged the receipt of this letter from the Broker in its letter of November 26, 2002. In this view of the matter, the charge must fail. Accordingly, we answer the question posted in the opening part of our order in the negative and hold that the appellants are not guilty of insider trading." 21. It was urged by Rohit Gupta that he was not privy to the transfer of funds by Advik Textiles to the appellant as he did not authorize the said transfer. It was contended that the appellant was a man of means and had a credit balance of Rs. 116.43 lacs in his account ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has violated the securities laws/regulations but it is not every violator who could be asked to disgorge. Only such wrongdoers who have made gains as a result of their illegal act(s) could be asked to do so. Since the chief purpose of ordering disgorgement is to make sure that the wrongdoers do not profit from their wrongdoing, it would follow that the disgorgement amount should not exceed the total profits realized as the result of the unlawful activity. In a disgorgement action, the burden of showing that the amount sought to be disgorged reasonably approximates the amount of unjust enrichment is on the Board." 23. In addition to the aforesaid, reliance was placed on another decision in S.E.C. v. Patel 61 F.3d 137 (2d Cir. 1995) decided on July 24, 1995, wherein it was held "where stock is purchased on the basis of inside information, the proper measure of damages is the difference between the price paid for the share at the time of purchase and the price of the shares shortly after disclosure of the inside information". 24. On the aforesaid basis of the two decisions, it was urged that the calculation made by the WTM on the basis of the difference between the price of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....passed "without prejudice to SEBI's right to enforce disgorgement along with further interest till actual payment is made". The words "along with further interest till actual payment is made" are conspicuous by their absence in the order dated 21-7-2009. In the circumstances, we are of the view that Shri Subramonium Prasad is correct in his submission. If there is default in payment of Rs. 6 crores within the stipulated time, no future interest is payable inasmuch as a much severer penalty of being debarred from the market for 7 years was instead imposed." 26. Reliance was also made on a decision of this Tribunal Shailesh S. Jhaveri vs. SEBI Appeal No. 79 of 2012 decided on October 4, 2012. 27. It was urged that the rate of interest at the rate of 12% p.a. was wholly excessive and was not in consonance with the interest rate prevailing at the time of either when the impugned order was passed or at the time when the alleged transactions took place. In the end, it was urged that there has been an undue delay of seven years in the issuance of the notice. It was contended that the proceedings initiated were wholly belated. The alleged transaction is of the year 2010 whereas the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s one of the persons involved in the merger discussions. Sanjay Tayal was also a signatory to the binding agreement. Sanjay Tayal had inside information. Rohit Gupta purchased shares on 17th & 18th May 2010 and sold on 25th and 27th May 2010 and made a profit of Rs. 95,77,614/- on 18th and 19th May 2010. Rohit Gupta received Rs. 116.44 lac from Advik Textiles. This amount was utilized to purchase the shares. The proceeds of the sale made by Rohit Gupta was deposited in his account on June 2, 2010 and on the very next day i.e. June 3, 2010, the sale agreement between Rohit Gupta and Advik Textiles was terminated and the alleged amount of advance given to Rohit Gupta pursuant to this agreement was refunded on June 17, 2010. Further, at the time when the trades were executed by Rohit Gupta on 17th and 18th May 2010, he had a balance of Rs. 1,32,747.78 in his bank account which was insufficient to pay the purchase price of the shares which he had executed on 17th and 18th May 2010. Advik Textiles was closely connected with the Tayal Group. Further, Rohit Gupta was not a regular trader in the securities market. 29. In order to fulfill the mandate to protect the interest of the invest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th, but also slow the inflow of foreign investment by genuine investors and also cast a slur on India's securities market. Message should go that our country will not tolerate "market abuse" and that we are governed by the "rule of law". Fraud, deceit, artificially, SEBI should ensure, have no place in the securities market of this country and "market security" is our motto. People with power and money and in management of the companies, unfortunately often command more respect in our society than the subscribers and investors in their companies are thriving with investors' contributions but they are a divided lot. SEBI has, therefore, a duty to protect investors, individual and collective, against opportunistic behavior of Directors and insiders of the listed companies so as to safeguard market's integrity." "43. Print and electronic media have also a solemn duty not to mislead the public, who are present and prospective investors, in their forecast on the securities market. Of course, genuine and honest opinion on market position of a company has to be welcomes. But a media projection on company's position in the security market with a view to derive a benefit from a pos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....judice has been caused to the appellants since nothing has been shown nor urged in the arguments. The restraint order was passed on December 12, 2015 which was not challenged by the most of the appellants. Therefore, in our opinion, there is no inordinate delay in the initiation of the proceedings. The contention raised on this aspect is accordingly rejected. 33. Before we deal on the question whether Rohit Gupta was an insider or not, it would be appropriate to peruse a few provisions of the relevant Regulations, namely, the PIT Regulations as hereunder : "2(c). "connected person" means any person who- (i) is a director, as defined in clause (13) of section 2 of the Companies Act, 1956 (1 of 1956), of a company, or is deemed to be a director of that company by virtue of sub-clause (10) of section 307 of that Act or (ii) occupies the position as an officer or an employee of the company or holds a position involving a professional or business relationship between himself and the company [whether temporary or permanent] and who may reasonably be expected to have an access to unpublished price sensitive information in relation to that company: [E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the holding or interest" "2(ha). "price sensitive information" means any information which relates directly or indirectly to a company and which if published is likely to materially affect the price of securities of company. Explanation.-The following shall be deemed to be price sensitive information :- (i) periodical financial results of the company; (ii) intended declaration of dividends (both interim and final); (iii) issue of securities or buy-back of securities; (iv) any major expansion plans or execution of new projects. (v) amalgamation, mergers or takeovers; (vi) disposal of the whole or substantial part of the undertaking; (vii) and significant changes in policies, plans or operations of the company." "2(i) "relative" means a person, as defined in section 6 of the Companies Act, 1956 (1 of 1956)" "2(k) "unpublished" means information which is not published by the company or its agents and is not specific in nature. Explanation.-Speculative reports in print or electronic media shall not be considered as published information." 34. The aforesaid provisions have b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ference between violation of the Code of Conduct Regulations and the FUTP Regulations would depend on the extent of the persistence on the part of the broker in indulging with transactions of the kind that has occurred in the present cases. Upto an extent such conduct on the part of the brokers/sub-brokers can be attributed to negligence occasioned by lack of due care and caution. Beyond the same, persistent trading would show a deliberate intention to play the market. The dividing line has to be drawn on the basis of the volume of the transactions and the period of time that the same were indulged in. In the present cases it is clear from all these surrounding facts and circumstances that there has been transgressions by the respondents beyond the permissible dividing line between negligence and deliberate intention." "30. We disagree with the above contention. The stage at which the monetary penalty was imposed on the two other brokers indulging in circular trading is prior to any determination of liability of the said two brokers who did not contest the charges. In the case of M/s Monarch Networth Capital Limited the stage has advanced far beyond the above and had culmi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of a general duty between all participants in market transactions for forego actions based on material, non-public information, so as to give rise to liability under Section 10(b) of the Securities Exchange Act for failure to disclose, would depart radically from established doctrine that a duty arises from a specific relationship between two parties and should not be undertaken absent some explicit evidence of congressional intent. Securities Exchange Act of 1934, Section 10(b) as amended 15 U.S.C.A. Section 7j(b)." "58. Adverting to the facts of the present case if the information with regard to acquisition of shares by M/s Passport India was parted with by Dipak Patel to Kanaiyalal Baldevbhai Patel and Anandkumar Baldevbhai Patel and the latter had transacted in huge volume of shares of the particular company/scrip mentioned by Dipak Patel as little while before the bulk order was placed by M/s Passport India and the said persons had sold the same a short while later at an increased price, such increase being a natural consequence of a huge investment made in the particular scrip by M/s Passport India, surely, it can be held that by the conduct of Dipak Patel, Kanaiy....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orders passed by the Appellate Tribunal impugned in Civil Appeals Nos. 2595, 2596 and 2666 of 2013 are set aside and the findings recorded and the penalty imposed by the adjudicating officer are restored. 37. In SEBI vs. Rakhi Trading Pvt. Ltd. [(2018) 13 SCC 753], the Hon'ble Supreme Court has held as under :- "38. We are fortified in our conclusion by the judgment of this Court in SEBI v. Kishore R. Ajmera, though it is a case pertaining to brokers, wherein it has been held at para 25 : (SCC p. 383) "25. The SEBI Act and the Regulations framed thereunder are intended to protect the interests of investors in the Securities Market which has seen substantial growth in tune with the parallel developments in the economy. Investors' confidence in the capital /securities market is a reflection of the effectiveness of the regulatory mechanism in force. All such measures are intended to pre-empt manipulative trading and check all kinds of impermissible conduct in order to boost the investors' confidence in the capital market. The primary purpose of the statutory enactments is to provide an environment conducive to increased participation and investment in the securiti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs or a group of brokers a conclusion can be reasonably reached that there is a concerted effort on the part of the brokers concerned to indulge in synchronized trades the consequence of which is large volumes of fictitious trading resulting in the unnatural rise in hiking the price/value of the scrip(s). It must be specifically taken note of herein that the trades in question were not "negotiated trades" executed in accordance with the terms of the Board's circulars issued from time to time. A negotiated trade, it is clarified, invokes consensual bargaining involving synchronising of buy and sell orders which will result in matching thereof but only as per permissible parameters which are programmed accordingly. 30. It has been vehemently argued before us that on a screen-based trading the identity of the second party be it the client or the broker is not known to the first party/client or broker. According to us, knowledge of who the second party/client or the broker is, is not relevant at all. While the screen-based trading system keeps the identity of the parties anonymous it will be too naïve to rest the final conclusions on said basis which overlooks a meeting o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tors. Synchronised trading is violative of all prudential and transparent norms of trading in securities. Synchronised trading on a large scale, can create false volumes. The argument that the parties had no means of knowing whether any entity controlled by the client is simultaneously entering any contra order elsewhere for the reason that in the online trading system, confidentially of counter parties is ensured, is untenable. It was submitted by the appellants that it was not possible for the broker to know who the counter-party broker is and that trades were not synchronised but it was only a coincidence in some cases. Theoretically this is OK. But when parties decide to synchronise the transaction the story is different. There are many transactions giving an impression that these were all synchronised, otherwise there was no possibility of such perfect matching of quantity, price, etc. As the respondent rightly stated it is too much of a coincidence over too long a period in too many transactions when both parties to the transaction had entered buy and sell orders for the same quantity of shares almost simultaneously. The data furnished in the show cause notice certainly goes ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rades. The time difference (between the buy and sell orders) of majority of the synchronised trades was very less with the price and quantity matching. The said synchronisation cannot take place in the absence of any specific understanding/arrangement between the clients at the first instance, especially when the shares of the company were highly liquid at the time of the trades. 4.24. The proof of manipulation in the circumstances always depends on inferences drawn from a mass of factual details. Findings must be gathered from patterns of trading data and the nature of the transactions, etc. Several circumstances of a determinative character coupled with the inference arising from the conduct of the parties in a major market manipulation could reasonably lead to conclusion that the Broker was responsible in the manipulation. The evidence direct or circumstantial, should be sufficient to raise a presumption in its favour with regard to the existence of a fact sought to be proved. As pointed out by Best in "Law of Evidence", the presumption of innocence is no doubt presumptio juris; but everyday practice shows that it may be successfully encountered by the presumption of gu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nable expectation to be in the know of things can only be based on reasonable inferences drawn from foundational facts This Court in SEBI v. Kishore R. Ajmera, stated : (SCC p. 383, para 26) "26. It is a fundamental principle of law that proof of an allegation levelled against a person may be in the form of direct substantive evidence or, as in many cases, such proof may have to be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled. While direct evidence is a more certain basis to come to a conclusion, yet, in the absence thereof the Courts cannot be helpless. It is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded and to reach what would appear to the Court to be a reasonable conclusion therefrom. The test would always be that what inferential process that a reasonable/prudent man would adopt to arrive at a conclusion." 39. In Utsav Pathak vs. SEBI Appeal No. 430 of 2019 decided on June 12, 2020, the Tribunal has held as under :- "19. The contention of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aborate, we find that the Tippee-1 i.e., the sister of the appellant purchased 4000 shares of CRISIL on 31/5/2013 and sold it on the day when the open offer announcement was made on 3/6/2013. Similarly, Tippee-2 purchased 15000 shares on 14/5/2013, 20/5/2013, 21/5/2013 and 24/5/2013 and sold it on 4/6/2013. E. The Tippees only traded in the shares of CRISIL and did not trade in any other shares. F. Tippee 2 had borrowed large amount [Rs. 1 cr] and sold off existing holdings etc to finance the buy orders of CRISIL shares thereby effectively putting all her eggs in one basket which is a highly abnormal investment behavior. G. Purchase of large chunks of shares and selling it immediately after announcement of the open offer without any plausible cause is suspicious. H. The Tippees were also charged for insider trading and violation of the PIT Regulations. The Tippees filed a Settlement Application which was allowed on payment of an amount. 22. From the aforesaid foundational facts, the circumstantial evidence or on a preponderance of probability by a logical process of reasoning from the totality of the attending facts and circumstances as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unt was transferred from Advik Textiles which is a company which was closely connected with the Tayal Group. The payment to the broker was made on May 20, 2010 after the amount was received by Rohit Gupta from Advik Textiles. 41. The expression "reasonably accepted" means material to show that such person could reasonably be accepted to have access to UPSI. The proximate facts and circumstances surrounding the events clearly indicates that Rohit Gupta had access to UPSI. 42. The contention that there was no UPSI as the same information was in the public domain from May 6, 2010 onwards cannot be accepted. It was contended that there were newspaper reports with regard to merger discussions between Tayal's and ICICI Bank and, therefore, the information being in the public domain could no longer be considered as an UPSI. In this regard, Regulations 2(k) of the PIT Regulations clearly indicates that news report cannot be treated as a published information. Thus, reliance on newspaper reports cannot be taken to mean that the UPSI was now in the public domain. Even otherwise, the appellant Rohit Gupta has relied upon the newspaper report dated May 6, 2010 which suggests that differe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he BOR and, therefore, Advik Textiles, Rohit Gupta and Tayal's had a common link. Thus, the contention that Rohit Gupta was not privy to transfer of funds by Advik Textiles to trade as he did not authorize the company is clearly an afterthought and is an irrelevant consideration. The sequence of events clearly indicates that the appellant could not have purchased the shares but by the transfer of funds by Advik Textiles. 44. On disgorgement, the contention is that the price has to be calculated on the basis of the price of the share when UPSI was made public and not on the basis of the calculation of the price when the shares were sold. In this regard, reliance has been made by the appellants in the case of Karvy Stock Broking Ltd. vs. SEBI Appeal No. 6 of 2007 decided on May 2, 2008, wherein the principle of disgorgement was propounded in paragraph 5 which is extracted hereunder :- "5. Before we deal with the contentions of the parties, it is necessary to understand what disgorgement is. It is a common term in developed markets across the world though it is new to the securities market in India. Black's Law Dictionary defines disgorgement as "The act of giving up somet....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) cited by the appellants also indicates that the method adopted is only applicable when the sale price is not capable of being computed with exactitude. Thus, we do not find any error in the method of computation / calculation of the unlawful gains made by the WTM. The decisions cited by the appellants in the case of Himani Patel vs. SEBI in appeal No. 154 of 2008 dated September 7, 2009 and Dushyant Dalal vs. SEBI in appeal No. 182 of 2009 decided on November 12, 2010 are distinguishable. 47. It was urged that the rate of interest awarded is excessive and arbitrary and further the interest could only be levied from the date of the order and not from the date of cause of action. This contention cannot be accepted. The appellants made unlawful gains in 2010 and have earned interest on it, and therefore, the authority was justified in imposing interest on the disgorged amount from the date of the cause of action and not from the date of the order. Further, nothing has been brought of record to indicate that in 2010, the rate of interest was lower than what has been levied in the impugned order. Consequently, in the absence of any documentary evidence, no latitude can be given to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gain became directors holding 50% each of the total shareholding in Advik Textiles. These facts leads to an irresistible inference that based on the conspiracy, money was transferred from Advik Textiles to Rohit Gupta for purchase of the shares. There is an another aspect even after they had resigned as directors from March 10, 2010, Navin Tayal remained a signatory to the bank accounts of the Advik Textiles and, therefore, had a control over the funds of the company. Thus, it cannot be doubted that Navin Tayal and Jyotika Tayal conspired to make an illegal gain through Rohit Gupta. The findings given by the WTM cannot be faulted. 49. The contention that an order of disgorgement cannot be fastened upon the appellants jointly and severally cannot be accepted. Reliance in the case of Mahavir Chauhan vs. SEBI Appeal No. 393 of 2018 decided on October 18, 2019 is distinguishable. The findings of this Tribunal in the case of Mahavir Chauhan (supra) was based on the fact that the WTM had in that case separately quantified the profit made by each of the noticees and consequently, in that context this Tribunal held that there cannot be the order for joint and several liability. On the o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rincipally on the grounds that the district court's disgorgement calculation was clearly erroneous in failing to account for a pre fraud value of 32 cents per share; the disgorgement order was impermissibly punitive because it imposed liability for funds he had transferred to co-defendants; and the district court also abused its discretion in fashioning an equitable remedy by imposing joint and several liability when there was no close relationship between the defendants and apportionment was warranted." "Cahill, in turn, argued that, assuming the truth of Lowry's declaration about the closing price of the stock prior to the fraud, the district court should assume a pre-fraud value of 32 cents in calculating the amount of profits causally connected to the fraud. Joint and several liability was inappropriate, he added, because it was clear to whom the proceeds went after the sale of shares and because there was no evidence of a close relationship or collaboration beyond the one transaction between Cahill and the Whittemore defendants, id. at 30, 32-33. Whittemore, on the other hand, argued that the record contained no evidence that he ever received the proceeds from the IOLTA accoun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ifying the calculations of the auditors himself. The business of life could not go on if people could not trust those who are put into a position of trust for the express purpose of attending to details of management. If Mr. Cory was deceived by his own officers - and the theory of his being free from moral fraud assumes under the circumstances that he was - there appears to me to be no case against him at all. The provision made for bad debts, it is well said, was inadequate; but those who assured him that it was adequate were the very persons who were to attend to that part of the business; and so of the rest. If the state and condition of the bank were what was represented, then no one will say that the sum paid in dividends was excessive. (at pages 485-86) Per Lord Davey, it was held: "In this state of the evidence, my Lords, I ask whether the course of business at the board meetings, as described by the respondent, was a reasonable course to be pursued by the respondent and other directors, or whether the knowledge which might have been derived from a careful and comparative examination of the weekly states and quarterly returns from the different branches....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d, therefore, the charge of insider trading cannot be levelled on them. It was urged that they were not involved in the trades executed by Rohit Gupta and that merely because Azam and Kulvinder were the directors, the charge of insider trading cannot be levelled. Further, the charge of violation of Regulations 3 and 4 of the PFUTP Regulations cannot be levelled as they have not traded in any securities. The contentions raised cannot be accepted. The charge is one of conspiracy in the commissioning of the offence of insider trading. Admittedly, Kulwinder and Azam were the directors of Advik Textiles at the time when the funds were transferred for the purpose of purchase of the shares in question. The connection between Rohit Gupta and Tayal's has been established in paragraph 33 of the impugned order which indicates that Kulwinder Nayyar and Azam Shaikh were closely associated with the Tayal's and they were directors in 14 companies possessed by the Tayal group. These appellants have contravened Section 12A(d) of the SEBI Act and, therefore, the order of the WTM cannot be faulted. 53. In so far as the appeals against the order of the AO is concerned, we find that the show cause n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d December 27, 2019, all the noticees were given an opportunity to inspect the documents on January 30, 2020. By the said notice, all the noticees were intimated that the hearing would be fixed on February 17, 2020. The record indicates that no one appeared to inspect the documents on January 30, 2020 in spite of the receipt of the notice nor appeared on the date fixed for hearing i.e. February 17, 2020 and accordingly the AO proceeded ex-parte and passed the impugned order. 58. The contention that the notice dated December 12, 2019 was received by the appellants on January 28, 2020 was vehemently denied by the respondent. The respondent contended that the said notice was received by the appellants on January 17, 2020 and proof of delivery of service has been annexed to the reply. It was contended that the letter of the appellants dated February 11, 2020 seeking further time to inspect the documents and for adjournment and for reschedulement of the hearing was never received and the appellants were put to strict proof. In rejoinder, the appellants admitted that the notice dated December 27, 2019 was received on January 17, 2020 but was not placed before the appellants and, there....