TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 922
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....a), (d), 4(1) and 4(2)(q) of SEBI (PFUTP) Regulations, 2003 (SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.). 2. We have heard Mr. Kunal Kataria, learned Advocate for the appellants and Mr. Ravishekar Pandey, learned Advocate for the respondent. 3. Brief facts of the case are, SEBI received three complaints (Dated February 11, 2019; April 22, 2019; July 25, 2019) on behalf of 'Aequitas Investment Consultancy Private Limited' ('Aequitas' for short), a SEBI registered Portfolio Management Services alleging that the employees of its broker 'Ambit Capital Private Limited' ('Ambit' for short) have violated the PFUTP Regulations by indulging in front- running activity and undertaking trades in advance of the trades of 'Aequitas' in their own accounts and also in their family members' accounts. The appellant No.2 was the employee of 'Ambit'. He traded through his parents' accounts. 4. SEBI carried out an investigation for the period from January 1, 2018 to December 31, 2018. A show cause notice (Dated April 22, 2022) to four noticees [i.e., Pawan Nandkishore Agarwal (Noticee No.1), Ajay Krishnamurthy Rao (Noticee No.4)....
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....ery premise. This principle ought to have been applied in the case of appellants also. e. The impugned order failed to appreciate that the complainant was never examined and not made available for cross examination. f. A charge of front running cannot be made merely because a Buy-Buy-Sell pattern is observed. To prove front running, one has to establish that the first leg of transaction was executed in advance of an impending transaction. The definition of 'front running' as per SEBI's circular requires that there must be proof of an impending large order. The concept of front running was considered by the Hon'ble Supreme Court of India in SEBI v. Kanaiyalal Baldevbhai Patel (SEBI v. Kanaiyalal Baldevbhai Patel, (2017) 15 SCC 1.). g. The alleged front running is a single isolated instance in the scrip of Vindhya Telelinks Limited. The Aequitas started trading the scrip at 9:33:35 and was trading in the scrip till 12:15:39. The appellants traded at around 11:35 when the trades of Aequitas had already been executed. The quantity of 1,59,277 shares of Aequitas was not placed at once. At SEBI's instance, a report was obtained from Wadia Ghandy & Co. which rev....
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....iate squaring off positions on the same day clearly establishes that the trades were executed with an intent to make a quick profit based on the prior knowledge of the big client's trading activity. d. Every day respondent receives around 3000 complaints on SCORES portal of SEBI. It is humanly impossible for the respondent to record statement of every complainant. SEBI has carried out its own investigation and arrived at its independent findings. The impugned order is passed in accordance with law and in compliance with principles of natural justice. e. As per the Gross Trade Value analysis, the tainted trades (mirror and front-running trades) executed by the appellant No.2 has reached 52% of the total value of trades executed by him. This indicates that at least half of the volume of the total trades carried out by the appellant were unfair trades. f. Though investigation has not brought out any price impact or investor loss, illegal gains made by the appellants have been quantified. SEBI, after considering the relevant factors under Section 15J of SEBI Act, has imposed a minimum penalty of Rs.5 lakhs under Section 15HA of the SEBI Act, 1992. Therefore, ....
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....diately executed at 13:51:33 only. The big client's order was placed prior to appellant's order at 11:44:41 which was executed at 15:29:57. Similarly in the case of TALWGYM, big client's order was placed prior to appellant's order at 10:54:16. 13. Shri Kataria vehemently contended that a front running is an act in which essentially the front runner places his order in advance of big client's order. He relied upon the following passage in SEBI v. Kanaiyalal Baldevbhai Patel (2017) 15 SCC 1 "19. SEBI has defined front-running in one of its Circulars in the following manner: Front-running: for the purpose of this circular, front-running means usage of non-public information to directly or indirectly, buy or sell securities or enter into options or futures contracts, in advance of a substantial order, on an impending transaction, in the same or related securities or futures or options contracts, in anticipation that when the information becomes public; the price of such securities or contracts may change." (Emphasis Supplied) 14. As noted hereinabove, in both cases of EIDPARRY and TALWGYM, appellant's orders were not placed prior to big client's order. ....
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....aded. Appellants have placed on record their scrip wise trades as Exhibit-D to the memorandum of appeal. It was contended by Shri Kataria that appellants have traded in several scrips on such dates when big client has not traded. We have perused the list of scrips annexed at page 278 of memorandum of appeal which shows that scrips of Andhra Sugar, Balrampur Chini Mills, Century Enka, DCM SHRIRAM and several others have been traded on the dates when the big client has not traded. This fact has remained uncontroverted. Therefore, in our view, the appellants are also entitled for similar relief on the ground of parity. 19. Fourthly, though it is settled that SEBI while adjudicating shall evaluate the matters based on preponderance of probability, in the absence of cogent material on record leading to such inference, in our view, in this case, SEBI ought to have examined the complainant. 20. Fifthly, it is appellant's case that the report submitted by Wadia Ghandy & Co., does not indicate that appellants were involved in front running. Appellant has annexed the excerpts of the report as Exhibit-F. Shri Kataria drew our attention and pointed that the said report shows that the com....