TaxTMI 
TaxTMI 
2023 (6) TMI 1508
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....ter referred to as 'CGM') imposing a penalty of Rs. 10,00,000 under Section 15HA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act') for violation of Regulations 3 and 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as 'PFUTP Regulations') and Rs. 1 lakh has been imposed upon Section 15A(b) of the SEBI Act for non-disclosure under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (hereinafter referred to as 'PIT Regulations'). 2. Proceedings were initiated against nine noticees against which noticee nos.2, 3 5 and 6 have filed the present appeals. 3. The facts leading to the filing of the present appeal is that PFL Infotech Ltd. (hereinafter referred to as 'the company'/'PFL') formerly known as Pioneer Farms Pvt. Ltd. was incorporated as a private limited company on 11th December, 1986 and was converted into a public limited company on 22nd January, 1993. The company initially established a hatchery unit in 1986-87. In 1995-96, the company undertook a project to e....
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....akeovers) Regulations, 2011 (hereinafter referred to as the 'SAST Regulations, 2011) and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as the 'LODR Regulations') had also been violated. 7. It is also pertinent to note that the company was trading in the Periodic Call Auction Session (hereinafter referred to as 'PCAS') for the period 9th July, 2013 to 12th January, 2014 and hence the scrip was illiquid. It opened at Rs. 44.20, went up to a high of Rs. 825, touched a low of Rs. 15 and thereafter closed at Rs. 15 during the investigation period. 8. It was observed that noticee no.5 and noticee no.6 contributed 8.09% to market positive LTP during patch 3 of the investigation period by placing buy orders at a price substantially higher than the Last Traded Price (LTP) of the scrip. Their trading pattern was found to be manipulative and fraudulent. The details of the manipulation done by Noticee nos.5 and 6 are more specifically spelt out in the impugned order. It was further found that during the same period i.e. Patch 3 when noticee nos.5 and 6 executed trades it increased the scrip price, allow....
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....r was contested. The CGM after considering the material evidence on record passed the impugned order holding that the trades executed by noticee nos.5 and 6 were manipulative and fraudulent and was done to benefit noticee no.2. The CGM also found that noticee no.2 was connected to noticee nos.5 and 6 and noticee no.2 was connected to noticee no.3 and, therefore, noticee no.2 was connected to noticee nos.5 and 6. In paragraph no.46, the CGM held that noticee no.3 acted as an intermediary between noticee no.2 who offloaded his shares at a profit and noticee nos.5 and 6 maintained the price of the scrip and facilitated the aforesaid offloading of shares of the Company by noticee no.2 and, therefore, noticee nos.2, 3, 5 and 6 have violated Section 12A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations. The CGM also found that noticee no.2 had violated the PIT Regulations as he did not make the necessary disclosure in Form 'D' and, consequently, levied a penalty. 12. We have heard Mr. CA Kushal Shah for the appellant in Appeal no.129 of 2023, Mr. Prakash Shah, Advocate for the appellant in Appeal no.195 of 2023; Mr. Gaurav Agarwal, Advocate assisted by Mr. Gaurav ....
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....acing buy orders at a price substantially higher than the last traded price of the scrip and that their trading pattern was found to be manipulative and fraudulent. In this regard, we find that on 31st January, 2014 noticee no.6 repeatedly placed buy orders at the rate of Rs. 523, when trades were being executed at Rs. 510, Noticee no.6 was placing buy orders at around Rs. 12 higher than last traded price. We also note that the other buy orders by other persons were being placed at or less than the last traded price and between 15:01:56 to 15:05:34, noticee no.6 was the only one placing buy orders above the lst traded price, and that too at such a huge variance of Rs. 13. 17. On 3rd March, 2014, noticee no.6 placed buy orders at Rs. 547-Rs.550, when the LTP was Rs. 534.5. thus, buy orders were placed at Rs. 13-Rs.16 more than the LTP. The other buy orders were in the range of Rs. 521-525 approximately. The buy orders of noticee no.6 were in the range of Rs. 13-16 more than LTP. 18. A tabular representation of the LTP manipulation is as follows:- Date LTP Buy order rate January 31, 2014 510 523 March 3, 2014 534 547 547 550 549 553 Mar....
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....ibrium for 2 entities, during Patch-3 of the investigation period. The LTP manipulation can be seen from the tabular chart below: Date LTP Buy order rate January 13, 2014 482.65 500 January 14, 2014 459 490 January 17, 2014 462 472 January 29, 2014 482 495 January 30, 2014 478 500 March 27, 2014 650 661 & 674 22. From the aforesaid, it is clear that the last traded price was lower than the buy orders placed by noticee nos.5 and 6. Further, the shares were illiquid and, consequently, we are finding it difficult to believe that when the shares were available at a lower price then why would a prudent person place a buy order at a higher price and that too at a significantly higher than the last traded price. There is no rationale for placing buy orders at such higher prices and no plausible explanation has been given. 23. Thus, we are satisfied that the trading pattern of noticee nos.5 and 6 was manipulative and fraudulent and violative of Section 12A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations. The finding given by the CGM in this regard does not suffer from any error of law. 24. Insofa....
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....the conclusion that since noticee no.3 is connected to noticee nos.5 and 6 and noticee no.3 is connected to noticee no.2, therefore noticee no.2 is connected to noticee nos.5 and 6 and were part of the scheme to manipulate the price by noticee nos.5 and 6 so that noticee no.2 could offload the shares at a profit. 29. In our view, the connection drawn by the Chief General Manger between Noticee nos.5 and 6 and noticee no.2 is farfetched and cannot be taken into consideration for the purpose of coming to a conclusion that there was a scheme by which noticee nos.5 and 6 manipulated the price of the scrip to benefit offloading the shares at a profit. Unless and unless there is some positive evidence of some meeting of minds between noticee no.2 and noticee nos.5 and 6 the finding of the CGM that there was a scheme to manipulate the price of the scrip by noticee nos.5 and 6 for the benefit of noticee no.2 is purely conjectural and based on surmises and conjectures and such finding cannot be sustained in the eyes of law. We are satisfied that there is neither direct nor indirect connection nor there is any relationship whatsoever between noticee no.2 with noticee nos.5 and 6. We are f....