2021 (4) TMI 1403

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....run Agarwala, Presiding Officer 1. The appellants have filed an appeal against the order passed by the Adjudicating Officer ('AO' for short) of the Securities and Exchange Board of India ('SEBI' for short) dated August 21, 2019 imposing a penalty of Rs. 5 lakh each for violation of Section 12A(a),(b) & (c) of the Securities and Exchange Board of India Act, 1992 read with Regulation 3 & 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 ('PFUTP Regulations' for short). 2. The facts leading to the filing of the present appeal is, that SEBI received information from Income Tax Department alleging that certain entities were misusing the stock exchange mechanism by generating bogus Long Term Capital Gain....

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....ay be stated here that no submissions were made by the learned counsel with regard to appellants nos. 1 to 6. The only submission made were with regard to the penalty imposed against the appellant no.7. It was contended that only 18,500 shares of AFSLwere allotted which were valued at Rs 7 lakh out of the total of 24 lakh shares allotted by the Company. It was further contended that the appellant is still holding on to the said shares and have not sold it and therefore he cannot be charged for manipulating the price of the scrip. It was further contended that amount given by the Company was a loan towards the professional fees to be adjusted in future as the appellant was a Chartered Accountant and was providing accounting services to the C....

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....st in the shares of the Company. Thus, we are of the opinion that the Company along with the management and allottees receiving such funds from the Company were perpetuating a fraud on the ordinary investing public who were deceived to invest in in the securities of the Company. 8. We accordingly find that when preferential allotment of shares by a listed Company is financed by the Company itself it gives a false impression that there was infusion of funds to its capital through preferential allotment. The action on the part of the Company, its management and the allottees including the appellants in particular have made fraudulent acts which is an unfair device, to deceive the investors. Such acts, omissions and concealment is prohibite....