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2023 (2) TMI 1438
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.... Vikram Shah, Usha Rakeshkumar Dixit, Tushar Ashok Thakur, Ashish Ishwarlal Shah, Ketan Jumakhlal Mehta, Sorabh Kumar Poddar, Ravi B. Wattamwar HUF, Megha Wattamwar, Vinita Sanjay Joshi, Sanjay Ambadas Joshi, Sandeep V Saraf, Neha Narayan Toshniwal, Pawan Darak, Kiran Narayanprasad Toshniwal, Sunita Toshniwal, Ritu Saraf, Tushar Ashok Thakur, Usha Rakeshkumar Dixit, Shrenik Kumar Jain, Manish Kumar Bhati, Mansi Manoj Rane, Omprakash Sharma, Tejas Gala, Vikram Navinchandra Shah, Kirit Ramniklal Mehta, Priyanka Pramod Mhapsekar, Ashish Ishwarlal Shah, Tejal Piyush Mehta, Ketan Jumakhlal Mehta Versus Securities and Exchange Board of India Justice Tarun Agarwala, Presiding Officer And Ms. Meera Swarup, Technical Member For the Appellant : Mr. Kunal Kataria, Advocate with Mr. Deepak Dhane, Advocate i/b. Corporate Pleaders For the Respondent : Mr. Ravishekhar Pandey, Advocate with Mr. Nishit Dhruva and Ms. Shefali Shankar, Advocate i/b. MDP ORDER PER : JUSTICE TARUN AGARWALA, PRESIDING OFFICER 1. In this group of appeals the appellants have challenged the order dated December 2, 2020 passed by the Whole Time Member ('WTM' for short) of the Securities and Exchange ....
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....n and found that the price of shares of Mishka moved from Rs. 5.50 on February 14, 2013 to Rs. 327.25 on January 15, 2014. After the split of the shares in December 30, 2013 SEBI noticed that price of the scrip touched a high of Rs. 49.90 on February 14, 2014. 4. The investigation further revealed that Mishka had also made a preferential allotment during 2012-13 and subsequent to the release of the compulsory lock-in period of 1 year, the preferential allottees and the promoter related entities were provided an exit at a high price by certain entities allegedly related or connected amongst themselves and with Mishka. 5. Accordingly, an ex parte ad interim order dated April 17, 2015 was passed against the Company, its promoters, directors and other suspected entities totalling 129 who were prima facie found to be in violation of the SEBI Act and the PFUTP Regulations. The interim order accordingly restrained them from accessing the securities market and further prohibited them from buying, selling or dealing in securities either directly or indirectly in any manner till further directions. 6. Subsequently, by an order dated November 10, 2015 and August 26, 2016 SEBI revoked....
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....gtas') were the directors who have violated Regulation 3 and 4 of the PFUTP Regulations for devising a manipulative scheme. 10. The show cause notice further alleged that 53 entities, namely, Noticee nos. 8 to 60 have indulged in an act amounting to manipulation of price of the scrip of the Company and were alleged to have sold the shares at inflated price and booked substantial profit and thereby violated Regulation 3 and 4 of the PFUTP Regulations. 11. The WTM after considering the material evidence on record found that the Company and its directors used the proceeds of the preferential allotment in contravention to the objects of the preferential issue and violated Section 12A and Regulation 3 of the PFUTP Regulations. The WTM found that Noticee nos. 8 and 9, namely, Anil Satyanarayan Roongta and Sudha Anil Roongta had a definite role to play in planning a fraudulent scheme in the securities market whereby a penny stocks had been identified, activated and subsequently transferred to several entities in the market. The WTM found that right from initiating act of purchase of the promoter shares and spreading it out in the market was per se manipulative and fraudulent and eve....
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....lants are not guilty of price manipulation and that the price manipulation, if any, has been done by the buyer and not by the seller. It was urged that buy order was placed above the LTP by the buyers before the appellants sell order. It was contended that since buy orders were placed above the LTP the appellants trades automatically matched with the buy orders and therefore the appellants cannot be charged for increasing the price since a higher price was already existing in the system at the behest of the buyer. It was also contended that initially an ex parte ad interim order was issued against the buyers but the same was subsequently revoked by an order dated October 5, 2017 as no adverse finding were made out against these buyers with respect to their role in the price manipulation. It was, thus, urged that since there was no connection with the buyer and, in the absence of any collusion of the appellants with the buyer the question of penalizing the appellants for manipulating the price of the scrip does not arise. 15. In the end, it was also argued in the alternative that the contribution to the price increase was very negligible and was less than 1% and that SEBI itself ....
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....e finding of the WTM that the appellants were, however, found guilty of unilaterally increasing the price of the scrip is patently erroneous and based on surmises and conjectures. Admittedly, in the instant case the buyer was placing the buy orders above the LTP and the trades of the appellants matched with the price depicted by the buyer. In such a scenario, the seller cannot be found guilty of manipulating the price nor can he be found guilty for increasing the price. Since the buyer had placed the buy orders above the LTP and whose buy orders got executed at a higher price, in our opinion, it is the buyer at whose instance the price has increased and therefore can be termed as a manipulator. Looking from any angle, the seller would look silly if he sells his shares at a lower price knowing fully well that the system is showing that the shares could be sold at a higher price. It is a common sense that a seller will always like to get the best price for his shares. Thus, on this score we find that the appellants as sellers are not manipulators nor have played any role in increasing the price of the share of the Company. 19. We also find that initially the buyers were restrained....
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....he WTM found that they were acting as a principal and not as an agent. 25. In this regard, we find that the contention of the appellant that the principles of natural justice was violated as they were not given an opportunity to cross-examine the buyers is patently erroneous and is irrelevant to the issue involved. The contention that RRSPL was approached by Subhash Maheshwari who had informed that he had buyers who were willing to purchase the shares of Mishka and that the entire transaction were sourced and concluded by Subhash Maheshwari and therefore the appellants acted as broker and not as a principal between the buyers and sellers is patently erroneous. The WTM has rightly disbelieved this theory and found that memorandum of understanding was only a piece of paper which was never acted upon and was procured to camouflage the scheme devised by the Roongtas. 26. We find that the Noticee nos. 8 and 9 being directors of RRSPL had devised a scheme whereby they purchased the entire shareholding from the promoters and promoter entities at the rate of R.s 5.00 per share and paid valuable consideration. The proof of payment has been depicted by the WTM in its order which fact h....