TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 1702
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....r. Sumit Rai, Advocate with Ms. Nidhi Singh, Ms. Deepti Mohan, Mr. Nishin Shrikhande, Ms. Hubab Sayyed, Mr. Harish Ballani, Ms. Nidhi Faganiya and Ms. Komal Shah, Advocates i/b Vidhii Partners Per: Justice Tarun Agarwala, Presiding Officer 1. Three appeals have been filed by eight (8) noticees against a common order dated February 26, 2021 passed by the Adjudicating Officer ("AO" for convenience) of the Securities and Exchange Board of India ("SEBI" for convenience) imposing a penalty of Rs. 10 lakhs each for violation of Regulations 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 ("PFUTP Regulations" for convenience). 2. The facts leading to the filing of t....
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....n 12A(a),(b),(c) of SEBI Act, 1992 r/w Regulation 3(a),(b),(c),(d) and Regulation 4(1), 4(2) (a), (e) of PFUTP Regulations. c. From the LTP analysis, it is alleged that during patch 3, 34 Noticees namely, Noticee No.1 to 11, 16, 17, 18, 21, 22, 23, 24, 34, 36, 37, 38, 39, 40, 43, 44, 45, 46, 47, 48, 53, 54, 55 and 56, by trading among themselves created misleading appearance of trading and manipulated the price of the scrip by contributing to the price rise and thereby it is alleged that the Noticees have violated Section 12A(a),(b),(c) of SEBI Act, 1992 r/w Regulation 3(a),(b),(c),(d) and Regulation 4(1), 4(2) (a), (e) of PFUTP Regulations. d. From the LTP analysis, it is alleged that during patch 4, 33 Noticees namely, N....
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....bhat and Noticee No. 62/ RRP), Noticee No. 61 / Prabhat and Noticee No. 62 / RRP had aided trades of six Noticees namely Noticee No. 1 to 5 and 10 by transferring funds received from Noticee No. 59 / PMC to aforesaid six Noticees, who in turn transferred aforesaid funds to their respective brokers. Thus, Noticee No. 1 to 5, 10, 59 to 62 indulged in fraudulent and unfair trade practices while dealing in securities of Noticee No. 59/ PMC and thereby it is alleged that the Noticees violated Section 12A(a), (b), (c) of SEBI Act, 1992 r/w Regulations 3(a), (b), (c), (d), 4(1) of PFUTP Regulations." 4. Noticees no. 1 to 5 in the show cause notice are noticees no. 1 to 5 in the impugned order and noticees no. 7,8 and 9 in the show cause notice ....
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....to 8 contributed significantly to positive Last Traded Price ("LTP") and also created New High Price ("NHP"). 9. The AO further disbelieved the contention of the appellants that the investments in the Company was being made on account of good prospects and positive news holding that the price earning ("PE") ratio of the Company was highly overvalued as compared to three peer Companies. 10. The AO held that the continuous buying of shares at increasing prices created an artificial demand in the scrip of the Company and the fact that the noticees were continuously purchasing even at high prices was only possible if there was some motive behind it. This motive was stated by the AO in paragraph 63, namely, that the noticees provided exit ....
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....st that noticees no. 6 to 8 are in any way connected to the Company or the promoters of the said Company. Indirect connection of noticees no. 6 to 8 through noticees no. 1 to 5 with the Company is farfetched and leads us nowhere. 14. Buying shares from the stock exchange platform is no crime. Continuous buying of shares at increased price is also no crime and such action in our opinion does not violate any provisions of the SEBI laws and especially the PFUTP Regulations. The fact that they accounted for 45.76% of the total buy quantity in 3 years or have acquired 52.5% of the total shareholding does not make their purchases illegal or tainted. 15. The finding that the appellants have created positive LTP and NHP is erroneous and based....
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....as further transferred by the noticees 1 to 5 to their respective brokers for settlement of their trading in the scrip of the Company. This is a serious charge but we find that there is no discussion or finding given by the AO in this regard. In the absence of any finding, we are of the opinion that the alleged motive for buying scrips at increased prices and holding on to them in order to provide an exit to the existing shareholders of the Company cannot stand the test of scrutiny. 18. In view of the aforesaid, in the absence of any cogent motive being proved, we are of the view, that the action of the appellants in continuously buying the shares at increasing prices and then holding on to these shares may create an artificial demand in....