TaxTMI 
TaxTMI 
2026 (6) TMI 14
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......... 10 C. SUBMISSIONS BY THE PARTIES .................................................. 22 D. ISSUES FOR DETERMINATION .................................................... 75 E. ANALYSIS ............................................................................................ 76 i. Relevant provisions of law ............................................................. 76 ii. Agency agreements between the appellant no. 1 and 12 entities ........................................................................................ 82 iii. Cornering of the positions in RPL November 2007 futures segment by the appellant no. 1 ...................................................... 89 iv. "Fraud" under the PFUTP Regulations ...................................... 94 v. Whether valid hedges in the futures segment constitute manipulative cornering in the present case? ............................. 113 vi. Sale of 1.95 crore RPL shares in the cash segment during the last 10 minutes on 29.11.2007 ............................................................. 120 F. DETERMINATION OF THE ISSUES ................
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....50 October 2007 29.10.2007 30.10.2007 31.10.2007 Rs. 223 Rs. 238 Rs. 247.90 Therefore, within a span of seventeen months since its issue, the price of the RPL shares had quadrupled. 6. This exceedingly bullish trend was studied by several analysts including Goldman Sachs, Morgan Stanley and Kotak Institutional Equities, who reported that the RPL stock was amongst the costliest refining stocks in the world. The price of the shares was overpriced and difficult to justify. Such reports caused an impression that there may be a price correction in the stock of RPL and it would consequently decrease in value. 7. It is in these circumstances as referred to above that the decision to divest 5% of the appellant's holding in RPL was taken i.e, 22.50 crore shares held by the appellant no. 1. However, notably, the board resolution dated 29.03.2007 was not passed specifically in respect of the intended sale of the RPL shares in the cash segment or for hedging in the derivatives market. The board resolution accorded broad powers to two officials of the appellant no. 1 to take steps as necessary to raise Rs. 87,000 crore. 8. It was noted by the appellant no. 1 tha....
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....t no. 1 realized an aggregate of Rs. 5,013 crore from the sale of the RPL shares in the cash segment as well as the settlement of the short positions in the futures segment. The appellant no. 1 realized Rs. 4,500 crore from sales in the cash segment and Rs. 513 crore from the trades made by the twelve independent entities in the November 2007 futures segment. Rs. 513 crore was the gain between the price at which the 9.92 crore short futures positions were taken and the price at which these positions were squared off (1.95 crore shares) and closed out by the NSE (7.97 crore shares) respectively. 13. A show cause notice came to be issued to the appellant no. 1 by the respondent on 29.04.2009, which was modified by the corrigendum dated 08.10.2009. Both these notices were later superseded by the fresh show cause notice issued by the respondent on 16.12.2010 ("SCN"). The allegations under the said SCN are recorded and summarized by the minority judgment of the SAT and reads thus: "14. The allegations in the Show Cause Notice are summarized as under:- (a) RIL took massive short positions through the 12 named entities in November 2007 RPL Futures, in breach of the po....
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.... d) It was held that the actions of the appellants herein constituted a violation of the provisions under Section 12A of the Securities and Exchange Board of India Act, 1992 ("SEBI Act") read with Regulations 3, 4(1) and 4(2)(e) of the PFUTP Regulations. It was held that the appellants had also violated the provisions of the SEBI circular No. SMDRP/DC/CIR-10/01 dated 02.11.2001 ("2001 SEBI Circular") and the NSE circular No. NSE/CMPT/2982 dated 07.11.2001 ("2001 NSE Circular dated"). e) On the basis of the aforesaid reasoning, it was held that the appellant had made unlawful gains of Rs. 513 crore in the futures segment, by fraudulent and manipulative means. Therefore, the trade of 7.97 short futures of the RPL stock was held to be invalid under Section 18A of the Securities Contracts (Regulations) Act, 1956 ("SCRA"). 15. Aggrieved with the order of the WTM, the appellant filed an appeal before the SAT challenging the observations therein. The decision of the SAT came to be delivered on 05.11.2020 with a majority of 2:1. The majority opinion therein is impugned before us, hence, the present two statutory appeals. B. DECISION OF THE SAT 16. The perusal of the ....
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....r 2001, therefore the appellants could not invoke provisions relating to the 1999 SEBI Circular. c) Therefore, it was held that the trades done by the twelve entities were on behalf of the appellant no. 1 and accordingly, the appellant no. 1 was liable for any illegality committed in the said transactions. a) The minority, after having perused the agreements entered into between the appellant no. 1 and the other appellants, observed that the twelve entities were acting on behalf of the appellant no. 1 as all transactions needed the prior approval of the principal and the twelve companies had no independent discretion. Further, the profits and losses accruing on account of the transactions in the futures segment were supposed to be transferred to the appellant no. 1 and the twelve entities would get a fixed commission. b) It was held that Section 226 of the Indian Contract Act, 1872, squarely applied to the set of facts in question meaning thereby that the acts of the twelve entities had such legal effect as if done by the principal (appellant no. 1 ) itself. c) It was observed that the 12 entities individually, had taken valid positions within the restricted position li....
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....yet the same could not be said to be a fraudulent or manipulative device. b) It was opined that the breach of the position limits could, at best, attract penalties under Section 9(3) of the SCRA. c) It was observed that there was no onus on the appellant no. 1 to disclose the agreements with the twelve agents in the 2001 SEBI Circular. Once the disclosure was required by way of the SCN, the appellant no. 1 promptly did so and the discovery of the agency agreements was not a result of SEBI's independent investigation. d) Though the object of position limits was to prevent concentration of positions that would enable the holder thereof to manipulate the market yet, it could not be said that concentration by itself would automatically amount to fraud. It was held that a separate act of manipulation was required to be cogently proved. e) Therefore, even if the open positions of all twelve entities aggregated breached the position limits as provided in the 2001 SEBI circular, the same would not by itself could not attract the PFUTP Regulations. 19. As regards the issue whether the transactions in the futures segment constituted genuine hedge transactions, the following wa....
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.... 22.5 crore shares in the cash segment, which meets the requirement set out in Pankaj Oil Mills (supra). b) It was observed that the appellant no. 1 was going to be placing sell orders for 22.5 crore RPL shares in the cash segment which may cause a substantial price decline even in a phased manner. Hence, mitigating this risk by entering into 9.92 futures positions qualifies as a valid hedge transaction. c) Further, if physical delivery of shares was allowed at the time when the appellant no. 1 took positions in the futures segment i.e, November 2007, there would be no question of an invalid hedge. The argument that there was an imperfect hedge which caused suspicions of fraud arose because of the cash settlement system prevailing at the time by way of which the appellant no. 1 could have booked profits without parting with the underlying stocks. d) The appellants' positions in the futures segment were imperfect hedges but that would not mean that such transactions would be invalidated on the said count. This is because a perfect hedge is possible in the system where physical delivery of shares is allowed. Therefore, there was no requirement to match the closing of open in....
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....es of a trading day, including the settlement date of such trader's futures holdings. 21. As regards the issue whether there was any element of fraud and manipulation in the transactions in question which would attract Section 12A of the SEBI Act and the PFUTP Regulations, the following was observed: Majority opinion: Minority opinion a) The majority opined that Section 18A of the SCRA was introduced to confer validity on such derivatives transactions that would otherwise be considered to be wagering contracts. However, such validity was provided only when the rules of exchange trading and clearing house settlement were followed. It was inferred from this that any trades that did not follow the stipulations of the stock exchanges or the provisions of the SCRA, SEBI Act and the rules and regulations thereunder, would be vitiated by illegality and fraud. b) It was observed that treating the conduct of the appellant no. 1 as merely a violation of the 2001 NSE Circular or 2001 SEBI Circular would result in adverse impact on the derivatives market and the securities market in general. c) It was observed that the intentional principal-agent agreements entered into by th....
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.... its proposal to sell 22.50 crore shares in the cash segment, such knowledge could at best create an expectation that the price of RPL shares might decline; it did not establish with certainty that the prices would fall when large quantities of shares are sold. This, he submitted, was demonstrated by the fact that although analysts consistently reported for over two months that the RPL shares were overpriced, their price continued to rise against expectations. 24. He further submitted that a charge of fraud could be leveled only if the respondent could prove that the appellant no. 1 had a deliberate and pre-arranged strategy to depress the price of RPL shares by activities such as engaging in circular trades in connivance with one or more parties with the intention of creating a false market by undertaking artificial trades, and inducing investors to buy or sell RPL shares in order to make unlawful gains. According to the learned senior counsel, none of the ingredients set out in the definition of 'fraud' as per Regulation 2(1)(c) of the PFUTP Regulations were present in the appellant no. 1's trades in the cash segment or in the trades of the 12 entities in the November 2007 RPL....
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....urpose. At the same time, it recognizes that in order to make hedging possible, the market should also have speculators who are prepared to be counter parties to the hedgers. A derivative market only or mostly consisting of speculators is unlikely to be a sound economic institution. A soundly based derivatives market requires the presence of both hedgers and speculators. [***] Hedging will not be possible if there are no speculators." 30. In this abovementioned context, the learned senior counsel submitted that the futures market was introduced to create a mechanism for hedging, and that speculation is an inherent and necessary part of the derivatives market. 31. He further argued that the fact that the 12 entities took sale positions in respect of only 9.92 crore RPL shares as against the proposed sale of 22.50 crore shares, i.e., approximately 50 per cent of the underlying exposure, demonstrates that the positions were bona fide hedges and not speculative trades undertaken to profiteer. These positions were taken through 12 entities since the position limits as per the 2001 SEBI Circular did not apply cumulatively to 'persons acting in concert' ("PAC"). ....
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....ttlement period on 01.11.2007 and 06.11.2007, were substantially held throughout the period despite opportunities for larger profits. Ultimately, the positions were closed at the end of the settlement period, through cash settlement, which was the only permissible mode of settlement at the relevant time. 37. Mr. Salve submitted that the Majority Judgment erroneously rejected the hedge transactions on the grounds that analysts' reports could not justify the hedge, the arrangement with the 12 entities amounted to circumvention of the position limits under the SEBI circulars, the appellant no. 1 had no hedging policy or compliance with accounting and regulatory requirements, and the futures positions were not closed simultaneously with the sale of shares in the cash segment. Mr. Salve submitted that the aforesaid findings are unsustainable since: a) There is no legal basis to hold that promoters cannot act upon analysts' reports; b) There is no legal protocol to be followed for a transaction to be a 'hedge' under law. Hedging is a commercial tool for de-risking and not a legal instrument for trading. There is no law prescribed for hedging. A breach of position lim....
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....to be tested. 39. Regarding the issue of alleged cornering of position limites and consequent fraud, it was submitted that there was no "cornering" of the November 2007 RPL Futures market and, in any event, such alleged cornering could not amount to "fraud" under the PFUTP Regulations. 40. Mr. Salve submitted that the appellant no. 1 observed exceptionally high liquidity in the November 2007 RPL Futures segment between 24.10.2007 and 31.10.2007, with traded quantities being nearly four times that of the cash segment, even before the appellant no. 1 commenced sale of RPL shares. It was in this background that the 12 entities took sale positions in the November 2007 RPL Futures, which constituted only a small percentage of the total trades in the F&O segment on the relevant trading days. According to the learned senior counsel, the allegation that such small percentage of trades by 12 entities induced other market participants to purchase RPL shares or resulted in cornering of position limits is wholly baseless. 41. It was submitted that the high demand for RPL Futures existed independently of the trades of the 12 entities and that market participants would have purchased ir....
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.... scheme intended to disrupt market in an impermissible manner. h) Even assuming there was a breach of the prescribed caps, the same would at best constitute a regulatory infraction and not fraud or manipulation, particularly in the absence of any evidence that the alleged concentration resulted in manipulation of prices or market demand. i) Furthermore, there is no evidence whatsoever that the alleged concentration resulted in manipulation of prices or demand. Absent such evidence, the allegation that concentration of position (while denying the appellant no. 1 cornered the positions) amounts to manipulation and fraud has no basis. 43. Regarding breach of positions limits and PAC, Mr. Salve submitted that SEBI and the SAT Majority proceeded on the basis that the appellant no. 1, through 12 alleged agents, breached position limits, effectively cornered the market in November 2007 RPL Futures, and created concentration of positions. This, according to SEBI, constituted a non-disclosed principal-agent arrangement amounting to a pre-planned fraudulent scheme, rendering the concept of "persons acting in concert" irrelevant. 44. Mr. Salve submitted that by taking ....
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....s meritless once alleged principal-agent relationship is established, cannot stand. According to him, SEBI's contention baseless particularly when neither the 2001 SEBI Circular required disclosure of PAC arrangements nor the NSE (F&O) Trading Regulations permitted disclosure of client identity. There was no regulatory mandate obligating the appellant no. 1 to disclose its intention to sell shares before taking positions in the F&O segment, and therefore the allegation of concealment is wholly misconceived. Hence, Mr. Salve submitted that the PAC acquiring positions in the F&O segment under a single directing mind was neither prohibited nor subject to any disclosure requirement under the SEBI framework. Consequently, such conduct could neither be treated as a violation of the SEBI Act or the PFUTP Regulations nor be characterised as "fraud" or "manipulation" under the PFUTP Regulations. 46. On the strength of the above submissions, it was contended that SEBI and the SAT Majority failed to appreciate that, at the relevant time, the regulatory framework did not provide for aggregation of positions held by persons acting in concert in single stock futures. At best, such conduct cou....
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....rther penalty could be imposed. 52. Mr. Salve submitted that futures and options transactions are inherently speculative in nature and, therefore, even a breach of position limits would at best amount to speculation beyond the limits prescribed under the SCRA, attracting only the penalties contemplated therein. Such breach, even if through PAC, could not by itself metamorphose into fraud or manipulation under the PFUTP Regulations. 53. It was further contended that the 2001 SEBI Circular having been issued under the SCRA, any alleged breach thereof could be dealt with only under the SCRA and the penalties prescribed thereunder. Merely because SEBI administers both the SCRA and the SEBI Act, violations under one statute cannot automatically attract the provisions of the other. To support this contention, reliance was placed on the Minority Judgment of SAT, which held that violation of position limits cannot attract Regulation 3(b) of the PFUTP Regulations which has been framed under the SEBI Act. Therefore, since the SCRA prescribes penalty separately for violation of the position limits, Regulation 3(b) of the PFUTP is not applicable for violation of position limits. 54. R....
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....hat market prices were influenced by trades of other participants as well, which SEBI failed to investigate, and selectively attributed price movement solely to the appellant no. 1's conduct. SEBI also failed to enquire into the 1.06 crore shares sold by other market participants at similar prices during the same time segment. g) The SAT Minority Judgment had rightly accepted that since other market participants had sold 1.06 crore shares during the same 8 minutes and 20 seconds before closing, attributing the fall in prices solely to the appellant no. 1's sale of 1.95 crore shares was unsustainable. Whereas, the SAT Majority Judgment had erroneously ignored the fact that the appellant no. 1 started selling only at 3:21:40 p.m., after 21 minutes of the last half hour of trading had already passed, and if the intention was to depress the weighted average settlement price, the appellant no. 1 would have started selling at 3:00 p.m. itself when the price stood at Rs. 208.20, a price at which the appellant no. 1 had earlier sold shares. h) SEBI's theory that the appellant no. 1 sold shares at 3:21 p.m. solely to depress the weighted average settlement price was commer....
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.... It was submitted that SEBI failed to establish that any of the transactions undertaken by the appellant no. 1 and the 12 entities were non-genuine or fraudulent trades, since all transactions were genuine and executed on the stock exchange at prevailing market prices between unrelated counterparties. There was no finding regarding inducement by way of engagement of 12 entities and merely engaging them could not amount to inducement to deal in securities. There is no violation of position limits and even assuming a breach, the same could not by itself constitute inducement to deal in securities. 59. Mr. Slave submitted that none of the ingredients of "fraud" under Regulation 2(c) of the PFUTP Regulations, including misrepresentation, false suggestion, or active concealment of material facts, could be established in the trades undertaken by the appellant no. 1 and the 12 entities, and that other ingredients set out in (4) to (9) of Regulation 2(1)(c) of the PFUTP Regulations were wholly irrelevant to the present case. 60. The attention of this Court was drawn to Regulations 3 and 4 of the PFUTP Regulations to contend that mere violation of a statutory provision does not ipso j....
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.... and manipulation was ultimately based on hypothetical reasoning rather than substantive analysis. 64. Majority Judgment erroneously concluded that the appellant no. 1's futures transactions were not hedges but fraudulent and manipulative, ignoring the appellant no. 1's trading data, statistics, and detailed submissions. It was contended that the findings rested on vague notions of "regulatory principles" and assumed that hedging required a prescribed policy or documentation, though no such legal requirement existed. The observations characterizing hedging as a "wild dream" and treating absence of a hedging policy as indicative of fraud were stated to be unsupported in law or facts and reflected a substitution of conjecture for evidence while disregarding the actual market conduct and execution of trades by the appellant no. 1. 65. It was submitted that despite Tables 1 to 15 being placed to demonstrate absence of manipulation in the last 10 minutes of trading on 29.11.2007, the SAT Majority Judgment rejected the entire analysis without examining the tables and relied solely on two observations- (i) that "simulation exercises" had no merit, and (ii) that 12 ....
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....ent. The SAT Minority, however, in a clear and reasoned analysis of facts and law, set aside the WTM's order holding that no fraud or manipulation was made out and that the PFUTP Regulations were not attracted. 69. It was submitted that SEBI is, in effect, "barking up the wrong tree", as it pursued an allegation of fraudulent trading by the appellant no. 1 contrary to the facts and evidence, without examining the reasons for (i) unusually high activity in the November 2007 RPL Futures from 24.10.2007 to 06.11.2007; (ii) the sharp rise in RPL futures price from Rs. 172.50 on 22.10.2007 to Rs. 280.50 on 06.11.2007 despite analyst reports indicating overvaluation; and (iii) the sudden price spurt in the cash segment on 29.11.2007 from Rs. 208.10 at 3:00 p.m. to Rs. 224.70 at 3:21:40 p.m. 70. The findings of SEBI and the SAT Majority were further assailed on the ground that the order of disgorgement under Section 11B of the SEBI Act was premised on alleged violations of the PFUTP Regulations, whereas the statutory explanation is confined to gains arising from contravention of the SEBI Act or regulations made thereunder and cannot be extended to alleged ....
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....that the transactions are not void. 74. On the crucial issue of whether the facts and figures in the data available to the WTM, it was submitted that Tables 1 to 15 placed before SAT contained actual trading data on positions, prices, and sales, which demonstrated that SEBI's inferences were not borne out by facts. Yet the SAT Majority Judgment failed to engage with the material and dismissed the entire data as "simulation exercises". This, despite the figures being factual and not hypothetical, amounts to an egregious error of law for not addressing a material submission. 75. Mr. Salve also addressed SEBI's contention that no substantial question of law arises under Section 15Z of the SEBI Act and relied on the judgment of this court in Securities and Exchange Board of India v. Mega Corporation Limited, reported in 2022 SCC OnLine SC 361. In this regard, he submitted that the expression "question of law" under Section 15Z is not confined to abstract legal issues divorced from facts, but rather a substantial question arises where there is erroneous application of law to admitted facts or violation of settled legal principles, as held by this court in Chandrabhan v. Saraswati,....
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....excess positions in its own name, it would only attract a monetary penalty under the SCRA framework and not allegations of fraud. 79. The appellant no. 1 engaged 12 entities as its agents, and the agreements were disclosed to SEBI upon inquiry, not discovered through investigation. The concept PAC was not applied to single stock futures at the relevant time, though it was recognised in other contexts like index futures and takeover regulations, with mandatory disclosures. PAC transactions were not prohibited and cannot be treated as fraudulent or dishonest. At worst, even if PAC aggregation is assumed, it would only amount to a violation of SCRA, not fraud under PFUTP Regulations. 80. He vehemently submitted that all the subject transactions were on the stock exchange at market-determined prices, were genuine arm's length trades, and not between connected counterparties, and were ultimately squared off at prevailing prices in cash. 81. He submitted that Regulation 3 of PFUTP Regulations prohibits fraudulent dealing in securities, and "fraudulent" must be read in line with the defined meaning requiring inducement. Regulation 3(b) bars manipulative or deceptive devices, and ....
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....tutes manipulation is baseless. Mere concentration, without use for price or demand manipulation, does not amount to fraud. SEBI itself permits PAC structures, undermining its claim that market participants were unaware of common control. 86. Mr. Salve submitted that a related basis on which SEBI relies under the PFUTP Regulations is the allegation that (a) the appellant no. 1 cornered 9.92 crore futures positions in RPL November 2007, rising from 63% to 93% of the market, and (b) the proposed sale of 22.5 crore RPL shares in the cash segment was not disclosed and would have impacted prices, amounting to concealment. However, he argues that such allegations levelled by SEBI are fundamentally erroneous on the following grounds. a) the appellant no. 1, through the entities, initially held 63% of open interest; the remaining 37% was available but not taken by others. b) the appellant no. 1 did not further acquire positions; the increase to 93.63% resulted from exit of other market participants. c) Sale of shares in the cash segment and taking futures positions are independent transactions unless linked by intent to depress prices. d) the appellan....
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...., consistent with the regulatory structure of hedging and inconsistent with any speculative or manipulative intent. Thus, the acquisition of positions and doing so by engaging 12 agents was in no way fraudulent or manipulative. 90. Mr. Salve submitted that hedging was not a legal defence but an explanation of the appellant no. 1's commercial motive for entering futures transactions. The SAT Majority wrongly rejected it by assuming that a legal framework or prior board-approved policy is required, conflating commercial intent with legal form. It also failed to examine whether the futures positions functioned as an imperfect hedge against expected price correction in an overvalued scrip. The notion of a "perfect hedge" is not recognised in law or policy and is a new construct of SEBI/SAT. 91. Regarding the issue of alleged price manipulation on 29.11.2007, Mr. Salve argued that SEBI did not examine the actual transaction data and instead relied on broad, inferential allegations. The SAT Majority, when confronted with detailed trading tables inconsistent with its theory, dismissed them as "simulation exercises" without addressing their evidentiary value. 92. Mr. Salve address....
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....m order dated 17.12.2023 of this Court; B. Rs. 25 crore deposited by the appellant under the SAT order dated 04.12.2023. 96. The appellant annexed the following details in the tabular form: Annexure 1- A snapshot of the trades by the 12 entites n RPL share in the November 2007 RPL Futures and by RIL in the cash segment (along with relavant statistics) Trading in November 2007 RPL Futures segment of NSE through 12 entites Date Net Purchases No. of shares (in crore) Purchase price (average for the day) (Rs. / share) Purchase value (Rs. crore) Net Sales No. of shares (in crore) Sale price (average for the day) (Rs. / share) Sales value (Rs. crore) Total trades in the F&O Segment (Futures + Options) % of RIL trades to total trades in the F&O Segment (Futures + Options) Open positions of 12 entities % of total open positions in Futures + Options together % of total open positions in November 2007 Futures 01-11-2007 2.22 277.08 615.12 54.59 4.1% 2.22 19.2% 24.2% 02-11-2007 2.10 263.88 554.16 31.68 10.0% 4.32 3....
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....nt by NSE) 7.97 215.60 1,718.33 37.89 29.4% 0 40.1% 93.6% Total 9.92 2,121.95 9.92 265.67 2,635.41 Gain in F&O segment 513.46 RIL's sales of RPL shares in cash segment of NSE + BSE in Nov 2007 Date Sale on NSE - No. of shares Sale on BSE - No. of shares Sale - No. of shares Sale price per share (average for the day) (Rs.) Sale value (Rs. crore) 01-11-2007 02-11-2007 05-11-2007 06-11-2007 4.67 2.52 7.19 235.32 1691.48 07-11-2007 08-11-2007 09-11-2007 ....
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.... 99. As regards the issue of hedging, Mr. Datar argued that although hedging is a permitted risk-mitigation tool, it cannot be used through devices that corner position limits and distort market integrity. The appellant no. 1 being the promoter of RPL, offloaded shares worth more than Rs.5,000 crores, and the derivative market cannot absorb such huge exposure. Position limits exist to preserve fairness, and such large-scale promoter offloading cannot be hedged through a single futures contract. Any such attempt, if structured to corner positions, amounts to serious PFUTP violations rather than legitimate hedging. 100. It was submitted by the learned senior counsel that even if the hedging theory is accepted, the exposure in the cash segment and positions held by the appellant no. 1 in the futures segment crossed on 15.11.2007, however, the latter were not reduced proportionately thereafter. Instead, the appellant no. 1 retained 7.97 crore shares as a "naked hedge" from 16.11.2007 till expiry on 29.11.2007 to benefit in the derivatives segment. This was done to reap benefits in the derivatives segment; therefore, the scheme hatched by the appellants together was clearly a fraud....
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....s based on alternative trading days cannot displace actual market conduct or findings of manipulation. The respondent submitted that even if such assumptions were considered, they do not negate the alleged scheme of building a net short position of 9.92 crore shares through 12 front entities. Further, the appellant no. 1 failed to explain why it maintained an open short position of 7.97 crore shares until expiry on 29.11.2007, despite its stated hedging requirement being only 4.45 crore shares from 16.11.2007, which according to SEBI indicates a devious and manipulative scheme. 104. The appellant no. 1 also failed to explain the urgency in selling RPL shares in November 2007, despite a decision taken in March 2007, especially when such a sale could have been spread over several months. The respondent noted that the first valuation report came only in September 2007, yet the appellant no. 1 did not act earlier despite funds being intended to be raised over two years. Instead, it suddenly sold 22.5 crore shares (about 5%) and simultaneously took short positions under the guise of hedging. It was submitted that these facts and circumstances indicate that the hedge argument provided....
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....ltiple entities under the guise of hedging. The agreement itself provides for transfer of profits to the appellant no. 1 (Clause 3.2), which is inconsistent with any genuine risk-mitigation purpose. The respondent therefore submitted that the arrangement was aimed at earning illegal profits rather than hedging risk. 110. The appellant no. 1's position in RPL November 2007 futures on the date of settlement, was twice its cash segment exposure, which according to the respondent was inconsistent with any genuine hedging structure. No bona fide hedge would be structured to generate disproportionate gains in derivatives rather than through actual cash market sales. The appellant no. 1 retained a short position of 7.97 crore shares until expiry, despite a stated hedging requirement of only 4.45 crore shares from 16.11.2007, which indicated a devious scheme rather than a valid hedge. 111. Mr. Datar relied on the Judgment of the Supreme Court of Canada in Ontario (Minister of Finance) v. Placer Dome Canada Ltd., reported in 2006 SCC OnLine Can SC 20 and Gujarat High Court in Pankaj Oil Mills v. CIT reported in 1976 SCC OnLine Guj 33, to submit that hedging must have a clear correlati....
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....s, is liable to be rejected. The creation of 12 entities, coupled with the agency arrangements and systematic breach of position limits, indicated a coordinated scheme to earn substantial profits in the derivatives segment alongside cash market sales. 117. The learned senior counsel drew the attention of this Court to the definition of "fraud" under Regulation 2(1)(c) of the PFUTP Regulations, which is inclusive and covers deceitful acts committed by a person or through agents. The creation of 12 entities solely to breach position limits, without disclosure, amounted to concealment and misrepresentation of material facts, leaving the market unaware of the concentration of nearly 90% open interest with the appellant no. 1-linked entities. This created a false impression of market position and price expectations. Further, the sale of 1.95 to 2.24 crore shares in the last minutes of trading with the intent to influence the settlement price forms part of the fraudulent scheme under the PFUTP Regulations. 118. It was submitted that the appellant no. 1 violated Regulation 3 of the PFUTP Regulations, as the creation of 12 entities was part of a fraudulent arrangement and the sale of....
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....e cash segment. The appellant no. 1 had taken disproportionately large short positions in the November RPL futures, with exposure on settlement day being double its cash market position, thereby creating a situation where it would benefit from any suppression in the settlement price. 123. The appellant no. 1 held short positions at Rs. 265/- per share and, due to its large exposure in the November 2007 Futures, it stood to benefit from a lower settlement price. The respondent alleged that heavy selling in the last 30 minutes, especially 10 minutes, depressed volume-weighted average price, with multiple trades below LTP indicating intent to influence price. The scheme resulted in suppressed settlement price and unlawful gains of Rs. 513 crores, with the respondent computing disgorgement after applying open interest limits and adjusting it to Rs. 447.27 crore. 124. In the last, it was submitted that the appellant no. 1's net gain of Rs. 513 crores arose from the alleged market manipulation through the scheme of employing 12 entities for circumventing position limits. Therefore, the said amount of money constitutes unlawful profit. The respondent, while computing disgorgement, a....
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....s introduced in the SCRA to permit trading in derivatives. Section 18A reads thus: "18A. Contracts in derivatives.- Notwithstanding anything contained in any other law for the lime being in force, contracts in derivative shall be legal and valid if such contracts are- (a) traded on a recognised stock exchange; (b) settled on the clearing house of the recognised stock exchange; or in accordance with the rules and bye-laws of such stock exchange. (c) between such parties and on such terms as the Central Government may, by notification in the Official Gazette, specify." 129. The SEBI introduced position limits for trading in such derivatives in the index market. The relevant portions of the SEBI Circular No. IES/DC/CIR-4/99 dated 28.07.1999 on "Risk Containment Measures for the Index Futures Market" ("1999 SEBI Circular") read thus: "5. Position Limits : 1. Customer Level : Instead of prescribing position limits at the client level, a self-disclosure requirement similar to that in the take-over regulations is prescribed : 1. Any person or persons acting in concert who together own 15% or more of the open intere....
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....fined in Regulation 2(1)(c) thereof and reads thus: "2. Definitions.- (1) In these regulations, unless the context otherwise requires,- (...) (c) "fraud" includes any act, expression, omission or concealment committed whether in a deceitful manner or not by a person or by any other person with his connivance or by his agent while dealing in securities in order to induce another person or his agent to deal in securities, whether or not there is any wrongful gain or avoidance of any loss, and shall also include (1) a knowing misrepresentation of the truth or concealment of material fact in order that another person may act to his detriment; (2) a suggestion as to a fact which is not true by one who does not believe it to be true; A (3) an active concealment of a fact by a person having knowledge or belief of the fact; (4) a promise made without any intention of performing it; (5) a representation made in a reckless and careless manner whether it be true or false; (6) any such act or omission as any other law specifically declares to be fraudulent, (7) deceptive behaviour by a person dep....
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.... may include all or any of the following, namely:- (...) (b) dealing in a security not intended to effect transfer of beneficial ownership but intended to operate only as a device to inflate, depress or cause fluctuations in the price of such security for wrongful gain or avoidance of loss; (...) (d) inducing any person for dealing in any securities for artificially inflating, depressing, maintaining or causing fluctuation in the price of securities through any means including by paying, offering or agreeing to pay or offer any money or money's worth, directly or indirectly, to any person; (e) any act or omission amounting to manipulation of the price of a security including, influencing or manipulating the reference price or bench mark price of any securities; (...)" (Emphasis supplied) ii. Agency agreements between the appellant no. 1 and 12 entities 133. It is undisputed by either of the parties in the present matter that the agreements entered into by and between the appellant no. 1 and the twelve entities create a principal-agent relationship. This is clear from the perusal of the said agreements. The re....
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....vel position limits, yet the effect of their coordinated transactions may have adverse impact on the market and participants. 137. We note that the 1999 SEBI Circular places only disclosure requirements and advises the clients/customers that such position limits do not constitute a ban on taking positions that may cross the stipulated limits. Similarly, the language of the 2001 SEBI Circular indicates that at the time the transactions in question were made, there were only disclosure requirements placed on a client/customer who wanted to enter positions higher than the prescribed limit. The relevant portion of the 2001 Circular reads thus: "At present the trading system of the exchange requires that client ID should be provided for each trade. However, this client ID is assigned by the trading member is not unique to a client across the market. At present the exchange monitors the trading member level position limits however, the client wise limit is not monitored by the exchange and is a requirement of disclosure by the client to the trading member and to the Exchange. (...)" (Emphasis supplied) 138. A holistic reading of the stipulations as regards positio....
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.... with the rules and by-laws of such stock exchange. Since the 2001 NSE Circular also stipulated position limits, it is the contention of the respondent that the breach of position limits by the appellant no. 1 would render its trades in the November 2007 RPL futures segment as invalid for violation of rules and by-laws of the NSE. 143. In our considered opinion, Section 18A of the SCRA is required to be read with Sections 9(1) and 9(2) respectively of the same. Section 9(1) and (2) read thus: "9. Power of recognised stock exchanges to make bye-laws (1) Any recognised stock exchange may, subject to the previous approval of the Securities and Exchange Board of India, make bye-laws for the regulation and control of contracts. (2) In particular, and without prejudice to the generality of the foregoing power, such bye-laws may provide for (...)" 144. What can be discerned from the aforesaid is that the 2001 NSE Circular must be within the four corners of the provisions present in the 2001 SEBI Circular. As discussed in the earlier parts of this judgment, the 2001 SEBI Circular mandates the disclosure of such positions as may have been taken in excess of ....
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.... in November 2007 futures segment. 150. In our considered view, the aforesaid assertion is not valid in terms of the 2001 SEBI Circular which specifically states that the positions limits as stated therein, are applicable on the combined positions in all derivative contracts on an underlying stock at a particular stock exchange. The relevant portion reads thus- "This position limits would be applicable on the combine position in all derivative contracts on an underlying stock at an exchange." 151. What is discernible from the aforesaid is that position limits are applicable on all derivatives be it futures or options. Further, there is no distinction between one-month, two-months or three-months futures series insofar as the position limits under the 2001 SEBI Circular are concerned. Therefore, calculating client/customer specific positions merely on the basis of the total open positions in the November 2007 futures of RPL is erroneous. Rather, the open position of that stock, in that exchange, across all derivatives ought to have been considered. 152. We say so because calculating open positions per a singular series would create a loophole by way of which a trader could ....
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.... futures) Appellant no. 1's calculations (basis of open positions across all derivatives) 06.11.2007 61.15% 48.60% 07.11.2007 63.82% 53.60% 08.11.2007 No calculation provided 56% 09.11.2007 No calculation provided 56.30% 12.11.2007 No calculation provided 57.90% 13.11.2007 No calculation provided 58.50% 14.11.2007 No calculation provided 59.30% 15.11.2007 No calculation provided 59.70% 16.11.2007 No calculation provided 60.30% 19.11.2007 No calculation provided 59.70% 20.11.2007 No calculation provided 59.50% 21.11.2007 No calculation provided 59.50% 22.11.2007 No calculation provided 57% 23.11.2007 78.95% 58.10% 26.11.2007 No calculation provided 45% 27.11.2007 No calculation provided 46.90% 28.11.2007 No calculation provided 47.20% 29.11.2007 93.60% 40.10% 156. The aforesaid makes it clear that the difference in calculation basis has a significant impact on the percentage result. Though the appellant no. 1's calculation of its open positions as on 29.11.2007 i.e., 40.10% is still considerably higher than the positi....
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.... act under the PFUTP Regulations remains to be seen. iv. "Fraud" under the PFUTP Regulations 161. "Fraud" under the PFUTP Regulations has been defined under Regulation 2(1)(c) thereof. For the purposes of this exposition, we may only refer to the limited portion of the said definition as reproduced below: "(c) "fraud" includes any act, expression, omission or concealment committed whether in a deceitful manner or not by a person or by any other person with his connivance or by his agent while dealing in securities in order to induce another person or his agent to deal in securities, whether or not there is any wrongful gain or avoidance of any loss" (Emphasis supplied) 162. A bare textual reading of the aforesaid definition indicates that- * First, a mala fide intention is not necessary for an act, expression, omission or concealment to fall under the definition, * Secondly, inducing another person to deal in securities is a necessary ingredient to constitute fraud, * Lastly, there is no requirement to prove injury to the persons who would have been adversely impacted by the fraud played upon them. This means that an act, expres....
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....s are undertaken, c) the value of the transactions, d) whether they involve circular trading and whether there is real change of beneficial ownership, and e) the conditions then prevailing in the market. The relevant portion of the judgment in Ketan Parekh (supra) reads thus: "20. (...) As already observed 'synchronisation' or a negotiated deal ipso facto is not illegal. A synchronised transaction will, however, be illegal or violative of the Regulations if it is executed with a view to manipulate the market or if it results in circular trading or is dubious in nature and is executed with a view to avoid regulatory detection or does not involve change of beneficial ownership or is executed to create false volumes resulting in upsetting the market equilibrium. Any transaction executed with the intention to defeat the market mechanism whether negotiated or not would be illegal. Whether a transaction has been executed with the intention to manipulate the market or defeat its mechanism will depend upon the intention of the parties which could be inferred from the attending circumstances because direct evidence in such cases may not be available. T....
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....er or not there is any wrongful gain or avoidance of any loss. ---xxx--- 54. The definition of "fraud", which is an inclusive definition and, therefore, has to be understood to be broad and expansive, contemplates even an action or omission, as may be committed, even without any deceit if such act or omission has the effect of inducing another person to deal in securities. Certainly, the definition expands beyond what can be normally understood to be a "fraudulent act" or a conduct amounting to "fraud". The emphasis is on the act of inducement and the scrutiny must, therefore, be on the meaning that must be attributed to the word "induce". ---xxx--- 56. A person can be said to have induced another person to act in a particular way or not to act in a particular way if on the basis of facts and statements made by the first person the second person commits an act or omits to perform any particular act. The test to determine whether the second person had been induced to act in the manner he did or not to act in the manner that he proposed, is whether but for the representation of the facts made by the first person, the latter would not have acted in ....
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....at may be utilised to determine whether fraudulent intention is reasonably made out or not. The list includes the following: a) volume of the trade effected; b) the period of persistence in trading in the particular scrip; c) the particulars of the buy and sell orders, namely, the volume thereof; d) the proximity of time between the two, and e) such other relevant factors. The relevant portions of the judgment in Kishore R. Ajmera (supra) read thus: "26. It is a fundamental principle of law that proof of an allegation levelled against a person may be in the form of direct substantive evidence or, as in many cases, such proof may have to be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled. While direct evidence is a more certain basis to come to a conclusion, yet, in the absence thereof the Courts cannot be helpless. It is the judicial duty to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded and to reach what would appear to the Court to b....
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....d expositions of law indicate that there is no consensus on whether or not intention plays a role in the determination of a fraudulent act. However, if we are to read these observations with the plain language of Regulation 2(1)(c) of the PFUTP Regulations, we may be tempted to observe that the meaning fraud in the securities market is unfettered by the requirement of intention. This observation may as well make the definition "omnipotent". 169. However, what is noteworthy is that the first part of the definition of 'fraud' under Regulation 2(1)(c) requires no proof of intent. On the other hand, the second part of the same definition that uses the word 'inducement' which expression partakes an intentional act directed towards inducement, quietly brings in the requirement of 'intention'. This creates an internal contradiction in the definition, causing confusion. 170. In our considered opinion, the plain language of the Regulation 2(1)(c) ought not to be read in a strict sense. We say so because the requirement of 'deceitful intention' being non-essential to the definition runs counter to the third element of the first part of the definition of fraud. As discussed hereinabove,....
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....s are prescribed. A reading of both the Regulations would reveal that the prohibited act should be directed towards manipulating the market and indulge in the act of fraud for many purposes including to make a gain or to avoid a loss. Though, it appears that there is a contradiction between the definition and Regulations 3 and 4, yet a closer scrutiny and harmonious reading would throw clarity. We find that, in enactments having drastic effect on the economy, there should be no room for doubts and misinterpretation. 175. We agree with the observation in Kanhaiyalal Baldevbhai Patel (supra) that fraud is jurisprudentially very difficult to define. However, such difficulty should not result in such a legislation that would cover every act, expression, omission or concealment under the sky. In our opinion, it cannot be the intention of the PFUTP Regulations to give unfettered powers to the respondent authority to decide the question of fraud. We find it apposite to purposively interpret Regulation 2(1)(c). In our considered view, both mens rea and actus reus cannot be made into irrelevant factors for deciding fraud. Therefore, we may outline the following scenarios for a more purpo....
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....2. ... The stock exchange is also a platform for the fair price discovery of a scrip based on the market forces of demand and supply. Securities market is so widespread and in a system of screen based trading various potential investors who track the scrips through the screens of the exchanges only see whether a particular scrip is active or not, whether it is trading in large volumes and whether the price is going up or down. Having regard to these factors he makes up his mind to invest or disinvest in the securities. When a person takes part in or enters into transactions in securities with the intention to artificially raise or depress the price he thereby automatically induces the innocent investors in the market to buy/sell their stocks. The buyer or the seller is invariably influenced by the price of the stocks and if that is being manipulated the person doing so is necessarily influencing the decision of the buyer/seller thereby inducing him to buy or sell depending upon how the market has been manipulated. ... In other words, if the factum of manipulation is established it will necessarily follow that the investors in the market had been induced to buy or sell and ....
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....pressed the degrees of probabilities within preponderance of probabilities. The relevant observations read thus:- "I do not think that the matter can be better put than it was by Lord Stowell in Loveden v. Loveden (1810) 2 Hagg. Con. 1, 3. "The only general rule that can be laid down upon the subject is, that the circumstances must be such as would lead the guarded discretion of a reasonable and just man to the conclusion". The degree of probability which a reasonable and just man would require to come to a conclusion - and likewise the degree of doubt which would prevent him coming to it - depends on the conclusion to which he is required to come. It would depend on whether it was a criminal case or a civil case, what the charge was, and what the consequences might be; and if he were left in real and substantial doubt on the particular matter, he would hold the charge not to be established: he would not be satisfied about it. But what is a real and substantial doubt? It is only another way of saying a reasonable doubt; and a reasonable doubt is simply that degree of doubt which would prevent a reasonable and just man from coming to the conclusion. So the phrase "....
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....nipulation. In our considered view, where the circumstances indicate that no inducement is present yet fraudulent conduct may have been at play, the standard of proof to be discharged is a higher degree of the preponderance of probabilities. v. Whether valid hedges in the futures segment constitute manipulative cornering in the present case? 181. Having discussed the definition of fraud under the PFUTP Regulations and ingredients thereof, we may now address ourselves on the issue whether 40.10% open interest of the appellant no. 1 in the derivatives market could amount to a fraudulent practice. In order to answer the same, we must look at the attending circumstances surrounding the appellant no. 1's transactions. 182. The appellant no. 1 gathered 40.10% open interest in the derivatives market on the settlement date, i.e., 29.11.2007 during a legal regime wherein futures were permitted to be settled only by way of the cash settlement system. This means that there was no onus on the appellant no. 1 to physically transfer the underlying RPL stock to the person with whom the futures contract was entered into. Once the position was closed voluntarily, or automatically settled o....
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.... the total underlying stocks. The relevant portion of the judgment reads thus: "Our conclusions are, therefore, as under: (1) Hedging contracts, in order to be out of speculative transactions, must be in respect of only raw materials so far as the manufacturer is concerned though these contracts may be both with regard to sales and purchases. (2). Hedging contracts need not succeed the contracts for sale and actual delivery of goods manufactured, but the latter may be subsequently entered into, provided they are within the reasonable time not exceeding generally the assessment year. (3) In order to be genuine and valid hedging contracts of sales, the total of such transactions should not exceed the total stocks of the raw materials or the merchandise on hand which would include existing stocks as well as the stocks acquired under the firm contracts of purchases." (Emphasis supplied) 186. In our considered opinion, the reliance placed upon the aforesaid judgment by the respondent is misplaced. Rather, the decision of the Gujarat High Court supports the submission of the appellant no. 1 in its submission that its transactions in the fut....
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....s a specific board resolution in this regard. As long as a board resolution that empowered officials of the appellant no. 1 to make trades in the cash segment and the derivatives segment was in place, there was no need for the appellant no. 1 to pass another board resolution specific to the sale of RPL shares. 191. The aforesaid discussion leaves no doubt in our minds that the 9.92 crore positions in the futures market (out of which 1.95 crore positions were squared off), were valid hedges. 192. In such view of the matter, could it be said that because the appellant no. 1 had a share of 40.10% of the total open interest in the RPL derivatives segment, it would amount to cornering with a view to manipulate prices for unlawful gains? In our considered opinion, the answer to this must be a firm 'No'. 193. We say so because cornering of positions with the intent to manipulate the market ought to be patently clear from the conduct and transactions of the accused person. In a case such as the present matter where the 40.10% share of the appellant no. 1 in open interests was validly justified by the consideration of hedging, we may look at the concentration in positions as only g....
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....mission that the appellant no. 1 violated Regulations 3 and 4 of the PFUTP Regulations, the respondent must prove whether price manipulation was at play in terms of Regulation 4(2)(e). vi. Sale of 1.95 crore RPL shares in the cash segment during the last 10 minutes on 29.11.2007 198. The respondent in order to discharge its burden to prove price manipulation, submitted before us that the appellant no. 1 coerced price discovery by placing sell orders for 1.95 crore RPL shares in the cash segment during the last 10 minutes of the settlement date, 29.11.2007. The respondent has contended that the appellant no. 1 made the aforesaid trades because it was apprehensive that the price of the RPL shares would increase which might cause it to suffer low profits in the futures segment. It was submitted that the sale of 1.95 crore shares in the cash segment was a pre-planned strategy to depress the share price and hence, was found to be fraudulent. Accordingly, the respondent has prayed for the disgorgement of the profits gained by the appellant no. 1 in the futures segment. 199. In our considered opinion, the aforesaid submission presents an unlikely situation. We say so because the ....
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....at the respondent has not inquired into simultaneous 1.06 crore shares sold in the cash segment during the same time and only pinned the blame of market manipulation on the appellant no. 1. 204. The aforesaid submissions show that the factum of price manipulation is not limpid from the facts and circumstances, in the slightest. It bears no further clarification that the respondent's case in the present matter hinges entirely on whether the appellant no. 1 fraudulently manipulated the share price of RPL to depress the same and such stand is not meted out by material evidences but rather are founded upon mere suspicion. 205. There is no gainsaying that the facts in the present matter are not starkly clear like in Rakhi Trading (supra) or Sandeep Paul v. SEBI, reported in 2019 SCC OnLine SAT 82, both of which have been referred to by the respondent to contend that the appellant no. 1 can be said to have manipulated the market even if no inducement or injury to others is proved. We find that reliance on these judgments by the respondent indicates that there are no circumstances which prove inducement or injury unless and until the core factum of price manipulation is proved. 2....
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.... said that this is the level of clarity from the surrounding circumstances that is required to prove the intent to manipulate, which is not present in the instant case. * Fourthly, if it had been the intention of the appellant no. 1 to manipulate prices, then it could have dumped a far larger quantity of shares to depress the RPL share price as much as possible in order to make better profit in the futures segment. * Lastly, stock market is a place with several participants. The respondent, without checking the trades of other participants who were dealing in substantial blocks of RPL shares, put the blame of the downward pressure on the price of RPL scrip on the appellant no. 1. The respondent cannot find fault with the appellant no. 1's conduct without proper due diligence. 208. In our considered view, the respondent has failed to discharge the burden of proof to establish price manipulation by the appellant no. 1. Therefore, we do not find any liability of fraud and manipulation being made out against the appellant no. 1. F. DETERMINATION OF THE ISSUES a. Whether the agreements entered into by and between the appellant no. 1 and the twelve entities wer....
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....g risk to number of hedge positions. Therefore, we find no force in the argument of the respondent that the appellant no. 1's futures positions from 23.11.2007 onwards were 'naked hedges'. 215. Our aforesaid observation is founded on the fact that there were no hedging policies in place during 2007. The NSE's hedge policy and SEBI's position limits for hedges were introduced 9 years after the facts in the present case transpired, i.e., in 2016. Furthermore, the 2016 hedging policies were provided in context of commodity derivatives and till date, there is no such policy in place for equity derivatives. c. Whether the agreements entered into by and between the appellant no. 1 and the twelve entities were used by the appellant no. 1 to corner open positions in the November 2007 futures segment of the RPL stock for the purpose of manipulating the futures market? 216. On the basis of the discussion in the aforesaid, the answer to this question must be a firm 'No'. We say so because the basis to calculate the percentage of the appellants' positions out of all the open positions in the derivatives market, was flawed. The respondent should have calculated the open interest of the....
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....act or omission. 220. We have taken this forward by discussing the definition of fraud under Regulation 2(1)(c) of the PFUTP Regulations and making the following courses of action necessary in certain situations. The definition of fraud under the PFUTP Regulations uses the word 'act' and not 'entry'. Though the definition is wide, it does not mean every expression, omission or concealment under the sky. This is because the expression 'inducement' as used in the provision is sine qua non to bring a transaction within the ambit of a fraudulent activity. In our opinion, it cannot be the intention of the PFUTP Regulations to give unfettered powers to decide the question of fraud. We find it apposite to purposively interpret Regulation 2(1)(c). In our considered view, both intention and act cannot be made into irrelevant factors for deciding fraud. Therefore, we may outline the following scenarios: i. in situations where injury due to wrongful act is established, i.e, inducement to deal in securities has caused the other person to be adversely affected and allowed the party accused of fraud to gain unlawful profits or avert ordinary losses at the former's expense, there woul....
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....he same. Had it been the intention of the appellant no. 1 to depress the price, it would have sold far more shares than 1.95 crore and with prices below Rs. 210/- per share. Merely because the appellant no. 1 did not place sell orders on the LTP cannot prove that the appellant no. 1's intention was to manipulate the price of the RPL stock. 225. Another reason for us to conclude that it is not likely that the appellant no. 1 would intentionally manipulate prices is because of its majority shareholding in RPL. Even though 5% out of the shareholding was being offered for sale in the cash segment, the appellant no. 1 continued to retain 70% of the stake in the company. Any decrease in price would depreciate the entire 70% holding and adversely impact the valuation of RPL. The trade-off that the appellant no. 1 would make as regards its 70% shareholding to gain profits in the futures segment for 7.97 positions, seems highly unlikely to us. 226. In such view of the matter, there is no manner of doubt in our minds that the respondent was unable to discharge the higher burden of proof to establish manipulation. Hence, fraud under the PFUTP Regulations is not made out against the appe....