Abhay Raj Rampher Shukla vs Sebi

Date of Decision: 07.02.2018

Appeal No. 223 of 2017

Abhay Raj Rampher Shukla Kailesh Nagar, Road No. 28, Near Shiv Mandir, Wagle Estate, Thane (W)-400 604 ...Appellant

Versus

Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051 ...Respondent

Mr. Saurabh Bachhawat, Advocate i/b Mr. Manoj Jain, CA for the Appellant.

Mr. Vivek Shah, Advocate i/b ELP for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Jog Singh, Member

Per: Justice J.P. Devadhar (Oral)

1.

This appeal is filed to challenge the order passed by the

Adjudicating Officer ("AO" for short) of Securities and Exchange Board

of India ("SEBI" for short) on May 16, 2017. By the said order penalty

of ` 1 lac is imposed on the appellant under Section 15HA of SEBI Act,

1992 for violating regulation 4(1), 4(2)(a) and 4(2)(e) of the SEBI

(Prohibition of Fraudulent and Unfair Trade Practice relating to

Securities Market) Regulations, 2003 ("PFUTP Regulations" for short). 2

2. SEBI noticed that the appellant had traded in the scrip of

Millenium Cybertech Limited ("MCL" for convenience) through the

stock broker M/s Vijay Bhagwandas & Co. during the period from July

01, 2005 to September 30, 2005 and had executed off-market transaction

to the extent of 2,70,000 shares with several entities which included

transactions with Rajendra Adukia, Ramasudhakaran Menon etc. Since

the said transactions were found to be fraudulent transactions, show

cause notice was issued calling upon the appellant to show cause as to

why action should not be taken against the appellant for violating the

PFUTP Regulations.

3. Initially by an ex-parte order dated October 28, 2010 penalty of ` 1

lac was levied on the appellant which was set aside by this Tribunal on

February 10, 2015 with a direction to serve the show cause notice to the

appellant and pass fresh order after hearing the appellant. Accordingly,

the show cause notice was served on the appellant.

4. Appellant in his reply to the show cause notice denied the

allegations made in the show cause notice. Thereafter, an opportunity of

hearing was given to the appellant and by the impugned order dated May

16, 2017 penalty of `1 lac has been imposed under Section 15HA of

SEBI Act.

5. Mr. Bachhawat, learned counsel appearing on behalf of the

appellant submitted that the impugned order which goes beyond the

allegation made in the show cause notice and takes note of the facts 3

recorded beyond the investigation period is ex-facie bad in law. He

submitted that the findings recorded in the impugned order that the

appellant had aided and abetted promoter of MCL in offloading their

shares in the market and that the appellant had colluded with promoters

and other directors in creating artificial volume and influencing price of

the scrip is baseless and without any evidence on record. He submitted

that the AO has erroneously referred to the sale obligation of

Ramasudhakaran Menon, met by the appellant which was not an issue

raised in the show cause notice. counsel for the appellant submitted that

in the absence of any trade and order log furnished to the appellant, the

AO was not justified in holding that the appellant has violated regulation

4(1), 4(2)(a) and 4(2)(e) of the SEBI PFUTP Regulations, 2003.

Accordingly, it is submitted that the impugned order deserves to be

quashed and set aside.

6. We see no merit in the above contentions.

7. Admittedly, the show cause notice issued to the appellant refers to

the trades executed by the appellant in the scrip of MCL through the

stock broker on market and also the trades executed by the appellant in

the scrip of MCL off-market.

8. Finding of fact recorded in para 11 & 12 of the impugned order is

that although the appellant himself had traded for limited number of

share on market, the appellant had aided and abetted other manipulators 4

by entering into off-market trades with them and even met the pay-in

obligation of shares sold by those manipulators in the market trades.

9. It is neither the case of the appellant that the persons to whom he

had sold the shares of MCL in off-market had not indulged in

manipulative trades nor it is the case of the appellant that he had not met

the pay-in obligation of the shares sold by the manipulators in the market

trades.

10. Fact that the trades executed by the appellant on market were not

responsible for increase in price or liquidity of the scrip of MCL, would

not absolve the appellant from facing penal consequences for aiding and

abetting the manipulators who had indulged in manipulating the price of

the MCL scrip. Apart from selling the shares of MCL in off-market to

the manipulators, the appellant has met the pay-in obligation of those

manipulators in respect of their on market trades. In such a case, the

inference drawn by the AO that the appellant had aided and abetted the

manipulators who had created a misleading appearance of trading in the

scrip of MCL and manipulated the price of MCL scrip in gross violation

of PFUTP Regulations cannot be faulted.

11. Penalty imposable for such violations under Section 15HA of

SEBI Act is up to ` 25 crore. However, after taking into consideration all

the mitigating factors the AO has imposed penalty of ` 1 lac which

cannot be said to be excessive or harsh.

5

12. In the result, we see no merit in the appeal and the same is hereby

dismissed with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member 07.02.2018 Prepared & Compared By: PK