Judgment
As delivered
BEFORE THE SECURITIES APPELLATE TRIBUNALMUMBAIOrder Reserved on: 4.1.2021Date of Decision:16.2.2021Appeal No. 332 of 20201.Amaresh Pathak258A, Parui Paka Road,Near Netaji Sangha Club,Kolkata - 700 061.2. Samaresh Pathak258A, Parui Paka Road,Near Netaji Sangha Club,Kolkata - 700 061.3. Susmita Pathak258A, Parui Paka Road,Near Netaji Sangha Club,Kolkata - 700 061. ...AppellantsVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Saurabh Bachhawat, Advocate i/b. Harsh Kesharia,Advocate for the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.2WithAppeal No. 345 of 2020Pradip BasuVill Chauli Po GhatalMidnapore, West Bengal - 711 202. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Saurabh Bachhawat, Advocate i/b. Harsh Kesharia,Advocate for the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.WithAppeal No. 314 of 2020SonuR/o H.No.Wz-G-42, Wz Block,Naraina Villa, Delhi - 110028. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...Respondent3Mr. Amit Gupta, Advocate i/b. AGKM Corpus Juris LLPfor the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.WithAppeal No. 322 of 2020Ramesh BahetiR/o A-18, Dena Apartment,Sector 13, Rohini,New Delhi- 110085. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Amit Gupta, Advocate i/b. AGKM Corpus Juris LLPfor the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.WithAppeal No. 350 of 20201. Kusum Devi BaidFlat No.D-502, AshokaVihar, 317, G T Road,Belurmath, Howrah,4West Bengal-711 202.2. Kamal BaidFlat No.D-502, AshokaVihar, 317, G T Road,Belurmath, Howrah, ...AppellantsWest Bengal-711 202.VersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Saurabh Bachhawat, Advocate i/b. Harsh Kesharia,Advocate for the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.WithAppeal No.353 of 2020Dev Kishan MalR/o 266, Bharat Apartment,Sector 13, Rohini,Delhi-110085. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...Respondent5Mr. Amit Gupta, Advocate i/b. AGKM Corpus Juris LLPfor the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.WithAppeal No.355 of 2020Kuldeep SinghR/o House No.214,Village Mangolpur,New Delhi - 110083. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Amit Gupta, Advocate i/b. AGKM Corpus Juris LLPfor the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.WithAppeal No.367 of 2020Narayan Dass RathiR/o 351, Maheshwar Mohalla,Outside Jassusar Gate,Banglanagar, Bikaner,6Rajasthan - 334004. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Amit Gupta, Advocate i/b. AGKM Corpus Juris LLPfor the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.WithAppeal No.368 of 2020Davender KumarR/o 1240, Mangol Puri,North West Delhi,Delhi - 110083. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Amit Gupta, Advocate i/b. AGKM Corpus Juris LLPfor the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.7WithAppeal No.382 of 2020Vishnu KhaitanA 502, Vidhi Apt. Opp.Powai,Petrol Pump, Ulhasnagar,Ulhasnagar, Maharashtra - 421004. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Jaikishan Lakhwani, Advocate i/b. J L LegalAdvisors for the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.WithAppeal No.383 of 2020Rachana Govind Attal604, Devi Darshan Tower,Gaon Devi Road,Near Kasturi Hospital,Mumbai - 401101. ...AppellantVersusSecurities and Exchange Board of India8SEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Jaikishan Lakhwani, Advocate i/b. J L LegalAdvisors for the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii PartnersWithAppeal No.387 of 2020Debashis Sur ChowdhuryBlock L/V, Flat No.3,Govt. Housing Estate,O D R C, Kolkata,West Bengal - 700038. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Jaikishan Lakhwani, Advocate i/b. J L LegalAdvisors for the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners9WithAppeal No.388 of 2020Benu MimaniJeewanram Chetandas, H P Pump,Burdwan Road, Siliguri, West,Bengal - 734404. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Jaikishan Lakhwani, Advocate i/b J L Legal Advisorsfor the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/bVidhii PartnersWithAppeal No.407 of 2020Akhileshwar Kumar MishraR/o 5/3/16 3rd Floor,Geeta Colony, Ajit Nagar,East Delhi-110031. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,10Bandra (E), Mumbai 400051. ...RespondentMr. Amit Gupta, Advocate i/b. AGKM Corpus Juris LLPfor the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.WithAppeal No.421 of 2020Rupesh Kumar SrivastavaR/o C/o Daya Shankar,Flat no.404, Tower 15,Nirala Estate, Greater Noida,Surajpur, Gautam Budh Nagar,UP 201306. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Amit Gupta, Advocate i/b AGKM Corpus Juris LLPfor the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/bVidhii Partners for the Respondent.WithMisc. Application No. 414 of 202011(Exemption from filingcertified copy)AndAppeal No. 425 of 20201. Pawan Somani2. Parinay SomaniJai Hanuman Estate2nd Floor, 4 Janata Sarani,Hindi Motor,Hooghly (W.B.) - 712 233. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Kunal Katariya, Advocate i/b Harsh Keshariya,Advocate for the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/bVidhii Partners for the Respondent.WithAppeal No. 410 of 2020Sunil SinghalKumher Gate, Pratap Colony,Bharatpur (Raj). ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,12Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Bharat B. Merchant, Advocate with Mr. NadeemShama, Advocate i/b. Thakordas & Madgavkar and Mr.Hari Om Maheshwari, Authorised Representative for theAppellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/bVidhii Partners for the Respondent.WithAppeal No. 519 of 2020Shalini AgarwalB-104, Chintamani Apartment,RNP Park, Bhayander (st) 401 105. ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Saurabh Bachhawat, Advocate i/b. Ms. YashviPanchal, Advocate for the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/bVidhii Partners for the Respondent.WithAppeal No. 520 of 2020Janardan Rama Bhunesar13Room no.B-27, Nehru Nagar,Station Road, Bhayander West -401 101 ...AppellantVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Saurabh Bachhawat, Advocate i/b Ms. YashviPanchal, Advocate for the Appellant.Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/bVidhii Partners for the Respondent.WithAppeal No. 521 of 20201. Paras Vinod Jain2. Ranju Devi Jain3. Shilpa Jain4. Vinodkumar Chotmal JainC-110 Anurag Apartment,RNP Park, Bhayandar (East) - 401 105. ...AppellantsVersusSecurities and Exchange Board of IndiaSEBI Bhavan, Plot No.C-4, "G" Block,Bandra Kurla Complex,Bandra (E), Mumbai 400051. ...RespondentMr. Saurabh Bachhawat, Advocate i/b. Ms. YashviPanchal, Advocate for the Appellant.14Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.CORAM: Justice Tarun Agarwala, Presiding OfficerDr. C.K.G. Nair, MemberJustice M.T. Joshi, Judicial MemberPer : Justice Tarun Agarwala, Presiding Officer1. All the appeals are against a common order andraises the same issue. Accordingly all the appeals arebeing decided together. By an order dated 9th January,2020 the Adjudicating Officer („AO‟ for short) haspassed an order against 29 entities imposing acumulative penalty of Rs.1,83,00,000 against theappellants for violation of Regulations 3 and 4 of theSecurities and Exchange Board of India (Prohibition ofFraudulent and Unfair Trade Practices Relating toSecurities Market) Regulations, 2003 (hereinafterreferred to as „PFUTP Regulations, 2003).2. The facts leading to the filing of the presentappeal is, that the investigation in the scrip of15Dhanleela Investments and Trading Company Ltd. wasconducted for the period 26th February, 2013 to 2ndMarch, 2015. It was found that the trading in the scripwas suspended since 2006 but was revoked in April,2012. Thereafter, the Company issued bonus shares inFebruary, 2013. At that time the prevailing price wasRs.17.50 which rose to Rs.427.85 in October, 2013.The show cause notice alleged that the appellantstraded on 82 days totaling 298 trades and that theappellants held sizeable quantities of shares but soldlimited shares though large orders were pending on theplatform of the stock exchange. It was alleged that thetrading pattern was not genuine and the appellant wasinstrumental in increasing the price of the scrip. It wasalso alleged that the noticee no.29 had evolved ascheme to jack up the price and sold certain number ofshares to other entities through off market transactionswho in turn sold the shares to the appellant.163. The stand of the appellant is, that they traded inminiscule quantities as a seller and that they have noconnection with the buyer. It was also contended thatthere is no collusion with the counter party and that thebuy orders were already in existence when theappellants placed their sell orders. It was contendedthat most of the appellants had no connection withnoticee no.28 or notice no.29 and some of theappellants had a limited connection of buying certainshares through an off market transaction. Other thanthat there was no connection.4. The AO while passing the order of penalty foundthat miniscule shares were being sold by the appellantswhen there was a demand for more shares and that theappellants had a substantive holding in the shares. TheAO further found that a prudent investor would havesold the entire shares especially when the price quotedwas above the LTP and there was no reason for the offmarket transfers to have taken place at a price much17lower than the LTP unless the motive was to increasethe price of the scrip. The AO thus came to theconclusion that the appellants were not genuine sellersand taking shelter of the decision of the Supreme Courtin SEBI vs. Kishore R. Ajmera (2016) 6 SCC 366 heldthat the trading pattern created a misleadingappearance which amounted to manipulation in theprice of scrip and, therefore, violative of Regulations 3and 4 of PFUTP Regulations. The AO also found thatthe appellants failed to give any plausible explanationas to why miniscule trades were being made.5. We have heard Mr. Saurabh Bachhawat, Advocateassisted by Mr. Amit Gupta and Mr. JaikishanLakhwani, Advocates for the Appellants and Mr.Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.Vidhii Partners for the Respondent.6. The grounds urged is, that there is an inordinatedelay in the issuance of the show cause notice. The18finding that the appellants had violated Regulations 3and 4 of the PFUTP Regulations, 2003 is patentlyerroneous since the appellant alone cannot bepenalized without there being collusion with thealleged buyer. In the instant case, there is neither anycharge nor any finding that the appellant had colludedwith the buyer. It was further contended that minisculetrades were executed. It was contended that in the caseof Amaresh Pathak only 12 trades were executedwherein only 2 trades contributed to the positive LTPand the remaining did not and whereas the appellanthas earned only a few thousands of rupees for whichthe penalty has been imposed. The learned counsel hasrelied on the decision of this Tribunal in Appeal no.97of 2019 Nishith M. Shah HUF and Appeal no.222 of2020 Rajesh Jivan Patel.7. On the other hand the learned counsel for therespondent laid stress that in the peculiar facts of thepresent case the ratio of the decision of Nishith M.19Shah HUF and Rajesh Jivan Patel is distinguishableand is therefore not applicable. The learned counselplaced reliance on a decision in Jaiprakash BohraAppeal no.162 of 2019. It was contended that noticeeno.28 had planned a scheme by which certain shareswere transferred to these entities namely the appellantswho in turn sold miniscule quantities therebyartificially increasing the price of the scrip.8. Having heard the learned counsel for the parties atsome length we are of the opinion that the controversyinvolved in this case is squarely covered in NishithShah case and Rajesh Jivan Patel and, consequently,the impugned order cannot be sustained. In NishithShah the Tribunal held :-"4. We have heard Shri Saurabh Bachhawat, thelearned counsel for the appellant and Shri KumarDesai, the learned counsel for the respondent SEBIat some length. We are of the opinion that theimpugned order cannot be sustained for thefollowing reasons:-"(a) The investigative reports nor the WTM or theAO found any connection between the buyer andthe seller. We also find that neither in the20investigative report nor in the impugned order anyconnection has been found between the appellantwith the promoters/directors of the Company. Thus,no causal connection has been established.(b) The investigative report finds that no adverseinference can be drawn against the buyer merelybecause the buyer had placed buy orders aboveLTP. On this basis, the buyer was exonerated fromthe charge of manipulation in the price of the scripwhen admittedly the buyer was placing buy ordersabove the LTP.(c) Buy orders were placed at 9.15 hrs and sellorders were placed during the course of the day butnot immediately after the buy orders nor the sellorders of the appellants were placed before the buyorders.(d) There is no finding that the appellant hasindulged in fraudulent or unfair trade practices insecurities.(e) Selling miniscule amount of shares by itself isnot illegal nor manipulative nor violative ofRegulation 3 and 4 of the PFUTP Regulationsunless collusion with others is found.(f) Allegation that the appellant has contributed tothe LTP cannot be upheld in the absence of anycollusion with the buyer or promoter/director of theCompany. One has to establish a connectionbetween a buyer and with the seller in order toinfer a manipulation in the price of the scrip.(g) The authorities have misread and misappliedthe decision of the Supreme Court in Ajmera's case21(supra). In this regard Paragraph 27 of thejudgment is extracted here under:-"27. Let us apply the aforesaid test to the factsof the present cases before us whereinadmittedly there is no direct evidenceforthcoming. The first relevant fact that has tobe taken note of is that the scrips in whichtrading had been done were of illiquid scripsmeaning thereby that such scrips though listedin the Bombay Stock Exchange were not amatter of everyday buy and sell transactions.While it is correct that trading in such illiquidscrips is per se not impermissible, yet,voluminous trading over a period of time in suchscrips is a fact that should attract the attentionof a vigilant trader engaged/engaging in suchtrades. The above would stand fortified by thenote of caution issued by the Bombay StockExchange in the form of a notice/memorandumalerting its members with regard to the necessityof exercising care and caution in case of highvolume of trading in illiquid scrips, as alreadynoted."In order to apply the aforesaid test, the facts of thepresent case is, that there is no direct evidence ofcollusion between the appellant as a seller withthat of the buyer. There is no finding that theappellant was known to the directors or promotersof the Company.Since no direct evidence is forthcoming we have tosee the indirect connection which is that theappellant was selling small quantities of scrips.Trading in small quantities in scrips is per se notimpermissible as held in Ajmera's case (supra). Iftrading in miniscule amount leads to an increase in22the price of the scrips one can presume or infer thatthe trading is manipulative but such trading cannothappen unilaterally. There must be evidence toshow collusion between the buyer and the seller. Inthe instant case there is none. The principle ofpreponderance of probability cannot be exercisedin the absence of any connection between the sellerand the buyer.(h) The charge that the appellant had contributedto the LTP as a seller which resulted in themanipulation in the price of the scrips cannot besustained in the light of the glaring fact that thesame charge against the buyer had been dropped.9. In the instant case, we find that there is noconnection between the buyer and the seller. It issettled law that the charge of raising the priceartificially has to be established without which thecharge of collusion between the buyer and the sellercannot be proved.10. In the absence of any finding of collusion betweenthe buyer and the seller the charge of collusion and/ormanipulation in the price of scrip cannot be sustainedsince it has not been proved. We also find that thebuyer had placed the order above the LTP and,therefore, was increasing the price. The buy orders23had been on the stock exchange platform for a periodof time and only matched when the appellants soldtheir scrip. The appellant alone therefore cannot becharged for manipulating the price especially when thebuyer have not been prosecuted by the respondent. Wefind that there is no connection established between theappellants with the shareholders and promoters of theCompany.11. In addition to the above when a person enters into atransaction in securities with the intention to artificiallyraise the price, he thereby automatically induces theinnocent investors in the market to buy/sell the stocks.The buyer or the seller is invariably influenced by theprice of the stocks and if that is manipulated the persondoing so is necessarily influencing the decision of thebuyer/seller thereby inducing him to buy or sell. This iswhat Regulation 4 of the PFUTP Regulation speaks of.Inducement to any person to buy or sell securities leadsto manipulation in the price of the scrip. If the factum24of inducement is established, it will necessarily followthat a fraud has been played and there has been amanipulation.12. Taking the aforesaid as a consideration theinducement in the instant case has been caused by thebuyer. The buyer has placed the buy order above theLTP. The buyer is inducing the seller to sell at a higherprice. The buyer is thus manipulating the price and isplaying a fraud on the system.13. There is no direct evidence of collusion betweenthe appellant and the buyer. The only indirect evidenceis that the appellants have sold miniscule quantitiesleading to an increase in the price of the scrip. One caninfer manipulation but such trading cannot happenunilaterally. There must be evidence to show collusionbetween the buyer and the seller. The principle ofpreponderance of probability cannot be exercised inthe absence of any connection between the seller and25the buyer. This is what the Supreme Court has held inAjmera‟s case.14. In view of the aforesaid, the impugned ordercannot be sustained and is quashed in so far as theappellants are concerned. All the appeals are allowedwith no order as to costs. Misc. Application no.414 of2020 is accordingly disposed of.Justice Tarun AgarwalaPresiding OfficerDr. C.K.G. NairMember16.2.2021RHNPer: Justice M.T. Joshi, Judicial Member15. I have had the honour to peruse the draft of theorder prepared by the Hon‟ble Presiding Officer.However with due respect, I am unable to agree with26the reasons recorded therein. I therefore propose todeliver my separate judgment in the appeals.16. The draft and more particularly Paragraph no 8 to12 of it would show that relying on the reasonsrecorded in the case of Nishit Shah HUF, appealno.97 of 2019 and Rajesh Jeevan Patel, appealno.222 of 2020, the appeals are allowed on twogrounds. Firstly no connection between the buyerswith the present appellants majority of whom are thesellers is established. Secondly when a buyer put anorder for purchase of shares for high prices it is whoinduces the sellers, but he is not prosecuted by therespondent SEBI. It is further reasoned therein that noconnection between noticee no.28 i.e. appellantNarayan Dass Rathi (who in off market transactionsold shares to other notices either directly or indirectly)either with other appellants or with thepromoter/company in question is found. It is held inthe draft order that in the absence of the material to27connect the appellant with the buyer the impugnedorder of SEBI cannot be upheld.17. It is trite to say that the standard to prove thecharge in the case is of preponderance of probabilitiesand not of a proof beyond reasonable doubt. The realtest however lies in the application of the standard in agiven case. For that purpose this Tribunal which isfinal fact finding forum is required to appreciate all therelevant facts, probabilities and circumstances foundfrom the record. Upon examining this material, weshall have to prepare rather a balance sheet of theproved/admitted material and find on which side, theprobability lie more. This exercise is explained moreprecisely by the then Hon‟ble Justice (later on ChiefJustice of India) Shri Y. V. Chandrachud in the case ofNarayan Ganesh Dastane ... Vrs .. Sucheta NarayanDastane (A.I.R. 1975 Supreme Court 1534) asunder :-28"The normal rule which governs civil proceedingsis that a fact is said to be established if it is proved bypreponderance of probabilities.Under s.3 of the Evidence Act a act is said to beproved when the court either believes it to exist or ifconsiders its existence so probable that prudent manought, in the circumstances, to act upon thesupposition that it exists. The first step in this processis to fix the probabilities. the second to weigh them.The impossible is weeded out in the first stage, theimprobable in the second. Within the wide range ofprobabilities, the Court has often a difficult choice tomake but it is this choice which ultimately determineswhere the preponderance of probabilities lies."While some judges try to formulize this exerciseas "of finding 51% probabilities", to borrow theinimitable Lord Denning‟s terminology from Miller...Vrs... Minister of Pensions (1947) 2, ALL ER 372 itwould be simply as "more probable than not".2918. Given the above principle, in my view thepresent appeal cannot be decided one way or the othermerely on the sole axis of presence or absence ofconnection/nexus between the buyer and seller orpromoters/the Company, or non-prosecution of thebuyer, though no doubt, these facts would be ofconsiderable importance in weighing the probabilities.While in the case of Nishit Shah (cited in thejudgment above) and many more, the factum of non-connection was held fatal to the SEBI‟s case, in caseslike of Ms. Sunita Gupta ...Vrs.....SEBI, Appeal no.269 of 2018, decided by this Tribunal on 19thSeptember 2019 and Mrs. Bharati Goyal.....Vrs.......SEBI, Appeal no. 159 of 2020, decided bythis Tribunal on 25th August 2020, this Tribunal uponweighing all the facts and probabilities on record ruledthat the absence of the connection/nexus would not befatal to the charges of manipulative/fraudulent tradeslevelled by SEBI and the appeals were dismissed. In30those cases also either no connection between thetrading parties was established or the counter partieswere not prosecuted.While the Hon‟ble Presiding officer in the draftorder has quoted the observations made by thisTribunal in the case of Nishith Shah, respondent SEBIpointed out that in the case of Nishith Shah the ordersof Whole Time Member restraining the appellantsfrom trading in securities as well the order of theAdjudicating officer imposing the penalty both werechallenged, in the present cases however the order ofthe Whole Time Member dated 18th March 2020 whichis on the same set of facts is not challenged. It wassubmitted that since the finding of facts has nowattained the finality, the order of AdjudicatingOfficer‟s order cannot be challenged.Besides this Tribunal in the case of Mrs BharatiGoyal & other appeals ... Vrs.... SEBI Appeal no.159 of 2020 decided on 25th August 2020 by this31Tribunal, observed that failure to establish connectionwith the promoters/directors of the Company inquestion or the counterparty to the trade would notabsolve the entity who traded in irrational manner inminiscule quantity for higher price given the fact thatthe share was not a miracle share.We can burden this judgment with many morecases of the like nature, but since all these cases eitherthis way or the other were decided on the facts of therespective cases wherein the factum of presence orabsence of connection/nexus was highlighted, it isunnecessary to put the list of those cases. The issuetherefore is not whether there is a legal requirement ofestablishment of connection/nexus or prosecution ofthe counterparty to the trades, but inter alia, whether ina given case on facts these factors assumes greaterimportance.19. Though in view of the fact that the order ofWhole Time Member restraining the present appellants32from trading in the securities is not challenged andtherefore the findings therein has attained finality, inview of the draft order of the Honble Presiding Officeron merit I alternatively propose to deal with the caseon merit.In view of the above proposition, it is necessary toappreciate all the proved/admitted material on recordof the present case, to weed out firstly the impossible,improbable secondly and peruse the material throughthe lens of a prudent man. If this exercise brings us toconclude that case of SEBI is more probable, thecharge should be sustained, else the appeals will haveto be allowed. To reiterate the present case posesbefore us the task of appreciation of evidencesimplicter and no more, which I propose to undertakehereinafter.20. Admitted facts of the case are that the trading inthe scrip of Dhanleela Investment and TradingCompany Limited (hereinafter referred to as33„Dhanleela‟) was suspended for a period between 11thSeptember, 2006 to 15th April, 2012. The same wasrevoked on 16th April, 2012. Thereafter except onetrade on 24th April, 2012 at a price of Rs.26 there wasno trade on the scrip till 26th February, 2013. On thatdate the price of the scrip opened at Rs.17.50. Withina period of 8 months i.e. till 9th October 2013 it rose toRs.427.85. This period is termed by respondent SEBIas Patch I of investigation.The second patch of investigation is from 10thOctober 2013 to th of December 2013, upon splitdeclaration of shares in the ratio of 5:1. On 10thOctober the price had nosedived to Rs. 87.25 but inthis period again soared to Rs. 213.95. In the lastpatch it closed on Rs. 90.35 on 2nd March 2015.So far as performance of Dhanleela is concerned ithad earned net profits of Rs.32 lakhs in the year 2012-13, Rs.52 lakhs in 2013-14 and Rs.13 lakhs in 2014-15.34Thus, as against the dismal performance of thecompany during both the patches, there remainedexponential upward swing in the price of the share.21. Prior to this period except noticee no 28- appellantNarayan Dass Rathi none of the appellants or othernoticees (Noticees Sanjay Kumar Shrivastav andTapan Kumar Dey are not before us) held a singleshare of the company. On 25th February, 2013 he -Appellant Narayan Das Rathi transferred in off markettransactions 25 shares each to the noticees/appellantnos.12 (Appellant Ramesh Baheti), 16 (AppellantKuldeep Singh) and 19 (Appellant Dev Kishan Mal)alongwith other noticees, and 2350 shares tonoticee/appellant no.29 (Appellant Devinder Kumar).Appellant in appeal no.383 of 2020. He in turntransferred shares to the appellants in appeal no.388 of2020 and 382 of 2020 and others.22. It is pertinent to note that in these off markettransaction the seller sold those shares to the above35noticees or the appellants for lower price though buyorders for higher price were pending on the stockexchange platform.23. It is further pertinent to note that appellant NarayanDass Rathi i.e. noticee no.29 in his reply to the showcause notice did not put forward any explanation as towhy the shares purchased by him at the rate ofRs.55.60 per share were sold by him for Rs.50 each inoff market transaction. On the stock exchangeplatform already a buy order at the rate of Rs.55.60was pending. Regarding rest of the off market transfersimilar pattern is discerned.24. The explanation of the transferors is that they wererequired to sell the shares in off market in view ofurgency of fund. However on the stock exchangeplatform already buy orders for a higher price werepending.25. So far as the appellant who had purchased shares ata lower price from the above appellants, admittedly36
they had later on put 1 to 10 shares for sale on the
stock exchange platform though buy orders for more
share for higher price were pending and further though
they had purchased the shares in off market transaction
as detailed above for a lower price. They could not
explain the reasons for the same.
26. The percentage of the trade of the appellant along
with the details are tabulated in summary manner
regarding these patches of investigation separately in
the impugned order as under:
Table 5: Summary of Sell Trades
( I Patch of Investigation) Sl. Seller Name Total No. of Total Sell Trade Positive % of No.of No. No.of trades no.of order Quanti LTP positive shares trades (LTP> order qty ty contributiLTP to held
0) s range on (Rs.) Total before Market these positive trades.
1. Paras Vinod Jain 23 5 23 2.6 100 26.05 6.35% 100
2. Ranju Devi Jain 23 4 23 1-10 100 23.95 5.84% 1000
3. Rachana Govind 20 5 19 3-20 95 22.40 5.46% 100 Attal
4. Shilpa Jain 24 4 24 2-6 95 20.95 5.11% 100
5. Benu Mimani 16 3 15 5-10 95 15.10 3.68% 100
6. Shalini Agarwal 24 4 24 2-9 95 12.35 3.01% 100
7. Akhileshwar 2 2 2 2-4 6 12.00 2.92% 25 Kumar Mishra
8. Sonu 2 2 2 2-3 5 11.55 2.81% 25
9. Sanjay Kumar 2 2 2 4-4 8 11.00 2.68% 25 Sharma
10. Sunil Singhal 2 2 2 2-5 7 10.75 2.62% 25
11. Amaresh Pathak 11 2 10 7-11 95 10.55 2.57% 100 37
12. Ramesh Baheti 7 7 7 2-4 20 10.20 2.49% 25
13. Rupesh Kumar 2 2 2 3-5 8 10.15 2.47% 25 Srivastava
14. Vinodkumar 19 3 19 3-8 95 9.70 2.36% 1000 Chotamal Jain
15. Parinay Somani 6 2 5 8-29 95 9.30 2.27% 100
16. Kuldeep Singh 7 7 7 1-4 20 9.10 2.22% 25
17. Janardhan Rama 11 2 11 6-13 95 8.35 2.03% 100 Bhunesar
18. Pawan Somani 8 2 7 7-32 95 8.30 2.02% 25
19. Dev Kishan Mal 7 6 7 1-5 25 8.20 2.00% 100
20. Pradip Basu 5 1 5 7-25 95 5.85 1.43% 100
21. Debashis Sur 10 2 10 7-10 95 5.70 1.39% 100 Chowdhury
22. Tapan Kumar Dey 10 2 10 6-11 95 5.45 1.33% 100
23. Kamal Baid 6 2 6 7-25 95 5.20 1.27% 100
24. Susmita Pathak 10 2 10 7-10 95 4.90 1.19% 100
25. Vishnu Khaitan 25 2 25 3-5 95 4.90 1.19% 100
26. Samaresh Pathak 10 2 10 7-10 95 4.65 1.13% 100
27. Kusum Devi Baid 6 2 6 8-25 95 4.60 1.12% Total 298 81 293 1911 291.20 70.96%
Table 8: Summary of Sell Trades of 11 Noticees
( II patch of Investigation ) Sl. Seller Name Total No. of Total Sell Trade Positive % of No.of No. No.of trades no.of order Quanti LTP positive shares trades (LTP> order qty ty contributiLTP to held
0) s range on (Rs.) Total before Market these positive trades.
LTP 1. Sanjay Kumar 1 1 1 10 10 9.2 7.07% 85 Sharma
2. Sonu 1 1 1 7 7 8.8 6.77% 100
3. Sunil Singhal 2 1 1 11 11 7.6 5..84% 90
4. Vishnu Khaitan 2 2 2 5 10 7.4 5.69% 25
5. Rachana Govind 1 1 1 5 5 6.95 5.34% 25 Attal
6. Susmita Pathak 1 1 1 5 5 6 4.61% 25
7. Samaresh Pathak 1 1 1 5 5 5.7 4.38% 25
8. Shalini Agarwal 3 2 3 5-14 25 3.7 2.85% 5
9. Benu Mimani 1 1 1 10 10 2.1 1.61% 25
10. Kamal Baid 1 1 1 10 10 1.95 1.50% 25
11. Vinodkumar 3 1 3 6-11 25 1.75 1.35% 25 Chotamal Jain Total 17 13 36 121 61.15 47.82% 38
27. The pattern thus would reveal that while some
buyers had placed a buy order for a higher price on
larger scale, the relevant appellant/noticees who
purchased the shares in off market for lower price,
used to put sell orders on miniscule quantities between
1 to 10 which get matched with the buy orders. Some
buy orders remained pending on the system for many
hours but those got matched with the miniscule sell
orders after more than 3-4 hours when either of these
noticees/appellants placed their sell orders. To repeat
the share was highly illiquid as prior to the
investigation period for ten months not a single trade
for a single share occurred till Appellant Narayan Das
Rathi transferred the shares in off market transactions
for a lower price to the other noticees/appellants.
28. All the above facts would show that except
noticee/appellant Narayan Das Rathi nobody was
holding the shares prior to 26th February, 2013 and
thereafter the shares were transferred in off market 39
transactions to the 27 entities either directly from him
or through Appellant Devindar Kumar, for a price less
than the price offered through pending buy orders on
the exchange platform. Thereafter those shares were
sold on miniscule proportion on the platform of SEBI
for a higher price though buy orders for this higher
price used to be in existence and sufficient share were
available to sell, thus substantially contributing to the
Last Traded Price (LTP). Tables no. 3 and 4 of the
impugned order shows that they had contributed to
70.96 % of the total trades during the period in
29. While some of the appellants like Kusum Devi
Baid, Kamal Baid, Dev Kishan Mal, Kuldeep Singh,
Devindar Kumar, Rachana Atal, Debashish
Chowdhary did not explain before the Adjudicating
Officer by failing to file reply to the show cause notice,
some of the appellant though filed reply were unable to
explain as to why they put sell order on miniscule 40
quantity when a comparatively large buy orders were
pending for the price which was more than price they
purchased. They simply defended their action by
replying that selling of shares in miniscule quantities is
30. It is true that no direct connection between the
seller and the buyer is established in the present case.
We do not have material to find out whether
respondent SEBI had investigated the said connection.
However, in my view the insistence solely on the
establishment of the connection or non-prosecution of
the buyers would be against the very principle that the
facts are to be established on preponderance of
probability and not on the requirement that the facts in
issue should be proved beyond reasonable doubt or to
The Tribunal has to consider all the probabilities
either favouring or against the premise and to repeat, if
majority of probabilities points toward the existence of 41
fact in issue , then the premise/ the charge will have to
31. To sum up, we find that trading in the scrip of
Dhanleela was suspended on the stock exchange
platform for a period of six years. After revocation of
the suspension there was no trade at all for a period of
10 months. It was thus a highly illiquid stock.
Thereafter the trade opened at Rs.17.50. During patch
one investigation period i.e. from 26th February, 2013
to 9th October, 2013 it reached to 427.85. The
appellant and the other noticees were the major
contributors to this fact through abnormal transactions.
Their sell on the exchange platform created a picture of
rosy picture of large scale trade quantities through
miniscule sale of shares. Thereafter in patch 2
investigation period i.e. from 10th October, 2013 to 5th
December, 2013 the price showed the same trend with
the same modus operandi. The fundamentals of the
company however did not match with this price swing. 42
These appellants had no shares with them before these
transactions. They had received shares in off market
transaction either directly or indirectly from the
Appellant Narayan Das Rathi for lower price than the
price available on exchange platform. No logical
explanation is forthcoming from the appellants for
these abnormal affairs. Therefore only conclusion that
can be drawn in my view is that all these transactions
were non genuine and were entered into only to
manipulate the price of the shares of Dhanleela.
32. It is true that a connection between buyer and seller
or between promoter/company and the buyer or seller
would be a strong indicator to conclude that there were
manipulative trades. In the absence of the same
however, this Tribunal is not handicapped in arriving
at the above conclusion as preponderance of
probabilities definitely lies in favour of the charge as
detailed above. In the circumstances in my view the
appeals deserve to be dismissed without any order as to 43
costs. The appeals are accordingly dismissed. Misc.
Application No. 414 of 2020 is also accordingly
Justice M.T. Joshi Judicial Member
33. In view of the majority opinion, the impugned
order cannot be sustained and is quashed in so far as
the appellants are concerned. All the appeals are
allowed with no order as to costs. Misc. Application
no.414 of 2020 is accordingly disposed of.
34. The present matter was heard through video
conference due to Covid-19 pandemic. At this stage it
is not possible to sign a copy of this order nor a
certified copy of this order could be issued by the
registry. In these circumstances, this order will be
digitally signed by the Private Secretary on behalf of 44
the bench and all concerned parties are directed to act
on the digitally signed copy of this order. Parties will
act on production of a digitally signed copy sent by fax
Justice Tarun Agarwala Presiding Officer
Justice M.T. Joshi Judicial Member
16.2.2021 RAJALA Digitally signed by RAJALAKSHMI RHN KSHMI H HDate:
NAIR 2021.02.18 NAIR 15:36:39 +05'30'
