Anil Vishnu Bharti vs Sebi

Date of Decision: 23.12.2020

Misc. Application No. 546 of 2020 And Appeal No. 527 of 2020

Akshata Majgaonkar G 228, Giriraj Complex, Bolinj, Virar (W), Maharashtra - 401303. ... Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400051. ... Respondent

With Misc. Application No. 547 of 2020 And Appeal No. 528 of 2020

Anil Vishnu Bharti A1 205 Laram Center, S V Road, Andheri (W), Mumbai - 400058. ... Appellant 2

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai -400051. ... Respondent

With Misc. Application No. 548 of 2020 And Appeal No. 529 of 2019

Pratik Kumar Jain Swapnil Vivekanand Colony, Deoli, Tonk, Rajasthan- 304804. ... Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400051. ... Respondent

Mr. Vikas Bengani, Advocate for the Appellants.

Mr. Anubhav Ghosh, Advocate with Mr. Ravishekhar Pandey, Advocate i/b. The Law Point for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C. K. G. Nair, Member Justice M.T. Joshi, Judicial Member 3

Per: Justice Tarun Agarwala, Presiding Officer (Oral)

1.

Three appeals have been filed against a common order.

Since the issue involved is the same, all the three appeals have been

taken up together and are being decided at the admission stage itself

without calling for a reply.

2. The appellants have filed the appeals against the order dated

July 31, 2020 passed by the Adjudicating Officer (hereinafter

referred to as 'AO') imposing a penalty of Rs. 5 lacs each on the

appellants. There is a delay in the filing of the appeals and,

accordingly, an application for condonation of delay has been filed.

For the reasons stated in the applications, namely, that the certified

copy of the impugned order was received on December 8, 2020, the

delay, if any, is condoned. The Misc. applications are allowed.

3. The facts leading to the filing of the present appeal is that

Securities and Exchange Board of India (hereinafter referred to as

'SEBI') conducted an investigation in the scrip of Lifeline Drugs and

Pharma Ltd. (LDPL) pursuant to a reference received from the

Director of Income Tax (Investigation), Kolkata. Based on the 4

investigation conducted by SEBI, it was found that the appellants

were creating misleading appearance of trading and contributed to

manipulation in the price of the scrip and, therefore, violated the

provision of Regulations 3 and 4 of the Securities and Exchange

Board of India (Prohibition of Fraudulent and Unfair Trade Practices

relating to Securities Market) Regulations, 2003 (hereinafter referred

to as 'PFUTP Regulations'). Accordingly, a show cause notice was

issued to them and after considering their replies and the material

available on record, the impugned order was passed by the AO

imposing a penalty of Rs. 5 lacs each for violation of Regulations 3

and 4 of the PFUTP Regulations.

4. The AO found that the alleged behaviour of the appellants by

way of selling the shares in miniscule quantity over and above the

LTP, despite more number of shares being available on the buy side

was with the motive to manipulate the price of the scrip which cannot

be held in a normal course of trading executed by the trader. The AO

found that the trading behaviour of the appellants was very unusual

and lacked honesty and intention to protect the interest of the genuine

investors in the securities market. The AO found that the pattern of

trades adopted by the appellants to place the sell order were executed 5

with a manipulative design to raise the price of the scrip and,

therefore, came to the conclusion that the alleged trades were

abnormal, deceptive, misleading, artificial and manipulative in

nature.

5. We have heard Mr. Vikas Bengani, the learned counsel for the

appellants and Mr. Anubhav Ghosh, the learned counsel with Mr.

Ravishekhar Pandey, the learned counsel for the respondent through

video conference.

6. The learned counsel for the appellants contended that in order

to establish the charge of price manipulation, the element of

collusion between the buyer and the seller is a sine qua non which in

the instant case was missing and which is admitted in the show cause

notice wherein it was clearly indicated that there was no connection

found between the contributors on the buy side with that of the

appellants contribution on the LTP on the sell side. The appellants

placed reliance on the decisions of this Tribunal in the case of M/s.

Nishith M. Shah HUF Appeal No. 97 of 2019 decided on January

16, 2020 and Rajesh Marchya (HUF) Appeal No. 496 of 2019

decided on February 7, 2020.

6

7. The learned counsel however submitted that even though he

has a good case on merits, he would be happy if the penalty is

reduced keeping in mind the principles of proportionality. The

learned counsel contended that in an identical case on the same

charge and in the same scrip, notice was issued by the same AO to

one Rajesh Jayantilal Savadia and the AO passed an order dated

October 23, 2020 finding the person is guilty of violating

Regulations 3 and 4 of the PFUTP Regulations and imposed a

penalty of Rs. 1 lac. It was contended that the pattern of trading of

Rajesh Jayantilal Savadia and that of the appellants was the same for

the same scrip and whereas Rajesh Jayantilal Savadia has been

penalised for an amount of Rs. 1 lac the appellants have been

penalised for a sum of Rs. 5 lacs each which is wholly arbitrary and

which indicates non-application of mind.

8. In this regard, we have perused the number of trades

executed by the appellants and the number of trades executed by

Rajesh Jayantilal Savadia which is extracted hereunder :- 7

% of No. of positive Total instances Positive LLP of SL. Name of Order with sell LTP Total NO. Noticee Quantity order of 1 Contribution Market share positive LTP Akshata Majgaonkar 1 17 17 42.35 7.34 Appellant

Anil Vishnu Bharti 2 Appellant 18 18 63.05 10.93

Pratik Kumar Jain 3 Appellant 14 12 77.4 13.44

Rajesh Jayantilal 4 Savadiya 26 260 67.35 11.70

9. From a perusal of the aforesaid chart, one finds Rajesh

Jayantilal Savadia executed 26 trades and contributed positive LTP

by 67.35%. On the other hand, appellant Akshata Majgaonkar 8

executed 17 trades and only contributed 42.35% towards positive

LTP. Further, appellant Anil Vishnu Bharti executed 18 trades and

contributed 63.05% positive LTP and Pratik Kumar Jain executed

only 14 trades and contributed 77.4% positive LPT.

10. Thus, we are of the opinion that the pattern of trading by

Rajesh Jayantilal Savadia is the same as that of the appellants for the

same scrip and during the same period. The positive LTP

contribution is the same and, therefore, there is no reason why one

noticee is penalised for Rs. 1 lac by the same AO and the appellants

are penalised for Rs. 5 lacs each. In our view, appellants are entitled

to a similar relief as given by the AO to Rajesh Jayantilal Savadia.

11. For the reasons stated aforesaid, the appeals are partly

allowed. The impugned order is affirmed. However, the penalty of

Rs. 5 lacs imposed on each of the appellants is reduced to Rs. 1 lac

each which shall be paid within four weeks from today. In the

circumstances of the case, parties shall bear their own costs.

12. The present matter was heard through video conference due

to Covid-19 pandemic. At this stage it is not possible to sign a copy 9

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 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 and/or

email.

Digitally signed by

Justice Tarun Agarwala RAJALAKSH RAJALAKSHMI H NAIR Presiding Officer MI H NAIR Date: 2020.12.29 11:59:15 +05'30'

Dr. C. K. G. Nair Member

Justice M. T. Joshi Judicial Member 23.12.2020 PTM