Antala Real Broking & Impex Pvt. Ltd. vs Sebi

Date of Decision : 19.02.2020

Appeal No. 414 of 2018

Dhirajbhai V. Sanghvi HUF No. A-14, Tirthbhumi Apartments, Near Lal Garden, Ellisbridge Ahmedabad, Gujarat - 380006. ..... Appellant

Versus

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

Mr. Vinay Chauhan, Advocate with Mr. K. C. Jacob, Advocate i/b Corporate Law Chambers India for the Appellant. Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b ELP for the Respondent.

With Appeal No. 415 of 2018

Shri Ashik D. Sanghvi No. A-14, Tirthbhumi Apartments, Near Lal Garden, Ellisbridge Ahmedabad, Gujarat - 380006. ..... Appellant

Versus 2

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

Mr. Vinay Chauhan, Advocate with Mr. K. C. Jacob, Advocate i/b Corporate Law Chambers India for the Appellant. Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b ELP for the Respondent.

With Appeal No. 416 of 2018

Shri Sagar D. Sanghvi A/14, Thirthbhumi Appartement, Near Law Garden, Ellisbridge, Ahmedabad - 380006. ..... Appellant

Versus

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

Mr. Vinay Chauhan, Advocate with Mr. K. C. Jacob, Advocate i/b Corporate Law Chambers India for the Appellant. Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b ELP for the Respondent.

With Appeal No. 428 of 2018 3

Shri Sajjan Kumar Nanwal D 176, Padmavati Society, Naroda, Ahmedabad, Gujarat - 382330. ..... Appellant

Versus

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

Mr. Rohit Mangsule, Advocate for the Appellant. Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b ELP for the Respondent.

With Appeal No. 429 of 2018

Shri Govind Kumar Varma D 176, Padmavati Society, Naroda, Ahmedabad, Gujarat - 382332. ..... Appellant

Versus

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

Mr. Rohit Mangsule, Advocate for the Appellant. Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b ELP for the Respondent. 4

With Appeal No. 430 of 2018

Ms. Sunitadevi Sajjan Nanwal D 176, Padmavati Society, Naroda, Ahmedabad, Gujarat - 382331. ..... Appellant

Versus

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

Mr. Rohit Mangsule, Advocate for the Appellant. Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b ELP for the Respondent.

With Appeal No. 431 of 2018

M/s. Vishu Enterprises D 176, Padmavati Society, Naroda, Ahmedabad, Gujarat - 382333. ..... Appellant

Versus

Securities & Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ... Respondent 5

Mr. J. P. Sen, Senior Advocate i/b Mr. Rohit Mangsule, Advocate for the Appellant. Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b ELP for the Respondent.

With Appeal No. 200 of 2019

Babubhai Desai Rabari Vasahat, Nava Vadaj, Ahmedabad, Gujarat 380016. ..... Appellant

Versus

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

Ms. Dhwani Shah, Advocate i/b Vis Legis Law Practice for the Appellant. Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b ELP for the Respondent.

With Appeal No. 309 of 2019

Antala Real Broking & Impex Pvt. Ltd. D79, Azad Medan Road, Near Shiv Mandir, Kubern Nagar, Ahmedabad, Gujarat - 382340. ..... Appellant 6

Versus

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

Ms. Dhwani Shah, Advocate i/b Vis Legis Law Practice for the Appellant. Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b ELP for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C. K. G. Nair, Member

Per : Justice Tarun Agarwala, Presiding Officer (Oral)

1.

Investigation was conducted by Securities and Exchange

Board of India (hereinafter referred to as 'SEBI') in the group of

Kavveri Telecom Products Ltd. (hereinafter referred to as 'Kavveri')

for the period June 1, 2010 to December 31, 2010 wherein it was

observed that a group of 9 entities were connected with each other

and were involved in trading among themselves in the scrip of

Kavveri. Based on the investigation report, a show cause notice

dated July 27, 2015 was issued to all the 9 entities. The Adjudicating

Officer (hereinafter referred to as 'AO') has passed a separate order

against two such entities and another order against the seven entities 7

imposing penalties for violation of Regulations 3 and 4 of Securities

and Exchange Board of India (Prohibition of Unfair and Fraudulent

Trade Practices relating to Securities Market) Regulations, 2003

(hereinafter referred to as 'PFUTP Regulations') by executing

synchronized and reversal trades, contributing in creation of artificial

volume and indulging in price rise in the scrip. All the entities have

filed the appeals against the orders of the AO which have been

clubbed together and are being decided by a common order, since the

issue involved is the same and has resulted from a common show

cause notice.

2. For facility, against the order of AO dated June 29, 2018, two

Appeals No. 431 of 2018 and 309 of 2019 have been filed by M/s.

Vishu Enterprises and M/s. Antala Real Broking & Impex Pvt. Ltd.

respectively. The charge against them was that these appellants

executed synchronized and reversal trades with other members of the

group and thereby contributed in creation of artificial volume and

indulged in price rise by entering buy/sell orders at a higher price

than the Last Traded Price (LTP), etc.

3. The AO also passed another order dated June 29, 2018 against

the other seven noticees imposing penalties against which Appeal 8

Nos. 414, 415, 416, 428, 429, 430, 431 of 2018 and 200 of 2019 have

been filed. These appellants have been charged for executing

synchronized and reversal trades with other members of the group

thereby contributing in creation of artificial volume.

4. We have heard Shri J. P. Sen, the learned senior counsel

alongwith Shri Vinay Chauhan, Shri K. C. Jacob, Shri Rohan

Mangsule, Ms. Dhwani Shah, the learned counsel for the appellants

and Shri Kumar Desai, the learned counsel alongwith Shri Abhiraj

Arora, Shri Vivek Shah for the respondent.

5. The points urged are that the appellants were connected entities

and were acting in concert is perverse which no reasonable person

would arrive at such a finding based on the material evidence on

record. The increase in the price of the scrip was not on account of

trading by the appellants but was on account of the performance of

the company, when they made various corporate announcements

over a period of time which factor has not been considered. The

finding that the appellants had executed reversal trades is against the

concept of reversal trades and the finding that the appellants had

executed synchronized trades was misconceived in as much as there

is no connection of the appellants with other entities. In addition to 9

the above, it was urged that the impugned orders suffer from

violation of the principles of natural justice. It was contended that

the AO has relied upon order logs, trade logs and investigation report

which was not part of the show cause notice nor such investigation

report, trade logs were supplied. It was, thus, urged that reliance on

such documents for which no opportunity was given to the appellants

was in violation of the principles of natural justice. In support of the

submission, the learned counsel for the appellants has placed reliance

upon a decision of this Tribunal in Appeal No. 281 of 2009

Mr. Vikas Gourihar Narnavar vs. AO, SEBI decided on June 15,

2010, in which it was held that the relevant portions of the

investigation report and trade logs as referred to in the show cause

notice which depicted the role played by the said appellant having

not being furnished alongwith the show cause notice was violative of

the principles of natural justice.

6. On the other hand, the learned counsel for the respondent Mr.

Desai, fairly conceded that the details of the trade logs, order logs

and the investigation report was not supplied to the appellants and

the same having being considered by the AO was thus in violation of

the principles of the natural justice. The learned counsel fairly 10

conceded that the impugned order may be set aside on this ground

and the matters may be remitted to the AO for fresh consideration.

7. In the light of the aforesaid, without going into the veracity of

the submissions made by the learned counsel for the appellants as to

whether the appellants were connected persons or whether there were

actual synchronized trades or reversal trades, the appeals are being

allowed on the short ground of violation of the principles of natural

justice. We find that the AO has considered the trade logs, order logs

and the investigation report in coming to the conclusion that the

appellants had indulged in synchronized and reversal trades. This

Tribunal in Ketan Parekh vs. SEBI Appeal No. 2 of 2004 decided

on July 14, 2006 held that the nature of transaction executed, the

frequency of the transactions are undertaken, the value of the

transactions, whether they involved circular trading and whether

there is a change in the beneficial ownership, the condition which

have prevailing in the market are some of the factors which goes to

show the intention of the parties. These factors can only be

considered and found if trade logs, order logs and the investigation

report are supplied to the appellants and a finding is given on that

aspect. The summary of the trade logs as indicated in the show cause

notice will not give a finding by itself on synchronized trades, 11

reversal trades, etc. Thus, on this short ground that there has been a

violation of the principles of the natural justice by not supplying the

relevant documents, the impugned orders cannot be sustained and on

this short ground the impugned orders passed by the AO are set

aside.

8. The appeals are allowed and the matters are remitted back to

the AO to decide the matters afresh after supplying the relevant

material, namely, trade logs, order logs, investigation report, etc.

The AO shall pass a fresh order after giving an opportunity of

hearing to the appellants. It is also made clear that all the points

raised by the appellants are left open and if raised before the AO the

same would also be considered and decided in accordance with law.

In the circumstances of the case, there shall be no order as to costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member 19.02.2020 Prepared & Compared by PTM