Basic Clothing Pvt. Ltd. vs Sebi

Date of Decision : 21.08.2019

Appeal No. 301 of 2019

Basic Clothing Pvt. Ltd. K-55, Udyog Nagar, Peergarhi, New Delhi - 110041. ..... 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. Amit Gupta, Advocate for the Appellant. Mr. Abhiraj Arora, Advocate with Ms. Misbah Dada, Advocate 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.

Against the order of the Adjudicating Officer (hereinafter

referred to as, 'AO') imposing a penalty of Rs. 5,50,000/- for

violation of Regulation 3(a), 4(1) and 4(2)(a) of the Securities and

Exchange Board of India (Prohibition of Unfair and Fraudulent

Trade Practices relating to Securities Market) Regulation, 2003 2

(hereinafter referred to as, 'PFUTP Regulations') the present appeal

has been filed.

2. The facts leading to the filing of the appeal is, that Securities

and Exchange Board of India (hereinafter referred to as, 'SEBI')

observed large scale reversal of trade in Stock Options segment of

BSE Ltd. (hereinafter referred to as, 'BSE') leading to creation of

artificial volume. In the investigation, it was found that trades

executed in Stock Options segment of BSE were non genuine trades

creating artificial volume to the tune of 826.21 crore units or 54.68%

of the total market volume in Stock Options segment of BSE.

During the investigation period, it was also found that the trading

activity was done in illiquid Stock Options.

3. The appellant, Basic Clothing Pvt. Ltd. was one of the various

entities which indulged in execution of non genuine trades in Stock

Options segment of BSE during the investigation period. A show

cause notice was issued indicating that the appellant had indulged in

reversal trades which were non genuine and creating false and

misleading appearance of trading in terms of artificial volumes in

Stock Options and, therefore, were manipulative and deceptive in

nature, thus, violating the provision of Regulations 3 and 4 of the

PFUTP Regulations.

3

4. The AO after considering the reply and after giving an

opportunity of hearing held that the appellant had violated the

provision of Regulation 3 and 4 of the PFUTP Regulations and

accordingly imposed a monetary penalty of Rs. 5,50,000/-.

5. Before the Tribunal the learned counsel for the appellant

contended that no trades were executed by the appellant and nor any

authority was given to the stockbroker to execute any trades on

behalf of the appellant and contended that at the time of submission

of the reply before the AO a specific relief was prayed that the

authority should summon the stockbroker and question him as to how

he had executed the trades.

6. The submission of the learned counsel for the appellant appeared

to be attractive in the first flush, but when we considered the stand

taken by the appellant before the AO, we find that no such stand was

ever taken by the appellant as raised before us. In fact, the stand

taken by the appellant before the AO was that he was trapped by M/s.

R. K. Stockholding Pvt. Ltd. who was their stockbroker and who

gave a rosy picture of high volatility with high rate of return in

securities market and succeeded to gain confidence of the appellant

by opening a trading account after signing the account opening 4

booklet the trades were performed in the account of the appellant

under supervision of the stockbroker. Thus, it is clear that the

appellant was doing trades which amounted to violation of

Regulations 3 and 4 of the PFUTP Regulations.

7. In the light of the aforesaid, we do not find any error in the

order passed by the AO. The appeal fails and is accordingly

dismissed.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

21.08.2019 Prepared & Compared by PTM