Bhavesh Jain & Anr. vs Sebi

Bhavesh Jain Rakesh Jain Ramsaran Bldg., 3rd Floor, Room No. 21, Plot No. 45, Jain Society, Sion (West), Mumbai 400 022. ...... 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. Bhavesh Jain and Mr. Rakesh Jain, Appellants in person. Mr. Kumar Desai, Advocate with Mr. Mihir Mody, Ms. Shruti Chiniwar, Mr. Saurabh Bachawat, Advocates i/b K. Ashar & Co. for the Respondent.

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

Per : Jog Singh (Oral)

1.

This appeal is preferred jointly by the two appellants, namely, Bhavesh

Hastimal Jain and Mr. Rakesh Hastimal Jain. The appellants have challenged

impugned order dated March 11, 2013 by which a penalty of ` 5 lac on each of

them has been imposed (total ` 10 lac) under Section 15HA of the Securities

and Exchange Board of India Act, 1992 (for short 'SEBI Act, 1992') read with

Section 15-I of the SEBI Act, 1992 and Rule 5 of the Securities and Exchange

Board of India (Procedure for Holding Inquiry and Imposing Penalties by

Adjudicating Officer) Rules, 1995 (for short Adjudication Rules). 2

2. The allegation against the appellant is that they acted in collusion with

one Mehta Group (Sunil Kumar Mehta) and have orchestrated the

manipulation of trading volume and price of the scrips of Allcargo, Anil,

Asian, KBS, KSL, Lotus, Mavens, MVL, Panaromic, SAT and Ushdev to

create artificial volume and price change and thereby violated the provisions of

Regulations 3(a), 3(b), 3(c), 3(d), and Regulations 4(1), 4(2)(a), 4(2)(b),

4(2)(d), 4(2)(e), 4(2)(f) and 4(2)(g) of the PFUTP Regulations read with

Section 12A(a), (b) and (c) of the SEBI Act, 1992.

3. After dealing with the summary of trading of structured trades in

abovesaid various group by the Mehta Group, the learned adjudicating officer

has held in para 17 of the impugned order :-

"17. I find that though the initial trades look like non- structured trades due to difference in order quantities or order, the orders were perfectly matched in sequence of two orders or in multiple orders. This mechanism was clearly adopted to avoid detection of the structured trades. The above synchronized trades were cleverly executed to look like non-structured trades but the above type of matching is only possible when there is a meeting of minds between the buyer and the counterparty seller and hence all the synchronized trades were actually structured trades. From the above, I conclude that the Noticees alongwith the Mehta Group have indulged in synchronized / structured trades."

4. A perusal of the impugned order clearly demonstrates that said Mehta

Group was, mainly, interested in creating artificial volume and in the process

of volume creation they have either manipulated or increased the price of the

scrips.

5. However, the appellants have categorically stated that the trades in

question were undertaken by Sunil Mehta whom they had never known to the

appellants and that they were totally unaware of the transactions. Further, they

submit that they do not have any knowledge of operating the computer. 3

6. After hearing both the appellants and counsel for the respondent, we

note that there is no finding in the impugned order that appellants had actually

traded in the scrip in question. It is also evident that said Shri Sunil Mehta

alongwith his group members has traded through Emkay Global Financial

Services Ltd. against whom no action seems to have been taken. Similarly,

said Shri Sunil Mehta who admittedly traded or placed orders in the account of

the appellants and / or directed the appellants to place trade orders on behalf of

members of his group has been let-off with a penalty of ` 1 lac. Whereas Shri

Bhavesh Kothari (Appeal No. 112 of 2015) has been saddled with a penalty of

` 3 lac. In the circumstances, we are inclined to uphold the impugned order by

reducing the penalty to ` 3 lac to be paid by the appellants within a period of

two months from the date of this order.

7. The appeal, thus, stands disposed of in the light of the abovesaid terms

with no order as to costs.

Sd/-

Justice J. P. Devadhar Presiding Officer

Sd/-

Jog Singh Member 11.09.2015 Prepared & Compared by PTM