Haresh Ramchandra Posnak vs Sebi

Date of Hearing : 05.12.2019 Date of Decision : 06.03.2020

Appeal No. 420 of 2018

Haresh Ramchandra Posnak Shop No. 8, Pranam Co-operative Housing Society Ltd., Chiku Wadi, Shimpoli, Borivali (West), Mumbai - 400092. ..... 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. Vikas Bengani, Advocate i/b Mr. Harsh Kesharia, Advocate for the Appellant. Mr. Vishal Kanade, Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point for the Respondent.

CORAM : Dr. C. K. G. Nair, Member Justice M. T. Joshi, Judicial Member

Per : Justice M. T. Joshi, Judicial Member 2

1. Aggrieved by the order of the Adjudicating Officer (hereinafter

referred to as 'AO') of Securities and Exchange Board of India

(hereinafter referred to as 'SEBI') dated August 31, 2018 imposing a

penalty of Rs. 6 lacs for violation of provisions of Regulation 4(1),

4(2)(a), 4(2)(b), 4(2)(e) and 4(2)(g) 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'), the present appeal has been preferred.

2. The record would show that earlier an ex-parte order was

passed against the present appellant by the Respondent SEBI in the

same matter imposing a penalty of Rs. 4.5 lacs. The Tribunal vide

order dated March 8, 2016 in group of the appeals filed by the

present appellant remanded the case to SEBI for passing fresh orders

on merit and in accordance with the law in view of the decision of

the Hon'ble Apex Court in the case of SEBI vs. Roofit Industries

Ltd. reported in [(2016) 194 Comp. Cas. 186 (S.C)].

3. After remand of the matter, it appears that the AO issued fresh

show cause notices to the appellant and after hearing the appellant

imposed a higher penalty as detailed (supra). Hence the present

appeal. 3

4. The learned counsel for the appellant Shri Vikas Bengani made

submission only on the issue of quantum of the penalty. He

submitted while in the earlier ex-parte proceedings without hearing

the appellant the penalty imposed was Rs. 4.5 lacs, now after the

appellant appeared before SEBI and contested the penalty was

imposed at Rs. 6 lacs. He further submitted that the investigation in

the trading of the shares of M/s. K. Sera Sera Productions Ltd.

(hereinafter referred to as 'the company'), was conducted for two

patches. The appellant is charged for circular trading only in one

patch. The appellant specifically adverted attention of the AO on the

quantum of penalty imposed on other persons involved in the matter.

However, the same was not considered and the impugned order was

passed.

5. Mr. Vishal Kanade, the learned counsel for the respondent

submitted that there is no parity between the cases of the so called

similar situated entities with the present appellant. Other persons

were charged for synchronized trading while the appellant was

charged for circular trading and, therefore, he submitted that

interference in the quantum is not warranted. 4

6. Upon hearing both the sides, in our view the order of the AO

on the quantum of the penalty cannot be sustained for the following

reasons.

7. The appellant has filed at 'Annexure E' to the affidavit in

rejoinder a copy of the order of the AO dated September 30, 2010

which would show that in the same scrip 10 entities had indulged

into synchronized / circular trades during the period from June 1,

2004 to October 31, 2004. The noticee therein i.e. S. P. J. Stock

Brokers Pvt. Ltd. had buy quantity 16,15,507 and sell quantity

16,55,882. The total buy quantity within group was 57,94,907 and

sell quantity was 61,67,615. Penalty of Rs. 50,000/- was imposed on

the said noticee.

8. So far as the present appeal is concerned, the order of the AO

would show that the appellant has indulged into buying and selling of

shares ranging from 1500 to 2000 shares and the total trading within

the group was 47,387.

9. The submission of the learned counsel for the respondent that

nature of trades in the case of S. P. J. Stock Brokers Pvt. Ltd. was

synchronized, while in the present case, the appellant indulged into 5

circular trades is without any merit as the same would not

qualitatively affect the nature of the fraudulent and unfair trade

within the meaning of PFUTP Regulations.

10. The appellant has adverted the attention of the AO by making

the written submissions in detail regarding other cases which is also

reproduced by the AO in internal page No. 17 onwards of the

impugned order. He has however not dealt with the said issue in his

order and simply observed that the act of noticee is repetitive in

nature. He further observed that disproportionate gain or unfair

advantage is not available on the record and slapped the penalty of

Rs. 6 lacs. Similar observations were made by another AO in the

case of S. P. J. Stock Brokers Pvt. Ltd. (supra) and the penalty of

Rs. 50,000/- was imposed for violation of PFUTP Regulations.

11. Considering all the facts on record, the following order :-

ORDER

1. The appeal is hereby partly allowed.

2. The order of the AO on merits of the case is hereby confirmed.

6 3. The order to the extent of imposing a monetary penalty of Rs. 6

lacs is hereby set aside. Instead a monetary penalty of

Rs. 50,000/- is imposed.

4. The appeal is accordingly disposed of without any order as to

costs.

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 06.03.2020 Prepared & Compared by PTM