Hitesh Asoo Nihalani vs Sebi

Date of Decision : 04.01.2023

Appeal No. 720 of 2021

Hitesh Asoo Nihalani 702, Premudyan Society, 9th and 12th Road Corner, Ram Krishna Mission, Khar (West), Mumbai - 400 052. ..... Appellant

Versus

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

Mrs. Rinku Valanju, Advocate with Mr. Sumit Yadav, Mr. Aditya Shah, Ms. Jheel Thakkar and Ms. Simran Singh, Advocates i/b R. V Legal for the Appellant.

Mr. Akash Rebello, Advocate with Mr. Manish Chhangani, Mr. Ravishekhar Pandey and Ms. Samreen Fatima, Advocates i/b The Law Point for Respondent SEBI.

CORAM : Justice Tarun Agarwala, Presiding Officer Justice M.T. Joshi, Judicial Member Ms. Meera Swarup, Technical Member

Per : Ms. Meera Swarup, Technical Member

1.

Aggrieved by the order dated February 3, 2021, passed

against the Appellant (Sh. Hitesh Asoo Nihalani) by the 2

Adjudicating Officer („AO‟) of the respondent, Securities and

Exchange Board of India („SEBI‟) imposing a penalty of

Rs. 5 lakh for violation of the provisions of Regulation

3(a),(b),(c),(d),4(1), 4(2)(a) and (g) of the SEBI (Prohibition

of Fraudulent and Unfair Trade Practices relating to Securities

Market) Regulations, 2003 („PFUTP Regulations‟ for short),

the present appeal has been preferred.,

2. SEBI conducted an investigation in the scrip of Kanchan

International Ltd. („Company‟) during the period October 4,

2011 and April 3, 2012. It was found that the Appellant along

with two other Noticees had traded in the scrip of the

Company thereby creating an artificial volume in the scrip by

reversing their trades which lead to false or misleading

appearance of trading in the market.

3. Show Cause Notice (SCN) was issued to the Appellant

on December 31, 2019 and an opportunity of hearing was

given on January 7, 2021. The Appellant did not furnish his

reply to the SCN. The Appellant also did not avail of the

opportunity of hearing.

4. We have heard Smt. Rinku Valanju, the learned counsel

for the appellant and Shri Akash Rebello, the learned counsel

for the respondent.

3

5. We are satisfied that the SCN dated December 31, 2019,

the notice of hearing dated December 17, 2020 and the

impugned order dated February 3, 2021 were delivered to the

Appellant on the email Id being used by the Appellant. The

Appellant chose not to reply to the SCN and did not avail the

opportunity of present hearing. Therefore, the AO was right in

stating "I am convinced that the principles of natural justice

have been duly followed in the matter as enough opportunities

were provided to the Noticees to reply to the SCN and to

appear for hearing."

6. Regarding the plea of the Appellant on delay in issuance

of the SCN and the Impugned Order, we note that the

investigation in the scrip of the Company was started by the

Respondent in 2014. The Respondent issued multiple

summons to the Appellant in 2015 to which the Appellant

gave replies and submitted documents. The impugned

transactions were of 2011-12 vintage, the Appellant got

summons in 2015 and supplied information / documents to

the Respondent in 2015-16. Thus, in our view, the

proceedings have not in any way prejudiced the case of the

Appellant even though SCN was issued in December 2019. 4

7. The question that remains to be re-affirmed is on the

conclusion reached by the AO that the Appellant has created

an artificial volume of 63,656 shares in the scrip of the

Company by reversing his trades with the connected parties

on a consistent basis and has, thus, violated Regulation

3(a),(b),(c),(d),4(1), 4(2)(a) and (g) of the PFUTP

Regulations. In our view, the conclusion reached by the AO is

correct. It cannot be a co-incidence that the Appellant traded

in 6 instances with the same parties in off-market as well as

on-market transactions. The defence of the Appellant that the

shares of the Company were brought on three days in June

2010 through his broker (Mahasagar Securities Pvt. Ltd.) does

not seem plausible as the payment to the broker is stated to

have been made in October 2010 after a gap of four months.

Once the violation of Regulation 3(a),(b),(c),(d),4(1), 4(2)(a)

and (g) of PFUTP Regulations are reaffirmed, the penalty of

Rs. 5 lakh imposed by the Respondent under Section 15HA of

the SEBI Act is the minimum penalty and we see no cause for

interference on the same.

8. In view of the above, the appeal being devoid of any

merit is dismissed without any order as to costs. 5

9. 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.

Certified copy of this order is also available from the Registry

on payment of usual charges.

Justice Tarun Agarwala Presiding Officer

Justice M.T. Joshi Judicial Member

Ms. Meera Swarup Technical Member

MADHUKA Digitally signed by 04.01.2023 R MADHUKAR SHAMRAO BHALBAR SHAMRAO Date: 2023.01.06

msb BHALBAR 17:12:28 +05'30'