Jayeshkumar Narottamdas Gandhi & Ors. vs Sebi

Date of Hearing : 12.02.2020 Date of Decision : 21.02.2020

Appeal No. 225 of 2019

1.

Jayeshkumar Narottamdas Gandhi

2. Bharati Jayesh Gandhi

3. Deval Jayesh Gandhi

B/403, 7 Star Apartments, Jairaj Nagar, Borivali (West), Mumbai - 400 094. ..... Appellants

Versus

Securities & Exchange Board of India Securities and 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 Mr. Geet Shikhar for the Appellants. Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b ELP for the Respondent.

With Misc. Application No. 555 of 2019 And Misc. Application No. 12 of 2020 And Appeal No. 503 of 2019 2

1. Jayeshkumar Narottamdas Gandhi

2. Bharati Jayesh Gandhi

3. Deval Jayesh Gandhi

B/403, 7 Star Apartments, Jairaj Nagar, Borivali (West), Mumbai - 400 094. ..... Appellants

Versus

Securities & Exchange Board of India Securities and 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 Mr. Geet Shikhar for the Appellants. Mr. Kumar Desai, Advocate with Mr. Abhiraj Arora, Mr. Vivek Shah, Advocates i/b ELP for the Respondent.

With Appeal No. 104 of 2019

1. Shri Sagar Dhanvant Jajal

2. Smt. Chandrika Dhanvant Jajal

C/301, Parshva Nagar, Building No. 2, Jain Mandir Road, Bhayandar (West), Thane - 401101. ..... Appellants

Versus

Securities & Exchange Board of India 3

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

Mr. Sagar Dhanvant Jajal, Appellant in Person. Mr. Kevic Setalvad, Senior Advocate with Mr. Anubhav Ghosh, Ms. Rashi Dalmia, Advocates i/b The Law Point for the Respondent.

With Appeal No. 347 of 2019

1. Jayeshkumar Narottamdas Gandhi

2. Bharati Jayesh Gandhi

3. Deval Jayesh Gandhi

B/403, 7 Star Apartments, Jairaj Nagar, Borivali (West), Mumbai - 400 094. ..... Appellants

Versus

Securities & Exchange Board of India Securities and 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 Mr. Geet Shikhar for the Appellants. Mr. Kevic Setalvad, Senior Advocate with Mr. Anubhav Ghosh, Ms. Rashi Dalmia, Advocates i/b The Law Point for the Respondent. 4

CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C. K. G. Nair, Member Justice M. T. Joshi, Judicial Member

Per : Justice Tarun Agarwala, Presiding Officer

1. The appellants have filed Appeal No. 225 of 2019 against the

order dated January 31, 2019 passed by the Whole Time Member

(hereinafter referred to as 'WTM') prohibiting the appellants from

accessing the securities market for a period of four years and further

restraining them from buying, selling or otherwise dealing in

securities directly or indirectly for a period of four years. The

appellants have also filed another Appeal No. 503 of 2019

challenging the order of the Adjudicating Officer (hereinafter

referred to as 'AO') dated June 24, 2019 wherein a penalty of

Rs. 6 lacs has been imposed for violation of Regulations 3 and 4 of

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').

In Appeal No. 104 of 2019 and in Appeal No. 347 of 2019, the WTM

found that by selling miniscule quantity of shares, the appellants had

manipulated the price of the scrip which was violative of Regulations

3 and 4 of the PFUTP Regulations and consequently, prohibited the 5

said appellants from accessing the securities market for a period of

four years, etc.

2. Since all the appeals are against the same violation of PFUTP

Regulations and for similar transactions, the said appeals are being

decided together. For facility, the facts stated in Appeal No. 225 of

2019 are taken into consideration. For the reasons stated in the Misc.

Application No. 555 of 2019 and Misc. Application No. 12 of 2020,

the delay in filing the Appeal No. 503 of 2019 is condoned. The said

Misc. Applications are allowed.

3. The charges levelled against the appellants are that it had

contributed to the positive LTP as a seller and that the trades made

by the appellants resulted in the manipulation in the price of the

scrip. Another question which necessarily arises for consideration is,

whether the appellants as a seller alone can be charged for increasing

the LTP in the absence of the buyer.

4. The WTM and the AO while passing the impugned orders

found that miniscule shares have been sold by the appellants when

there was a demand for more shares and that the appellants had a

substantive holding in that scrip. Further finding was that a prudent 6

investor would have sold the entire shares at the first opportunity

especially when the price quoted by the purchaser was above the

LTP and, thus, there was no reason to sell miniscule amount of

shares unless the motive was to increase the price of the scrip. The

authorities found that the trading pattern of the appellants in selling

the scrip was not genuine and were aimed in manipulating the price

thereby violating Regulations 3 and 4 of the PFUTP Regulations.

5. We find that the controversy involved in the present appeals is

squarely covered by the decision of this Tribunal in M/s. Nishith M.

Shah HUF vs. SEBI in Appeal No. 97 of 2019 and other companion

appeal decided on January 16, 2020, wherein this Tribunal has held

that if trading in miniscule amount leads to an increase in the price of

the scrips one can presume or infer that the trading is manipulative

but such trading cannot happen unilaterally and that there must be

evidence to show collusion between the buyer and the seller.

6. In the instant case, we find that the investigation report itself

indicates that there is no connection between the appellants, with the

buyer, promoter or with the company. In the absence of any

connection between the seller and the buyer, the appellants could not

be charged with manipulating the scrips nor the trading pattern of the 7

appellants could infer manipulating the price of the scrip. Further,

unless the buyer is charged with violation of PFUTP Regulations, the

seller alone cannot be charged of collusion in manipulation of the

price of scrip.

7. In the light of the aforesaid, the impugned orders cannot be

sustained and are quashed. The appeals are allowed with no order as

to costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member

21.02.2020 Prepared & Compared by PTM