Jinesh Devendra Bhatt vs Sebi

Date of Decision : 20.08.2019

Appeal No. 426 of 2018

Jinesh Devendra Bhatt 1402, Divya Gunjan CHS, Ganesh Chowk, Mahavir Nagar, Kandivali (W), Mumbai - 400 067. ..... 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. Akshit Jain, Advocate i/b R.V. Legal for the Appellant.

Mr. Anubhav Ghosh, Advocate with Ms. Rashi Dalmia, Advocate i/b The Law Point for the Respondent.

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

Per : Dr. C.K.G. Nair, Member (Oral)

1.

By an order dated June 28, 2018 the Adjudicating

Officer ('AO' for short) of Securities and Exchange Board of

India ('SEBI' for short) has imposed a penalty of Rs. 3 lakh 2

on the appellant under Section 15HA of the SEBI Act, 1992

for violation of the provisions of Regulations 3(a), 3(b), 3(c),

3(d), 4(1), 4(2)(a), 4(2)(b), 4(2)(e) and 4(2)(g) of SEBI

(Prohibition of Fraudulent and Unfair Trade Practices relating

to Securities Market) Regulations, 2003 ('PFUTP

Regulations' for short). This appeal has been filed aggrieved

by the said order.

2. The impugned order has been passed pursuant to an

investigation carried out by SEBI in the scrip of BGIL Films

and Technologies Limited ('BGIL' for short) during June 19,

2008 to March 20, 2009. The investigation revealed that

during the said period the share price of BGIL increased from

below par to Rs. 100 because of manipulative trading by a

group of 22 entities, including the appellant herein, by

executing self trades and by raising the Last Traded Price

(LTP). Following issue of a show cause notice dated February

20, 2017 and after providing an opportunity of personal

hearing, filing replies etc. the impugned order has been

issued.

3. Shri Akshit Jain, learned counsel for the appellant

submits that the appellant incurred loss; one Shri Chetan

Dogra was instrumental in making the appellant trade; the 3

contribution to the New High Price (NHP) was very

insignificant (75 paise only) and the appellant traded in the

scrip only in the normal course of business. While all these

factors were included in his reply dated May 10, 2018

submitted to the AO, none of these aspects has been

considered by the AO in the impugned order. Further, it was

contended that the net price increased on account of

appellant's trade was only 75 paise which is miniscule and the

benefit of SEBI's policy on self trades that some small

percentage of self trades automatically happens and where

there is no manipulative intent such self trades do not invite

any penalty was not granted to the appellant. In any case, not

considering the reply in totality, irrespective of whether reply

is beautiful or ugly, itself makes the impugned order liable to

be quashed.

4. We also heard Shri Anubhav Ghosh, learned counsel

who appeared on behalf of the respondent and perused the

documents before us. The impugned order as well the show

cause notice quite clearly articulate the position relating to the

nature of appellant's trades and how the same has violated the

provisions of the PFUTP Regulations. We note from the

impugned order that apart from substantial volume 4

manipulation and price manipulation in the scrip by all the

noticees together, the appellant herein himself has contributed

a positive LTP of Rs. 18.80 (Rs. 9.10 as buyer and Rs. 9.70 as

seller) in the scrip. Further, the appellant executed self trades

of 15239 shares in 19 trades. In these self trades also the

appellant contributed LTP of Rs. 0.75. It is also important to

note that the appellant was trading in the scrip as part of the

group and admittedly on the instruction of Shri Chetan Dogra

who is another notice in which the group contributed a

positive LTP contribution of Rs. 938.73 in 1784 trades.

Therefore, the entire effort of the group, including the

appellant, was in creating substantial artificial volume and

raising the price and misleading the market. The contention of

the appellant that his reply was not considered is also

incorrect, since para 11 of the impugned order and

specifically in sub-para 11(g) the gist of the appellant's

contention has been captured. In a case of analyzing market

manipulation together by a number of entities each

individual's role may not be explained in great detail because

it is the group behavior as a whole that becomes more

relevant.

5

5. The submission that the appellant's role was miniscule

either in terms of the LTP contribution / NHP contribution or

in terms of the total volumes traded and hence the penalty

imposed is too high does not have any merit, since the penalty

imposed is Rs. 3 lakh only for a serious violation of PFUTP

Regulations. The penalty imposable for such violation under

Section 15HA of SEBI Act is Rs. 25 crore or three times the

profit made out of such practices, whichever is higher. Given

this while imposing a penalty of only Rs. 3 lakh the AO has

taken all possible mitigating factors, including the fact that

the appellant might have made losses. Accordingly, we find

no merit in the appeal.

6. Appeal, therefore, fails and is dismissed with no orders

on costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member 20.08.2019 Prepared and compared by:msb