Krunal Gopaldas Rana & Anr. vs Sebi

Order Reserved: 26.4.2021 Date of Decision: 08.6.2021

Appeal No.265 of 2019

1.

Sanjay Jethalal Soni

2. Krupa Sanjay Soni

3. J.M. Soni Consultancy through its Proprietor Sanjay Jethalal Soni 36, Malay Bungalows, Science City Road, Sola, Ahmedabad- 380 001. ...Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (E), Mumbai-400051. ...Respondents

Mr. Nishant Upadhyay, Advocate i/b. Jyoti Pandey, Advocate for Appellants.

Mr. Kumar Desai, Advocate with Mr. Nishit Dhruva, Mr. Chirag Bhavsar and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

With Appeal No.267 of 2019

Dhiren Dharamdas Agrawal 2

12, Shardanagar Housing Society, Lane No.1, Paldi, Ahmedabad-380007. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (E), Mumbai-400 051. ...Respondents

Mr. Nishant Upadhyay, Advocate i/b. Jyoti Pandey, Advocate for Appellants.

Mr. Kumar Desai, Advocate with Mr. Nishit Dhruva, Mr. Chirag Bhavsar and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

With Appeal No.270 of 2019

1. Amul Gagabhai Desai 135, Ranuja Nagar, Opp. Anand School, Ahmedabad - 380015.

2. Shantiben Gangaram Desai B/407, Ambika Smruti Park Society, Near Super High School, Ambika Nagar, Odhav Ahmedabad-382415. ...Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, 3

Bandra (E), Mumbai-400 051. ...Respondent

Mr. Nishant Upadhyay, Advocate i/b. Jyoti Pandey,Advocate forAppellants.

Mr. Kumar Desai, Advocate with Mr. Nishit Dhruva, Mr. Chirag Bhavsar and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

With Appeal No.271 of 2019

1. Jimish Jitendrabhai Soni

2. Vaishali Jimish Soni A-301, Dharti Crystal, IOC Tragad Road, Chandkheda, Ahmedabad - 382424. ...Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (E), Mumbai-400 051. ...Respondents

Mr. Nishant Upadhyay, Advocate i/b. Jyoti Pandey, Advocate for Appellants.

Mr. Kumar Desai, Advocate with Mr. Nishit Dhruva, Mr. Chirag Bhavsar and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

With Appeal No.272 of 2019 4

Mahesh Somabhai Desai B17, Chaapra, Nr. Chhaya Flat, Somabhai Rabari Vasahat, Ghatlodia, Ahmedabad-380061. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (E), Mumbai-400 051. ...Respondents

Mr. Nishant Upadhyay, Advocate i/b. Jyoti Pandey, Advocate for Appellant.

Mr. Kumar Desai, Advocate with Mr. Nishit Dhruva, Mr. Chirag Bhavsar and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

With Appeal No.273 of 2019

1. Sweta Dilipkumar Soni B 201, Ashray Tower, Vejalpur, Ahmedabad-380051, Gujarat.

2. Nehaben Janakray Soni 1018, Shriji Society, Tal: Dhansura District: Sabarkantha, Modasa-383310, Gujarat. ...Appellants

Versus

Securities and Exchange Board of India 5

SEBI Bhavan, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (E), Mumbai-400 051. ...Respondent

Mr. Nishant Upadhyay, Advocate i/b. Jyoti Pandey, Advocate for Appellants.

Mr. Kumar Desai, Advocate with Mr. Nishit Dhruva, Mr. Chirag Bhavsar and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

With Appeal No.274 of 2019

Praveen Daduji Thakor 24, Sattadhar Society, Nr. Ratna Plaza Complex, Chandlodia, Ahmedabad-382481. ...Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (E), Mumbai-400 051. ...Respondents

Mr. Nishant Upadhyay, Advocate i/b. Jyoti Pandey, Advocate for Appellants.

Mr. Kumar Desai, Advocate with Mr. Nishit Dhruva, Mr. Chirag Bhavsar and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

With Appeal No.275 of 2019 6

1. Krunal Gopaldas Rana Z-1072, Khedavalano, Khando, Khambat-Cambay Anand-388620.

2. Amitkumar Rameshchandra Rana Pan Pole, At: Khambat, Anand-388620 ...Appellants

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (E), Mumbai-400 051. ...Respondent

Mr. Nishant Upadhyay, Advocate i/b. Jyoti Pandey, Advocate for Appellants.

Mr. Kumar Desai, Advocate with Mr. Nishit Dhruva, Mr. Chirag Bhavsar and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

With Appeal No.276 of 2019

1. Nalinkumar Narottambhai Pala

2. Deepaben Ajaykumar Pala

3. Hetalben Rajeshkumar Pala Maruti Agro Industries, Opp. Ankur Protein Industries, NH08, Sarkhej Bavla Road, Tal: Sanand Changodhar, Ahmedabad-382213. ...Appellants 7

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (E), Mumbai-400 051. ...Respondent

Mr. Nishant Upadhyay, Advocate i/b. Jyoti Pandey, Advocate for Appellants.

Mr. Kumar Desai, Advocate with Mr. Nishit Dhruva, Mr. Chirag Bhavsar and Mr. Harshad Vyas, Advocates i/b. MDP & Partners for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Justice M.T. Joshi, Judicial Member

Per: Justice M.T. Joshi, Judicial Member

1. Aggrieved by the direction of the Adjudicating

Officer ('AO' for short) of respondent Securities and

Exchange Board of India (for short 'SEBI') directing

to pay penalty in the range of Rs.5 lakhs to Rs.30 lakhs

by the respective appellants depending on the

repetitive nature of the violations of the violation of

regulation 3(a), (b), (c) and (d), 4(1), 4(2)(a) and (g) of 8

Securities and Exchange Board of India (Prohibition of

Fraudulent and Unfair Trade Practices relating to

Securities Market) Regulations, 2003 (for short

'PFTUP Regulations') and Section 12A(a), (b) and (c)

of the Securities and Exchange Board of India Act,

1992, out of 18 noticees the present appeals are

preferred by 17 noticees. 13 appellants have filed a

common reply to the show cause notice issued by the

AO.

2. The allegations are that the present appellant along

with the another noticee being connected with each

other had indulged into reversal trades, matched trades,

self-trades, price and volume manipulation

contributing to the Last Traded Price (LTP) etc. in the

scrip of Ushdev International Ltd. (hereinafter referred

to as the 'Company') during April 1, 2010 to January

10, 2011.

3. The appellants though accepted that they were

known to each other principally submitting that 9

appellant Mr. Sanjay Soni,the proprietor of another

appellant M/s. J.M. Soni Consultancy was also a sub-

broker and as such all other appellants had opened

account with him and, therefore, common mobile

number is provided, but denied that any of them have

indulged into any manipulative trade practices. The

learned AO, however, made the the analysis of the

data of the trading of the appellants and considering

the connection between them came to the conclusion

that the appellants have indulged in the manipulation

of the price of the scrip and, therefore, the impugned

order came to be passed. Hence, the present appeal.

4. Heard Mr. Nishant Upadhyay, Advocate for the

Appellants and Mr. Kumar Desai, Advocate assisted

by Mr. Nishit Dhruva, Mr. Chirag Bhavsar and Mr.

Harshad Vyas, Advocates for the Respondent.

5. The appellants have admitted that they are known to

each other as appellant Mr. Sanjay Soni was the sub-

broker and with the aid of the appellant Mr. Sanjay 10

Soni the accounts were opened by the other appellant.

There were fund transfer between some of the noticees

and common mobile number is also shared between

some of them. The detailed table of connection

between the appellants is given by the learned AO in

paragraph no.4 of the order. The appellant, however,

submitted that said connection had nothing to do with

any alleged manipulation and they in their own

discretion considering that the scrip of the Company

was liquid and attractive traded in the same without

any intent of manipulation.

6. The price volume analysis would show that during

the investigation period the price of the scrip increased

from Rs.220 to Rs.396.95 which is around 80%.

Further, there was spurt in the volume also as detailed

in the table no.2 given by the learned AO. So far as

the present appellants are concerned their contribution

in the rising of the price that is to the positive LTP is

significant as detailed in table no.3 of the impugned 11

order. It would show that while appellant Ms. Krupa

Soni had contributed maximum i.e. 16.45% to the

positive LTP, the minimum contribution was around

1% .

7. There were matched trades also between some of

the appellants though as pointed by the appellants in

reply to the show cause notice the matching was not in

exact figure. However, the volume of the matching

trades between these appellants as enumerated in table

4 of the impugned order would show that the same

ranged from 78% to 30%.

8. As regards the self-trades, respondent SEBI had

along with the show cause notice provided the trade

logs giving details. The appellants vide their common

reply to the show cause notice simply denied that they

had indulged in the self-trades. However the record

from which table no.5 in the impugned order is

prepared would show that appellant Mr. Krunal, Ms.

Krupa and Mr. Amul had indulged into self-trades. 12

The number of self-trades range from 178 to 941

trades. These self-trades occurred within a period of

around two months. The mere denial of these trades

without any justification would clearly show that these

three appellants had intentionally indulged into self-

trades.The number of these self trades within a short

period of 2 months also would show that those could

not be accidental.

9. So far as the reverse trades are concerned though

the quantity of reversed shares is not exact as pointed

out by the appellant, the quantity of the reverse trades

is also voluminous, so also the quantity of the same, as

detailed in table no.2 of the impugned order.

10. So far as the allegation of price manipulation is

concerned the details of the same are given in table

no.7 of the impugned order to show as to how the

present appellants had caused increase in the price i.e.

by contributing to the positive LTP as detailed supra. 13

11. Next of the allegation was regarding establishing

new high price during the investigation period. This

would also show that the appellant Ms. Krupa, Mr.

Krunal and Mr. Dhiren Kumar had established new

high price in the range of 2.36% to 7.6% as detailed in

table 8. It is also shown that these very appellants had

contributed to the positive LTP by the first trades

which also is significant as detailed in table no.9 of the

impugned order.

12. Mr. Nishant Upadhyay, learned counsel appearing

for the appellant adverted our attention towards the

additional documents filed on record vide Miscellaneous

Application no. 72 of 2021. The application was

allowed. The documents are in the nature of 3 research

reports of CARE rating Agency for the years 2012-13

onwards. Besides reports of on First Call and Phillips

Capital are also filed. . Press releases of the Company of

the year 2011, 2013 , and price data of the Company of

the relvant period is also placed on recod. 14

13. On the strength of these additional documents Mr.

Upadhyay submitted that the fundamentals of the

Company Ushdev International Ltd. had justified the

price rise of it's shares. He submitted that the scrip

was liquid. Research reports strongly indicated that the

Company was financially sound. There were buy calls

from the locals with whom the noticees were holding

the trading account. Therefore, merely because the

present appellants had contributed to the positive LTP

the same cannot be counted for.

He additionally submitted that there is a delay in issuing

of show cause notice for a period of more than seven

years. Therefore, relying on the judgements of this

Tribunal in the cases like Ashok Shivlal Rupani and

Ors vs. SEBI, appeal no.417 of 2018 dated 22-08-2019,

Mr. Rakesh Kathotia & Ors. vs. SEBI, appeal no. 07 of

2016 decided by this Tribunal on 27.05.2019 he

submitted that on this sole ground he appeals are liable

to be allowed.

15

14. On the other hand, Mr. Kumar Desai, the learned

counsel for the respondent submitted that while no plea

of causing any prejudice due to delay is taken before

the AO, the reply to the show cause notice would show

that the appellant had replied the same without having

any prejudice in defending the proceedings. He,

therefore, submitted that in the facts of the present the

ratio of the judgments would not be applicable.

Considering this fact we do not find any merit in the

submissions of the appellants as regards the plea of

delay.

15. As regards the merits of the case, Mr. Desai

submitted that voluminous data of self-trades, matched

trades, reversal trades, contribution to the positive

LTP, volume manipulation as detailed supra would

show that the present appellants being connected with

each other had indulged into the manipulation of

volume and price of the scrip. As regards the

additional documents filed by the appellants he 16

submitted that the appellants had already taken the plea

regarding sound financial position of the Company and

the liquidity of it's share. However according to him

the trades of the appellants as detailed in the impugned

order would show that the appellants indulged in price

and volume manipulation.

16. Having considered the rival submissions in our

view all the appeals are liable to be dismissed. The

connections between the appellants is an admitted fact.

The voluminous data would show that the appellants

have indulged into self-trades, reversal trades, matched

trades, volume manipulation and also contributed to

the price rise of the share either by establishing

through a first trade or new high price without any

justification. The percentage of the trades of the

appellant in contribution of the price rise is so

significant, the numbers of matched trades, self trades,

are so substantive that merely because the scrip was

liquid or that during the relevant period the 17

fundamentals of the Company were good, the same can

not be a reasons for taking another view than the view

taken by the learned AO on the basis of the

circumstances as detailed supra.

17. As regards the quantum of the penalty, we find that

the learned AO has taken into consideration the

repetitive nature of the violations caused by the

respective appellant i.e appellant Mr. Sanjay Soni,

appellant Ms. Krupa Soni, appellant Mr. Krunal,

appellant Mr. Dhiren and appellant Mr. Amul as given

in the separate table no.12. In the circumstances,

higher penalty was imposed proportionate to the

numbers of earlier violations committed by them. In

the circumstance, in this regard also no interference is

warranted.

18. In the result the following order.

All the appeals are hereby dismissed without any

order as to costs.

18

19. The present matter was heard through video

conference due to Covid-19 pandemic. At this stage it

is not possible to sign a copy of this order nor a

certified copy of this order could be issued by the

registry. In these circumstances, 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. Parties will

act on production of a digitally signed copy sent by fax

and/or email.

Justice Tarun Agarwala Presiding Officer

Justice M.T. Joshi Judicial Member

8.6.2021 RAJALA Digitally signed by RAJALAKSHMI RHN KSHMI HDate:

NAIR 2021.06.12 H NAIR 18:11:09 +05'30'