Manish Suresh Joshi vs Sebi

Date of Decision : 13.01.2020

Appeal No. 2 of 2020

Manish Suresh Joshi 1/1229/3190, Tagore Nagar, Vikhroli (East), Mumbai - 400083. ......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. Vikas Bengani, Advocate for the Appellant. Mr. Anubhav Ghosh, Advocate with Mr. Ravishekhar Pandey, Advocate i/b The Law Point for the Respondent.

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

Per : Justice Tarun Agarwala, Presiding Officer (Oral)

1.

The present appeal has been filed against the order passed by

the Adjudicating Officer (hereinafter referred to as 'AO') of

Securities and Exchange Board of India (hereinafter referred to as 2

'SEBI') dated November 29, 2019 imposing a penalty of Rs. 1 lac

upon the appellant 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').

2. The facts leading to the filing of the present appeal is, that

SEBI noticed a sharp increase in the price of the shares from

Rs. 41.00 to Rs. 122.65 during the period from May 29, 2009 to

April 30, 2010 of the then company known as Spectacle Industries

Ltd. Pursuant to an investigation, a show cause notice was issued

and, after considering the reply, an order of penalty dated September

26, 2014 was passed against the appellant. The said order was

challenged by the appellant which was allowed by an order of the

Tribunal dated March 8, 2016. The AO's order was set aside and the

matter was remitted to the AO for fresh consideration.

3. Pursuant to the remand, a fresh show cause notice dated August

5, 2019 was issued by the AO. The charge that the appellant

indulged in synchronized trades was dropped and only the charge

relating to creating artificial volume in the scrip of the company

remained. The AO by an order dated November 29, 2019 found that

the charges levelled against the appellant stood proved and 3

accordingly imposed a penalty of Rs. 1 lac. The appellant, being

aggrieved by the said order, has filed the present appeal.

4. The finding that the appellant was guilty of fraudulent and

unfair trade practices under Regulations 3 and 4 of the PFUTP

Regulations was based on the sole finding that the appellant is

connected with one Narendra Prabodh Ganatra who, in turn, was

connected to the Pabari-Parikh Group of 28 entities (PPG Entities).

The AO on the basis of this connection has given a finding that the

appellant was connected with the PPG entities and, therefore, were

connected with each other and traded heavily in the scrip of the

company. The AO also found that the appellant was guilty of

connivance with the counter party and applying the decision of the

Hon'ble Supreme Court in the case of Securities and Exchange

Board of India vs Kishore R. Ajmera [(2016) 6 SCC 368] decided

on February 23, 2016 found him guilty on the preponderance of

probability.

5. Having heard the learned counsel for the parties and having

perused the record, we find that proceedings in the case of Narendra

Prabodh Ganatra was dropped by an order of AO dated November

29, 2019 wherein the AO after considering the evidence on record

and considering the total volume contribution made by Ganatra held 4

that the trades made by Ganatra did not contribute to the price

increase and, therefore, exonerated him from the charge of violation

of Regulations 3 and 4 of the PFUTP Regulations.

6. The decision of the AO in Ganatra case has not been disputed

by the respondent. However, an attempt was made to justify the case

on the ground that the volume of trade made by Ganatra was

miniscule compared to the volume of trade made by the appellant.

Be that as it may. We are of the view that in view of exoneration of

Ganatra of the charge of violation of PFUTP Regulations, the

connection with the PPG Entities gets broken. Once the link in the

chain is broken, there was no other connection between the appellant

with that of the PPG Entities. The only link through which the

appellant was found guilty was that the appellant was connected with

Ganatra who, in turn, was connected with the 28 entities of PP

Group. Once the Ganatra link is broken, there was no evidence to

show that the appellant was in any way connected directly or

indirectly with the PPG Entities.

7. In the light of the aforesaid, the charge of connivance of the

appellant with the counter party, namely, PPG Entities cannot be

proved. The principles involved in the Ajmera case cannot be made

applicable to the facts and circumstances of the present case. 5

Consequently, the impugned order cannot be sustained and is

quashed. The appeal is allowed.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Justice M. T. Joshi Judicial Member

13.01.2020 Prepared & Compared by PTM