Mr. Chetan S. Kothari And Anr. vs Sebi

Date of Decision : 24.09.2019

Appeal No. 135 of 2018

1.

Mr. Chetan S. Kothari

2. Mrs. Chetna C. Kothari

Flat No. 1502, 15th Floor, Rasraj Height, Rokadia Lane, Borivali (West), Mumbai - 400 092. ..... Appellants

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. Nihar Mody, Advocate with Mr. Saurabh Bachhawat, Advocate and Mr. Ravi Vijay Ramaiya, Chartered Accountant i/b Shah & Ramaiya Chartered Accountants for the Appellants. Mr. Vishal Kanade, Advocate with Mr. Anubhav Ghosh, Ms. Rashi Dalmia, Ms. Arjita Chaturvedi, Advocates 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 : Justice Tarun Agarwala, Presiding Officer (Oral) 2

1. We have heard the learned counsel for the parties. Against an

order for violating Regulation 3(i) of the Securities and Exchange

Board of India (Prohibition of Insider Trading) Regulations, 1992

(hereinafter referred to as, 'PIT Regulations') and violation of Clause

3.2.2 and 3.2.5 of the Model Code of Conduct and Regulation 12(1)

and 12(2) of the Securities and Exchange Board of India

((Prohibition of Insider Trading) Regulations, 2015 imposing a

composite penalty of Rs. 38 lacs, the present appeal has been filed.

2. It is alleged that the appellants sold shares while in possession

of unpublished price sensitive information and also when the trading

window was closed. The stand of the appellants was that they had

never sold the shares and that without any specific instruction and

without their knowledge the appellants' broker had sold these shares.

It was also stated that these shares were in pool account of the broker

and were not sold from the demat account of the appellants.

3. We find from a perusal of the paragraph 32 of the impugned

order that personal hearing was conducted by the Adjudicating

Officer (hereinafter referred to as, 'AO') on February 1, 2018 and

thereafter the matter was reserved. Written submission according to

the appellants was filed on February 8, 2018. It seems that the AO

has considered an email of the broker dated February 16, 2018 3

wherein the broker has said that the shares were sold on the

instruction of the appellants. This is a vital fact which if considered

by the AO was required to be forwarded and accosted to the

appellants. Considering such material without giving an opportunity

to the appellants is violative of the principles of natural justice.

4. Thus, on this short ground, the impugned order cannot be

sustained and is quashed. The matter is remitted to the AO to re-

decide the matter after providing a copy of the e-mail of the broker to

the appellants and after giving an opportunity to the appellants to file

an appropriate reply. Proceedings will commence from that stage

onwards and the AO will decide the matter afresh within six weeks

thereafter.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 24.09.2019 Prepared & Compared by PTM