Mr. Jangoo Dalal vs Sebi

DATE : 05.03.2018

Misc. Application No. 42 of 2018 And Appeal No. 42 of 2018

Mr. Jangoo Dalal 301-Marker Mansion, 623, Lady Jahangir Road, Dadar, Mumbai 400 014. ..... Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, C-4A, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. ...... Respondent

Ms. Sakeena Mahadik, Advocate with Mr. Pankaj Uttaradhi, Advocate i/b Visesha Law Services for the Appellant. Mr. Mustafa Doctor, Senior Advocate with Mr. Pranav N. Jain, Mr. Chirag Bhavsar, Advocates i/b MDP & Partners for the Respondent.

CORAM : Justice J. P. Devadhar, Presiding Officer Dr. C. K. G. Nair, Member

Per : Justice J. P. Devadhar (Oral)

Misc. Application No. 42 of 2018 :

1.

By this misc. application appellant seeks condonation of 6 days delay

in filing this appeal. For the reasons stated in the application, delay is

condoned. Misc. Application is disposed of accordingly.

Appeal No. 42 of 2018 :

1. This appeal is filed to challenge the order passed by the Adjudicating

Officer ('A. O.' for short) of Securities and Exchange Board of India 2

('SEBI' for short) on November 23, 2017. By the said order penalty of

Rs. 10 lac is imposed on the appellant under Section 15HB of the Securities

and Exchange Board of India Act, 1992 ('SEBI Act' for short).

2. At the relevant time the appellant was the non-executive director of

Smartlink Network System Ltd. ('company' for convenience) and the

appellant was also a 'designated person' of the company in terms of

Securities and Exchange Board of India (Prohibition of Insider Trading)

Regulations, 2015 ('PIT Regulations' for short).

3. Basic charge levelled and held against the appellant is that the

appellant sold 30,000 shares of the company when the trading window was

closed without obtaining pre clearance and the same was in gross violation

of the PIT Regulations.

4. It is relevant to note that the company itself had instituted an inquiry

against the appellant on the very same issue and found that on account of

above sale effected during the period when the trading window was closed

the appellant had avoided loss of Rs. 1,06,200/- and directed the appellant

to deposit the said amount in the Prime Minister's Relief Fund.

Accordingly, the appellant has remitted that amount to the Prime Minister's

Relief Fund.

5. In relation to the impugned order whereby penalty of Rs. 10 lac is

imposed, counsel for the appellant submitted that the sale was effected

inadvertently and without any intention to violate the PIT Regulations and,

therefore, imposition of penalty is unjustified. We see no merit in the

above contention, because, being a non executive director and a 'designated

officer', the appellant ought to have known that selling the shares of the

company during the period when the trading window was closed without 3

obtaining the pre clearance was in gross violation of the PIT Regulations.

Having violated the PIT Regulations even inadvertently, the appellant

cannot escape penal liability.

6. It was contended by counsel for the appellant that the appellant is in

the process of filing a consent application and, therefore, time be granted to

the appellant. There is no merit in this contention, because, the appellant

had already filed a consent application on August 10, 2017 filed and the

same has been rejected by SEBI on ground that the violation under the

Insider Trading Regulations cannot be compounded. Therefore, the

appellant is not justified in seeking time to file another consent application.

7. Counsel for the appellant submitted that the AO has failed to take into

consideration the mitigating factors such as, the violation allegedly

committed by the appellant was a single violation committed inadvertently

and the notional profits made by the appellant have already been remitted to

the Prime Minister's Relief Fund. It is further submitted that the above

mitigating factors and the mitigating factors set out in Section 15J have not

been considered by the A. O., and, therefore, penalty imposed against the

appellant deserves to be deleted.

8. We see no merit in the above contention. Fact that part of the loss

averted by the appellant as determined by the company has been paid to the

Prime Minister's Relief Fund would not preclude SEBI from determining

the actual loss averted by the appellant. In the impugned order, the A. O.

has found that the loss averted by the appellant was more than Rs. 4.28 lac.

The A.O. has accepted the plea of the appellant that he was not in

possession of UPSI when 30,000 shares of the company were sold. The A.

O. has found the appellant guilty of trading in the shares of the company

when the trading window was closed and not procuring pre clearance for 4

sale of shares when the trading window was closed. Penalty imposable

under Section 15HB of SEBI Act for such violations is upto Rs. 1 crore.

However, the A. O. after taking all the mitigating factors has imposed

penalty of Rs. 10 lac as against the imposable penalty of Rs. 1 crore, which

cannot be said to be excessive or unreasonable.

9. For all the aforesaid reasons, we see no merit in the appeal and the

same is dismissed with no order as to costs.

Sd/-

Justice J. P. Devadhar Presiding Officer

Sd/-

Dr. C. K. G. Nair Member 05.03.2018 Prepared & Compared by PTM