Mr. Mahendra Nihalchand Surana & Others vs Sebi

IN THE SECURITIES APPELLATE TRIBUNAL AT MUMBAI DATED THIS THE 2ND DAY OF APRIL, 2026 CORAM: Justice P.S. Dinesh Kumar, Presiding Officer Ms. Meera Swarup, Technical Member Dr. Dheeraj Bhatnagar, Technical Member Appeal No.662 of 2023 1. Mr. Mahendra Nihalchand Surana 304, "A" Wing, Abrol Vastu Park, Near Ryan International School, Mumbai - 400064. 2. Mahendra Nihalchand Surana HUF 304, "A" Wing, Abrol Vastu Park, Near Ryan International School, Mumbai - 400064. 3. Ms. Anita Mahendra Surana 304, "A" Wing, Abrol Vastu Park, Near Ryan International School, ...Appellants Mumbai - 400064. (By Mr. Abhineet Pange, Advocate with Mr. Sumit Agrawal and Mr. Kavish Garach, Advocates i/b. Regstreet Law Advisors for the Appellants.) Securities and Exchange Board of India Plot No.C4-A, „G‟-Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051, Maharashtra. ...Respondent 2 (By Mr. Sumit Rai, Advocate with Ms. Khushbu Chhajed and Ms. Khushbu Trivedi, Advocates i/b. MDP Legal for the Respondent.) With Appeal No.701 of 2023 1. Aakansha Rajendra Surana B Wing, 3305/06, Oberoi Woods, Mohan Gokhale Road, Mumbai - 4000063. 2. Aayush Rajendra Surana B Wing, 3305/06, Oberoi Woods, Mohan Gokhale Road, Mumbai - 4000063. 3. Beena Rajendra Surana B Wing, 3305/06, Oberoi Woods, Mohan Gokhale Road, Mumbai - 4000063. 4. Rajendra N. Surana HUF B Wing, 3305/06, Oberoi Woods, Mohan Gokhale Road, Mumbai - 4000063. 5. Rajendra Nihalchand Surana B Wing, 3306, Oberoi Woods, Mohan Gokhale Road, ...Appellants Mumbai - 4000063. (By Mr. Saurabh Bachhawat, Advocate with Mr. Kaushik Puranik, Mr. Shantibhushan Nirmal, Ms. Roshani Shaikh and Mr. Mohd Saif Mohd Ali Khatri, Advocates i/b.

Profess Law Associates for the Appellants.) The Adjudicating Officer Securities and Exchange Board of India SEBI Bhavan, Plot No.C-4A, G-Block, 3 Bandra Kurla Complex, Mumbai-400051. ...Respondent (By Mr. Sumit Rai, Advocate with Ms. Khushbu Chhajed and Ms. Khushbu Trivedi, Advocates i/b. MDP Legal for the Respondent.) With Appeal No.883 of 2023 Suudeep Luniya 40, Devi Path, J. L. N. Marg, Jaipur, Rajasthan-302004. ...Appellant (By Mr. Deepak Dhane, Advocate i/b. Corporate Pleaders for the Appellant.) Securities and Exchange Board of India SEBI Bhavan, C-4A, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai-400051. ...Respondent (By Mr. Sumit Rai, Advocate with Ms. Khushbu Chhajed and Ms. Khushbu Trivedi, Advocates i/b. MDP Legal for the Respondent.) THESE APPEALS ARE FILED UNDER SECTION 15T OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 TO SET ASIDE ORDER DATED MAY 31, 2023 PASSED BY THE SEBI. THESE APPEALS HAVING BEEN HEARD AND RESERVED FOR ORDERS ON MARCH 13, 2026 COMING ON FOR PRONOUNCEMENT OF ORDER THIS DAY, THE TRIBUNAL MADE THE FOLLOWING: 4 ORDER Per: Justice P. S. Dinesh Kumar, Presiding Officer These three appeals are directed against order dated May 31, 2023, passed by the AO1, SEBI2 imposing a penalty of ₹5 Lakhs each on the appellants for manipulative trading in the scrip of Gayatri Sugars Ltd. They are heard together and disposed of by this common order.

2. Appeal No.662 of 2023 is filed by noticee Nos.9, 11 and 12, Appeal No.701 of 2023 by noticee Nos.7, 8, 10, 13 and 14 and Appeal No.883 of 2023 by noticee No.6. 3. Brief facts of the case are, SEBI conducted an investigation into the trading of Gayatri Sugars Limited („Gayatri Sugars‟ for short) scrip between April 10, 2018 and April 23, 2018 and it revealed that noticee Nos.1 to 33 had circulated SMS during the investigation period inducing the investors to purchase the shares and there was a sudden increase in the trading volume. After investigation, an SCN4 was issued to 16 noticees. Appellants in Appeal No.662 of 2023 submitted their reply contending inter alia: 4. Appellants in Appeal No.701 of 2023 filed their reply to the SCN: 5. Appellant in Appeal No.883 of 2023 stated in his reply to the SCN that he traded in the scrip because the share price was increasing; that he was not aware of any counter-party; and that even after the investigation period, he was holding 2,84,776 shares. 6. After adjudication, the AO has imposed a penalty of Rs.5 Lakhs on these appellants and others.

7. We have heard Mr. Abhineet Pange, learned Advocate for the appellants in Appeal No.662 of 2023, Mr. Saurabh Bachhawat, learned Advocate for the appellants in Appeal No.701 of 2023, Mr. Deepak Dhane, learned Advocate for the appellant in Appeal No.883 of 2023 and Mr. Sumit Rai, learned Advocate for SEBI. 8. Learned Advocate for appellants in Appeal No.662 of 2023 submitted that appellants5 have not received any SMS. SEBI‟s entire case hinges upon the alleged dissemination of message through SMS recommending purchase of shares in Gayatri Sugars. There is no specific finding against the appellants to support the penalty. He submitted that appellants had acquired shares between July and December, 2017 and sold in their normal course of trading. First appellant suffered a loss of ₹27,525/-, second appellant suffered a loss of ₹9,700/- and third appellant suffered a loss of ₹27,075/-. He submitted that the findings recorded against the appellants in para Nos.55 and 56 are wholly unsustainable in law and prayed that the appeal may be allowed. 9. Learned Advocate for appellants in Appeal No.701 of 2023, submitted that the noticee Nos.7 to 14 belong to one family.

There is no material on record to show that the sellers and the purchasers had any connection. During the investigation period, the total number of shares traded was about 1.83 Crore shares and the average trading per day was 18.30 Lakh shares. (noticee Nos.9,11 and 12) 5 7 The appellants have traded in about 2.37 Lakh shares which is a negligible quantity. SEBI has not prosecuted other traders, who actually accounted for millions of trades. Appellants in these appeals decided to sell their shares because the share price was falling. They also did not receive any SMS. In substance, it was submitted that the appellants are in no way involved in any synchronised trade and prayed that the appeal may be allowed. 10. Learned Advocate for appellant in Appeal No.883 of 2023 submitted that the Adjudicating Officer has recorded a finding in para 31 of the impugned order that noticee No.5 had acquired 77,08,789 shares pursuant to a scheme of amalgamation and he had sold them to the appellant herein. He submitted that the appellant regularly traded in the shares of Gayatri Sugars. He pointed out6 that at the end of F.Y.2018-19, appellant had retained 2,84,776 shares of Gayatri Sugars and he had no connection with the seller of these shares.

11. Mr. Sumit Rai, learned Advocate for the SEBI submitted that the investigation has revealed that the appellants in Appeal Nos.662 and 701 of 2023, who belong to one family, created a misleading appearance of trading in the scrip of Gayatri Sugars. The meeting of minds between the sellers and buyers was evident from the trades executed by the appellants with noticee Nos.15 and 16. The trading pattern exudes a planned approach to provide exit to the Surana family and the appellants. On April 10, 2018, 4,15,003 shares out of the total 4,22,959 were traded. Page 66 of memorandum of appeal 8 The number of shares traded till April 9, 2018 was 1,00,158 shares. He argued that it cannot be a mere coincidence that the time and share price of appellant‟s shares matched with that of counter-parties. With regard to the appellant in Appeal No.883 of 2023, Mr. Rai submitted that the appellant had purchased 5,00,806 shares from noticee No.5 in a synchronised manner. 12. Quoting the examples7 of sell orders of noticee Nos.7 to 10 and 14, Mr. Rai submitted that they had placed sell orders at a higher price than the traded price and subsequently, modified the price to conclude the trades.

13. In substance, he submitted that the AO‟s finding that the appellants had violated the securities laws based on the trading pattern does not call for interference. 14. We have carefully considered the rival contentions and perused the records. 15. The point that arises for our consideration is, whether the appellants violated the SEBI (PFUTP) Regulations, 20038? 16. Undisputed facts of the case are, during the investigation period, about 1.83 Crore shares of Gayatri Sugars were traded. Noticee Nos.7 to 149 are alleged to have sold 4.22 Lakh shares; Para 37 of the impugned order Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair 8 Trade Practices Relating to Securities Market) Regulations, 2003 9 Appellants in Appeal Nos.662 and 701 of 2023 9 and appellant in appeal No.883 of 2023 is alleged to have purchased 5,00,806 shares from noticee No.5. 17. It is not in dispute that except the allegation of synchronised trading, no material is brought on record to show that the sellers and the purchasers were connected in any manner such as exchange of phone calls or being relatives, friends or acquaintances.

Further, sellers‟ claim that they did not receive any SMS is also not disproved by any cogent evidence such as mobile carrier certificate. It is also not in dispute that the average number of shares traded during the investigation period of about 10 days10 is about 1.83 Crores. The total number of shares dealt by noticee Nos.7 to 1411 are 4.22 Lakhs on the first day of investigation i.e. April 10, 2018. Thus, compared to 1.83 Crore shares, the number of shares (4.22 Lakhs) sold by noticee Nos.7 to 14 is miniscule in nature. 18. The entire case is based on the alleged synchronised trades. The only finding that the AO has recorded against the noticee Nos.7 to 14 is in paragraph Nos.53 to 56 of the impugned order. With regard to the appellants‟ contention that there was no impact on the market as their shares constituted only 1.3% of the market, the AO based on certain statistics has held that if all the trades of the noticees are taken together, it created a misleading appearance about the scrip impacting the price and causing loss to gullible investors. We have carefully analysed this finding in para 53 of the impugned order.

As noted 10 April 10 to April 23, 2018 11 appellants in appeal Nos.662 and 701 of 2023 10 hereinabove, the average trading per day during the investigation period was 18.30 Lakh shares and during the entire investigation period about 1.83 Crore shares were traded. The statistics recorded by the AO shows that the highest sale is of 4.22 Lakh shares by the noticee Nos.7 to 14 12 during the investigation period. When compared with the huge volume of trading of about 1.83 Crore shares, 4.22 Lakh shares is insignificant and therefore, the AO‟s finding that this trading had any impact on the price and caused any loss to the investors is perverse. 19. Adverting to para 37(e), (f), (g) and (h) of the impugned order, it was strenuously contended by Mr. Rai that noticee Nos.7, 8, 10 and 14 had consciously modified and lowered the „sell‟ orders to suit the traded price. According to him this amounted to manipulation. We have carefully considered the findings in the said paragraphs which read thus: This order was further updated to 9.25 at 14:19:50.801884; appellants in appeal Nos.662 and 701 of 2023 11 h) At 14:15:58.745098, Noticee No.7 placed sell order no.1523331000001277732 for 50,000 shares at Rs.9.44.

At that time, the trade rate was at Rs.9.40. At 14:19:45.433790, the said sell order was updated to sell order rate of Rs.9.25;" 20. In the case of noticee No.7, he had placed sell order at ₹9.44 when the traded rate was ₹9.40. In next four minutes he reduced the sell order to ₹9.25. Similar is the case of noticee Nos.8, 10 and 14. We may record that when trading takes place on the Exchange‟s platform, it is not possible for the seller or buyer to identify the counter-party unless they are otherwise connected and agree to trade at a particular time. Evidently, no connection has been established between the appellants and the counter-parties. In the case on hand, appellants‟ stand is, they had acquired shares between July and December, 2017. The news reports had shown that sugar price was falling and it persuaded them to sell the shares in the sugar company. Appellants have produced a news report from „Live Mint‟ dated April 9, 2018 along with their rejoinder. It says that depressed sugar prices will see the sugar divisions making losses. This news article is not denied. In the absence of any material contrary to the stand taken by the appellants, it is reasonable to infer that a prudent investor would be guided by the news reports to decide about his stocks.

Surprisingly, the AO has rejected appellants‟ similar contention based on governmental policy, excess stock of sugar etc. In our view, a retail investor or a trader takes business decision based on various factors. Unless, the theory propounded by the Regulator is based on some foundational facts and figures, a mere ipse dixit of the 12 Regulator is not sufficient to record an adverse finding. Therefore, we find no merit in Mr. Rai‟s contention. 21. Learned Advocate for the appellant in appeal No.701 of 2023, adverting to appellants‟ reply to the SCN submitted that the appellants were trading in the shares prior to the investigation period. We have perused the table contained in 3(g)(iv) of the reply to the SCN as „Exhibit D‟ and it reads as follows: 22. The above table shows that appellants have sold about 82,041 shares between March 26, 2018 and April 03, 2018, which is about 1/5th the quantity of shares sold by them during the investigation period, which commenced on April 10, 2018. It shows that these appellants were regularly trading in Gayatri Sugar‟s shares and no suspicious circumstance is demonstrated by the Regulator to sustain the alleged violation.

23. The next finding is in para 55 of the impugned order with regard to noticee Nos.9, 11 and 12. The AO has noted 13 appellant‟s contention that their trades were not dependent on the alleged bulk SMS and recorded thus: (Emphasis Supplied) 24. Further in para 56 of the impugned order, the AO has noted thus: 25. A careful perusal of AO‟s order shows that the above findings are not based on any logical inference. The AO‟s finding that appellants have failed to explain as to why they sold all their holdings on the same day and how their trades matched with noticee Nos.15 and 16 is rather strange. We are conscious of the fact that the standard of proof required is preponderance of probability, but at the same time, the finding recorded by the adjudicating authority must be logical and acceptable to a prudent human being. In the case on hand, there is no material to hold that the sellers and buyers are connected in any manner. The total quantity of shares traded during the investigation period is about 1.83 Crore shares, whereas noticee Nos.7 to 14 have sold 4.22 Lakh shares, which is insignificant.

SEBI has not prosecuted those had traded the remaining about 1.79 Crore shares. Thus, ex facie, the impugned order is wholly unsustainable in law so far as noticee Nos.7 to 14 are concerned. 26. Noticee No.613 has purchased 5,00,806 shares from noticee No.5. Here also, there is no material to show that the seller and purchaser were connected in any manner. The learned AO has recorded a finding that noticee No.5 was a top seller and had contributed about 15.39% of sale. This finding is not sustainable for want of a logical connection of facts. As noted above, as against 1.83 Crore shares, purchase of 5 Lakh shares is not a significant circumstance to affect the market. Further, the appellant has produced year-wise opening and closing balance of shares in Gayatri Sugars for F.Y. 2017-18 to F.Y.2019- 2014. It shows that opening balance in F.Y. 2017-18 was 15.73 Lakh shares and closing was 10.09 Lakh shares. For F.Y.2018-19 opening was 10.09 Lakh shares and closing was 2.84 Lakh shares. Thus, there is no adverse material on record to reject appellant‟s claim that he was a regular trader in the normal course and he was trading in the said scrip.

Accordingly, we hold that the findings recorded against noticee No.6 are also unsustainable in law. Therefore, we hold that the appellants 13 appellant in appeal No.883 of 2023 14 Page 66 of memorandum of appeal 15 have not violated the SEBI (PFUTP) Regulations and accordingly, answer the point for consideration in the negative. 27. In the light of above discussion, the impugned order qua noticee Nos.6 to 14 is unsustainable in law. Hence, the following: iv. No costs. Justice P.S. Dinesh Kumar Presiding Officer Ms. Meera Swarup Technical Member Dr. Dheeraj Bhatnagar Technical Member RAJALA Digitally signed 02.04.2026 KSHMI by RAJALAKSHMI H NAIR Date: 2026.04.09 RHN H NAIR 10:22:24 +05'30'