Ms. Sunita Gupta vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision: 21.04.2017

Appeal No. 193 of 2016

Ms. Sunita Gupta E-1, Model Town-II, Delhi- 110 009 ...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. Shambhu Nath Singh, Advocate for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Anubhav Ghosh, Advocate i/b The Law Point for the Respondent.

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

Per: Justice J.P. Devadhar (Oral)

1.

This appeal is filed to challenge the order passed by the Whole

Time Member ("WTM" for short) of Securities and Exchange Board of

India ("SEBI" for short) on April 13, 2016. By the said order the

appellant is restrained from accessing the securities market for a period

of 3 years under Section 11 and 11B of Securities and Exchange Board of

India Act, 1992 ("SEBI Act" for short) for violating regulation 11 of the

Securities and Exchange Board of India (Prohibition of Fraudulent and

Unfair Trade Practices relating to Securities Market) Regulations, 2003

("PFUTP Regulations" for short).

2

2. In Para 21 of the impugned order the WTM has recorded thus:-

"It has been alleged in the SCN that Ms. Sunita Gupta had indulged in synchronized trades and circular trades. Out of the 3,42,246 shares of the Company bought by Ms. Sunita Gupta trades for 1,76,813 shares were synchronized with trades of Mr. Purshottam Khandelwal, Cosmo and the entities of Vishvas Group viz; Mr. Praveen Poddar, Mefcom and ISF. Further, out of 3,42,246 shares sold by her, trades for 74,205 shares were synchronized with trades of Mr. Purshottam Khandelwal, Cosmo and the entities of Vishvas Group viz; Mr. Praveen Poddar, Mefcom and ISF. Further, out of 3,42,246 shares of the Company bought by Ms. Sunita Gupta during the investigation period 2,88,800 shares were involved in circular trading with Mr. Purshottam Khandelwal, Cosmo and the entities of Vishvas Group viz; Mr. Praveen Poddar, Mefcom and ISF and out of the 3,42,246 shares sold by her 288,387 shares were involved in circular trading with Mr. Purshottam Khandelwal, Cosmo, Vishvas and the entities of Vishvas Group viz;

Mr. Praveen Poddar, Mefcom and ISF. Her trades had also contributed in LTP/NHP manipulation as described in the SCN.

Ms. Sunita Gupta has not given any plausible explanation to these types of trades with connected entities rather she has admitted to have indulged in those trades as sub-broker and has claimed her transactions to be bona fide. Thus, by her own admissions, she has not 3

only admitted her alleged trades but also to be acting as sub-broker which requires registration with SEBI. I, therefore, reject her contentions."

3. From the aforesaid findings recorded in the impugned order it is

apparent that the appellant had indulged in synchronized trades, circular

trades and her trades had also contributed to substantial variation in the

Last Traded Price (LTP)/New High Price (NHP) which is prohibited

under the PFUTP Regulations.

4. Above findings recorded in the impugned order is not contested by

the counsel for the appellant on merits. Only argument advanced by the

counsel for the appellant is that once the Adjudicating Officer ("AO" for

short) of SEBI for the very same violation has passed an order on July

22, 2014 imposing penalty of Rs. 60 lac, then, the WTM of SEBI could

not have initiated parallel proceedings under Section 11, 11(4) and 11B

of the SEBI Act and pass the impugned order. Relying on decisions of

the Apex Court in case of Kunjan Nair Sivaraman Nair v/s Narayanan

Nair & Ors. reported in (2004) 3 SCC 277 and in case of

Dr. Subramanian Swamy v/s State of Tamil Nadu & Ors. reported in

2014 (1) Scale 79 it is submitted by counsel for the appellant that once

the proceeding initiated by SEBI for alleged violation of PFUTP

Regulations has resulted in passing an adverse order by the AO on July

22, 2014, then, for the very same violations initiating second proceedings

which has resulted in passing the impugned order, is wholly illegal and

contrary to law. It is also submitted by the counsel for the appellant that 4

restraining a person from accessing the securities market under Section

11(4) of the SEBI Act is penal in nature and therefore, once penalty is

imposed by the AO for the PFUTP violations, the WTM, for the same

violations, could not have invoked Section 11(4) of SEBI Act and

penalize the appellant by restraining her from accessing the securities

market for 3 years.

5. We see no merit in the above contentions.

6. Where a person violates the provisions contained in the SEBI Act

and the regulations made thereunder, then, SEBI is empowered to initiate

penalty proceedings against that person under Chapter VIA of SEBI Act

and also issue directions in the interests of investors or securities market

as it deems fit under Chapter IV of SEBI Act. Thus, the powers conferred

on the Board under Chapter IV are independent from the powers to

impose penalty under Chapter VIA of SEBI Act. Accordingly, in the

present case, since the appellant had indulged in synchronized/ circular

trades in gross violation of SEBI Act/ PFUTP Regulations and the same

was detrimental to the interests of the investors and securities market, the

Board deemed it fit to issue direction under Chapter IV in addition to the

penalty imposed under Chapter VIA of SEBI Act. Therefore, in the facts

of present case, initiation of proceedings under Chapter IV even after

initiating proceedings under Chapter VIA cannot be faulted.

7. Counsel for appellant had placed reliance on decisions of the Apex

Court in the case of Kunjan Nair Sivaraman Nair (Supra) & in the case of

Dr. Subramanian Swamy (Supra) which have no relevance to the facts of 5

present case, because, SEBI Act itself contemplates that where a person

violates SEBI Act and the regulations made thereunder, then apart from

imposing penalty under Chapter VIA, it would be open to the Board to

issue such directions at it deems fit under Chapter IV of SEBI Act.

8. In the result, we see no merit in the appeal and the same is hereby

dismissed with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Dr. C.K.G. Nair Member 21.04.2017 Prepared & Compared By: PK