Neetu Gupta vs Sebi

Order Reserved On: 07.02.2020 Date of Decision : 25.02.2020

Misc. Application No. 521 of 2019 And Appeal No. 420 of 2019

Giriraj Kumar Gupta HUF FF 41, A, F-Block, Mangal Bazar, Laxmi Nagar, New Delhi- 110 095 ...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

WITH Misc. Application No. 522 of 2019 And Appeal No. 421 of 2019

Rajeev Kumar Ram Prasad Gupta 5/127, First Floor, Vaishali Ghaziabad, Uttar Pradesh- 201 010 ...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 2

WITH Misc. Application No. 514 of 2019 And Misc. Application No. 88 of 2020 And Appeal No. 422 of 2019

Giriraj Kumar Jagdish Prasad Gupta FF-41 A, III Floor, Mangal Bazar, Laxmi Nagar, New Delhi-92 ...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

AND Misc. Application No. 524 of 2019 And Appeal No. 423 of 2019

Neetu Gupta FF-41 A, F-Block, Mangal Bazar, Laxmi Nagar, New Delhi-92 ...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. Bhupender Sharma, Advocate with Mr. Sumit Kumar, Advocate for Appellants.

Mr. Kevic Setalvad, Senior Advocate with Mr. Chirag Bhavsar, Ms Eram Quraishi and Mr. Harshad Vyas, Advocates i/b MDP & Partners for the Respondent. 3

CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M. T. Joshi, Judicial Member

Per: Dr. C.K.G. Nair

1.

These four appeals have been preferred to challenge the

orders of the Whole Time Member ("WTM" for convenience)

of the Securities and Exchange Board of India ("SEBI" for

convenience) dated June 04, 2019 and an addendum dated July

30, 2019. By the said order(s) the appellants, among others,

have been restrained from dealing in the securities market,

directly or indirectly, for a period of 4 years.

2. The order impugned in these appeals have been issued

pursuant to an investigation by SEBI in the abnormal price rise

in the scrip of Ram Minerals and Chemicals Limited ("RMCL"

for convenience), a company listed in the BSE Limited. During

the period of examination which is from December 13, 2013 to

December 10, 2014 the price of the scrip increased from ` 2.2 to

` 219.55. SEBI had also received a reference from the Principal

Director of Income Tax (Investigation), Kolkata vide letter

dated April 27, 2015 alleging the usage of the stock exchange

mechanism to benefit from Long Term Capital Gain Tax,

wherein one of the scrips included was that of RMCL. 4

3. Thereafter, a show cause notice was issued on June 27,

2017 to 19 entities/ noticees enclosing the findings of SEBI's

investigation. In the show cause notice it was alleged that

during the period of investigation, the price of the scrip

increased from ` 2.2 to ` 219.55 with a net Last Traded Price

("LTP") of ` 217.35. The show cause notice also provided

information relating to the 10 top buyers, 15 top sellers

(counterparties); their detailed buy and sell position,

contribution to LTP etc. Three of the appellants; Giriraj Kumar

Gupta HUF, Giriraj Kumar Jagdish Prasad Gupta and Rajeev

Kumar Ram Prasad Gupta were part of the buyers who

contributed substantially to LTP, about 3% or more while the

appellant Neetu Gupta was on the sell side contributing to

positive LTP of 1.21% of the total market positive LTP. All

these details are given at pages 3 to 7 of the impugned order.

4. Further, it is held in the impugned order that connection

between the noticees/ appellants have been established in terms

of off-market transfers in the scrip, company directorships,

address and through fund transfers. Accordingly, it is held in

the impugned order that the three appellants Giriraj Gupta,

Neetu Gupta and Rajeev Kumar Gupta received 1500 shares

each off-market from All Time Buildtech Pvt. Ltd. on March

29, 2014. From such off-market transfers a connection is 5

established between the seller and the buyer on the premise that

without such connection an off-market transfer is not possible

and that too in shares of the same scrip from the same entity.

5. Similarly, it is held in the impugned order that the

connections between All Time Buildtech Pvt. Ltd. and three

other noticees (Anuradha Arora, Aradhna Choudhary and B G

Freight Shoppe India Pvt. Ltd.) are established through common

address and common directorship. Similar connection has been

established regarding fund transactions, among others between

All Time Buildtech Pvt. Ltd. and B G Fright Shoppe India Pvt.

Ltd.

6. It is the contention of the learned counsel Shri Bhupender

Sharma, appearing on behalf of the appellants, that three of the

appellants herein are connected/ related is an admitted position

with appellant in Appeal No. 422 of 2019 as the Karta of

appellant in Appeal No. 420 of 2019 and appellant in Appeal

No. 423 of 2019 as the wife of appellant in Appeal No. 422 of

2019. So there is nothing untoward in the finding that they are

connected entities which is the fact but appellant in Appeal No.

421 of 2019 is not connected to the other three entities. It was

also contended that the only connection established between

these appellants to the entire issue is the off-market purchase of 6

1500 shares each by the three appellants from All Time

Buildtech Pvt. Ltd. on March 29, 2014. It is the contention of

the learned counsel for the appellants that since the appellants

were trading in the securities market they came to know of the

parties and bought the shares. Moreover, the appellants traded

only on a few days. For instance, appellant Neetu Gupa traded

only in two shares, 1 share each on two occasions; appellant

Giriraj Kumar Gupta HUF traded in 15 shares on three

occasions combined and appellant Rajeev Kumar Ram Prasad

Gupta traded on 29 occasions and in a total of 1105 shares. It

was also submitted that all these details are also given in Table-

7 (pg. 13 and 14) of the order of the Adjudicating Officer dated

July 31, 2019. Similarly, even the alleged LTP contribution is

very insignificant in respect of these trades and in the case of

the seller Neetu Gupta, no charge of LTP contribution can be

attributed because a seller would always wants to sell at

maximum possible rates.

7. It was also contended by the learned counsel that seven

entities who have traded in similar ways have been let off with a

warning by the same impugned order. Hence since the

appellants have also traded in miniscule quantities in the normal

course of business and having found no connection with other

entities except an off-market transaction with one of them which 7

is not sufficient to invoke provisions of SEBI (Prohibition of

Fraudulent and Unfair Trade Practice relating to Securities

Market) Regulations ("PFUTP") violations. In any case, it was

contended that the restraint of 4 years imposed on the appellants

is too harsh particularly when the appellants earn their

livelihood by trading in the securities market.

8. We have also heard Shri Kevic Setalvad, learned Senior

counsel representing SEBI who emphasised that off-market

purchases by three of the appellants from the same party on the

same day is not just a co-incidence and when the scrip has been

manipulated to raise the price from ` 2.2 to ` 219.55 and

wherein a group of entities including the appellants are found to

have played a substantive role in fraudulent and manipulative

trade practices. Therefore, there is no deficiency in the

impugned order and the debarment imposed on the appellants is

in tune with the seriousness of the violations committed by

them. It was also contended by the learned senior counsel for

the respondent that a small quantity of buy or sell order itself is

deceptive as such orders were placed when there was large

number of counterparty orders in the market. Learned senior

counsel for respondent also placed their reliance on the orders

of this Tribunal in Jayprakash Bohra vs. SEBI (Appeal No.

162 of 2019 decided on 05.11.2019 and Shri Lakhi Prasad 8

Kheradi vs. SEBI (Appeal No. 232 of 2017 decided on

21.06.2018.

9. Though, we note that the appellants have raised the issue

of delay, the same is not argued by the learned counsel. Hence

we do not propose to go into the issue and deal with only the

merit of the matter. Having heard the learned counsel for the

parties, we are of the considered view that the impugned

transactions, in the facts and circumstances of the matter, would

fall in the realm of violations of PFUTP Regulations. Individual

argument that each entity's trade is miniscule and only on a few

days alone etc. is not sufficient to rebut the findings in the

impugned order. The appellants have not given the details of

their off-market transactions with an entity which is also found

to be part of the group which manipulated the scrip of RMCL.

The unwillingness of the appellants in giving the details of those

off-market transactions and in turn placing buy orders above

LTP in the market subsequently cannot be viewed in isolation.

The argument submitted by the learned counsel for the

appellants that no further connection has been established

therefore has no merit in the totality of the facts and

circumstances of the case. In such matters, the preponderance

of probability based on the totality of circumstances, as held by

the Apex Court in the matter of Kishore R. Ajmera (2016) 6 9

SCC 368 squarely applies. The orders in Jayprakash Bohra

(Supra) and Shri Lakhi Prasad Kheradi (Supra) also apply the

same ratio.

10. However, we note from the impugned order that there has

been a division of the noticees into two categories: 12 of them

have been imposed a restraint for 4 years while 7 of them have

been let off with a warning. This is apparently based on the

magnitude of trade and the contribution to the LTP. By the same

reasoning we are of the view that the restraint imposed on Neetu

Gupta (appellant in Appeal No. 423 of 2019) cannot be

sustained particularly when she was only a seller who traded

only on two occasions. However, being part of the group and

recipient of the off-market deal we do not propose to completely

exonerate her. Similarly given the facts of the matter we are of

the considered view that a uniform restraint of 4 years imposed

on the appellants is harsh.

11. In conclusion, we are of the considered view that a

warning is sufficient to meet the ends of justice in respect of

Neetu Gupta, appellant in Appeal No. 423 of 2019. In Appeal

No. 420 of 2019 and 422 of 2019 we reduce the period of

restraint from 4 years to 1 year and in Appeal No. 421 of 2019 10

we reduce the period of restraint from 4 years to 2 years.

Directions in the impugned order are modified accordingly.

12. All the appeals are disposed of on above terms with no

orders on costs. Consequently, Misc. Application Nos. 521 of

2019, 522 of 2019 524 of 2019 and 88 of 2020 seeking stay and

Misc. Application No. 514 of 2019 seeking exemption to file

certified copy of the impugned order have become infructuous

and the same are also disposed of.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 25.02.2020 Prepared & Compared By: PK