Pearl Arcade Trading Private Limited vs Sebi

Date of Decision: 09.01.2023

Appeal No. 06 of 2023

Rashmi Jain W/o Late Shri Vijay Kumar Jain Front Row House, H. No. 4, Grand Parady Apartments, August Kranti Marg, Grant Road West, Mumbai- 400 036 ...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. Deepak Sharma, Practicing Company Secretary for the Appellant.

Mr. Ravishekhar Pandey, Advocate with Mr. Nishit Dhruva and Ms. Shefali Shankar, Advocates i/b MDP & Partners, Advocates for the Respondent.

WITH Appeal No. 07 of 2023

Wave Inter Trades Private Limited A-2, Basement, Arcadia Building, Nariman Point, Mumbai- 400 021 ...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

Mr. Deepak Sharma, Practicing Company Secretary for the Appellant.

Mr. Ravishekhar Pandey, Advocate with Mr. Nishit Dhruva and Ms. Shefali Shankar, Advocates i/b MDP & Partners, Advocates for the Respondent.

WITH Appeal No. 08 of 2023

Embassy Finance & Consultants Pvt. Ltd. A-2, Basement Arcadia Building, Nariman Point, Mumbai- 400 021 ...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. Deepak Sharma, Practicing Company Secretary for the Appellant.

Mr. Ravishekhar Pandey, Advocate with Mr. Nishit Dhruva and Ms. Shefali Shankar, Advocates i/b MDP & Partners, Advocates for the Respondent.

WITH Appeal No. 09 of 2023

Ankit Jain S/o Late Shri Vijay Kumar Jain, W-76, Greater Kailash-II, New Delhi- 110 048 ...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 3

Mr. Deepak Sharma, Practicing Company Secretary for the Appellant.

Mr. Ravishekhar Pandey, Advocate with Mr. Nishit Dhruva and Ms. Shefali Shankar, Advocates i/b MDP & Partners, Advocates for the Respondent.

WITH Appeal No. 10 of 2023

Tohee Trading & Agencies Pvt. Ltd. A-2, Basement Arcadia Building, Nariman Point, Mumbai- 400 021 ...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. Deepak Sharma, Practicing Company Secretary for the Appellant.

Mr. Ravishekhar Pandey, Advocate with Mr. Nishit Dhruva and Ms. Shefali Shankar, Advocates i/b MDP & Partners, Advocates for the Respondent.

AND Misc. Application No. 1472 of 2022 And Appeal No. 11 of 2023

Pearl Arcade Trading Private Limited 401/A, Pearl Arcade, Opp. P K Jewellers, Dawood Baug Lane, off JP Road, Andheri West, Mumbai- 400 058 ...Appellant

Versus 4

Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai- 400 051 ...Respondent

Mr. Himanshu Agarwal, Advocate i/b Bellator Legal Services LLP for the Appellant.

Mr. Ravishekhar Pandey, Advocate with Mr. Nishit Dhruva and Ms. Shefali Shankar, Advocates i/b MDP & Partners, Advocates for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member

Per: Justice Tarun Agarwala, Presiding Officer (Oral)

1.

For the reasons stated in the application, the delay in the

filing of the appeal is condoned. The application is allowed.

2. These appeals are against a common order dated July 14,

2022 passed by the Adjudicating Officer ("AO" for

convenience) of the Securities and Exchange Board of India

("SEBI" for convenience) imposing penalties under the SEBI

(Substantial Acquisition of Shares and Takeovers) Regulations,

2011 ("SAST Regulations" for convenience) and SEBI

(Prohibition of Insider Trading) Regulations, 1992 ("PIT

Regulations") and are being taken up together, since the issue is

common.

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3. Investigation in the matter of trading activity in the scrip

of Mishka Finance and Trading Limited was conducted by SEBI

to ascertain whether there was any violation of the PIT

Regulations and the SAST Regulations. The investigation

revealed that the noticees had not made the requisite disclosures

at various point of time pertaining to the acquisition of shares

and change in the shareholding in the Company as well as to the

stock exchanges as required under PIT Regulations and the

SAST Regulations.

4. Accordingly, a show cause notice dated March 29, 2019

was issued calling upon them to show cause as to why an

enquiry should not be initiated and penalty should not be

imposed. The AO after considering the replies and the material

evidence on record found that the disclosures as required to be

made under Regulation 29 & 30 of the SAST Regulations and

under Regulation 13 of the PIT Regulations were not made and,

consequently, passed the impugned order imposing penalties of

different amounts against the appellants.

5. We have heard Shri Deepak Sharma, Company Secretary

and Shri Himanshu Agarwal, the learned counsel for the 6

appellants and Shri Ravishekhar Pandey, the learned counsel for

the respondent.

6. Having heard the learned counsel for the parties, we find

that the appellants were holding investment in equity shares of

Pyramid Trading and Finance Limited which is now known as

Mishka Finance and Trading Limited. It was contended that

they had sold their investment in equity shares of the Company

through one broker M/s Roongta Rising Stock Pvt. Ltd. who

had purchased all the shares and paid the entire consideration.

Further, the transfer of shares were done only on instructions of

noticee no. 5 and necessary intimation were made to the stock

exchange. Further, the transfers of shares were done through

off-market as trading in the scrip were suspended at that point of

time. It was also stated that the outgoing promoters were not

directly or indirectly connected or associated with the various

transferees and that the appellants were not persons acting in

concert.

7. In so far as noticee no. 8 Pearl Arcade Trading Private

Limited is concerned, it was stated that the appellant had

nothing to do with the other noticees and had no connection

with them. It was stated that necessary disclosures were made

under Regulation 30 (2) to the Company but however timely 7

disclosures were not made to the stock exchange. Further,

disclosure under Regulation 13(2A) of the PIT Regulations was

made.

8. Having perused the record we find that the entire shares of

the Company were in physical mode and were held by noticee

nos. 1 to 7. Out of a total of 4,98,000 shares of the Company, a

total of 4,19,700 shares which constituted 84.28% of the total

shareholding were held by noticee nos. 1 to 4 who were shown

as promoter entities of the Company and were also inter

connected with each other. Noticee no. 5 was the father of

noticee no. 6 and husband of notic3ee no. 7. Further, noticee

no. 5 was the uncle of noticee no. 4.

9. We find that noticee nos. 1 to 7 received shares off-market

and thereafter transferred the entire shareholding except 2,000

shares i.e. 4,96,000 in off-market in physical form to 383

entities during the period December 30, 2011 to February 04,

2013 on 12 different dates. As a result of the transfer of the

shares, the shareholding of noticee nos. 1 to 7 in the Company

reduced from 100% to 0.40% of the total shareholding. The

noticee nos. 1 to 7 were the promoters of the target company

and were acting in concert and were required to disclose their

adequate shareholding and voting rights to the target company 8

as well as to the stock exchange within seven working days of

the end of the financial year. Admittedly, the appellants failed

to make such disclosures under Regulation 30(2) of the SAST

Regulations during the quarter ending 31 March, 2012.

Similarly, the appellants also failed to make a necessary

disclosure under the PIT Regulations. These disclosures have

not been disputed and, consequently, the violations are upheld

by us also.

10. It was urged, that the factors contemplated under Section

15J of the SEBI Act has not been considered. This aspect is

patently erroneous as we find that the factors under Section 15J

has been considered based on which small amounts of penalties

has been imposed and not the maximum.

11. In so far as noticee no. 8 is concerned he was a

preferential allottee and was introduced as a promoter of the

Company. His shares were locked till 23 September 2013. He

was not an immediate relative of the other noticees but on the

strength of being a promoter the AO has categorized noticee no.

8 as a person acting in concert as per Regulation 2(q)(2)(iv) and

2(q)(2)(v) of the SAST Regulations. In our opinion, merely

because the noticee no. 8 was categorized as a promoter he

cannot be deemed to be a person acting in concert unless there 9

was something to show that there was a meeting of minds,

common intention etc. with the other noticees as held by the

Supreme Court in Daiichi Sankyo Company Ltd. vs. Jayaram

Chigurupati & Ors. (2010) 7 SCC 449 and in SEBI vs. Sunil

Krishna Khaitan & Ors. 2022 SCC OnLine SC 862. In the

instant case, we find that the AO has not ventured into this

aspect of the matter and has mechanically categorized noticee

no. 8 to be acting in concert with the other noticees. In our

opinion this finding is incorrect and cannot be sustained.

12. We, however find that the appellant has admitted that he

had made belated disclosures to the Company and failed to

make the disclosures to the stock exchange. However, the

learned counsel for noticee no. 8 contended that he cannot be

clubbed to pay the penalty joint and several for violation of

Regulation 30(2) of the SAST Regulations along with the other

noticees on the strength of a person acting in concert. This

submission appears to have some force. Since we have already

found that noticee no. 8 was not acting in concert the penalty

under Regulation 30(2) of the SAST Regulations cannot be

fastened upon noticee no. 8 to be paid join and severally with

other noticees.

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13. In view of the aforesaid, while affirming the violations

committed by the appellants, we dismiss the appeals with the

modification that the appellant Pearl Arcade Trading Private

Limited, noticee no. 8 will pay a sum of Rs. 1 lakh for violation

of Regulation 13(2A) of the PIT Regulations and Rs. 35,000/-

for violation of Regulation 30(2) of the SAST Regulations.

14. This order will be digitally signed by the Private Secretary

on behalf of the bench and all concerned parties are directed to

act on the digitally signed copy of this order. Certified copy of

this order is also available from the Registry on payment of

usual charges.

Justice Tarun Agarwala Presiding Officer

Ms. Meera Swarup PRERNA Digitally signed Technical Member 09.01.2023 by PRERNA

PK MANISH Date: 2023.01.13 MANISH KHARE

KHARE 11:49:42 +05'30'