Pradeep Kumar Jindal vs Sebi

Order Reserved On: 27.08.2021 Date of Decision : 31.08.2021

Appeal No. 05 of 2021

Aanchal Jindal F-3/12, Model Town-II, Second Floor, New 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

WITH Appeal No. 06 of 2021

Mamta Jindal F-3/12, Model Town-II, Second Floor, New 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

WITH Appeal No. 07 of 2021

Archit Jindal H-1/1-A, Model Town-III, New Delhi- 110 009 ...Appellant

Versus 2

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

AND Appeal No. 08 of 2021

Pradeep Kumar Jindal F-3/12, Model Town-II, Second Floor, New 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. Vikas Bengani, Advocate for Appellants.

Mr. Vyom Shah, Advocate with Mr. Ravishekhar Pandey and Ms. Prerna Sharma Advocates i/b The Law Point for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Justice M. T. Joshi, Judicial Member

Per: Justice Tarun Agarwala, Presiding Officer

1.

The above four appeals have been filed against different

orders passed by the Adjudicating Officer ("AO" for

convenience) of the Securities and Exchange Board of India

("SEBI" for convenience) imposing a penalty for violation of

13(4A) and 13(5) of SEBI (Prohibition of Insider Trading)

Regulations, 1992 ("PIT Regulations" for convenience) and 3

29(2) and 29(3) of the SEBI (Substantial Acquisition of shares

and Takeover) Regulations, 2011 ("SAST Regulations" for

convenience). Since the issue is common in all the appeals, the

same are being taken up together at the admission stage itself

and are being decided finally without calling for a reply since no

factual controversy is involved. For facility, the facts stated in

the appeal of Aanchal Jindal is being taken into consideration.

2. A show cause notice was issued to the appellants

alleging that the appellant as a promoter failed to make

disclosures of the changes in the shareholdings in the scrip of

the company in accordance with the disclosure requirements

under the PIT Regulations and SAST Regulations. Inspite of

the receipt of the show cause notice, no reply was filed and,

accordingly the AO proceeded and passed the impugned order.

3. In the case of Aanchal Jindal the AO found that

between 19.06.2013 to October 2013 the appellant had made

transactions in the scrip of the company on seven occasions and

failed to make the necessary disclosures under the PIT and

SAST Regulations. Similarly, the AO found in the case of

Mamta Jindal that the transactions were made from June 11,

2013- May 2014 on seven occasions and in the case of Archit 4

Jindal the transactions were made from June 29, 2013 -April 02,

2014 on eleven occasions and in the case of Pradeep Kumar

Jindal the transactions were made on two occasions i.e. on

August 08, 2013 and April 02, 2014.

4. Since no reply was filed, the AO held that since

necessary disclosures were not made the appellants had violated

the provisions of the PIT and SAST Regulations and

accordingly imposed penalty as stated hereunder:-

a) Aanchal Jindal - Rs. 10,50,000/- b) Mamta Jindal - Rs. 9,00,000/- c) Archit Jindal - Rs. 11,50,000/- d) Pradeep Kumar Jindal - Rs. 12,00,000/-

5. We have heard Mr. Vikas Bengani, the learned counsel

for the appellants and Mr. Vyom Shah, the learned counsel for

the respondent.

6. The learned counsel for the appellants contended that

the appellants were under a stress in relation to the divorce

proceedings of Aanchal Jindal and other criminal cases and after

settlement of the divorce proceedings the appellants were under

a depression and therefore could not file any reply. The learned

counsel accordingly contended that the matter may be remanded

so that they could file an appropriate reply. We cannot accept 5

the submission as it is not based on any sound or legal

reasoning. The impugned order indicates that ample

opportunity was provided and inspite of receipt of the notices,

no reply was filed.

7. Before us the appellants admitted that the transactions

were made and disclosures were not filed under the PIT and the

SAST Regulations and consequently admitted the violations. It

was however contended that some of the transactions were

made to the broker to transfer the scrip as security towards

margin money and therefore there was no change in the

beneficial ownership of the scrip. It was also contended that

inter-se transaction between the promoters were made and

therefore the question of any loss to the investors does not arise

as the shareholding of the promoter and promoter group

remained the same. It was thus urged that the non-disclosure

was only technical in nature. The learned counsel further

contended that the quantum of penalty imposed on a technical

violation was harsh, arbitrary and disproportionate.

8. On the other hand, the learned counsel for the

respondent contended that since there were repeated violation of

the provisions of the PIT and SAST Regulations and 6

considering the factors mentioned in section 15J the penalty

imposed was just and proper which is not liable to be interfered

with especially when the violation was admitted by the

appellants.

9. Having heard the learned counsel for the parties, we

find that admittedly disclosures were not made by the appellants

under the PIT and SAST Regulations, Therefore the appellants

have violated the provisions of 13(4A) and 13(5) of the PIT

Regulations and 29(2) and 29(3) of the SAST Regulations. The

contention that some of the transactions were only inter-se

transfers between the promoters and therefore such transactions

could not be taken into consideration is erroneous in as much as

all the transactions whether from one promoter to another

promoter was still required to be disclosed under the aforesaid

Regulations.

10. We however find that the AO while taking into

consideration the factors mentioned in Section 15J of the SEBI

Act has found that the amount of disproportionate gain or unfair

advantage to the appellants nor the loss caused to the investors,

if any, cannot be quantified as a result of the default committed

by the appellants. The AO on the basis of repetitive nature of 7

default found this to be an important element and, therefore,

imposed the penalty.

11. We are of the view, that the penalty figure arrived at by

the AO is not based on any logical reasoning. We are of the

opinion that the penalty imposed is harsh and disproportionate

for the alleged violation especially when a specific finding has

been given that no disproportionate gain has been caused to the

appellant nor any loss has been suffered by the investors. Thus,

merely because there has been a repetitive default on the part of

the appellant does not entitle the AO to impose the penalty

which apparently is disproportionate.

12. In the instant case, we find that the appellant Aanchal

had made a default of disclosures on seven occasions and was

imposed a penalty of Rs. 10,50,000/-. Mamta Jindal was

penalized Rs. 9,00,000/- for repetitive default on seven

occasions. Archit Jindal was imposed a penalty of Rs.

11,50,000/- for violation on eleven occasions and Pradeep

Kumar Jindal was imposed a penalty of Rs. 12,00,000/- for

violation on two occasions. Thus, even on the ground of

repetitive defaults the penalty imposed by the AO is

disproportionate.

8

13. Considering the aforesaid, we are of the opinion that the

penalty imposed is excessive and considering the factors taken

into section 15J especially the finding that there has been no

disproportionate gain made by the appellants nor such

transactions has caused loss to any of the investors, we are of

the opinion that on account of the violation of non-disclosure by

the appellants a penalty of Rs. 3,00,000/- (Rupees three lakhs

only) each on the appellants for violations of sections 13(4A)

and 13(5) of the PIT Regulations and 29(2) and 29(3) of the

SAST Regulations would be appropriate. The said amount shall

be paid by each of the appellants within four weeks from today

if not paid.

14. For the reasons stated aforesaid, the violations

committed by the appellants as per the impugned order is

affirmed and only the penalty amount is modified to the extent

stated aforesaid. The appeals are partly allowed.

15. The present matters were heard through video

conference due to Covid-19 pandemic. At this stage it is not

possible to sign a copy of this order nor a certified copy of this

order could be issued by the Registry. In these circumstances,

this order will be digitally signed by the Private Secretary on 9

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

on the digitally signed copy of this order. Parties will act on

production of a digitally signed copy sent by fax and/or email.

Justice Tarun Agarwala Presiding Officer

Justice M. T. Joshi Judicial Member 31.08.2021 RAJALA Digitally by signed

PK KSHMI NAIR RAJALAKSHMI H

Date: 2021.09.01 H NAIR 15:28:07 +05'30'