Rajesh Jayantilal Shah & Ors. vs Sebi

those 20 entities present proceedings was against the 11 entities

named as Shah Group Entities.

The present appellants challenged the prohibitory order

before this Tribunal vide Appeal No. 132 of 2017 decided on

June 30, 2017. This Tribunal disposed of the said appeal with a 4

direction to the respondent SEBI to pass final order within a

period of 6 months from the date of the order. The learned

counsel for the appellants during oral submissions placed before

us a copy of another order passed in the same appeal by this

Tribunal in Misc. Application No. 335 of 2017 dated December

21, 2017 which would show that the time of passing the final

order was extended for a period of 3 months. Thereafter the

temporary prohibitory order however was revoked vide the

impugned order.

4. The charges levelled by the respondent SEBI in the show

cause notice and the reply filed by the appellants would

admittedly show that the appellants along with the deceased

noticees were connected with Nirmal Kotecha. Nirmal Kotecha

was a registered client of JM Financials through its sub-broker

Shailesh Jayantilal Shah i.e. deceased noticee. They always

used to be connected with each other through their conversation

on mobile between Nirmal Kotecha and deceased Jayantilal

Shah and Appellant No. 2 Nirmal Shah. Further said Nirmal

Kotecha had paid a sum of ` 10 lakhs to Man Viral

Constructions Limited i.e. Group Entity of the present appellant.

According to the appellants the said amount was received for

advance payment for booking of a flat of the said entity and

after cancellation of the booking, the amount was returned to

Nirmal Kotecha. Further an amount of ` 10 lakh was advanced 5

by Nirmal Kotecha's wife (Viral Doshi) to deceased Shailesh

Shah on September 25, 2008 without any interest. The

appellants explained that since Devang Shah, (Appellant No. 6)

a nephew of Shailesh Shah got admission in the University of

Exeter, UK, for deferring the expenses, the loan was advanced.

However, vide letter dated August 29, 2016 the appellants

explained that out of the said amount an amount of ` 2,67,584/-

was utilized for the purposes of business of deceased noticee-

Shailesh Shah. Thus, whatever may be explanation it is an

admitted fact that the present appellants were closely connected

with said Nirmal Kotecha.

5. In this background, it was found by respondent SEBI that

between December 17 to 19, 2008 the present appellants bought

shares of PSTL in the following manner:- Sr. Name No. of shares during on Dec 17-19, 2008 No. 1. RAJESH JAYANTILAL SHAH 49,216

2. SHAILESH JAYANTILAL SHAH 8,336

3. NIRMAL ROHITBHAI SHAH 24,723

4. DEVANG R SHAH 30,044

5. RITABEN ROHITKUMAR SHAH 22,000

6. JAYANTILAL RATILAL SHAH 5,000

7. BINABEN SHAILESHKUMAR SHAH 10,002

8. NAMITABEN SACHINKUMAR SHAH 3,500

9. SACHIN JAYANTILAL SHAH 10,000

10. MANISHABEN RAJESHKUMAR SHAH 5,000

11. JINNY NIRMAL SHAH 2,500

Total 1,70,321 6

All these shares along with additional 200 shares were sold by

the appellants on December 22, 2008. According to respondent

SEBI the appellants along with deceased noticees had made

wrongful gain of ` 24,39,602.91 from these transactions in the

following manner:-

Sr. No. of No. Shares Difference Undue Profit Name Bought on Buy rate Sale rate in Buy and made (Rs.) Dec 17-19, Sell rate 2008 1. RAJESH 49,216 63.34 82.52 19.18 943,851.96 JAYANTILAL SHAH 2. SHAILESH 8,336 69.67 80.98 11.31 94,261.81 JAYANTILAL SHAH (Deceased) 3. NIRMAL 24,723 63.25 79.09 15.84 391,518.03 ROHITBHAI SHAH 4. DEVANG R SHAH 30,044 65.59 77.52 11.93 358,548.39 5. RITABEN 22,000 73.30 79.45 6.15 135,400.00 ROHITKUMAR SHAH 6. JAYANTILAL 5,000 61.00 76.18 15.18 75,879.72 RATILAL SHAH(Deceased) 7. BINABEN 10,002 61.25 75.92 14.67 146,692.11 SHAILESHKUMAR SHAH 8. NAMITABEN 3,500 60.63 75.71 15.08 52,776.79 SACHINKUMAR SHAH 9. SACHIN 10,000 61.05 77.30 16.25 162,500.00 JAYANTILAL SHAH 10. MANISHABEN 5,000 63.07 78.70 15.63 78,174.10 RAJESHKUMAR SHAH 11. JINNY NIRMAL 2,500 75.00 70.46 -4.54 - SHAH Total 1,70,521 24,39,602.91

The appellants explained that they had a normal business

relations with Nirmal Kotecha; they had nothing to do with

publication some forged letter. They were regularly buying and

selling the shares of PSTL and therefore they should be

exonerated from the charges. 7

6. The WTM however found that while earlier the appellants

have traded in the scrip of PSTL in miniscule quantity or on

December 16, 2008 on day trading basis, particularly from

December 17 to 19, 2008 they had accumulated large amount of

shares as detailed (supra). Further, taking into consideration the

fact that Nirmal Kotecha was in regular contact with the

members of present Shah family and more particularly the

trading pattern of the appellants to accumulate the shares before

December 22, 2008 and off-load the same on December 22,

2008 at 10.30 am, WTM held that it would clearly show that the

present appellants along with the deceased noticees had in

violation of Regulation 11 of SEBI (Prohibition of Fraudulent

and Unfair Trade Practices relating to Securities Market)

Regulations, 2003 ("PFUTP Regulations" for convenience)

made the wrongful gain. Hence the order.

We have heard Shri R. S. Loona, Advocate for the

appellants and Shri Kevic Setalvad, Senior Advocate for the

respondent.

7. The learned counsel for the appellants submitted that

while an ex-parte ad interim order was passed by respondent

SEBI on April 23, 2009 it took around 5 years for issuing show

cause notice i.e. on January 16, 2014. Thereafter, also no action

was taken by respondent SEBI and therefore the appellants had 8

to approach this Tribunal as detailed (supra) wherein from time

to time respondent SEBI was directed to pass the final order.

He therefore submitted that this fact itself would show that for

the delay, the impugned order should be quashed. On facts, he

submitted that there are no allegations of synchronization or

reversal of trades. The appellants had clearly admitted the

business relations with Nirmal Kotecha. The show cause notice

would show that the Appellant No. 1 Rajesh Jayantilal Shah

used to trade in PSTL's shares regularly right from June 10,

2008 onwards. He further submitted that the impugned order

itself would show that on November 16, 2008 the appellants had

sold some shares however, purchase of the shares of PSTL only

between December 17-19, 2008 is taken into consideration.

Further, the appellants have sold some shares after 10.30 am i.e.

after the market was stabilized. The same is however not

excluded from disgorgement. In the circumstances he wanted

the appeal be allowed.

8. The learned counsel for the respondent on the other hand,

on the basis of the material placed before us states that no

inference in the order is warranted.

Upon hearing both the s the appeal deserves to be

dismissed for the following reasons:- 9

Though the learned counsel for the appellants submitted

that there is a delay in the proceeding, the documents filed by

the appellants themselves would show that before the WTM

they were pressing time and again for more documents from the

respondents before filing reply to the show cause notice. Even

though a compact disk was supplied to them the demand

continued which ultimately led to filing of reply belatedly.

Though the practice of keeping temporary prohibitory order

continuing for a long period cannot be accepted, it is to be noted

that ultimately the said order is revoked. Therefore, the issue

does not survive.

9. The WTM had taken into consideration the earlier dealing

of the appellants in the scrip of PSTL wherein the appellants

were charged for last traded price manipulation. The appellants

and deceased noticees were exonerated from the charges and

only charge remained for trading of the appellants and deceased

noticees for a period from December 17 to 22, 2008. The

trading of period of December 16 is also taken into

consideration by the WTM. However, finding that there was

sudden increase in purchase of the shares of PSTL by the

appellants and the deceased noticees during December 17-19,

2008 as detailed (supra) and off-loading of all those shares on 10

December 22 before 10:30 am as detailed (supra), the order was

passed.

10. It is an admitted fact that Nirmal Kotecha had close

relations with the appellants. Many business transactions as

well as gratuitous transactions of advancing interest free loan

between them is an admitted fact. Out of interest free loan

granted by Nirmal Kotecha to the appellants, admittedly

appellants utilized some portion for the business purpose.

Admittedly, they always had telephonic conversation.

Admittedly, the appellants form a family group as further

explained in the paragraph 1 of the synopsis itself. The

appellants had pleaded before the WTM that the proceedings

against them be kept in abeyance till the proceedings against

Nirmal Kotecha would come to an end i.e. appeal filed by

Nirmal Kotecha in this Tribunal is decided. Judicial notice can

be taken that the appeal filed by Nirmal Kotecha, i.e. Appeal

No. 261 of 2018 is finally dismissed by this Tribunal on merit

on 02.03.2020 holding him guilty of causing false media report

causing the rise in the price of the scrip as detailed in the above

table.

In the circumstances, the findings recorded by the learned

WTM needs no interference. 11

11. The learned counsel for the appellants has placed on

record a number of decisions rendered by this Tribunal, wherein

on fact this Tribunal has held that the delay in proceeding has

caused prejudice to the noticees therein. In other cases relied by

the appellants, on facts fraudulent or unfair trading was not

found. To put the record straight the following judgements

were relied by the appellants:- Sanjay Gupta vs SEBI (Appeal

No. 89 of 2019 decided on June 04, 2019), Kapil Chatrabhuj

Bhuptani vs. SEBI (Appeal No. 95 of 2013 decided on October

10, 2013, KSL & Industries Ltd. vs SEBI (Appeal No. 9 of

2003 decided on September 30, 2003 etc. However, finding

that the facts are different in the present case, the ratio of any of

the judgments would not be applicable in the present appeal.

12. In the result, the following order:-

ORDER

13. The appeal is hereby dismissed without any order as to

costs.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 17.03.2020 Prepared & Compared By: PK