Rajesh Tawri vs Sebi

Date of Decision: 23.06.2021

Appeal No. 402 of 2021

Rajesh Tawri B/603, Garden Estate CHS, Khopat, Opp. Punjani Industrial Estate, Thane West Thane- 400 601 ...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. Harsh Kesharia, Advocate for the Appellant.

Mr. Suraj Chaudhary, Advocate with Mr. Bhushan Shah, Mr. Chirag Shah, Mr. Akash Jain and Mr. Rishab Jain, Advocates i/b Mansukhlal Hiralal & Co. for the Respondent.

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

Per: Justice Tarun Agarwala, Presiding Officer (Oral)

ORDER:

1. The present appeal has been filed by the appellant against

the order dated March 10, 2021 passed by the Adjudicating 2

Officer ("AO" for convenience) of the Securities and Exchange

Board of India ("SEBI" for convenience) imposing a penalty of

Rs. 5 lakhs for violating regulations 3 and 4 of the SEBI

(Prohibition of Fraudulent and Unfair Trade Practice relating to

Securities Market) Regulations, 2003 ("PFUTP Regulations" for

short).

2. The facts leading to the filing of the present appeal is, that

SEBI conducted an investigation in the trading activity of

certain entities in the scrip of Anukaran Commercial Enterprise

Limited for unusual price movement from January 01, 2012 to

January 06, 2015. The investigation period revealed that the

price in the scrip of the company saw an abnormal rise, which

was not supported by any corporate announcements or material

changes in the business activities of the company. It was

noticed that some of the sellers were selling their shares in

miniscule quantities above the Last Traded Price ("LTP")

despite having sufficient quantities of shares in their respective

demat accounts and these shares were being sold on a

continuous basis. Based on the investigation report a show

cause notice was issued to the appellant and other noticees show

cause as to why appropriate penalty should not be imposed for

violating regulations 3 and 4 of the PFUTP Regulations. 3

3. The appellant filed a reply contending that he was not

involved in any activity which was violative of the SEBI Act

and its regulations and that he had no relationship with the

company/ promoters or directors. The appellant contended that

his trading pattern was to sell miniscule quantities of the scrip

and the same was not been done with the manipulative intent of

increasing the price. It was contended that he had sold the

shares in the ordinary course of its business and was not done in

connivance with the buyers nor was he connected with the

promoters/ directors of the company. It was also contended that

the trades were executed when the buy orders were already

pending in the market.

4. The AO after considering the material evidence on record

found that the trading pattern of the appellant indicated a

manipulative intent to increase the price of the scrip by selling

miniscule quantities of the shares. The AO found that the trades

of the appellant were manipulative as well as fraudulent and

were violative of regulations 3 and 4 of the PFUTP Regulations

and accordingly imposed a penalty of Rs. 5 lakhs. 4

5. Having heard Shri Harsh Kesharia, the learned counsel for

the appellant and Shri Suraj Chaudhary, the learned counsel for

the respondent, we find from a perusal of paragraph 20 and

paragraph 46 that the appellant had received 100 shares from

noticee no. 4 Mountain View Developers Private Limited and

immediately within 24 hours of receiving the shares the

appellant started trading in the scrip of the company by selling 1

or 2 shares on a continuous basis. The email of noticee no. 4

was the same as that of the Managing Director of the company

namely Kushal Shah. Thus, there is a direct connection of

noticee no. 4 with the MD of the company. Noticee no. 4 had

given the shares to the appellant. Thus, an irresistible inference

is drawn that there is a connection between the appellant,

noticee no. 4 and the company and the trades were executed

with the sole purpose of manipulating the price for obvious

vested reasons. This finding given in paragraph 20 of the

impugned order has not been disputed nor questioned in the

memorandum of appeal.

6. In paragraph 46 of the impugned order it has been come

on record that the appellant has alleged that he has purchased

the shares off-market in cash from noticee no. 4 @ 85.35 per 5

share. No proof of the sale consideration has been filed but

what is striking in the instant case is, that on the date when the

appellant alleges to have received the shares from noticee no. 4

the market price on the Stock Exchange of the shares of the

company was Rs. 150/- per share. This fact has not been

disputed by the appellant. We find it strange that if the market

value of the shares were Rs. 150/- then there was no reason for a

person especially noticee no. 4 to sell the same to the appellant

at a lesser price unless there was an ulterior motive.

7. In view of the aforesaid, we are of the opinion that the

principles propounded in the decision of M/s Nishith M. Shah

HUF vs. SEBI in Appeal No. 97 of 2019 decided on January

16, 2020 is not applicable and is distinguishable in the instant

case. The pattern of the trades executed by the appellant clearly

shows that the same was done with a manipulative and

fraudulent intent to increase the price of the scrip.

8. For the reasons stated aforesaid, we do not find any error

in the impugned order. The appeal fails and is dismissed with

no order as to costs.

6

9. The present matter was 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 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 23.06.2021 RAJALA Digitally by signed

PK KSHMI NAIR RAJALAKSHMI H

Date: 2021.06.28 H NAIR 14:07:37 +05'30'