Reena Pandey vs Sebi

DATE : 30.09.2015

Appeal No. 347 of 2014

Reena Pandey 133/142-A 'Ó' Block, Kidwai Nagar, Kanpur 208 023. ..... 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. 348 of 2014

Arun Kumar Bajpai 133/142-A 'O' Block, Kidwai Nagar, Kanpur, Uttar Pradesh 208023. ..... 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. 349 of 2014

Uma Shankar Gupta 105/663, Dupty Ka Parav, Kanpur 208 003. ..... 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. 350 of 2014 2

Kanchan Gupta 105/663, Dupty Ka Parav, Kanpur 208 003. ..... 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. Prakash Shah, Advocate for the Appellants. Mr. Kumar Desai, Advocate with Mr. Tomu Francis, Advocate for the Respondent.

CORAM : Justice J. P. Devadhar, Presiding Officer Jog Singh, Member

Per : Jog Singh (Oral)

1.

These four appeals have been filed by the four appellants, namely,

Ms. Reena Pandey, Mr. Arun Kumar Bajpai, Mr. Uma Shankar Gupta,

Ms. Kanchan Gupta against a common impugned order dated June 27,

2014. By said order, a penalty of ` 10 lac has been imposed under Section

15I of the SEBI Act, 1992 read with Rule 5 of the Adjudication Rules by

the learned adjudicating officer for contravention of Regulations 3(a), (d),

4(1), 4(2)(a) to (g) of the Securities and Exchange Board of India

(Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities

Market) Regulation, 2003 (hereinafter referred to as FUTP Regulations) on

the following six persons, (1) Ms. Reena Pandey, (2) Mr. Arun Kumar

Bajpai, (3) Mr. Uma Shankar Gupta, (4) Ms. Kanchan Gupta, (5) Abhay

Kumar Mehta, HUF and (6) Mr. Abhay Kumar Mehta. Two of these six

persons, namely, Abhay Kumar Mehta, HUF and Mr. Abhay Kumar Mehta

(individual) have not preferred any appeal whereas remaining four namely,

Ms. Reena Pandey, Mr. Arun Kumar Bajpai, Mr. Uma Shankar Gupta, 3

Ms. Kanchan Gupta have preferred the four appeals nos. 347, 348, 349, 350

of 2015 respectively.

2. With the consent of the parties, we have heard all the four matters

together and are being disposed of by this common order. We have taken

case of Ms. Reena Pandey as the lead case.

3. Shri Prakash Shah, learned counsel for the appellants has argued that

the four appellants have never been a part of any market manipulation and

there was no charge in the show cause notice to that effect. Learned

Counsel for the appellants has argued that the only charge in respect of the

four appellants is relating to synchronized trades. They were the victims of

ill advice given by said two persons HUF/individual. Indeed, it was

abovesaid Mr. Abhay Kumar Mehta, who manipulated and instigated the

four appellants to allow their accounts to be used for such transactions.

Therefore, the appellants deserve consideration in the matter of atleast

imposition of penalty and they cannot be put on par with Mr. Abhay Kumar

Mehta who was the main culprit and brain behind the whole

synchronization. Most of these four appellants have no experience of

capital market.

4. Per contra, Shri Desai, Learned Counsel for respondent has sought,

to justify the impugned order on the ground that the synchronized trades

have been clearly effected in the accounts of each of the appellants. They

are party to the larger mischief, therefore, same penalty should be imposed

on them also.

5. We have heard the learned counsel for the parties at length and

minutely perused the pleadings.

4

6. It is evident from the records that during investigation period i.e.

from February 1, 2011 to July 14, 2011, it was noted by SEBI that the

appellants alongwith Mr. Abhay Kumar Mehta HUF have traded in the

scrip of Rodium Realty Ltd. (RRL). It is also clear that the appellants have

acted at the instance of the stockbrokers in executing synchronized/ reversal

trades in their accounts which led to creation of artificial volume of the

scrip of the RRL whose shares are mistraded on the Bombay Stock

Exchange. It is, thus, clear that the appellants have been rightly held guilty

of violating the provisions of Regulations 3(a), (d), 4(1), 4(2)(a) to (g) of

the FUTP Regulations.

7. The learned adjudicating officer has rightly held that trades in

question were undertaken in the accounts of appellants by Abhay Kumar

Mehta without any intention of performing and without changing the

ownership of shares. Therefore, we find no fault with impugned order in

holding all the six noticees guilty of synchronized / reversal trades. One

Shri Avinash Sahu has been exonerated by the learned adjudicating officer

rightly on the ground that an insignificant volume of trade was executed by

him. This shows the fairness and proper application of mind on the part of

the learned adjudicating officer and cannot be a ground to exonerate the

appellants who admittedly undertook synchronized / reversal trades for

greater quantity than Anivash Sahu.

8. Having said so, we also note that noticee nos. 5 and 6, namely, Abhay

Kumar Mehta, HUF and Mr. Abhay Kumar Mehta who was the kingpin in

the whole conspiracy and induced the appellants by promising a small

amount of about ` 3000 per ` 1 crore transaction. Thus, the main benefit, if

any, was to go to the kingpin. In the circumstances, treating the appellants

on par with said two persons is not justified while awarding the penalty. 5

Moreover, some of the appellants before us seem to be absolutely ignorant

about the capital market and its working and they were just acting as

proxies for Mr. Abhay Kumar Mehta by allowing their accounts to be used

by said Mr. Ajay Kumar Mehta / HUF who have not challenged the penalty

imposed against them.

9. Therefore, in the peculiarity of facts and circumstances of the case

we are inclined to reduce the penalty from ` 10 lac to ` 5 lac in respect of

the four appellants to be paid to the respondent within a period of two

months from today. Therefore, all the four appeals stand disposed of by

modifying the penalty as abovesaid. No costs.

Sd/-

Justice J. P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

30.09.2015 Prepared & Compared by PTM