Sanjay Jalan vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision : 19.07.2022 Misc. Application No. 670 of 2022 And Appeal No. 389 of 2022 Mrs. Rinku Jalan Active Acres, Flat No. 13E, Tower 6B, 54/10 D.C. Dey Road, Kolkata - 700 015. ..... 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. Rohit Gupta, Advocate with Ms. Nirupama Kar and Mr. Akshay Shetty, Advocates i/b Interjuris for the Appellant. Mr. Nishit Dhruva, Advocate with Mr. Yash Garach, Ms. Shefali Shankar and Ms. Meghna Arvind, Advocates i/b. MDP & Partners for Respondent. WITH Misc. Application No. 671 of 2022 And Appeal No. 390 of 2022 Mrs. Anila Jalan Flat No. 102, E 1, Harrington Court, #99 Harrington Road, Chetput, Chennai. ..... 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 Mr. Rohit Gupta, Advocate with Ms. Nirupama Kar and Mr. Akshay Shetty, Advocates i/b Interjuris for the Appellant.

Mr. Nishit Dhruva, Advocate with Mr. Yash Garach, Ms. Shefali Shankar and Ms. Meghna Arvind, Advocates i/b. MDP & Partners for Respondent. AND Misc. Application No. 672 of 2022 And Appeal No. 391 of 2022 Sanjay Jalan Flat No. 102, "Avatara". Wheat Croft Road, Nungambakkam, Chennai - 600 034. ..... 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. Rohit Gupta, Advocate with Ms. Nirupama Kar and Mr. Akshay Shetty, Advocates i/b Interjuris for the Appellant. Mr. Nishit Dhruva, Advocate with Mr. Yash Garach, Ms. Shefali Shankar and Ms. Meghna Arvind, Advocates i/b. MDP & Partners for Respondent. 3 CORAM : Justice Tarun Agarwala, Presiding Officer Justice M.T. Joshi, Judicial Member Ms. Meera Swarup, Technical Member Per : Justice Tarun Agarwala, Presiding Officer (Oral) 1. Three appeals have been filed against a common order dated May 20, 2022 passed by the Adjudicating Officer („AO‟ for short) of the Securities and Exchange Board of India („SEBI‟ for short) imposing a penalty of Rs. 20 lakhs to be paid jointly and severally by the appellants for violation of Section 12A (a),(b),(c) of SEBI Act, 1992 read with Regulations 3(a),(b),(c) and (d), 4(1), 4(2) (a), (d) and (g) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 („PFUTP Regulations‟ for short).

2. Noticing certain irregularities in the scrip of Le Waterina Resorts & Hotels Limited („Le Waterina‟ for short) SEBI conducted an investigation, based on which a common show cause notice dated September 28, 2017 was issued to sixteen entities. The present order is, however, confined to three appellants. 3. It was observed that the appellants are connected to each other in as much as Sanjay Jalan is the managing director of the Company, Mrs. Anila Jalan is the mother of Sanjay Jalan and Mrs. Rinku Jalan is the wife of Sanjay Jalan. The investigation revealed that Mrs. Anila Jalan transferred 6,60,000 shares pre-split and 57,58,550 shares post-split to six entities. Further, Mrs. Rinku Jalan transferred 7,79,455 shares pre-split and 49,01,000 shares pre-split to nine entities. It was observed that these entities after receiving shares from the appellants and other promoter related entities traded during the investigation period thereby increased the volume and price of the scrip and also contributed to positive LTP. 4. Accordingly, the show cause notice alleged that:- 5. The AO after considering the material evidence on record and after considering the replies of the appellants found the appellants guilty of fraudulent trade practice and accordingly imposed a penalty of Rs. 20 lakhs to be paid jointly and severally.

6. We have heard Shri Rohit Gupta assisted by Ms. Nirupama Kar and Mr. Akshay Shetty, the learned counsel for the appellants and Shri Nishit Dhruva assisted by Shri Yash Garach, Ms. Shefali Shankar and Ms. Meghna Arvind, the learned counsel for the respondent. 7. We find that on July 4, 2011 there was a stock split in Le Waterina on the basis of which the value of the stock was split from Rs. 10 into Rs. 1. The appellant Sanjay Jalan who was the promoter and managing director of the Company and Mrs. Anila Jalan, mother of the Sanjay Jalan and Mrs. Rinku Jalan, wife of Sanjay Jalan transferred shares of the Company 7 to various entities who were part of a scrip through off-market transfers during both pre-split period and post stock split period. The AO has found connection between the appellant with the suspected entities which fact has not been seriously disputed before us. 8. The suspected entities who received shares off-market from the appellants traded these shares in the market by executing trades amongst themselves and thereby created artificial volume in the scrip of the Company.

9. The AO further found that there were financial dealings between the appellants Sanjay Jalan and his wife Mrs. Rinku Jalan and the contention that they had separated was disbelieved. Before us no such contention was raised and the findings given by the AO in this regard is consequently upheld. The AO further found that the appellants were connected with the suspected entities through fund transfers. 10. Considering the replies and the arguments made and upon a perusal of the record we find that the charges framed in the show cause notice stands proved. The appellants in connivance with each other had transferred huge quantities of shares of Le Waterina under a scheme or artifice to various 8 suspected entities thereby creating artificial volume and which led to increase in the price of the scrip. The trades made by the suspected entities through the appellants were clearly fraudulent trades. 11. We are of the opinion that transfer of the shares to the suspected entities who were clearly connected with the appellants was totally manipulative through fraudulent trading with a view to increase the volume and price by the suspected entities.

The suspected entities admittedly have received large quantities of shares from the appellants Mrs. Anila Jalan and Mrs. Rinku Jalan. Such acts of manipulation in the scrip of Le Waterina were in violation of Section 12A of the SEBI Act and Regulations 3 and 4 of PFUTP Regulations. 12. In view of the aforesaid, detailed findings given by the AO with regard to the connection and manipulation done by the appellants in the volume and price of the scrip of the Company needs no interference. The appeals lack merits and is dismissed summarily. 13. 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. 9 Certified copy of this order is also available from the Registry on payment of usual charges. Justice Tarun Agarwala Presiding Officer Justice M.T. Joshi Judicial Member Ms. Meera Swarup RAJALA Digitally signed Technical Member by RAJALAKSHMI 19.07.2022 KSHMI HDate: