Sonal Vijay Mehta vs Sebi

Date of Decision: 16.03.2023

Appeal No. 253 of 2023

Sonal Vijay Mehta C-3, H-83, Mahavir Nagar, Shankar Lane, Kandivali, Mumbai- 400 067 ...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. Mahesh V. Rajpopat, Advocate for the Appellant.

Mr. Sumit Rai, Advocate with Mr. Bhushan Shah, Ms. Sayali Puri and Ms. Daksha Kasekar, Advocates i/b Mansukhlal Hiralal & Co. for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member

Per: Justice Tarun Agarwala, Presiding Officer (Oral)

1.

The present appeal has been filed questioning the legality

and validity of the order dated December 31, 2022 passed by the

Adjudicating Officer ("AO" for convenience) of the Securities

and Exchange Board of India ("SEBI" for convenience)

imposing a penalty of Rs. 5 lakhs for violation of the Section 2 12A of the SEBI Act, 1992 read with Regulations 3 and 4 of the

SEBI (Prohibition of Fraudulent and Unfair Trade Practices

relating to Securities Market) Regulations, 2003 ("PFUTP

Regulations" for convenience).

2. Based on an investigation in the scrip of Radha Madhav

Corporation Limited ("the Company" for convenience) a show

cause notice was issued to the appellant to show cause as to why

and enquiry should not be held and penalty should not be

imposed for manipulating the price of the scrip and creating a

misleading appearance of trading.

3. The appellant contested the matter and denied the charges

contending that his trades were not meant to increase a price of

the scrip nor was the appellant capable of influencing the price

of the scrip.

4. The AO after considering the reply and the material

evidence on record found that the appellant by placing

miniscule quantities of buy orders was not a normal trading

activity and the same was done deliberately to increase the price

and create a false impression about the trades in the market.

The AO came to the conclusion that the trades were 3

manipulative and violative of Regulations 3 and 4 of the PFUTP

Regulations.

5. We have heard Shri Mahesh V. Rajpopat, the learned

counsel for the appellant and Shri Sumit Rai, the learned

counsel for the respondent.

6. From the material on record we find that the price of the

scrip during the relevant period was Rs. 8.20 per share which

reached a high of Rs. 19.87. During the said period the

appellant had contributed to Rs. 25.04 to market positive last

traded price ("LTP") which worked out to 12.03% to market

positive LTP through 363 trades during 18 trading days. The

AO further found that out of 363 trades the appellant had

executed buy orders on miniscule quantities ranging from 1

trade to 2-10 trades in 330 trades which worked out 90.91% of

the appellant's total trades. These 330 trades were of miniscule

quantity but contributed to Rs. 24.01/- positive LTP which was

11.53% of the market positive LTP.

7. From the above, it is clear that the appellant was executing

large number of miniscule quantity trades at higher price than

the LTP when large quantities of sell orders were available in

the order book. Such pattern of trading is not a normal trading

activity in as much as it is common sense that a buyer would 4

buy a scrip at the lowest possible price and, therefore, it does

not stand to reason as to why the appellant was buying the

shares at a higher price. The only reason which is probable is

that the intention was to increase the price for vested reasons.

8. In view of the trading pattern, we are of the given opinion

that there was a concerted effort on the part of the appellant to

manipulate the market by placing miniscule quantities of buy

orders above LTP and, therefore, the intention was not bonafide.

9. In view of the aforesaid, we do not find any error in the

impugned order. The appeal fails and is dismissed with no

order as to costs.

10. 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.

Certified copy of this order is also available from the Registry

on payment of usual charges.

Justice Tarun Agarwala Presiding Officer

Ms. Meera Swarup PRERNA Digitally signed Technical Member 16.03.2023 by PRERNA

PK MANISH MANISH KHARE Date: 2023.03.16 KHARE 17:51:12 +05'30'