Sumeet Industries Limited vs Sebi

Order Reserved On: 23.06.2016 Date of Decision : 30.06.2016

Appeal No. 113 of 2014 Sumeet Industries Limited 504, Trividh Chambers, Opp. Fire Station, Ring Road, Surat, Gujarat- 395 002 ...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. 114 of 2014 1.

Shankarlal Somani

2. Raj Kumar Somani

3. Bajranglal Somani 504, Trividh Chambers, Opp. Fire Station, Ring Road, Surat, Gujarat- 395 002 ...Appellants 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. 115 of 2014

1. Sumeet Kumar Somani

2. Mahesh Kumar Somani 504, Trividh Chambers, Opp. Fire Station, Ring Road, Surat, Gujarat- 395 002 ...Appellants Versus Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai -400 051 ...Respondent 2

AND Appeal No. 116 of 2014

1. Somani Overseas Ltd.

306, Nilkanta Apartments, Near Umrajakat Naka Athwa Lines, Surat- 395 002

2. Sumeet Menthol Pvt. Ltd.

504, Trividh Chambers, Opp. Fire Station, Ring Road, Surat, Gujarat- 395 002

3. Sumeet Silk Processors Pvt. Ltd. 504, Trividh Chambers, Opp. Fire Station, Ring Road, Surat, Gujarat- 395 002

4. Sitaram Prints Pvt. Ltd.

306, Nilkanta Apartments, Near Umrajakat Naka Athwa Lines, Surat- 395 002

5. Ambaji Syntex Pvt. Ltd.

504, Trividh Chambers, Opp. Fire Station, Ring Road, Surat, Gujarat- 395 002

6. Urmila Sunder 129, Sarjan Society, Umrajakat Naka Parle Point, Surat- 395 002

7. Ganga Somani 12, Keshav Park Society, Parle Point, Surat- 395 002

8. Sumandevi Somani 37, Ghod Dod Road, Surat- 395 002 ...Appellants

Versus

Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai -400 051 ...Respondent 3

Mr. Somasekhar Sundaresan, Advocate with Mr. Paras Parekh and Mr. Dhaval Kothari, Advocates i/b. J. Sagar Associates for Appellants.

Mr. Shyam Mehta, Senior Advocate with Mr. Saurabh Bacchawat and Mr. Hitesh Mutha, Advocates i/b K. Ashar & Co. for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Dr. C.K.G. Nair, Member

Per: Justice J.P. Devadhar

1. Appellants in these four appeals are aggrieved by the common

order passed by the Adjudicating Officer ("AO" for short) of Securities

and Exchange Board of India ("SEBI" for short) on 20.02.2014. By the

said order penalty is imposed on each appellant under Section 15HA of

the Securities and Exchange Board of India Act, 1992 ("SEBI Act" for

short) totally aggregating to ` 17,92,00,000/- on ground that the

appellants have violated the provisions contained in the Securities and

Exchange Board of India (Prohibition of Fraudulent and Unfair Trade

Practices relating to Securities Market) Regulations, 2003 ("PFUTP

Regulations" for short) read with Section 12A of the SEBI Act.

2. It is not in dispute that in respect of the very same violations

committed by the appellants herein, the Whole Time Member ("WTM"

for short) of SEBI passed an order against the appellants on 21.05.2014

under Section 11 & 11B of the SEBI Act. The said order was challenged

by appellants by filing appeals before this Tribunal. By our two separate

orders passed today in Appeal No. 224 of 2014 and Appeal No. 225 of

2014 we have upheld the decision of WTM of SEBI that Sumeet

Industries Ltd. ("SIL" for short) in concert with Mr. Purshottam 4

Khandelwal had resorted to inflating the price of SIL and therefore the

trades executed by the promoters of SIL were fraudulent and

manipulative trades and consequently, the unlawful gains made by the

promoters of SIL are liable to be disgorged. We have also upheld the

restraint order passed against SIL and its two directors. However, we

have found fault with the quantum of unlawful gains computed by the

WTM of SEBI and therefore, we have, inter alia, quashed the quantum of

unlawful gains quantified by the WTM of SEBI and restored the matters

for re-computing the unlawful gains.

3. As the decision of the WTM of SEBI that the appellants have

violated the provisions contained in the PFUTP Regulations is upheld by

us, arguments to the contrary, advanced by the appellants in these appeals

cannot be sustained. However, argument of the appellants that the

penalty imposed by the AO against the appellants is not commensurate

with the violations allegedly committed by each appellant deserves

consideration.

4. In the impugned order, the AO has not discussed the basis on

which the quantum of penalty has been fixed on each individual. Since

the basis for determining the quantum of penalty on each appellant is not

set out in the impugned order, it is not possible to answer the question as

to whether the penalty imposed is commensurate with the violations

committed by each appellant.

5

5. Apart from the above, since the decision of the WTM of SEBI in

relation to the quantum of illegal gains made by each appellant is set

aside and restored for fresh decision, in our opinion, it would be just and

proper to quash and set aside the impugned order passed by the AO and

restore the matter for fresh decision on merits and in accordance with

law.

6. Accordingly, for the reasons stated hereinabove, we set aside the

impugned order passed by the AO on 20.02.2014 and direct the AO to

pass fresh order on merits and in accordance with law.

7. All four appeals are disposed of in the above terms with no order

as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Dr. C.K.G. Nair Member 30.06.2016 Prepared & Compared By: PK