Sweta Virendra Shah vs Sebi

Date of Decision: 4.12.2019

Misc. Application No.458 of 2019 And Appeal No.380 of 2019

Sweta Virendra Shah B-11, Krupa Apartment, Behind Shefali Apartment, Vasna, Ahmedabad - 380007. ..... Appellant

Versus

Securities and Exchange Board of India SEBI Head Office, SEBI Bhavan II, Plot No.C-7, "G" Block, Bandra- Kurla Complex, Bandra (East), Mumbai - 400 051. ...... Respondent

Mr. Jinendra D. Parikh, Authorised Representative for the Appellant.

Mr. Chirag Bhavsar, Advocate with Ms. Eram Quraishi, Advocate i/b. MDP & Partners for the Respondent.

CORAM: Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member

Per : Justice M.T. Joshi (Oral)

1.

Aggrieved by the imposition of penalty of Rs.2 lakh for

violation of provisions of Regulation 9(1) read with Schedule

B of the Securities and Exchange Board of India (Prohibition

of Insider Trading) Regulations, 2015 (hereinafter referred to

as 'PIT Regulations) the present appeal is preferred. 2

2. Appellant Swetha was working as Accounts Manager

with Kushal Tradelink Ltd. (hereinafter referred to as the

'Company') from 1st February, 2016. She was a Designated

Employee under the PIT Regulations. It was found that she

had entered into opposite transactions (contra trade) i.e. sell

or buy shares of the Company during the six months period

following the prior transaction. Further, she had traded twice

in the scrip of the Company during the period when the

trading window remained closed in violation of the

provisions of the Code of Conduct as prescribed under

Regulation 9(1) read with Schedule B of the PIT Regulations.

3. It is an admitted fact that while the trading window

remained closed from October 19, 2016 to November 16,

2016 the appellant had purchased 200 shares of the

Company. Similarly, when the trading window was closed

for the period between December 21, 2016 to January 7,

2017 she again purchased 150 shares of the Company.

4. The appellant submitted before the Adjudicating

Officer that she had joined the Company in February, 2016

and was made permanent in April, 2017. Her scope of

working was restricted to the compliance of direct taxes.

She had no access to any financial data which was price 3

sensitive. The total quantum of transaction executed by her

was below the threshold limit as prescribed under the Code

of Internal Procedures and Conduct for Prohibition of Insider

Trading. The contra trade was executed only with

investment motive and not for any speculation. She further

submitted that as she had not carried any of the transactions

with any speculative intention the proceedings may be

dropped. Alternatively, she submitted that she may be

directed to contribute in Investor Education Protection Fund

the profit earned by her.

5. The Adjudicating Officer found that the submission of

the appellant are against the provisions of the model Code of

Conduct as well as the PIT Regulations as the issue of

threshold limit is irrelevant to the present issue. Therefore

taking into consideration the provisions of Section 15HB and

15J of the Securities and Exchange Board of India Act, 1992

(hereinafter referred to as 'SEBI Act') and finding that the

amount of disproportionate gain or unfair advantage cannot

be quantified, imposed a penalty of Rs.2 lakhs. Hence the

present appeal.

6. Learned counsel for the appellant submitted that the

appellant was a newly appointed officer during that period. 4

She was unaware of the Model Code of Conduct. The trades

entered into by her are very miniscule and hence he

submitted that the appeal may be allowed.

7. On the other hand, learned counsel for the respondent

submits that the violation of the provisions is clearly

established. The appellant was Designated Officer during the

period and, therefore, as per the PIT Regulations alongwith

the Model Code of Conduct there cannot be any escape from

the liability.

8. Having heard both the sides, in our view though the

appellant is found to have violated the provisions as detailed

above considering the miniscule transactions carried by her

and finding that she was a new entrant in the Company, the

penalty imposed upon her is rather disproportionate.

9. Section 15J of the SEBI Act provides as under:-

Factors to be taken into account by the adjudicating officer.

15J. While adjudging quantum of penalty under section 15-I, the adjudicating officer shall have due regard to the following factors, namely :--

(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;

(b) the amount of loss caused to an investor or group of investors as a result of the default;

5 (c) the repetitive nature of the default.

10. The Adjudicating Officer had observed that

disproportionate gain or unfair advantage made by the

appellant cannot be quantified. Similarly, the loss suffered

by the investor as a result of the appellant's default cannot

also be quantified. Taking into consideration all these facts,

in our view instead of penalty of Rs.2 lakhs imposed by the

respondent penalty of Rs.1 lakh would be just and sufficient.

11. The appeal is therefore partly allowed without any

order as to costs. The penalty imposed by the Adjudicating

Officer at Rs.2 lakhs is reduced to Rs.1 lakh. Misc.

Application for stay is disposed of.

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member

4.12.2019 Prepared and compared by RHN