Vasudev Ramchandra Kamat vs Sebi

Date of Hearing : 12.01.2021 Date of Decision : 19.01.2021

Appeal No. 287 of 2020

Vasudev Ramchandra Kamat Flat No. - 14, 6th Floor, Dhanvantari Building - 2, J. J. Hospital Campus, Byculla, Mumbai - 400 008. ..... 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. Vikas Bengani, Advocate for the Appellant. Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms. Kinjal Bhatt, Mr. Hersh Choudhary, Advocates i/b Vidhii & Partners for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C. K. G. Nair, Member Justice M. T. Joshi, Judicial Member

Per : Justice Tarun Agarwala, Presiding Officer 2

1.

The present appeal has been filed questioning the order of the

Adjudicating Officer (hereinafter referred to as 'AO') of Securities

and Exchange Board of India (hereinafter referred to as 'SEBI')

dated March 20, 2020 by which a penalty of Rs. 1 lac was imposed

for violating the Regulations 3 and 4 of Securities and Exchange

Board of India (Prohibition of Fraudulent and Unfair Trade Practices

relating to Securities Market) Regulations, 2003 (hereinafter referred

to as 'PFUTP Regulations').

2. The facts leading to the filing of the appeal is, that investigation

was made in the alleged synchronized trading in the scrip of

Spectacle Ventures Ltd., on the basis of which a show cause notice

was issued and thereafter the AO passed an order dated December

22, 2014 imposing a penalty of Rs. 5 lacs for synchronized trading.

It was held that the appellant was connected with Bharat Thakkar and

Bhavesh Pabari, on the basis of the common address and off-market

transaction with Bharat Thakkar. This Tribunal, by an order dated

March 8, 2016 allowed the appeal and set aside the order of the AO

holding that the address of the appellant was different from the

address of Bharat Thakkar and Bhavesh Pabari and, therefore, on this

ground no connection could be established. The Tribunal 3

accordingly remanded the matter to the AO for a fresh decision on

merits.

3. It seems that nothing was done and eventually proceedings were

initiated on December 13, 2017 and again on March 25, 2019 by

appointment of a fresh AO who issued a fresh show cause notice and

thereafter passed the impugned order.

4. We have heard Mr. Vikas Bengani, the learned counsel for the

appellant and Mr. Vishal Kanade, the learned counsel alongwith

Ms. Nidhi Singh, Ms. Kinjal Bhatt, Mr. Hersh Choudhary, the

learned counsel for the respondent through video conference.

5. The contention of the appellant is, that there has been delay

of 45 months in initiating fresh proceedings from the date of the

remand order. It was urged that on account of undue delay, the

proceedings should be quashed on this ground itself. In this regard,

we are of the opinion that pursuant to the remand order SEBI

appointed the AO on December 13, 2017 who did nothing and

subsequently another AO was appointed on March 25, 2019 who

issued a fresh show cause notice and fixed December 4, 2019 for

hearing and thereafter passed the impugned order dated March 20, 4

2020. In view of the aforesaid, we are of the opinion that the

proceedings cannot be quashed on the ground of undue delay. Even

though is nothing on record to indicate as to why the proceedings

could not be decided pursuant to the remand order passed by the

Tribunal we are of the opinion that when the matter is remanded,

every effort should be made by the authority to decide and dispose of

the matter as early as possible. Delay in the disposal creates a

prejudice and gives an impression that the respondent are not

interested in proceeding further in the matter.

6. The learned counsel for the appellant contended that when a

show cause notice had earlier been issued, there was no occasion for

the AO to issue a fresh show cause notice on December 4, 2019 and

thus contented that the issuance of the second show cause notice is

illegal and therefore the entire proceedings should be quashed. In

this regard, we are of the opinion that when the Tribunal set asides

the order of the AO and remits the matter to the AO to decide the

matter afresh, the AO is required to proceed on the basis of the

material available on the record pursuant to the show cause notice

which had already been issued. There is no requirement to issue

another show cause notice. However, in the instant case, by

issuance of a fresh show cause notice, the proceedings are not 5

vitiated in as much as we find that in the fresh show cause notice the

earlier charge was reiterated and no fresh charges are levied against

the appellant. Consequently, we treat this show cause notice as only

a notice of intimation to the appellant fixing the date for hearing in

the matter. We may however, observe that when the matter is

remitted by the Tribunal to the AO for fresh consideration, no fresh

show cause notice is required to be issued.

7. We find from a perusal of the impugned order that the charge

of price manipulation against the appellant in the scrip of Spectacle

Ventures Ltd. has been dropped. We also find that the charge

relating to the appellant that he was connected with Bharat Thakkar

and Bhavesh Pabari on the basis of common address shown in the

KYC documents has also been dropped. No evidence on these

aspects could be found against the appellant.

8. However, the appellant has been found to be connected with

Bharat Thakkar on the basis of off-market transaction between the

appellant and Bharat Thakkar. With regard to the script in question,

we find that two transactions were executed on September 10, 2009

and June 16, 2010. On the other hand, we find that the trades were 6

executed by the appellant on August 9, 2010, December 6, 2010 and

December 7, 2010 after a considerable period of time.

9. The AO found that the appellant was connected with Bharat

Thakkar on the basis of off-market transaction. The AO also found

that Bharat Thakkar was connected with some of the Bhavesh Pabari

entities and one such entity in the Bhavesh Pabari group was Bharat

G. Vaghela. On this basis through a circuitous route, the AO held

that there was a connection between the appellant and the counter

party Bharat G. Vaghela. On this basis, one trade of appellant

executed on December 6, 2010 has been found to be a synchronized

trade with Bharat G. Vaghela, based on which a finding of violation

of Regulations 3 and 4 of the PFUTP Regulations has been given

leading to the imposition of penalty of Rs. 1 lac.

10. Having heard the learned counsel for the parties on this aspect

and having perused the record, we are of the view that the impugned

order on this score cannot be sustained. In the first instant, we are of

the opinion that there is no connection whatsoever between the

appellant and his counter party Bharat G. Vaghela. The only indirect

connection that has been found is that Bharat G. Vaghela is

connected with the Pabari group in which Bharat Thakkar is also one 7

of the entities. No linkage has been found between Bharat Thakkar

with Bharat G. Vaghela. Thus, in our view, this circuituous route

cannot make the appellant connected with Bhavesh Pabari group who

were the main entities indulging in the synchronized trading.

11. Admittedly, the appellant had executed three trades and only

one such trade executed on December 6, 2010 matched with the trade

of Bharat G. Vaghela. The matching of one trade only does not lead

to a conclusion that the appellant was indulging in a synchronized

trade.

12. Further, the quantum of the alleged synchronized trade in

the case of the appellant is too miniscule to influence the market

equilibrium or affect the volume of trades. The quantum of trades

was insignificant to come to any conclusion of synchronized trades.

We are of the opinion that synchronized trades per se are not illegal.

It is only when synchronized trades were executed with a view to

manipulate the price of the scrip that the provision of the PFUTP

Regulations get attracted. In the instant case, the AO itself dropped

the charge of the price manipulation against the appellant. Thus, in

the absence of any manipulation of the price and on account of

miniscule one trade we are of the opinion that it does not lead to 8

conclusion of synchronized trades. The provision of Regulations 3

and 4 of the PFUTP Regulations will not get attracted in the facts and

circumstance of the present case.

13. Consequently, the impugned order cannot be sustained and

is quashed. The appeal is allowed with no order as to costs.

14. The present matter was heard through video conference due

to Covid-19 pandemic. At this stage it is not possible to sign a copy

of this order nor a certified copy of this order could be issued by the

Registry. In these circumstances, 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.

Parties will act on production of a digitally signed copy sent by fax

and/or email.

Justice Tarun Agarwala RAJALAKS Digitally signed Presiding Officer by RAJALAKSHMI HMI H H NAIR Date: 2021.01.19 NAIR 16:41:30 +05'30' Dr. C. K. G. Nair Member

Justice M. T. Joshi Judicial Member 19.01.2021 PTM