Appeal Nos. 134 and 135 of 2013. Case: 1. Ashesh Agarwal, 2. Bansal Suppliers Pvt. Ltd. Vs 1. Securities and Exchange Board of India, [Alongwith Appeal Nos. 139 and 140 of 2013], 2. Adjudicating Officer Securities and Exchange Board of India, [Alongwith Appeal Nos. 136 and 137 of 2013]. Securities and Exchange Board of India
| Case Number | Appeal Nos. 134 and 135 of 2013 |
| Counsel | For Appellant: None and For Respondents: Mr. Shiraz Rustomjee, Senior Advocate with Mr. Mihir Mody and Mr. Pratham V. Masurekar, Advocates |
| Judges | J.P. Devadhar, J. (Presiding Officer) and Jog Singh, Member |
| Issue | Companies Act, 1956 - Sections 12, 235, 236, 237, 238, 239, 240, 241; Securities And Exchange Board of India Act, 1992 - Sections 11C(2), 11C(3), 15A(a), 15HA, 15I |
| Judgement Date | October 31, 2013 |
| Court | Securities and Exchange Board of India |
Order:
Jog Singh, Member
-
This bunch of six appeals arises out of a common show cause notice (for short "SCN") dated June 28, 2011 issued to the six appellants for the alleged violation of certain provisions of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (for short "FUTP Regulations") and Section 11C(2) and (3) of the SEBI Act, 1992 (for short SEBI Act). The proceedings under the SEBI Act and relevant rules finally culminated into the impugned order dated May 30, 2013 by which a penalty of ` 5 lac on each of the appellants aggregating to ` 30 lac has been imposed under Section 15HA of the SEBI Act for violation of Regulations 3(a) to (d), 4(1), 4(2)(a), (b), (e) and (g) of the FUTP Regulations. Similarly, a penalty of ` 10 lac on each appellant aggregating to ` 60 lac has been imposed under the provisions of Section 15A(a) of the SEBI Act for violation of Section 11C(2) and (3) thereof. Since a common question of law and fact is involved in the matter, these appeals are taken up for final disposal at the admission stage and are being disposed of by this common order. The appeals were presented to the Registry of this Tribunal on July 16, 2013 and after scrutinizing the same, notices dated July 31, 2013 were sent to the appellants as well as respondent to appear before the Tribunal for hearing on September 13, 2013. The appellants, however, instead of appearing in person or through an authorized representative or an advocate sent a letter dated September 9, 2013 requesting for an adjournment on the ground that no Advocate was available in Kanpur to defend the matter in Mumbai. In the interest of justice, the appeals were adjourned to October 17, 2013 making it explicit that appeals might be heard and disposed of at the admission stage on October 17, 2013. Registry was, accordingly, directed to issue fresh notices to the appellants regarding posting of the matter on October 17, 2013. Records reveal that the service has been duly effected on the appellants.
-
On October 15, 2013 written submissions were filed in all the six appeals on behalf of the appellants with an advance service to the respondent. When the matters were called out on October 17, 2013 at 10.30 a.m. nobody turned up on behalf of the appellants. The appeals were passed over and kept to be taken in the second round. At about 12.30 p.m., the appeals were again taken up. Nobody turned up on behalf of the appellants. In the circumstances, the Tribunal went through the appeals and the written submissions preferred by the appellants and also heard the oral arguments advanced on behalf of the respondent. The appeals were, thus, reserved for orders with an opportunity to respondent to file response to the written submissions preferred by the appellants on October 15, 2013. Pursuant thereto the respondent has preferred written brief submissions on October 23, 2013.
-
Brief facts leading to the filing of the appeals are that the respondent conducted an investigation for the period from February 1, 2010 to September 24, 2010 into the alleged irregularity/illegality in trading in the shares of Rich Capital and Financial Services Ltd. now known as Rich Universe Network Limited, hereinafter referred to as "RUNL". Investigation, interalia, revealed that the scrip of RUNL opened at ` 56.75 on February 1, 2010 and reached a high of ` 119.90 on September 2, 2010 and closed at ` 111.80 on September 24, 2010 with an abnormal volume during the investigation period.
-
A group of entities i.e. Mr. Ashesh Agarwal, appellant in appeal No. 134 of 2013, Bansal Suppliers Pvt. Ltd., appellant in appeal No. 135 of 2013, Nirbharant Management Consultants Pvt. Ltd., appellant in appeal No. 136 of 2013, Cityon Infrastructure Pvt. Ltd., appellant in appeal No. 137 of 2013, Sanjeev Agarwal, appellant in appeal No. 139 of 2013 and Big Broker House Stock Ltd., appellant in appeal No. 140 of 2013 were found related/connected to each other in one way or other way by common address, common directors, dealing in off-market transactions etc. and created artificial volumes/price and false or misleading appearance of trading in the shares of RUNL by indulging into reversal/circular trading among themselves in the securities market. The respondent issued summons dated July 29, 2011 and August 1, 2011 to which appellants failed to respond.
-
In the circumstances, the respondent was compelled to appoint an Adjudicating Officer under Section 15I of the SEBI Act read with Rule 4 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 by order dated May 8, 2012 to inquire and adjudicate the alleged violations by the appellants under Sections 15HA and 15A(a) of the SEBI Act. Pursuant thereto a common SCN dated June 28, 2012 was issued to the appellants to show cause as to why an inquiry be not held against them and why penalty be not imposed upon them for violating the aforesaid provisions of FUTP Regulations and SEBI Act.
-
It is, interalia, alleged in the show case notice that the appellants are related/connected to each other and RUNL in one way or the other. They transferred 1,01,600 shares to different entities through off market and purchased 1,00,590 shares from the same entities in the market (i.e. 99%) which were in the nature of reversal/circular trades. The appellants traded amongst themselves for 1,64,570 shares and out of which there were reversal/circular trades as evidenced by trade/order logs. It is alleged that such circular/reversal trading which were manipulative in nature as the shares were bought and sold by the appellants in market and off-market mechanism without resulting into meaningful change of ownership. The trades in question were executed with an intent to create artificial volumes by way of misleading...
To continue reading
Request your trial