TMI Blog2010 (1) TMI 1251X X X X Extracts X X X X X X X X Extracts X X X X ..... t, Smt. Jagruti Parikh and Jagruti Securities Limited who are the promoters of the company. The entities to whom the shares had been transferred further off-loaded the shares in the market. The Board also found that in some cases the entities on receiving the shares in off market transactions further transferred them to other entities again in off market transactions and the shares were ultimately traded in the market. It may be mentioned that Smt. Jagruti R. Parikh is the wife of the Appellant and she is the Appellant in the connected Appeal No. 45 of 2009. Jagruti Securities Limited which is also one of the promoters of the company is the Appellant in Appeal No. 43 of 2009. It is alleged that the entities to whom the Appellant, his wife and Jagruti Securities Limited had transferred the shares in off market transactions had formed a cartel with a view to facilitate the off-loading of the shares in the market. The list of the entities to whom the shares had been transferred in off market transactions is given in paragraph 4 of the show cause notice that was issued to the Appellant. Among others, Vipul R. Jain, Rameshchandra K. Jain and Vikas Gourihar Narnavar are the persons to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a failure on your part to make the necessary disclosure in this regard. You are, therefore, alleged to have violated the provisions of Regulations 13 (3) of the IT Regulations. Date From To Quantity Shareholding % Shareholding 14.6.04 10299348 Market 31401 11422756 29.29 28.6.04 10264251 10045185 500000 10622756 27.24 08.7.04 10264251 10045185 500000 9622756 21.97 10264251 10113394 350000 8569268 09.7.04 10264251 10078939 1500000 6869268 17.61 8. Further, you being the director of JIK at the relevant time were also required to make disclosures as required under Regulation 13 (4) of the IT Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly dated November 14, 2008, the Noticee enclosed the copies of disclosures and clarified that these disclosures were made in the relevant period of time viz., 2004. 28. In this regard I am doubtful about the genuineness of his claim since if the Noticee had made disclosures in accordance with Regulation then who prevented him from submitting the copies of the same to the SEBI investigation team in the year 2004 itself. However, it is admitted fact that he failed to do so. 29. Secondly, assuming that Noticee had made disclosures to JIKIL and then it was mandated on JIKIL to in turn inform BSE and NSE within five days of receipt of the same from the Noticee as per Regulation 13 (6) of the Insider Trading Regulations. However, I find that, no disclosures have been made by JIKIL to the exchanges under both SEBI (SAST) Regulations, 1997 and Reg 13 (6) of the Insider Trading Regulations between June 1, 2004 and August 31, 2004 specifically and generally throughout the year 2004. Furthermore, JIKIL has not submitted copy of any disclosures made to it by the two entities including the Noticee in the year 2004 when the investigation took place. Therefore, in my opinion if the Noticee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was any price manipulation of the scrip by any of the Appellants nor was it alleged that the shares had been off-loaded to arrest the price of the scrip from falling drastically than from what it had already fallen during the investigation period. Curiously enough, without making any allegations in the show cause notice, the adjudicating officer basing himself on material which was never furnished to the Appellants at any stage of the proceedings found that they had violated the FUTP Regulations with a view to protect the price of the scrip from falling drastically. The adjudicating officer further referred to the price data of the scrip on the Bombay Stock Exchange and also on the National Stock Exchange to conclude that the price had already fallen from ₹ 4 to ₹ 2.80 on NSE and from ₹ 3.95 to ₹ 2.80 on the BSE. The adjudicating officer has gone far beyond the show cause notice and recorded findings on issues which were never raised in the show cause notice. On this ground alone, the impugned orders in so far as they hold the Appellants guilty of violating the FUTP Regulations cannot be sustained. This is not only ground on which we are setting aside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had, alongwith others to whom the shares had been transferred in off market transactions, formed a cartel to assist the promoters in manipulating the scrip of the company. There is no allegation in the show cause notice that the price of the scrip had been manipulated. The allegation is that these Appellants alongwith others formed a cartel to facilitate the promoters to off-load their shares in off-market transactions. Apart from a bald assertion made in the show cause notice, there is not an iota of material on the record to show that these persons formed a cartel or that the promoters of the company were in any way linked with the persons to whom the shares had been transferred in off market transactions. He has not referred to any material which could substantiate these findings nor could it be pointed out to us by the learned Counsel appearing for the Board. Merely because the promoters transferred the shares to them in off market transactions is no ground to hold that there was a link between the two. Off market transactions are not per se illegal. In this view of the matter and without saying anything more, we set aside the findings recorded by the adjudicating officer regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the fact that the Appellant is the managing director of the company and such letters could be placed on the records of the company any time. We are inclined to uphold the finding on the basis of the letters dated September 29, 2006 which the Appellants and the company had addressed to the investigating officer. The learned Counsel for the Appellants however, objected to the production of these letters (dated September 29, 2006) for the first time in the appeal before us. These letters were produced on January 19, 2010 during the course of the hearing and on the request of the learned Counsel for the Appellants, we adjourned the matter to the following day to enable him to seek instructions from his clients and he could not dispute that his clients had addressed these letters to the investigating officer though he sought to offer some explanation for the admission made. As already observed, the letters categorically state that the Appellants had not made the necessary disclosures and, therefore, we uphold the findings recorded by the adjudicating officer that they had violated Regulation 13 of the IT Regulations. 6. The next question that arises is what should be the penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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