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2018 (4) TMI 1715 - AT - SEBIFraudulent scheme of trading in the scrip of M/s. S. J. Corporation Ltd. (‘SJC’) - violation of SEBI Act and PFUTP Regulations - Market manipulation where the scheme employed by the appellants involved hiking the price of the shares in which the promoters had to make open offer - defunct company is taken over - increase the price of the scrip which they have to buy in an open offer at a higher price - HELD THAT:- There is no ambiguity in our mind that a scheme of fraud has been conceived and implemented by the appellants herein, except appellant no. 5. We also hold that this is a unique case of manipulation. A defunct company is taken over by a few parties; peculiar interest is shown by a few others in buying the shares of that company placing orders mostly at 5% above the LTP thereby gradually raising its price to abnormal levels and creating artificial liquidity in the scrip and thereafter most of the parties trying to off-load their holdings at a substantially inflated price. If individual case is seen independently there is nothing abnormal about it but when the picture is looked at in totality what is unfolding is a fraud perpetuated on the market / investors. It is not that the trade logs are disputed or the financial transactions are in dispute. What is disputed is only the motive behind such trade and the financial transactions. Even the argument of the promoters of SJC that they did not trade is only legally correct since another companyw herein they were promoters at the relevant time placed a buy order on 28.01.2009 (in Phase-II) for 100 shares at price 5% above the LTP, though only 10 shares got delivered. Similarly, appellant placed one buy order for just 5 shares at the rate of ₹ 1185/- per share on 26.09.2009. This was the highest reported price ever and it is equivalent to a pre-split price of ₹ 11850/-. Since the counter party did not meet the obligation the difference was credited to the appellant’s account. This appellant was already holding 400 shares of SJC (pre-split) and her husband (appellant in appeal no. 536 of 2015) had offloaded part of his holdings in Phase-III. Therefore, each small buy or small role played by each appellant needs to be juxtaposed with the motive of the appellant. Further, residing in a location or telephone calls between people also in itself do not make one party to a fraudulent scheme; but all associated factors together do make them parties. Therefore, given the factual matrix perused by us we find no merit in the submissions of the appellants. We find no fault in imposing such a joint and several penalty as it is now abundantly clear that the appellants were acting together and together they inflated the notional value of their shares to more than ₹ 132 crore. If they could be party to such a fraudulent scheme whether they are a homogeneous group or otherwise they should find a way to fulfill the consequences / obligation of paying the penalty jointly and severally imposed upon them. In view of the above reasons we find no merit in the appeals except that of Ms. Reshma Patel, Appellant No. 5 as she succeeds in her appeal. Since in the impugned order penalty of ₹ 2.5 crore has been imposed under Section 15HA of SEBI Act on 19 appellants jointly and severally and one of them succeeds in the appeal the penalty amount also needs to be reduced. Accordingly, we reduce the joint and several penalty from ₹ 2.5 crore to ₹ 2.3 crore to be paid by 18 of the appellants.
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