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2019 (5) TMI 977 - AT - SEBIFraudulent activities in the securities market - profits earned through this illegal trading activity - Execution of the scrips or any manipulation of the price of the scrips - HELD THAT:- The appellant was integral part of this collusive trading as he was one of the channels through which sensitive information was passed on to KB and is equally responsible for front running. Even though there is no conclusive proof as regard the contents of communication between DP and the appellant, nonetheless an irresistible inference can be drawn that sensitive information regarding forthcoming trades of Passport was passed on by DP to KB and the appellant. The proximity of time when the mobile calls were made between DP and AB and the trading of the shares at the time when Passport was also placing the orders leads to an irresistible conclusion of the involvement of the appellant as part of the front running. The modus operandi was such that DP was in constant touch with KB and the appellant and was passing on the sensitive information which was being utilized by KB from his trading activity. The appellant is the beneficiary of the profits from the trading activities done by KB. We find that the profit received by KB was transferred to Bhoomi Industries in which the appellant was a partner. We further find that the same amount was again transferred to the personal account of the appellant. Thus an irresistible conclusion can be drawn that the profits earned through this illegal trading activity by KB was shared with the appellant. In this regard, a vague reply was given by the appellant to the extent that the fund received by the appellant from Bhoomi Industries could have been in the nature of loan or repayment or withdrawal from capital account. No details were furnished in this regard and, therefore, an irresistible conclusion drawn by the Adjudicating Officer that there was a sharing of profits cannot be faulted. The standard of proof is preponderance of probability and the proof of manipulation always depends on the inferences drawn from a host of circumstances. A finding has to be arrived at from the pattern of trading. The cumulative analysis determines the modus operandi which can lead to an inference regarding the conduct of the parties while manipulating the securities market and thereby arrive at a conclusion of manipulation. Circumstantial evidence could be sufficient to raise a presumption with regard to the existence of a fact which is sought to be proved. A transaction has been executed with the intention to manipulate the market or defraud its mechanism will depend on the intention of the parties which could be inferred from the attending circumstances since direct evidence in such cases are not available. As held in SEBI vs. Kanaiyalal Baldevbhai Patel [2017 (9) TMI 1269 - SUPREME COURT] held that it is between inducement and criminal law and the wider meaning thereof under the SEBI Act is that to make inducement an offence. The intention behind the representation or misrepresentation of facts must be dishonest whereas in the latter category of cases the element of dishonesty needs not be present or proved. Further in the latter category of cases (under SEBI Act) a mere inference rather than proof that the person induced would have acted in a manner that he did for the inducement was sufficient. The element of dishonesty or bad faith in the making of inducement was not required. In the light of the above, the decisions cited by the learned counsel for the appellant is distinguishable and are not applicable in the facts and circumstances of the present case. It is clear that the information passed on by DP induced the appellant to connive with his brother KB. The sharing of the profits leaves no manner of doubt that KB and the appellant had acted in connivance with DP to encash the benefit of the information parted with by DP. The appellant was not only part of the front runner but was involved in the fraud committed by DP and had aided and abetted the same.
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