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2021 (1) TMI 763 - AT - Companies LawLevy of Penalty - manipulation in price of the scrip of Blue Blends by employing/adopting a strategy of trading called 'Advancing the Bid' - HELD THAT:- The nature/pattern of trading adopted by the appellants is not in the nature of what a rational investor would do. A large number of sell orders were placed repeatedly on several trading dates at less than the LTP; it is illogical. Therefore, the contention of the appellants that it was following momentum trading has no meaning as by placing a large number of orders below the LTP the appellants themselves were creating a momentum. Of course we notice that a number of orders of the appellants were placed on or marginally above LTP, but that is the rational behaviour expected from a seller and no fault can be found for SEBI in not considering such trades as violative of the PFUTP Regulations. Further, it is also on record that in 124 out of 166 times sell orders were placed in single digits of 1, 2, 3 etc shares, which defies the submission of the appellants that they were placing orders below the LTP because only if sell orders are placed a bit below the LTP large quantities could be sold in a falling market. Therefore, clearly the strategy of trading [momentum trading] adopted by the appellants was creating its own momentum inimical to the interest of the securities market. Even if it affected only about 10 % of the market volume in the scrip of Blue Blends, as contended by the appellants, it is no consolation since influencing 10% of the market by 2 entities is a significant deviation from market equilibrium. Therefore, de hors the connectivity issue itself the appellants are in violation of the PFUTP regulations by the very nature of their trading strategy and trading pattern. Mitigating factors are inbuilt in the given punishments. 4 weeks restrain from the securities market as directed by the WTM and ₹ 5 lakhs joint and several penalty imposed by the AO are not harsh or disproportionate in the given facts and circumstances for us to interfere with the impugned orders. However, if the appellants so desire they may pay ₹ 2.5 lakh each - Appeal dismissed.
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