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2022 (4) TMI 945 - SC - SEBIInsider trading - Whether existed a close relationship/immediate relation between the appellants? - circumstantial evidence (trading pattern and timing of trading) - HELD THAT:- In the present case, as rightly argued by the learned counsel of the appellant, the foundational facts were not proved which could raise the alleged presumption. SEBI failed to place on record any material to prove that the appellants were “connected persons” to Balram Garg as required by Regulation 2(1)(d)(ii)(a) read with Regulation 2(1)(f) of the PIT Regulations as none of the appellants were financially dependent on Balram Garg or even alleged to have consulted Balram Garg in any decision related to trading in securities. In light of the above principles of law laid down by this Court, it was imperative on the Respondent/SEBI to place on record relevant material to prove that the appellants namely, Mrs. Shivani Gupta, Sachin Gupta, Amit Garg and Quick Developers Pvt. Ltd. were “immediate relatives” who were “dependent financially” on appellant Balram Garg or “consult” Balram Garg in “taking decisions relating to trading in securities”. However, SEBI failed to do so as has been already recorded by the WTM in its order dated 11.05.2021. The said appellants were not “immediate relatives” and were completely financially independent of the appellant Balram Garg and had nothing to do with the said Balram Garg in any decision making process relating to securities or even otherwise. In the context of appellant no. namely Quick Developers Pvt. Ltd., the record clearly reveals that it is neither a “holding company” or an “associate company” or a “subsidiary company” of PCJ nor the appellant Balram Garg has ever been the Director of Quick Developers Pvt. Ltd. Therefore, Quick Developers Pvt. Ltd. cannot be held to be a “connected person” visàvis the appellant Balram Garg. Reliance of the Respondent/SEBI on transactions between appellant Sachin Gupta and PCJ and the subsequent payments of rent by PCJ is against the principles of natural justice as these allegations were not part of the Show Cause Notices There is no material on record for the WTM and the SAT to arrive at the finding that both late P.C. Gupta and the appellant Balram Garg communicated the UPSI to the other appellants. The said appellants were not “immediate relatives” and were completely financially independent of the appellant Balram Garg and had nothing to do with the him in any decision making process relating to securities or even otherwise. The submission of the learned counsel of the respondent regarding the same residential address of the appellants also falls flat as admittedly the parties were residing in separate buildings on a large tract of land. Lastly, in our opinion, the SAT order suffers from nonapplication of mind and the same is a mere repetition of facts stated by the WTM. The Appellate Tribunal was exercising jurisdiction of a First Appellate Court and was bound to independently assess the evidenced and material on record, which it evidently failed to do. Accordingly, the appeals are allowed and the impugned judgement and final orders of WTM and SAT are set aside. The deposits made by the appellants in both the appeals in terms of the impugned orders or interim orders of this Court shall be refunded to the respective appellants.
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