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2023 (8) TMI 201 - SECURITIES APPELLATE TRIBUNAL MUMBAIViolation of the SEBI (Prohibition of Insider Trading) Regulations - Financial assistance to the preferential allottees - limiting genuine capital infusion - direction of the WTM directing the appellants to pay the amount jointly or severally - HELD THAT:- We are of the opinion, that when the Company uses its own funds and distribute it to the allottees for the purpose of subscription to the shares it deceives the genuine investors and falsely leads the investors to invest in the shares of the Company. Such scheme in our opinion perpetuates a fraud on the ordinary investors and gives a false impression that there was an infusion of funds through preferential allotment. We are further of the opinion, that this kind of fraudulent act which is an unfair device was meant to deceive the investors and such act is clearly prohibited u/s 12A of the SEBI Act read with Regulations 3 and 4 of the PFUTP Regulations. In view of the aforesaid, the contention raised by the learned counsel for the Company does not hold any merit. Direction of the WTM directing the appellants to pay the amount jointly or severally - A person can be directed to disgorge amount equivalent to the wrongful gain made by him. By such contravention, the liability to disgorge the amount is individual and not collective - Direction of the WTM directing the appellants to pay the amount jointly or severally is against the provisions of Section 11B and to that extent, it cannot be sustained. There is no inter se connection of noticees no. 10, 11 and 14 with the other noticees except that these noticees are connected to the Company noticee no. 1. In our view, the directions to pay the penalty amount jointly and severally was not proper and is arbitrary. The appellants have been found to be part of the scheme planned by the Company and have been involved in transferring the funds to the preferential allottees for subscription of the preferential allotment of the shares. The AO has imposed a penalty of Rs. 46 lakhs upon 23 noticees to be paid joint and severally which works out to Rs. 2 lakhs per noticee. However, considering the peculiar facts and circumstances of the present case, which shall not be treated as a precedent in other cases, we are of the opinion, that the penalty of Rs. 4 lakhs would be just and proper for each of the appellants i.e. noticees no. 10, 11 and 14.
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