|
Advanced Search Options
SEBI - Case Laws
Showing 201 to 220 of 510 Records
-
2020 (12) TMI 156
Fraudulent use of the mutual funds units of the complainant - Applicant seeking the grant of regular bail - applicant herein malafidely facilitated the accused director Awanish Kumar Mishra and AFSPL in using the said fraudulently transferred mutual fund units for margin - applicant seeking interim bail on the account of his wife’s illness - HELD THAT:- Applicant was in a fiduciary capacity and has allegedly committed gross breach of trust in relation thereto in alleged connivance with other co-accused persons of an alleged amount of INR 344.07 crores, and it has to be taken into account the factum that the complainant is a public limited company, and that the members of the public have also consequently been allegedly defrauded of the amount of INR 344.07 crores by alleged fraudulent use of the mutual funds units of the complainant of INR 344.07 Crores by the accused persons inclusive of the applicant arrayed as the accused no.4 by inter alia creation of 350 shell companies.
Applicant is alleged to have committed an economic fraud which affects the moral fabric of society, coupled with the factum that economic offences corrode the very fabric of democratic governance and probity in public life and are considered to be the gravest offences against the society and the persons alleged to have committed such offences are necessarily required to be treated differently in the matter of bail.
What is brought forth through the observations therein is to the effect that merely because a person who was not arrested by the police or Investigating Agency during investigation nor produced in custody as envisaged in Section 170 of the Cr.P.C., 1973 ought not to be taken into custody merely because the charge sheet has been filed, the same however, does not spell out an embargo on the Court to reject a prayer made for bail by such an accused not arrested during investigation or not produced in custody, to be taken into custody in the circumstances where the facts of a case as alleged bring forth the gravity and magnitude of the alleged commission of an offence and consequently negate the grant of bail.
As regards the contention raised on behalf of the petitioner that the petitioner was not a flight risk and there is no scope of his tampering evidence and influencing the witnesses, the same per se does not suffice to grant bail to the applicant in view of the magnitude of the alleged commission of breach of fiduciary trust placed. In the circumstances the bail application filed by the applicant seeking the grant of regular bail is rejected and as regards the prayer made by the applicant seeking the grant of interim bail for the reasons that his wife is unwell, it cannot be overlooked that the proceedings in the present application are pending since institution in June 2020 and apparently there is no urgency qua the treatment of the applicant’s wife required - The bail application in the circumstances is dismissed.
-
2020 (12) TMI 36
Power of SEBI to pass an ex parte interim order - allegation against the respondent was that being in possession of price sensitive information and being a connected person, he had sold the shares and had, thus, made a notional gain or averted a notional loss - appellant alleged that the reason for passing an ex-parte order was that there was a possibility of a diversion of the notional gain made by the respondent - HELD THAT:- Tribunal, in our view, was correct in coming to the conclusion that since the investigation was pending since 2017 and information had been supplied on 28 November 2019, there was no urgency for passing an ex-parte interim order of the nature that was issued by the Whole Time Member. It was, in this background, that the Tribunal, while affirming the power of SEBI to pass an ex parte interim order in appropriate cases, observed that this should be exercised “only in extreme urgent matters
Since we have come to the conclusion that the Tribunal was on the facts of the case correct in setting aside the ex-parte order of the Whole Time Member on the ground that no urgency has been made out to sustain such an order, it is necessary for this Court to clarify that the interpretation which has been placed by the Tribunal on the powers of SEBI, particularly in paragraph 9 of the impugned order, which has been extracted above, shall not be cited as a precedent in any other case. The order passed by the SEBI must necessarily be in accord with Section 11(4) of the SEBI Act.
We affirm the view of the Tribunal on the facts as they have emerged. The appeals are accordingly disposed of.
-
2020 (12) TMI 29
Expulsion against the appellant, from the membership of the National Stock Exchange of India Limited - Validity of respondents’ decision of withdrawal of trading facility and subsequent action of closing out of open transactions - appellant has contended that since the trading facility itself was interdicted, it could not have been expected to keep up with various margins and deposits prescribed by the respondents as no trading was being permitted.
Whether prior approval of SEBI/Central Government was essential for enforcing the circular dated 19.05.1997 against trading/clearing members? - HELD THAT:- Clause (5) of Chapter IX of the Byelaws uses the phrase “the relevant authority may determine and announce” the operational parameters. Both “determination” and “announcement” of such parameters is therefore, within the competence of the Exchange. Such announcement can be made by the Exchange by circulating a communication amongst the members, as it rightfully did in the present case by way of the subject circular. A similar clause has been inserted in Chapter VI of the Byelaws of the Clearing Corporation as well, thereby empowering the Clearing Corporation to issue operational parameters relating to trading limits and consequent actions in case of noncompliance.
Whether the circular is invalid as being in conflict with the Byelaws of the Exchange, particularly regarding the manner of closing out prescribed therein? - HELD THAT:- The circular provides for the effect of violation of the exposure limits and lays down that any such violation shall be treated as a violation of the Byelaws of the Clearing Corporation, without prejudice to the power of the Exchange to withdraw the trading facilities. This withdrawal is contemplated as an imminent action to protect the market from being exposed to unsecured financial exposure. Consequent thereto, closing out of open positions has been contemplated - The nature of action contemplated under clause 16 is in furtherance of the basic mandate laid down under Section 9 of the 1956 Act. For, section 9 of the Act clearly provides that all contracts/deals on the market are subject to the Byelaws (including Regulations, operational parameters etc. issued under the Byelaws) and Rules of the Exchange. One of the consequences of not acting in accordance with the Byelaws is provided under clause 16, apart from other provisions - on a comprehensive view of the scheme of closing out under the Byelaws of the Exchange, Byelaws of the Clearing Corporation and the circular, we are of the view that an action of forthwith closing out is permissible under the said scheme, particularly clause 18, and thus, the circular is not ultra vires clauses 17 and 18 of the Byelaws. Rather, the circular furthers the spirit underlying clause 18.
Whether the appellant is legally bound by the subject circular which allows the withdrawal of trading facility and forthwith closing out of open positions? - HELD THAT:- It is clear that the scheme of 1956 Act enables the Exchange to resort to suspension and expulsion of the members, in accordance with its approved Byelaws and Rules. Section 3(2) of the Act specifies certain matters that must be appropriately covered in the Byelaws or Rules. Clause (c) of the said subsection expressly provides that matters of admission, qualification, exclusion, suspension, expulsion and readmission of members must be covered in the Byelaws/Rules.
In the present case, it is not in dispute that the Interest Free Security Deposit to be maintained by the appellant actually fell short of the required margins during the relevant period. Therefore, we are neither on question of existence of power to expel nor on the factum of whether or not the deposits fell short of the prescribed margins. What falls for our examination, here, is the sole question as to whether the obligation of the appellant to keep up with the adequacy of deposits continued despite the withdrawal of its trading facility. An affirmative answer would justify the expulsion.
Whether the appellant was obligated to maintain the prescribed Interest Free Security Deposit and other deposits, despite the withdrawal of its trading facilities, for continued membership of the Exchange? - HELD THAT:- Having observed that the appellant failed to maintain the requisite membership margins with the Exchange for a long period and refused to make up for the shortfalls when called upon to do so by the Exchange, there is nothing to deviate from the view taken by the Tribunal that the appellant acted in contravention of the Byelaws and Rules of the Exchange necessitating unto termination - ScheduleII of the SEBI (Stock Brokers and SubBrokers) Regulations, 1992 prescribes a “Code of Conduct” for the stock brokers and clause 5 thereof specifies that compliance with statutory requirements is a mandatory aspect of code of conduct of a stock broker. The appellant consistently failed to comply with the requirements and acted in a manner which was prejudicial to the sanctity of a MemberExchange relationship.
The Tribunal rightly confirmed the order of expulsion.
Withholding of securities - vesting period - return of unrealised securities - recovery of unrealised securities - HELD THAT:- The following directions are issued for full and final settlement of all claims between the parties:
(i) NSE to evaluate and get the remaining transferrable securities, if any, transferred in its favour and recover the remaining amount using the same evaluation criteria adopted in respect of other withheld securities of the appellant within 6 weeks.
(ii) After realisation, the surplus amount be returned forthwith to the appellant along with interest at the rate of 12% P.A. from the date of determination of claim/date of vesting until the date of payment.
(iii) Respondents to return the unrealised securities including those with outstanding objections to the appellant within 6 weeks from today.
(iv) In case recovery is not possible from the remaining securities, for any reason whatsoever, the respondents may communicate the same to the appellant forthwith and the appellant shall then pay the amount so demanded (including interest, if any), to the respondents within 6 weeks from the date of receipt of such communication.
(v) NSE is directed to oversee the evaluation and realisation of remaining securities, and settlement of claims.
Appeal disposed off.
-
2020 (12) TMI 2
Forward trade in commodities - Trading Irregularities - Piercing of corporate veil - abuse of position by the MD / Chairman of the Commodity Exchange - Plea of lack of adequate opportunity - principles of natural justice - Issuing show cause notice to the second respondent and not to the first respondent - multiple proceedings have been initiated but have resulted in no culmination over a period just short of a decade.
HELD THAT:- We do feel that there was an endeavour to some extent by Respondent No.2 herein to prolong the proceedings but then looking into the enormity of the contents of the show cause notice running into 150 pages with documents spanning 4,000 pages supporting it, a reasonable time had to be given to respond to the same. We may note that the whole enquiry was at the behest of “independent enterprising journalist.” The manner in which the proceedings were sought to be closed raises serious doubts in our mind that a fair process and opportunity has been extended to Respondent No.2 herein.
Piercing of corporate veil - Insofar as Respondent No.1 herein is concerned, not even a formal show cause notice has been issued. However, the fact remains that the communications addressed by Respondent Nos.1 and 2 herein do give rise to a clear and unequivocal view that it was understood as a notice both to Respondent Nos.1 and 2 herein. - to some extent truth in what has been alleged by the appellants before us, i.e., that Respondent Nos.1 and 2 herein are conveniently playing this game of coming up separately even though they are joined in all purposes. We are conscious of the fact that Respondent No.1 herein is a separate legal entity being a registered company, but the concept of piercing the veil is not unknown to law. By this process, the law either goes behind the corporate personality to the individual members or ignores the separate personality of the company. - We are, thus, not able to hold that there was a failure to serve show cause notice to Respondent No.1 herein merely because no such notice was specifically addressed to it.
The directions passed by the SAT for the case to begin with the service of fresh show cause notices would not be an appropriate direction. In the conspectus of the factual position from the proceedings which have taken place and the legal principles discussed, we are of the view that the following directions would subserve the interest of justice and perfect the rights of the parties:
i. No fresh show cause notice is required to be served on Respondent No.1 herein and the show cause notice dated 21.6.2011 would be treated as a show cause notice to both Respondent Nos.1 and 2 herein.
ii. The documents already asked for by Respondent No.1 and 2 herein and not supplied should be supplied. In order to obtain clarity on this issue, we direct that a list of documents sought for by either respondents be supplied to the SEBI within two weeks from the date of this order and those documents are to be supplied by SEBI within two weeks thereafter.
iii. Respondent Nos.1 and 2 herein are granted opportunity to file their reply to the show cause notice without any further delay within a period of four weeks after receiving aforementioned documents.
iv. The SEBI would thereafter proceed to give an opportunity for personal hearing both to Respondent Nos.1 and 2 herein and these proceedings are to go on, on a day-to-day basis and no request for adjournment will be entertained in this behalf from either respondents..
v. The SEBI would take a final view on the subject matter thereafter.
vi. Needless to say, if Respondent Nos.1 and 2 herein are aggrieved by the same, the remedy against the same lies before the SAT.
vii. We make it clear that all pleas as raised by Respondent Nos.1 and 2 herein would be considered by the SEBI, legal or factual including but not confined to aspects of jurisdiction. In fact, this is the very purpose of relegating the proceedings before the SEBI and not to SAT as the right of appeal is a valuable right to be exercised after adequate opportunity at the first adjudication stage level.
The order of the FMC dated 23.7.2011 has been set aside and a fresh order has to be passed. The different proceedings initiated, still pending almost at a nascent stage, are in pursuance of that order. The natural consequence, thus, would be that those proceedings would have to be kept in abeyance for the time being, till a view is taken by SEBI in pursuance of the directions passed by this order and would have to abide by the decision taken by the SEBI or in appeal arising therefrom. We clarify that were Respondent Nos.1 and 2 herein to fail in their endeavours, it will not mean that those other proceedings have to start de novo and can continue from the stage where they are, subject, of course, to the nature of directions passed afresh by SEBI.
Appeals disposed off.
-
2020 (11) TMI 1111
Fraudulent And Unfair Trade Practices Relating To Securities Market - imposition of disgorgement - taking positions as a hedge in the derivative markets by someone who has an underlying exposure - F&O Market amounts to the commission of a ‘fraudulent and manipulative trade’ in securities in terms of the SEBI (PFUTP) Regulations - Offloading 5% of the shares in RPL by its promoter RIL would cause a flutter in the stock market and would not be in the interest of the investors - short positions taken - differences of views within the three-member Bench.
Appellants are prohibited from dealing in equity derivatives in F&O segment of Stock Exchanges, directly or indirectly, for a period of one year from the date of the order and shall disgorge an amount alongwith interest @12% p.a. w.e.f. 29.11.2017 onwards till the date of payment
Whether the Principal-Agent model/‚agency model‛ adopted by appellant no. 1 RIL and implemented with the help of other 11 appellants (because of merger of 2 of the original 12 other Noticees, there are 11 other appellants) in cornering huge position limits in the 2007 November single stock futures contract in the shares of Reliance Petroleum Ltd. (‘RPL’ for short) and the offloading of substantial quantities of RPL shares in the cash segment of the stock exchanges in the last 10 minutes (effectively 8.40 minutes) of the trading hours on 29 November, 2007, the settlement day, allegedly with an intention to artificially depress the price in the cash segment to make larger gains in the future contracts, are violative
HELD THAT:- As cornering about 62% / 93% of the market-wide position limit by one entity through a manipulative scheme or device is not the same thing as exceeding the position limit by a client in a transparent manner, visible to the exchange/clearing corporation/house. Therefore, the finding in the impugned order that it is a rare case of violation of section 12A of the SEBI Act and Regulation 3 and 4 of the PFUTP Regulations is perfectly in order. Further, it is an established fact that SEBI administers the SCRA, 1956, SEBI Act, 1992, Depositories Act, 1996 and the delegated provisions of the Companies Act, 1956/2013. Therefore, if the nature of the violations specified in any legislations spills over to the mandate under another legislation, SEBI is fully within its rights to invoke the provisions of both/all those legislations. In the instant matter, therefore, when it was held that the position limit violation had been achieved through a dubious, manipulative scheme or a device, such an act would squarely fall within the provisions of SEBI Act and PFUTP Regulations. We, therefore, find no error or mistake on the part of the WTM in invoking the relevant provisions of SCRA, SEBI Act and the PFUTP Regulations, 2003 and in passing the Order under section 11 and 11B of SEBI Act accordingly.
Disgorgement is an amount equivalent to the wrongful gain made or loss averted and therefore it is an equitable remedy; not a penal action. Moreover, equity is further served when the disgorged amount is credited to the Investor Protection Fund of SEBI, for the benefit of the market participants, particularly small investors; not to the Consolidated Fund of India as in the case of fine/penalty. Therefore, both the contentions that disgorgement is a penalty and SEBI does not have the power to impose disgorgement under section 11B of SEBI Act are contrary to the expressly stated provisions of the SEBI Act and therefore have no merit and are rejected forthwith.
Further, fact that disgorgement of Rs. 447.27 crore (+interest) imposed on the appellant no. 1 is a sizable sum does not make that direction harsh both because (1) it is only a remedial action and (2) what is disgorged is only what has been gorged by contravention of the specified laws. Nothing has been taken out of the appellant’s own funds/assets in the process. Since it is only an equitable remedy there is no question of that being harsh or a penal action.
Given the aforesaid reasons, appeal lacks any merit and is hereby dismissed. No orders on costs. Appellant no. 1 is directed to make payment of the disgorged amount of Rs. 447.27 Crore along with simple interest calculated at the rate of 12% p.a. with effect from November 29, 2007 till the actual date of payment to SEBI within 60 days from the date of this Order.
In view of the majority opinion, the appeal is dismissed with no order as to costs. Appellant no. 1 is directed to make payment of the disgorged amount of Rs. 447.27 Crore along with simple interest calculated at the rate of 12% p.a. with effect from November 29, 2007 till the actual date of payment to SEBI within 60 days from the date of this Order.
-
2020 (11) TMI 1013
Validity of Ex-parte adinterim order dated October 20, 2020 passed by the Whole Time Member - attachment of demat accounts and bank accounts of respondent - Section 11 and 11B of the Securities and Exchange Board of India Act, 1992 - HELD THAT:- The direction of the WTM to deposit a sum of ₹ 1292.46 crore is wholly arbitrary and has been passed without any application of mind. Admittedly, the sale consideration has to be distributed to the shareholders of the Company after meeting the tax liability, indemnity, transaction cost, debt outstanding etc. According to the Company which is recorded in the impugned order, the total amount comes to ₹ 1026.44 crore and the balance left for distribution of the shareholders is ₹ 854.40 crore which amount is also reflected in the annual report 2018-19 as well as in the report of BSE dated December 12, 2019 - the direction to deposit the entire sale consideration of ₹ 1292 is neither appropriate nor beneficial to the survival of the Company at this stage. The fact that 50% of the sale consideration is also required to be distributed to the promoters and promoters group has not been disputed by the respondent.
The respondent knowing fully well that a substantial amount was parked in fixed deposits, the direction to the appellant to deposit ₹ 1292. 46 crore in an escrow account is neither just nor proper especially when there is no specific finding on diversion of funds. The written note submitted by SEBI further indicates that a sum of ₹ 1002 crore is lying in fixed deposits - the direction to deposit further amount would cripple the Company and bring it to down to its knees which is neither in the interest of the Company nor in the interest of its shareholders.
The appellant no. 1 Company shall deposit a sum of ₹ 500 crore in a separate escrow account within 10 days from today, the details of which would be supplied to SEBI and to the stock exchanges - Appeal allowed.
-
2020 (11) TMI 56
Validity of Downgrading petitioner's bank loans' rating to 'IND BB+' from 'IND BBB - Covid-19 pandemic outbreak - Reserve Bank of India has announced moratorium for the period upto 31st May, 2020 vide Circular dated 27.03.2020 - objection regarding territorial jurisdiction - whether third respondent cannot be characterised as “State” within the meaning of Article 12 of the Constitution of India? - HELD THAT:- Even though the third respondent may be located in Mumbai, in as much as part of the cause of action arose within the territorial limits of this Court, this writ petition cannot be dismissed on the ground of lack of territorial jurisdiction. Likewise, reliance on the ouster clauses in the rating agreement is equally misplaced.
As third respondent is a private body and not a “State” within the meaning of Article 12 of the Constitution and by rating its clients, the third respondent is not discharging any public function and the subject matter involves analysis by financial experts and the petitioner is having effective alternative remedies, we dismiss this writ petition as not maintainable.
The petitioner is at liberty to avail the in-house remedy available to them or move Securities and Exchange Board of India(SEBI) directly by filing a complaint against the third respondent.
-
2020 (10) TMI 1332
Non- compliance of the provisions of Regulation 16(1) of Securities and Exchange Board of India (Issue of Listing of Debenture Securities) Regulations, 2008 - Penalty on the appellant imposed under section 15A(b) and 15HB of the SEBI Act - Appellant is a housing finance company, and at present, is undergoing corporate insolvency resolution process - HELD THAT:- As the adjudicating authority by order declare moratorium for prohibiting the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement or order in any court of law, tribunal, arbitration panel or other authority.
In our view, the provision is clear and explicit and needs no further elaboration. Pursuant to a moratorium declared under section 14 the institution of suits or proceedings against the corporate debtor is prohibited or continuation of a suit or proceedings. Further, execution of any judgement or order in any court of law, tribunal, arbitration panel or other authority is also prohibited.
Thus, where a moratorium has been declared under section 14 of IBC, the authority which in the instant case is SEBI/AO will have no jurisdiction to institute any proceedings. Where a proceeding has already been instituted and during the pendency of the proceedings a moratorium order is passed under section 14 then the authority is prohibited from continuing with the proceedings. This is clear from a bare reading of the provisions of section 14(1) of the IBC.
The contention of the respondent that the word 'proceedings' depicted in section 14(1) has to be given an expansive meaning cannot be considered either by the adjudicating officer as it would amount to contempt of court. In any case, the prohibition is on the institution of a proceeding. In the instant case, the moratorium kicked in when the petition was filed on November, 2019 under Rule 5(a)(i) of the Insolvency and Bankruptcy (Insolvency and liquidation proceedings of financial service provider and application to Adjudicating Authority) Rules, 2019 and thereafter it was admitted on 3rd December, 2019. The adjudicating officer issued notice subsequently on 24th December, 2019. It is quite clear that the proceedings was initiated by the adjudicating officer after the moratorium had come into effect. In our view no proceedings could be instituted in view of section 14(1) of the Act.
We are also of the opinion that external aid can only be considered when there is an ambiguity in the provision. In this regard, the provision of section 14 is very clear and explicit and there is no room for any ambiguity. Further, the Supreme Court has categorically explained the effect of section 14 of the IBC. We, therefore, find that the adjudicating officer could not have considered the report of the insolvency committee to come to the conclusion that he had the power to proceed under SEBI law inspite of a moratorium having come into effect under section 14 of the IBC.
For the reasons stated aforesaid, the impugned order imposing a penalty and proceeding to recover under section 28A of the Act upon failure to pay cannot be sustained and is quashed. Since the proceedings could not be instituted, we also quash the show cause notice and the entire proceedings. The appeal is allowed.
-
2020 (10) TMI 1228
Winding up proceedings of Mutual fund scheme - objections to the e-voting results - Need for approval of unit-holders - validity of Regulations 39 to 40 of the Mutual Funds Regulations - majority of unit-holders on the happening of any event which in the opinion of the Trustees requires a Scheme to be wound up - duties of the Trustees under the Mutual Funds Regulations - obligation of the Trustees or Trustee Company - role of SEBI - issuance of direction to SEBI - HELD THAT:- We hold that Regulations 39 to 40 of the Mutual Funds Regulations are valid.When the Board of Directors of a Trustee company, by majority, decides to wind up a Scheme by taking recourse to sub-clause (a) of clause (2) of Regulation 39, the Trustee company is bound by its statutory obligation under sub-clause (c) of clause (15) of Regulation 18 of obtaining consent of the unit-holders of the Scheme. The consent of unit-holders will be by a simple majority. In view of the obligation of the Trustees under sub-clause (c) of clause (15) of Regulation 18, a notice as required by clause (3) of Regulation 39 can be issued and published only after making compliance with the requirement of obtaining consent of the Unit-holders.
Clause 15A of Regulation 18 of the Mutual Funds Regulations 1996 operates in a different field which has nothing to do with the process of winding up of a Scheme. Therefore, compliance with Clause 15A of Regulation 18 is not a condition precedent for winding up of a Scheme pursuant to sub-clause (a) of clause (2) of Regulation 39.
Considering the duties of the Trustees under the Mutual Funds Regulations, they perform a public duty. Therefore, when it is found that the Trustees have violated the provisions of the SEBI Act or Mutual Funds Regulations, a Writ Court, in exercise of its jurisdiction under Article 226 of the Constitution of India, can always issue a writ of mandamus, requiring the Trustees to abide by the mandatory provisions of the SEBI Act or the Mutual Funds Regulations.
In the facts of the case, for the reasons which we have recorded earlier, no interference can be made with the decision of the Trustees dated 23rd April 2020 of winding up of the said Schemes. However, the decision can be implemented only after obtaining the consent of unit-holders as required by sub-clause (c) of clause 15 of Regulation 18.
On compliance being made with sub-clauses (a) and (b) of clause (3) of Regulation 39, Regulation 40 triggers in and therefore, AMC or Trustees have no right to continue the business activities of the Schemes which will include borrowings. Similarly, from the date of publication of the notice in accordance with sub-clause (b) clause (3) of Regulation 39, AMC is disentitled to honour the redemption requests made earlier.
The copy of the Forensic Audit report produced in a sealed cover, does not contain final findings and it is specifically mentioned therein that after taking the views/responses of SEBI, AMC and Trustee company, some of the conclusions in the report may undergo a change. Hence, the said report can at best be termed as a tentative report. Hence, the same is not relevant for deciding these petitions. As the said document is not relevant, it is not necessary for this Court to go into the legality of the claim for privilege.
After receiving the final findings/report of the Forensic Auditors, SEBI is bound to consider of initiating an action as contemplated by Regulation 65, depending upon the findings recorded therein. It is the obligation of the Trustees or Trustee Company to provide copies of the minutes of the meeting held on 20th and 23rd April 2020 to the Unit-holders and no confidentiality can be attached to the said minutes of the meetings - In exercise of the powers under Section 11B of the SEBI Act, SEBI has no jurisdiction to interfere with the decision of winding up of a Scheme made by taking recourse to Regulation 39(2)(a).
ORDER:-
i) We hold that no interference is called for in the decision of the Trustees taken on 23rd April 2020 of winding up the said six Schemes;
ii) We hold and declare that the decision of the Trustees (the Franklin Templeton Trustee Services private Limited) to wind up six Schemes mentioned in paragraph-1 of the Judgment by taking recourse to sub-clause (a) of clause (2) of Regulation 39 of the Mutual Funds Regulations cannot be implemented unless the consent of the unit-holders is obtained in accordance with sub-clause (c) of clause (15) of Regulation 18. Hence, we restrain the Trustees from taking any further steps on the basis of the impugned notices dated 23rd April 2020 and 28th May 2020, till consent of the unit-holders by a simple majority to the decision of winding up is obtained by the Trustees in accordance with sub-clause (c) of Clause (15) of Regulation 18 of the Mutual Funds Regulations;
iii) It will be open for the Trustees to obtain consent of the unit-holders as provided in sub-clause (c) of clause (15) of Regulation 18 and to take further steps in accordance with clause (3) of Regulation 39 of the Mutual Funds Regulations;
iv) We hold that Regulations 39 to 41 of the Mutual Funds Regulations are legal and valid;
v) We direct the Securities and Exchange Board of India to ensure that the Forensic Auditors submits their report in accordance with Regulation 64 at the earliest. After the report is submitted by the Forensic Auditor, the Securities and Exchange Board of India or its Chairman shall examine the report and shall take a decision on the question of taking action as provided in Regulation 65 of the Mutual Funds Regulations and under SEBI Act. The decision shall be taken within six weeks from the date of the receipt of the Forensic Audit Report;
vi) We direct the Trustees to provide true copies of the Board Resolutions placed on record in sealed cover to unit-holders of the said six Schemes as and when they apply for providing copies thereof;
vii) We hold that the unit-holders are not entitled to receive a copy of the Forensic Audit Report filed on record in a sealed cover;
viii) No other relief is required to be granted in these writ petitions.
-
2020 (10) TMI 689
Whether the Board obliged to grant a personal hearing to the petitioner while considering an exemption application under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 - HELD THAT:- It is a settled position that the requirement of compliance with the principle of natural justice can vary in different situations and conditions. Even where situations where principles of natural justice require an opportunity of hearing, it does not in all circumstances mean a personal hearing. A “reasonable opportunity of being heard” to the applicant before deciding exemption application. Therefore whenever it is found necessary to provide for an opportunity, SEBI has expressly incorporated it in such provisions. No such stipulation is found in the Regulation at hand.
Apprehension expressed by the SEBI that by reading duty to give personal hearing in this Regulation would have adverse ramifications on its working cannot be said to be unwarranted. The SEBI has framed several regulations on various aspects of the securities market. A large number of applications are filed before it. It will hamper the functioning of the SEBI if the exercise of its every power is preceded by mandatory personal hearing, whether the regulation provides for it or not.
There is no duty on the Board while considering an exemption application under Regulation 29 of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, to give a personal hearing to the applicant.
Interest of justice to give a personal hearing to the Petitioner - argument of the Petitioner that since SEBI has formed an opinion and the rigid application of the Regulations, it is necessary to give an opportunity of personal hearing - As rightly pointed out by SEBI, there is no such formation of opinion. There were no reasons given in the earlier order. The Petitioner has submitted the relevant material. Petitioner has also been given an opportunity to submit additional written submissions. Once there is no requirement of a personal hearing under Regulation 29, we do not find that there is a special case made out by the Petitioner or any extraordinary circumstances exist to give special direction for the Petitioner.
Writ Petition is dismissed.
-
2020 (10) TMI 332
Interpretation of Statute - Whether Section 14 and 238 of IBC 2016 have an overriding effect on the provision of Section 28 of SEBI Act? - HELD THAT:- IBC which is a complete code in itself was enacted in the year 2016 and the law makers after considering the various acts prevailing at that time have framed the IBC to have a faster resolution process at par with developed countries with the primary objective of maximisation of value of assets to all stake holders. The preamble of IBC clearly mentions that the objective of the Code is maximisation of value of assets, to promote entrepreneurship, availability of credit and balance the interest of all stake holders in a time bound manner, whereas the primary object of SEBI is to protect the interest of the investors in securities market and to promote the development to regulate the securities and for matters connected therewith - it is evident that IBC is clearly a time bound action with a wider remit, whereas SEBI was given a broad mandate to protect the interest of investors and the IBC which had brought into force after considering various acts prevailing at that point of time must have also been considered SEBI Act and its implication in the corporate debtor and its operations. Therefore Section 14(1) in IBC which came into force after the enactment of IBC 2016 has precedence over Section 28A of SEBI Act.
It is pertinent to go through the judgment of the Hon'ble Supreme Court in Innoventive Industries. Vs. ICICI Bank and others [2017 (9) TMI 58 - SUPREME COURT ] where Hon'ble Supreme Court shows the primacy of IBC over other Acts.
Thus, the issue framed in the instant application got an overwhelming affirmative answer that Sections 14 and 238 of IBC has an overriding impact on Section 28A of SEBI Act when an application is admitted under CIRP under Section 7, 9 or 10 of IBC - As both the Central Acts are having similar objectives, instead of clinging to over the supremacy of the Act the Recovery Officer appointed by the SEBI under Section 28A may cooperate with the Resolution Professional in protecting the interests of the investors as well as finding a quicker resolution in the instant application.
SEBI is suggested to direct their Recovery Officer to cooperate with the Resolution Professional and if required be a part of the CoC as an observer for a quicker resolution and maximisation of the value of the assets of the corporate debtor.
Thus, it is concluded that Section 14 and Section 238 of IBC 2016 has an overriding effect on Section 28A of SEBI Act. As such there is no need to modify our earlier order dated 18.9.2019 - SEBI is not barred from taking any action as it may deem fit, against the directors, shareholders and key management personnel of the Corporate Debtor for their fraudulent acts.
Application dismissed.
-
2020 (9) TMI 1304
Ex-parte interim order passed by WTM - illegal gains made using unpublished price sensitive information - directing the Appellant to deposit a sum in an escrow account in a Nationalised Bank towards - WTM further directed the Banks to freeze all debits to the extent of the above amount till such time the escrow account is opened and the amount is transferred and directed the depositories to suspend all debits and, therefore, restrained the Appellants from disposing or alienating any assets or properties till such time the amount is credited in the escrow account - Appellant contented that there was no urgency in passing an ex-parte order with regard to the trades done by the Appellants
HELD THAT: In the instant case, we do not find that the matter is one of extreme urgency which requires passing of an ex-parte interim order. We find that the trades were done in the year 2017. Nothing has come on record as to when the Respondent became aware of these transactions. However, we find that the proceedings were initiated in February, 2019 which continued till 11th March, 2020 and, thereafter, it took the Respondents another 4 months to pass the impugned order.
This by itself indicates that there was no extreme urgency in passing the impugned order. We, therefore, are of the opinion that merely by arriving at a prima facie case that the Appellants were an insider as defined under the PIT Regulations, 2015 cannot be made the sole basis for passing the impugned order without considering the balance of convenience or irreparable injury.
Only reason given for passing the interim order has been provided in para 34 of the impugned order namely that the illegal gains should be impounded otherwise it would result in irreparable injury to the interest of the securities market and investors. In our view, illegal gains are yet to be adjudicated and, therefore, in the absence of adjudication it will not be proper to impound the so called illegal gains especially when there is no assertion that the Appellants are disposing of the property in question or they are obstructing or delaying the proceedings.
The impugned order in so far as it relates to the Appellants cannot be sustained and is quashed at the admission stage itself without calling for a reply except the show cause notice. The Appeal is allowed and the Misc. Application are accordingly disposed of.
We further direct the Appellants to file a reply to the show cause notice on or before 7th October, 2020. The Respondent will thereafter decide the matter finally after giving an opportunity of hearing to the Appellants either through physical hearing or through video conference within 6 months thereafter.
During the interim period, in order to safe guard the interest of the investors in the securities market and also to protect the integrity of the securities market, we direct the Appellants to provide a fixed deposit of Rs 2,60,93,085.85 in the name of SEBI for a period of one year, within two weeks from today. This fixed deposit receipt will be kept in the safe custody with the respondent and will not be encashed till three months after the passing of the final order by the respondent.
-
2020 (9) TMI 1254
Penalty for violation of Regulations 3 and 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’) - trading activities in the illiquid Stock Options at BSE - non-genuine trades which was 81.38% of the total trades executed in the Stock Options Segment of BSE - HELD THAT:- As buying and selling of equivalent quantities within the day may not be illegal but if the trades were done with ulterior purposes then the same are non-genuine. In the instant case, we find that one party is making a profit and the other party is making a loss. In addition, there is proximity in the time of sell orders at a higher price and the same quantity is being reversed to the same party in a lower price within a fraction of seconds or few minutes. We find that contracts got matched between the same parties. We fail to understand as to why the Appellants who made the transactions repeatedly incurred substantial losses within a few minutes. Given the fact that there was proximity of time between buy and sell orders one can reasonably point to some kind of manipulative exercise with prior meeting of minds especially when one can see it plainly that it was a clear case of synchronised trading namely that a synchronised trade is one where the buyer and seller enter quantity and time of shares they wish to transact at the same time.
From the aforesaid cumulative analysis of the reversed transactions with the counter party, quantity, time and significant variation of the price clearly indicates that the trades were non-genuine and had only misleading appearance of trading in the securities market without intending to transfer the beneficial ownership. One finds it to be naive to presume that the perception of the two counter parties to a trade changed within few seconds/minutes and positions were interchanged and the contracts were changed where one party made profit and the other party ended up making losses every time without prior meeting of mind. It is not a mere coincidence that the Appellants could match the trades with the counter party with whom he had undertaken the first leg of respective trade. In our opinion, the trades were non-genuine trades and even though direct evidence is not available in the instant case but in the peculiar facts and circumstances of the present case there is an irresistible inference that can be drawn that there was meeting of minds between the Appellants and the counter parties, and collusion with a view to trade at a predetermined price.
As urged by the learned counsel for the Appellants that the penalty awarded is excessive and harsh and, therefore, prayed that in the event the order is affirmed the Tribunal may consider reducing the penalty amount taking into consideration the financial status of the Appellants and the negligible transactions executed by the Appellants.
We have perused the orders passed by the AO. We find that the AO has taken into consideration not only the factors contained in Sec. 15J of the SEBI Act but has also taken into consideration the number of total trades, the artificial volume generated, the loss incurred, etc while imposing the penalty. It may be stated here that the minimum penalty under Sec. 15HA is Rs.5Lacs and maximum penalty is Rs. 25 crores or three times the profit made. We find that the AO has excercised its discretion which is neither harsh nor arbitrary. We do not find any error in the quantum of penalty imposed by the AO.
We do not find any merit in the appeals and the same are dismissed with no order as to costs.
-
2020 (9) TMI 1209
Seeking quashment of FIR at the investigation process - activities promising return of profits upon soliciting deposits in the form adviser fee / royalty - cognizable offence under the provisions of PID Act - HELD THAT:- The police in the present case has registered FIR not on the basis of complaint of a victim and now seeks to find whether there are any victims or not, which is absolutely against the ethos of investigative processes.
The provisions of IPC and PID Act are not attracted prima facie in this case, that there is an statutory bar against taking cognizance by Court for any such offence, which is in the domain of SEBI Act, 1992, which requires complaint to be filed by SEBI Board. This case is squarely relates to breach of provisions of SEBI Act, 1992 and SEBI Regulations, 2013 and only Special Court is empowered to take cognizance on the basis of complaint filed by SEBI Board. The police was not authorized to register an FIR in such case because there is a specific statutory bar in such matters.
What the police could have done was that bring to the notice of SEBI Board the alleged violation being committed by the applicant Company. After providing vital information and inputs to the SEBI Court, the matter would have been looked into by SEBI Board only and appropriate complaint could have been filed by SEBI Board before the competent Special Court - instead of doing so, the police has embarked upon registration of FIR in such a case and by doing so, has travelled beyond the scope of its competence and jurisdiction.
Application allowed.
-
2020 (9) TMI 1170
Insider trading - Insiders and Connected Persons - Unpublished price sensitive information - Period of existence of the UPSI - loss incurred by the Company and a substantially fall in the net sales - HELD THAT:- Investigation has clearly brought out the trades done by the Noticees, who were insiders and also promoters of the Company, while in possession of the UPSI to the detriment of the public shareholders of the Company. The said promoters had virtually offloaded their entire unencumbered holding in the Company during this period. Given that the facts clearly make out a prima facie case of insider trading by the promoters of the Company, is of the considered view that the Non-interference by the Regulator at this stage would result in irreparable injury to interests of the securities market and the investors.
Section 11(4) of the SEBI Act casts an obligation on the Board, in appropriate cases, to impound and retain the proceeds of securities in respect of such transactions either pending investigation nor upon completion of such investigation. The facts in this case compels me to take urgent steps to impound and retain the proceeds of the notional loss avoided allegedly by the aforementioned insiders by invoking the powers under Section 11(4)(d) of the SEBI Act. Considering the facts and circumstances of the case, the balance of convenience lies in favour of SEBI.
Accordingly, as an interim measure, an Ad–Interim Ex–Parte Order for impounding such alleged unlawful notional loss avoided under Section 11(1) read with 11(4)(d) and 11B(1) of the SEBI Act read with Regulation 10 of the PIT Regulations needs to be issued against Rajeev Vasant Sheth, Aarti Sheth and Divya Sheth.
Individual amount of unlawful loss avoided is to be credited to an interest bearing Escrow Account [“Escrow Account in Compliance with SEBI Order dated September 04, 2020 – A/c (in the name of the respective person)”] created specifically for the purpose in a Nationalized Bank. The Escrow Account(s) shall create a lien in favour of SEBI and the monies kept therein shall not be released without permission from SEBI.
Banks are directed that no debits shall be made, without permission of SEBI, in respect of the bank accounts held jointly or severally by the persons mentioned under Table-11, except for the purposes of transfer of funds to the Escrow Account. Further, the Depositories are also directed that no debit shall be made, without permission of SEBI, in respect of the demat accounts held by the aforesaid persons. However, credits, if any, into the accounts maybe allowed. Banks and the Depositories are directed to ensure that all the aforesaid directions are strictly enforced. Further, debits may also be allowed for amounts available in the account in excess of the amount to be impounded. Banks are allowed to debit the accounts for the purpose of complying with this Order.
The persons mentioned under Table-11 are directed not to dispose of or alienate any of their assets/properties/securities, till such time the individual amount of unlawful loss avoided is credited to an Escrow Account except with the prior permission of SEBI. Further, on production of proof by the persons mentioned under Table-11 that the individual amount of unlawful loss avoided has been deposited in the Escrow Account, SEBI shall communicate to the Banks and Depositories to defreeze their respective accounts.
The persons mentioned under Table-11 are further directed to provide a full inventory of all their assets whether movable or immovable, or any interest or investment or charge in any of such assets, including property, details of all their bank accounts, demat accounts, holdings of shares/securities if held in physical form and mutual fund investments and details of companies in which they hold substantial or controlling interest immediately but not later than 7 working days of this Order.
Observations/findings contained in this Order are made on the basis of the Investigation conducted by SEBI in the matter. The findings in this order may be treated as allegations against the respective persons mentioned in Table-11 above for the purpose of show cause against them. Accordingly, the persons mentioned under Table-11 above are advised to show cause as to why suitable directions, including the following, should not be issued/imposed against them under Sections 11(1), 11(4)(d) and 11B(1) of the SEBI Act for the alleged violations of the provisions of Sections 12A(d) & (e) of the SEBI Act and Regulations 4(1) of the PIT Regulations:
a) Directing them to disgorge an amount equivalent to the unlawful loss avoided on account of insider trading in the shares of TJL along with interest;
b) Directing them to refrain from accessing the securities market and prohibiting them from buying, selling or otherwise dealing in securities for an appropriate period.
The persons mentioned under Table-11 are also called upon to show cause as to why appropriate directions for imposing penalty under section 11B(2) and 11(4A) read with Section15G and 15HB of the SEBI Act should not be issued against them for the alleged violations of the aforementioned provisions of SEBI Act and the PIT Regulations.
The persons mentioned under Table-11 may file their replies to SEBI within 30 days from the date of receipt of this Order. They may also indicate in their replies whether they wish to avail an opportunity of personal hearing in the matter.This Order shall come into force with immediate effect and shall be in force till further Orders.
-
2020 (8) TMI 843
Violation of the provisions of PFUTP Regulations - trading dynamics as sufficient to establish PFUTP violations - how deceptive the nature of trading adopted by the Appellants are? - HELD THAT:- We are of the considered view that there are missing links in the investigation as brought out in the impugned order. While the trading pattern of both the Appellants; placing the buy orders for generally very small number of shares and the timing of the orders; all point towards possible violation of the provisions of PFUTP Regulations it is also possible that an investor through a thorough observation of the movement of the scrip could be placing orders in the system without any intention to manipulate the market.
Since the dividing line is very thin and blurred distinguishing both these categories is a difficult, if not impossible, task. Though the learned counsel shed some light on this ‘irrational behaviour’ some more analysis of the overall trading in the scrip during the investigation period would have been helpful since no connection have been established between the Appellants and the suspected/connected entities nor with the promoters or directors etc. of Mapro Industries.
The scrip of Mapro was not a miracle scrip, as reflecteded in its limited trading data given in the impugned order, for the Appellants to place their orders in the early morning itself, mostly just after 9 a.m. at prices higher than LTP by 2 to 4% as if this scrip had to be bought at any cost. If any investor takes such a stand, and if he/she is so convinced of the performance of the scrip, he/she would buy at least a reasonable quantity rather than placing a buy order for miniscule quantities of 1, 2, 5 or 10 shares etc as done by the appellants.
Nature and pattern of trading of the Appellants are violative of the stated provisions of PFTUP Regulations, 2003 but in the given facts and circumstances of the matter and in the absence of any effort in the impugned order towards connecting the dots in terms of relationship/connection/money transfer/even some interaction between the Appellants and other suspected entities or to the promoters of Mapro we are unable to uphold the penalty imposed on the two Appellants. A warning to the Appellants that repetition of trading of similar nature/pattern as the impugned ones will lead to penal consequences is sufficient to meet the ends of justice.
-
2020 (8) TMI 427
Credit Rating Rationales - factors required to be considered by ICRA while deciding the rating - praying for a decree of declaration, declaring the Credit Rating Rationales dated 24th April, 2020 and 30th April, 2020 passed by the defendant or any other similar credit rating rationale downgrading the plaintiff’s credit rating from BBB+ (stable outlook) to BBB (negative outlook) as null, void, unenforceable and ineffective - also seeks decree of mandatory injunction directing the defendant to withdraw the said credit rating rationales from the physical as well as electronic records of the defendant including on the world wide web - charge of Violation of rating methodologies or the CRA Regulations or the Master Circular - Whether the defendant-ICRA has a right to publish the rating despite being objected to by the plaintiff/JPL?
HELD THAT:- Combined reading of SEBI CRA Regulations and RBI Master Circular clearly depict that as far as the initial rating is concerned, if the same is not accepted, then the same will not be published by the Credit Rating Agency however, once an initial credit rating is accepted and published based whereon a party seeks financial facility, during the pendency of the said financial facility, the Credit Rating Agency is mandated to conduct periodic surveillance and even if subsequent rating opined by the Credit Rating Agency during the period of surveillance is not accepted by the party, the same will still be disseminated by press release on the website of the Credit Rating Agency as also intimated to the Stock Exchange/Debenture Trustees.
Clause (B) of the agreement between JPL and ICRA clearly defines the scope of work and that once the initial credit rating is assigned and accepted, ICRA shall subject to clause (F) keep the rating under surveillance during the lifetime of the bank facility, that is, such time that any amount is outstanding against it or the sanction remains valid whichever is earlier. Once based on the credit rating a party seeks a bank facility it cannot thereafter want the Credit Rating Agency to not conduct periodic surveillance thereof and in case of a change therein not intimate the same to the concerned agency and the parties duly affected by the said Credit Rating. The interpretation as sought to be given by JPL would be contrary to the public policy and hence cannot be accepted.
As per the terms of the agreement between JPL and ICRA as also the CRA Regulations, Master Circular of RBI, the Credit Rating Agency, that is, ICRA was entitled to publish the initial rating once accepted, based whereon JPL took credit facility and thereafter ICRA is mandated to conduct periodic reviews/surveillance of the credit rating and publish the same in the best interest of the provider of the financial facility and the other parties.
What are the factors required to be considered by ICRA while deciding the rating and whether those factors have been considered by ICRA or the finding of ICRA is based on erroneous considerations? - Credit rating of the company is based on the futuristic position of the company to clear its debt liability and the same is not dependent merely on the fact that in the preceding year, debts had been cleared. The opinion of ICRA as primarily based on the fact that though in the previous year there were increased repayments of debt, however, the debt liability was still high coupled with the fact that JPL could not procure contract to optimally utilize its power generation and was utilizing power generation only to the extent of 1/3rd and that the primary client of JPL being TANGENDCO, the time for recovery of its dues was increasing as in the past thereby making the liquidity and debt paying capacity of JPL stretched.
As opinion of ICRA is rendered after taking into account all positive or negative factors and that it is an opinion rendered by experts in the field, this Court will not, unless the said opinion is perverse, arbitrary and mala fide, interfere in the same as a mathematical calculation of a credit rating is not possible. Therefore, as regards issue No.(ii) is concerned, this Court finds that the rating rationales depend from industry to industry and that ICRA has taken into account the relevant rating rationales, both positive and negative and based thereon rendered the opinion which is plausible on the facts and the said opinion being neither perverse nor arbitrary nor mala fide, this Court will not interfere therein by passing a decree declaring the same to be null and void.
Whether this Court can grant a mandatory injunction against ICRA directing it to review its ratings? - ICRA had downgraded the credit rating of JPL in the previous year also from AAA to BBB+ when neither JPL filed no suit raising objection to the downgrading or to the publishing of the credit rating. Credit rating having been utilized by JPL for receiving the financial facility, till the subsistence of the financial facility, JPL can neither seek setting aside of the said rating unless the same is irrational, arbitrary or mala fide and also cannot seek a decree that the said rating be not disclosed/published - Evidentiary value of opinion of an expert has to be decided on the basis of the credibility of the expert and the relevant facts supporting the opinion. Therefore, the emphasis has to be on the data on the basis of which opinion is formed. Further, if the opinion is intelligible, convincing, and based on reasoning, no decree declaring the said opinion as null and void, unenforceable and ineffective cannot be passed as is prayed by the plaintiff in prayer (a) of para 66 of the suit in respect of the Credit Rating Rationales dated 24th April, 2020 and 30th April, 2020 passed by the defendant. As the impugned Credit Ratings are surveillance ratings even if JPL objects to the same, no mandatory injunction can be granted to the defendant to remove the Grade Rating Rationales from the physical as well as electronic record of the defendant on the worldwide web, much less permanent injunction.
-
2020 (8) TMI 83
Failure to close the trading window - provisions of Clause 4 of Minimum Standards for Code of Conduct to Regulate, Monitor and Report Trading by Insiders mentioned in Schedule B read with Regulation 9(1) of PIT Regulations, 2015 - As alleged that the acquisition of AIMIN by Ecap was a price sensitive information which had come into existence on January 25, 2017 upon signing of Term Sheet - HELD THAT:- Price movement of the scrip of EFSL at the relevant point of time. Corporate announcement was made on the platform of BSE at 18:56:48 hours on April 05, 2017 i.e. after the market had closed on the said day. The scrip of EFSL had closed at ₹ 167.90 on the said day. However, I note that the scrip had opened at ₹ 175.95 the next day. This shows that the price of the scrip of EFSL had registered a spike of 4.79% on April 06, 2017.
EFSL had made another announcement on April 06, 2017 wherein it had informed BSE and NSE that the Insurance Regulatory & Development Authority of India (“IRDAI”) had accepted the registration application form IRDA/R2 of Edelweiss General Insurance Company, a wholly owned subsidiary of EFSL, for carrying on business as a general insurance company in India (“IRDAI Approval”). The said information was disseminated on BSE at 13:40:34 on April 06, 2017. Therefore, the said information cannot be said to have had a role in price spike observed at the time the market opened. In light of this, I am of the view that the acquisition of AIMIN by Ecap was not only a price sensitive information but also was effective in pulling up the price of the scrip of EFSL. From this angle note that the announcement considered to be not UPSI is grossly misconceived.
Term sheet has fructified and transformed into a final transaction by way of an SPA. Therefore, hold it not incorrect to take the view that the UPSI had come into existence on the day of signing of Term Sheet itself. In spite of the above, note that the allegation in the present matter is non–closure of trading window which admittedly had not been closed, therefore, it seldom matters when the UPSI had actually begun.
There was certainly a duty cast upon the Noticee to close the trading window in view of the existence of UPSI which the Noticee had admittedly failed to comply with. Therefore, hold that the Noticee has violated the provision of Clause 4 of Minimum Standards for Code of Conduct to Regulate, Monitor and Report Trading by Insiders under Schedule B read with Regulation 9(1) of PIT Regulations, 2015.
Whether the Noticee is liable for penalty? - As established in the pre-paragraphs, the Noticee has violated the provision of Clause 4 of Minimum Standards for Code of Conduct to Regulate, Monitor and Report Trading by Insiders under Schedule B read with Regulation 9(1) of PIT Regulations, 2015.Therefore, the Noticee is liable for a penalty under Section 15HB of SEBI Act.
In view of the contentions of the Noticee regarding “technical violation” and mitigating factors as prescribed in Section 15J of the SEBI Act, 1992, it became necessary to understand the repetition, if any, of the violation committed by the Noticee. To ascertain the same, the Noticee was advised to furnish information on past closure of trading window since the commencement of PIT Regulations, 2015 when the onus of compliance shifted to the Compliance Officer.
The practice of merely making the relevant employees cognizant of their responsibilities does not tantamount to closure of trading window as has been expected in the law. If mere intimation of the people privy to the information is what is expected then the law would have been designed in such a fashion. Any short cut in the practices to a clearly laid down law is not acceptable - law casts a responsibility on the compliance officer to take a call on “Closure of trading window” and to disseminate the same to the stock exchanges. As incidentally note that the Noticee has admittedly begun intimating stock exchanges on trading window closure only from January 2019.
From the replies of the Noticee, find non-compliance on the part of the Noticee by failing to close trading windows when necessary as per law. Therefore, there were repeated instances wherein the Noticee had failed to close the trading window. In view of the above the argument of the Noticee that there was no repetition of violation is not acceptable. A repetitive violation, in disregard to the applicable provisions of law, cannot be construed to be a technical violation.
Material/facts on record, the reply submitted by the Noticee and also the factors mentioned in the preceding paragraphs, in exercise of the powers conferred upon me under Section 15-I of the SEBI Act read with Rule 5 of the Adjudication Rules, in exercise of the powers conferred upon me under Section 15-I of the SEBI Act read with Rule 5 of the Adjudication Rules, hereby impose a penalty of ₹ 5,00,000/- (Rupees Five Lakh only) on the Noticee. Said penalty is commensurate with the lapse/omission on the part of the Noticee.
Noticee shall remit / pay the said amount of penalty within 45 days of receipt of this order through online payment facility available on the website of SEBI - In the event of failure to pay the said amount of penalty within 45 days of the receipt of this Order, recovery proceedings may be initiated under Section 28A of the SEBI Act for realization of the said amount of penalty along with interest thereon, inter alia, by attachment and sale of movable and immovable properties.
-
2020 (7) TMI 831
Fraudulent and manipulative trading in the scrips - illegal gains made by the Noticees through the fraudulent and manipulative trades - SEBI was directed by SAT to bring out the date-wise reversal of trades done by the trading Noticees and pass a fresh order within a period of three months after granting an opportunity of hearing - HELD THAT:- In securities market, ‘reversal trades’ are understood to be trades where the parties after executing a trade enter into a ‘reverse trade’ or opposite trade for similar quantities usually within a short time period. However, as held by the Hon’ble Tribunal in the matter of Anita Dalal, in a given case reversal transaction could also happen over multiple days. What is important is the intention of the parties to manipulate the scrip as can be noted from the nature of their trades across multiple days.
The Hon’ble Supreme Court in the matter of SEBI v. Rakhi Trading [2018 (2) TMI 580 - SUPREME COURT] had held that “Once the reversal transactions are shown to be non-genuine or shown to be fictitious creating a false or misleading appearance in the market for ulterior purpose and that the stock market was misused by such manipulative device, this is in clear violation of the provisions of PFUTP Regulations, 2003.”
In the present case, since it is established that all the Noticees were acting as a group and were engaged in manipulative trading in the scrip, have no hesitation in holding that the back and forth transaction in scrip between the Noticees have to be considered as reversal trades even though such trades happened across days.
Computation of the ill-gotten gains - Noticees have submitted that as per the data available from the BSE Price Volume Data in the scrip of Polytex, 75% of total trades had been marked delivery and 25% as intra-day during the investigation period. As can be noted from Table I, the cumulative buy value of the trades by the Noticees which have been taken for the purpose of calculating the ill-gotten gains was Rs. 2,28,90,79,601 and the sell value was Rs. 2,31,96,78,775. The STT and SEBI turnover fee paid at the applicable rates during the investigation period for such trades works out to Rs. 36,06,157.46. The ill-gotten gains made by the Noticees after excluding the eligible expenses would be Rs. 2,69,93,016.79.
Directions - As in exercise of the powers conferred upon me under section 19 of the SEBI Act, 1992 read with sections 11 and 11B of the SEBI Act, and Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 2003, confirm the computation of ill gotten gains made in SEBI order dated January 31, 2019 and hereby direct the Noticees to jointly and severally, disgorge an amount of Rs. 2,69,93,016.79, as ascertained along with interest calculated at the rate of 12% per annum from 17 December, 2012 onwards, till the date of payment. The above payments shall be made by the parties in the manner provided in the SEBI order dated January 31, 2019.
-
2020 (7) TMI 386
Unpublished price sensitive information being shared on a messaging platform 'Whatsapp' - whether the appellant is entitled for inspection and for supply of all the documents in possession of the adjudicating authority including those documents upon which no reliance has been placed by the Adjudicating Officer ('AO') of the Securities and Exchange Board of India ('SEBI' )? - HELD THAT:- Concept of fairness and principles of natural justice are in-built in Rule 4 of the Rules of 1995 and that the AO is required to supply the documents relied upon while serving the show cause notice. This is essential for the person to file an efficacious reply in his defence.
The contention that the appellant is entitled for copies of all the documents in possession of the AO which has not been relied upon at the preliminary stage when the AO has not formed any opinion as to whether any inquiry at all is required to he held cannot be accepted. A bare reading of the provisions of the Act and the Rules as referred to above do not provide supply of documents upon which no reliance has been placed by the AO, nor even the principles of natural justice require supply of such documents which has not been relied upon by the AO. We are of the opinion that we cannot compel the AO to deviate from the prescribed procedure and supply of such documents which is not warranted in law. In our view, on a reading of the Act and the Rules we find that there is no duty cast upon the AO to disclose or provide all the documents in his possession especially when such documents are not being relied upon.
Practice of filing a compilation of judgments without citing during the course of arguments is not an accepted practice and consequently we are not required to consider such decisions which were no cited at the Bar.
The request of the appellant for supply of the documents in possession of the authority is misconceived and cannot be accepted. Prima facie, the only object in making such demand is to obstruct the proceedings. We accordingly do not find any merit in the appeal and is dismissed.
............
|
