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2018 (6) TMI 679 - AT - Companies LawSerious fraud on the securities market - off-loading the fraudulently dematted excess shares of SCCL to innocent investors - whether SEBI has unduly favoured the violator who are found to have committed serious fraud on the securities market? - Held that:- Issuing shares in excess of authorised share capital and further dematting those unauthorized excess shares and allowing those shares to be sold on-market to innocent investors is a serious fraud on the securities market. In such a case, SEBI is unjustified in not initiating any action against the depositories. It is not in dispute that in the present case, the main architect in committing serious fraud on the securities market was Mr. Mishra, Chairman and Director of SCCL. In fact Mr. Mishra, vide letter dated 27.04.2007 had admitted that the shares in excess were intentionally sold by him in order to meet the liability of SCCL towards unsecured creditors. In such a case, merely debarring Mr. Mishra from accessing the securities market for 10 years and not even initiating penalty proceedings against Mr. Mishra who had collected crores of rupees by selling the unauthorized excess shares is wholly unjustified. When 17 entities including the appellant were found to have aided and abetted Mr. Mishra in off-loading the fraudulently dematted excess shares of SCCL to innocent investors in gross violation of PFUTP Regulations, imposing penalty ranging from ₹ 1 lac to ₹ 2 lac on most of the entities as against the imposable penalty of ₹ 25 crore under Section 15HA of SEBI Act clearly shows that SEBI has shown undue leniency by imposing nominal penalty on the violators. In any event, having imposed penalty of ₹ 1 lac in the ex-parte order passed against the appellant, without assigning any reasons SEBI is not justified in treating the appellant differently from other similarly situated violators and imposing higher penalty of ₹ 16 lac on the appellant. The appellant is justified in contending that he is being victimized for approaching this Tribunal and that there is no reason to treat the appellant differently from other similarly situated violators. In our opinion, the course adopted by SEBI in the present case is detrimental to the interests of the securities market. We set aside the impugned order passed against the appellant and restore the matter for fresh decision on merits. We sincerely hope that SEBI would take appropriate remedial measures in the matter and ensure that its credibility as an efficient market regulator is not eroded.
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