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2019 (3) TMI 828

n of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control - HELD THAT:- First of all the statement attributed to the appellant is as reported by a news reporter. There is no evidence as to the appellant acquiring any shares of Amrutanjan. On the other hand, what is available on record is that no effort in acquisition has been made. The appellant has clarified to the Stock Exchange immediately on receiving their communication on April 5, 2010 that it was a general statement relating to his business interest. The statement is further emphasized by the clarification provided by Amrutanjan itself which also stated that “the said news item is false and without basis and the promoters of the Company have no intention to sell out and the promoters do not foresee any reason to dilute their stake and exit from the company”. - While dealing with a serious issue of fraud the authorities need to ascertain the motive in the absence of any connecting evidence. Is nothing to prove that the quoted statement in the news report is exactly what is stated by the appellant unless the statement is derived from a written communication issued by the .....

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ities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ( PFUTP Regulations, 2003 for short) is the question raised in this appeal. Since vide order dated December 27, 2017 the Adjudicating Officer ( AO for short) of Securities and Exchange Board of India ( SEBI for short) has answered this question affirmatively and imposed a penalty of ₹ 8 lakh on the appellant, this appeal has been filed challenging the said order. 2. During an investigation SEBI observed that the Chairman of Emami Ltd. Shri R.S. Agarwal (appellant herein) reportedly told a Times of India journalist that he is interested in acquiring the Company Amrutanjan Helathcare Ltd. ( Amrutanjan for short). The news report dated April 3, 2010 stated the following reportedly quoting the appellant:- Yes we are interested to buy Amrutanjan. Our group is looking for acquisition in the pharma and FMCG sectors. But, we do not know who is buying into that company. 3. A Show Cause Notice (SCN) dated June 7, 2016 was issued to the appellant directing to show cause why an enquiry should not be held and penalty be not imposed under Section 15HA of .....

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ptive devices, insider trading and substantial acquisition of securities or control - No person shall directly or indirectly - (a) ………. (b) ………. (c) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing in securities which are listed or proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder; PFUTP Regulations, 2003 Prohibition of certain dealings in securities 3. No person shall directly or indirectly- (a) ……… (b) ……… (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under. 4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in .....

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ll as in terms of volumes, an analysis of the market position in BSE as well in NSE from February 17, 2010 till April 19, 2010 in terms of open price, high price, low price, close price and total quantity traded was made. The conclusion was that there had been increase in both volume and price post April 3, 2010 as compared to the period prior to April 3, 2010. Specific comparison has been made between two trading days April 1, 2010 and April 5, 2010, the last traded day and the first traded day before and after the press report with the intermittent dates being holidays for market. 7. We have extensively heard Shri Somasekhar Sundaresan, learned Counsel for the appellant and Shri Karan Bhosale, learned Counsel for the respondent SEBI. We have also perused the documents placed before us. We note that fraud in securities market is a serious offence as defined in law and as dealt in the PFUTP Regulations. The objective of the PFUTP Regulations is to act as a deterrent against fraudulent and manipulative behavior and practices in the securities market and to provide exemplary punishment for violations. 8. Now the question before us is whether a reported statement made by the Chairman .....

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any motive or a scheme or any evidence a reported news item alone is not sufficient to prove a serious charge like fraud. If at all the reported statement is correct it could an expansive mood of the person. Silence as a sign of wisdom cannot be stretched to a point of total silence in the world of securities market. Substantial movement in the prices etc. of a profitable company with sufficient liquidity cannot be attributed to such a reported statement alone. 11. Before parting with, the limitations of a comparative static analysis as given in the impugned order also needs to be emphasized. The comparison made in the impugned order is by taking the price / volume data of April 1, 2010 and April 5, 2010. However a look at the data for 30th and 31st March, 2010 also give a different picture which is as follows:- NSE Date Open Price High Price Low Price Close Price Traded Quantity 30-Mar-10 854.9 989 848.1 949.3 489648 31-Mar-10 950 1054 937.5 1020.5 834070 01-Apr-10 1030.1 1044.95 1001 1024.35 308538 05-Apr-10 1025.1 1229.25 1025.1 1225 887705 BSE Date Open Price High Price Low Price Close Price Traded Quantity 30-Mar-10 850 981 850 948.8 270742 31-Mar-10 950 1050 946.5 1017.65 393 .....

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