TMI Blog2020 (6) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of Dave that more disaggregated details are needed to prove reversal trade and in the impugned order only aggregates are given though we do not agree with their submission that reversal trade done on the same trading day only can be treated as reversal trades. As borne out from SEBI's record that detailed calculations regarding profits made by the trading entities in respect of two entities were not given to the appellants - We also note that there is considerable discrepancy between the profits as calculated by the appellants themselves as well as SEBI as given in the impugned order though the appellants claim that those calculations are based on the trade logs given by SEBI. In order to harmonize the appellants deserve to be given details of calculations made by SEBI in respect of all noticees which admittedly is not done in the instant matter. We pass the following directions:- (a) Appeal No. 356 of 2019 is allowed and we permit the appellant to liquidate the shares lying in the margin account of Ghogari to the extent of the legally permissible debit amount. (b) In respect of other 11 appeals while upholding the finding in the impugned order that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkets Pvt. Ltd. ('Neevan' for short) are no more 'alive' since their names have been struck off from the list of companies by the Registrar of Companies (RoC) In short, 11 appeals are filed by 14 of the entities against whom the impugned order is passed and one appeal is filed by an entity which is not directly impacted by the order. Since the impugned order is common all these appeals are heard together and decided by this common decision. 3. Common facts relating to these appeals are the following: SEBI conducted an examination relating to trading in the scrips of Polytex India Limited ('Polytex' for short), for the period 13-4-2012 - 17-12-2012; KGN Enterprises Limited ('KGN' for short) for the period 27-12-2011 to 17-12-2012 and Gemstone Investments Limited ('Gemstone' for short) for the period 18-4-2012 to 17-12-2012, all companies listed with the BSE Limited ('BSE' for short). Pursuant to the said examination an ad-interim ex-parte order was passed by SEBI on May 10, 2013 whereby 11 entities were restrained from accessing and dealing in the securities market directly or indirectly till further directions for alleged violat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 4, namely, Shree Shagun Financial Services thereby preventing Appellant No. 4 from accessing securities market directly or indirectly. 8. It is the contention of the learned Authorised Representative Dr. S.K. Jain appearing on behalf of the these appellants that SEBI did not provide the complete documents while issuing the SCN; data provided as annexure to SCN as KYC documents were either not legible nor having the same details as stated in the SCN. Accordingly, it was contended that by not providing all the documents the appellants were prejudiced and natural justice suffered. 9. It was further contended by the Authorized Representative that two of the entities against whom directions have been passed in the impugned order, namely, Oliwonders and Neevan are extinct as they have been deleted from the list of companies by the RoC. As such, no order could have been passed against extinct entities, particularly, when a joint and several liability of disgorgement has been fastened on the appellants along with such extinct entities. Further, since Appellant Nos. 1, 2 and 3 did not trade nor made any profits a joint and several liabilities for disgorgement against them is unten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of trading by the trading noticees. Further it was contended that the promoters of the companies whose shares were alleged to be manipulated for increasing its price did not sell their holding and hence for whose benefit or what is the motive behind such alleged manipulation is not proved in the impugned order. 13. Appellant No. 1, 2 and 3 were not part of the ad-interim ex-parte/confirmatory order or the investigation report. Their names got added, based on an internal note approved by the WTM which is but not provided to the appellants. Moreover, the appellants request to merge two parallel proceedings in the scrip of Polytex was not given any consideration and if the same was merged into one investigation it would be clearly shown that the price and volumes in the scrips were high even otherwise than during the alleged period of manipulation. It was also contended that several of the appellants are still holding part of the scrips. Appeal No. 438 of 2019:- 14. We have heard Shri Vikas Bengani, the learned counsel for the appellants. He contended that the appellant Bhavesh Pabari is also a financing noticee being partner of Shree Shagun Financial Services along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a trade to be considered as reversal trade, the learned counsel for the appellants contended, both the buy and sell part of the trade have to take place within a few minutes or atleast within the same trading day itself which is not the case in the instant matter. The appellant traded on a number of days during the investigation period, some of them were buy trades and some of them were sell trades and at the end of the period the total quantity purchased was 591428 and the total quantity sold was 560947 which SEBI is considering as reversal trade which is absolutely not correct according to standard interpretation of reversal trade. It is over a period of 8 months that the appellant traded. Further, it was contended that detailed calculation regarding disgorgement is not given; even the calculation given after the hearing was only in respect of 7 out of 9 entities. These appellants also contended that if the two investigations periods in the scrip of Polytex were merged the fact that the appellant made considerable losses and the fact that the appellants contribution to LTP was negative would have emerged. 18. In order to canvas his submission that charge of reversal trade wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng levy of delayed payment charges comes to ₹ 37,00,210/-. Still todate SEBI has not given permission to the appellant to sell the said shares maintained in the margin account of Ghogari. 21. We have been told by the learned counsel for SEBI that no such permission was needed for the appellant to dispose of the shares of Ghogari lying in the margin account upto the amount of the debit on account of that client and in respect of several other appellants (trading members) are concerned their brokers had in fact sold the shares in the respective margin accounts and recouped the money due to the respective brokers. 22. Given the facts of the case we are of the considered view that the appellant is an affected party though indirectly and therefore prejudiced and therefore the appeal is maintainable. Moreover, we are constrained to observe that the attitude of SEBI in not responding to the appellant who is a regulated entity, when it sought SEBI's permission as a matter of abundant caution, is that of apathy. 23. Learned counsel appearing for SEBI Shri Kumar Desai vehemently contended that the impugned orders passed against the entities is perfectly in order as the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties in great detail and after perusing the various documents produced before us we are of the view that the appellants in 11 of the 12 appeals (except Appeal No. 356 of 2019) have violated the provisions of SEBI Act and PFUTP Regulations. 26. In respect of these 11 appeals we are of the considered view that violations have been established through connection, fund transfers, the nature and magnitude of trading, contribution to LTP etc. However, it is an admitted fact that document relating to two entities regarding the detailed calculation of the disgorgement amount were not provided to the appellants and even other documents were provided through multiple tranches and some after the proceedings. 27. We also note that the interpretation of reversal trade is different from its standard/normal interpretation. Even if the contention (and the ratio of those two judgments relied upon by SEBI Master finlease Ltd. (supra) and Anita Dalal (supra)are taken on board more details regarding the date-wise trading pattern of the appellants atleast on sample days is needed. Just aggregates over a period of 8 months are insufficient to prove the same. 28. We do not find any merits in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ips and 16 entities, the proceedings vide show cause notice dated February 26, 2016 is in respect of only one scrip (Polytex) and 10 entities. Therefore, we do not find any deficiency in SEBI proceedings with another investigation in one of the scrips involved in this impugned order for another distinct period. 31. The contention of the appellant that the losses dealing in the scrip of Gemstone/KGN should have been set off with the profits made while dealing in the scrip of Polytex does not have any merit as unlike tax rules where such set off is allowed for normal business profits and losses this is a case of manipulative trade and dealings and manipulations and that too in the nature of fraudulent and unfair trade practices does not deserve such treatment which normal business transactions are entitled to. Further, the nature and magnitude of the violation is such that the prices and volumes particularly in the scrip of Gemstone and Polytex had assumed such proportions as explained in the impugned order. For example, the price of Gemstone increased by 127%; the noticees had bought about 60% the market volume and sold about 46% of the market volume. Tables 4 and 5 of the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tities in respect of two entities were not given to the appellants (Page 176 to 178 - the e-mail message on Page 176 of the appeal memo states that gain calculation shows in respect of 7 entities have been attached while the attachment at Page 177 gives 9 names and the attachment at Page 178 gives 8 names. Hence, the inconsistency). We also note that there is considerable discrepancy between the profits as calculated by the appellants themselves as well as SEBI as given in the impugned order though the appellants claim that those calculations are based on the trade logs given by SEBI. In order to harmonize the appellants deserve to be given details of calculations made by SEBI in respect of all noticees which admittedly is not done in the instant matter. 34. In the result we pass the following directions:- (a) Appeal No. 356 of 2019 is allowed and we permit the appellant to liquidate the shares lying in the margin account of Ghogari (Appellant in Appeal No. 207 of 2019) to the extent of the legally permissible debit amount. (b) In respect of other 11 appeals while upholding the finding in the impugned order that the appellants have violated provisions of SEBI Act and PFUTP ..... X X X X Extracts X X X X X X X X Extracts X X X X
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