TMI Blog2009 (12) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... curities market directly or indirectly for a period of 45 days and also directing him to disgorge an amount of ₹ 66,20,209 which is the unlawful gain made by him. He has also been directed to pay another sum of ₹ 23,83,275 being the interest for three years at the rate of 12 per cent per annum. The other appeal is directed against the order dated 10-6-2009 passed by the adjudicating officer holding the appellant guilty of the same charges and imposing a monetary penalty of ₹ 70 lakhs on him. Facts giving rise to these appeals clearly bring out the fraud that the appellant played in cornering the shares in the Initial Public Offering (IPO). 2. Atlanta Limited (Atlanta) came out with an IPO in September 2006 and offered 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner, the appellant received 57, 172 shares which were meant for the employees of Atlanta and after getting them transferred in his demat account he sold them in the market for a sum of ₹ 1,51,96,009. The show-cause notice further stated that the shares were allotted to the employees at the rate of ₹ 150 per share. The appellant was alleged to have violated regulations 3(c) and 4(1) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (for short 'the Regulations'). The appellant filed a detailed reply to the show-cause notice in which he did not dispute the fact that he had financed the applications of 11 employees whose names ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs under Section 15HA of the Act. Hence, these appeals. 3. We have heard the learned Counsel for the parties. The fact that the appellant is a director of a group company of Atlanta is not in dispute. It is also not in issue that he financed the applications of 11 employees for the allotment of shares from the quota reserved for them. It is common case of the parties that 11 employees were allotted 57,172 shares with the finances provided by the appellant and that they transferred these shares to the demat account of the appellant between 26-9-2006 and 4-10- 2006. The chart showing the names of the employees, the date and amount of finance given and the date on which the employees received the shares which chart is referred to in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication in his own name which he could not as he is not an employee of the issuer company, he thought of a deceitful device to file applications in the name of 11 employees and wholly financed those applications and immediately on the allotment of shares he got them transferred in his demat account and subsequently sold them in the market thereby making a windfall gain. It is also an admitted fact that the employees' quota in the IPO was over subscribed by 1.14 times and had the appellant not cornered the shares, the same would have been allotted to the genuine employees of Atlanta. This conduct of the appellant clearly amounts to fraud as defined in the Regulations and in addition deprived the employees of their due shares. Even if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted an unfair trade practice while dealing in the shares of Atlanta. The impugned order rightly holds him guilty of violating regulations 3(c) and 4(1) of the Regulations. It is again admitted between the parties that the issue price of the shares was ₹ 150 and the appellant sold them at a much higher price on different dates at an average price of ₹ 265.80. The whole-time member has calculated the unlawful gain made by the appellant in this regard and has rightly directed him to disgorge a sum of ₹ 90,03,484 including interest at the rate of 12 per cent per annum for three years. Disgorgement is the forced giving up of profits obtained by illegal or unethical acts. It is a repayment of ill-gotten gains that is imposed on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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