Vishal Pravinbhai Soni And Others vs Securities And Exchange Board Of India

Tarun Agarwala, Presiding Officer

Two appeals have been filed against a common order dated May 17, 2019 passed by the Adjudicating Officer (“AO†for convenience) of

Securities and Exchange Board of India (“SEBI†for convenience) holding them guilty of violating regulations 3 and 4 of the SEBI (Prohibition of

Fraudulent and Unfair Trade Practice relating to Securities Market) Regulations, 2003 (“PFUTP Regulations†for short) and accordingly a

penalty was imposed. Since the issue is common both the appeals are being taken up together.

The appellants was served with the show cause notice dated December 26, 2018. The appellant in Appeal No. 489 of 2019 did not file any reply.

The appellant in Appeal No. 490 of 2019 filed a reply contending that the trades in question were executed by his broker without his express

knowledge and he was only informed after the trades had taken place. None of the appellants availed the opportunity of personal hearing though they

were served with the notice of hearing. Accordingly, the AO after considering the material available on record passed the impugned order.

We have heard Mr. Vikas Bengani, the learned counsel for the appellant in Appeal No. 490 of 2019 and Ms. Akansha Jain, Practicing Company

Secretary in Appeal No. 489 of 2019 and Mr. Vishal Kanade, the learned counsel assisted by Manish Changani, Mr. Anubhav Ghosh and Mr.

Ravishekhar Pandey, advocates for the respondent.

The learned counsel for the appellant in Appeal No. 490 of 2019 contended that the record would show that only miniscule sales were made by the

appellant which was 0.07% of the total trade volume and as per the show cause notice contribution less than 5% are liable to be ignored. It was also

contended that the inter se connection between the noticees is illogical and cannot be sustained. The learned counsel however contended that he

would be happy if the penalty is reduced as was done in the case of Akshata Majgaonkar vs. SEBI (Appeal No. 527 of 2020 decided on 23.12.2020)

wherein on similar facts the penalty was reduced on the ground of miniscule trades being executed.

The authorized representative in Appeal No. 489 of 2019 contended that except in the case of Henal Patel the contribution of trades for others was

less than 5% and that miniscule trades were made which did not impact the market. It was further contended that the show cause notice itself

indicates that the buyer had placed the orders first which orders were matched by the miniscule trades executed by the appellants. It was contended

that whereas the appellants have been issued a show cause notice, for the same trades, the buyer has not been issued a show cause notice on the

ground that there were no material evidence against them. It was contended that the charge under regulations 3 and 4 of the PFUTP Regulations can

only be proved if there is collusion between the buyer and the seller and in the event the buyer has been let off and not charged the question of

indicting the appellants does not arise.

Considering the aforesaid, we find that the question of collusion between the buyer and seller has not been taken into consideration. The question

that if the buyer has been let off would be the consequence in so far as the seller is concerned qua the appellant has also not been taken into

consideration. In this regard, we find that this Tribunal has passed several decisions some of which are M/s Nishith M. Shah HUF vs SEBI (Appeal

No. 97 of 2019 decided on 16.01.2020) and Amaresh Pathak & Ors. vs SEBI (Appeal No. 332 of 2020 decided on 16.02.2021) wherein this Tribunal

has found that in order to prove collusion there must be a buyer and a seller and that in the absence of collusion the contribution to Last Traded Price

(LTP) becomes immaterial.

The learned counsel for the appellant submitted that since no such plea was raised before the AO nor they appeared for hearing it was no longer

open to the appellants to make out a case on merits as put forth before this Tribunal. In our view, this contention cannot be accepted in as much as it

is always open to the appellants to make out a case on the basis of the facts which are already on the record. In the instant case, the show cause

notice itself reveals the buyers have been let off who were counterparties to the trades executed by the appellants. What would be impact of this

aspect and the decisions passed by this Tribunal is required to be considered by the AO.

In view of the aforesaid, the impugned order cannot be sustained and is quashed. The appeals are allowed. The matters are remitted to the AO to

decide the matters afresh in the light of the observation made aforesaid. It would be open the appellants to file their replies and take such grounds as

permissible in law. In the circumstances of the case, parties shall bear their own costs.

The present matters were heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor

a certified copy of this order could be issued by the Registry. In these circumstances, this order will be digitally signed by the Private Secretary on

behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Parties will act on production of a digitally

signed copy sent by fax and/or email.