Bharti Goyal And Others vs Securities And Exchange Board Of India

All Trades,,,,Trades with LTP>0,,,Trades with LTP>0 and buy orders placed first,,,

No.of

trades",No.of shares,"LTP Cont.

(in Rs.)",% to Mkt LTP,"No.of

trades",No.of shares,"LTP

Cont.

(in Rs.)",No.of trades,No.of shares,"LTP

Cont. (in

Rs.)","% to Market net

LTP

9,284,28.65,8.13%,4,34,28.65,4,34,28.65,8.13%

Kishore R. Ajmera (2016) 6 SCC 368 and stated that in matters like PFTUP violations many a times hard evidence is not forthcoming and only a,,,,,,,,,,

preponderance of probability is sufficient to establish violation.,,,,,,,,,,

Shri Anubhav Ghosh, learned counsel for the Respondent in Appeal no.159 of 2020, while adopting the arguments put forth by Shri Kumar Desai,",,,,,,,,,,

further emphasized how trading dynamics alone is sufficient to establish PFUTP violations and how deceptive the nature of trading adopted by the,,,,,,,,,,

Appellants are. Further, in addition to Ajmera (supra), he also relied on the judgment of the Hon’ble Supreme Court in SEBI vs. Rakhi Trading",,,,,,,,,,

(CA No. 1969/2011, order dated February 8, 2018).",,,,,,,,,,

The relevant provisions of the PFUTP Regulations are quoted below:-,,,,,,,,,,

“PFUTP Regulations, 2003",,,,,,,,,,

Prohibition of certain dealings in securities,,,,,,,,,,

No person shall directly or indirectlyâ€",,,,,,,,,,

(a) buy, sell or otherwise deal in securities in a fraudulent manner;",,,,,,,,,,

(b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange,",,,,,,,,,,

any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made,,,,,,,,,,

thereunder;,,,,,,,,,,

(c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be",,,,,,,,,,

listed on a recognized stock exchange;,,,,,,,,,,

(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 thereunder.,,,,,,,,,,

Prohibition of manipulative, fraudulent and unfair trade practice",,,,,,,,,,

(1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities.",,,,,,,,,,

(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the,,,,,,,,,,

following, namely:-",,,,,,,,,,

(a) indulging in an act which creates false or misleading appearance of trading in the securities market;,,,,,,,,,,

…………..,,,,,,,,,,

(e) any act or omission amounting to manipulation of the price of a security;,,,,,,,,,,

After hearing the learned counsel for the Appellant L.K. Vyas and Appellant Ms. Bharti Goyal in person and after perusing the records we are of,,,,,,,,,,

the considered view that there are missing links in the investigation as brought out in the impugned order. While the trading pattern of both the,,,,,,,,,,

Appellants; placing the buy orders for generally very small number of shares and the timing of the orders; all point towards possible violation of the,,,,,,,,,,

provisions of PFUTP Regulations it is also possible that an investor through a thorough observation of the movement of the scrip could be placing,,,,,,,,,,

orders in the system without any intention to manipulate the market. Since the dividing line is very thin and blurred distinguishing both these categories,,,,,,,,,,

is a difficult, if not impossible, task. Though the learned counsel shed some light on this ‘irrational behaviour’ some more analysis of the overall",,,,,,,,,,

trading in the scrip during the investigation period would have been helpful since no connection have been established between the Appellants and the,,,,,,,,,,

suspected/connected entities nor with the promoters or directors etc. of Mapro Industries.,,,,,,,,,,

At the same time trading pattern of the Appellants and their explanation that they were keen to invest in the scrip of Mapro because of its,,,,,,,,,,

extremely promising nature, [even ignoring that such an explanation is forthcoming for the first time] also do not enlighten us. Therefore, we have to",,,,,,,,,,

balance the lack of evidence of meeting of minds and the unconvincing response of the Appellants. That promising nature of the scrip is reflected,,,,,,,,,,

neither in volume of trading in the scrip of Mapro during the investigation period of almost 8 months nor we have been told there were any major,,,,,,,,,,

announcement regarding the performance of Mapro Industries during this period. Therefore, the Appellants had to have extraordinarily sharp eagle",,,,,,,,,,

eyes to pick on an ordinary scrip which was witnessing an artificial price surge and in the process a limited surge in volumes during the investigation,,,,,,,,,,

period which was primarily found to be handy work of some connected/suspected entities. We are unable to believe that the Appellants herein jumped,,,,,,,,,,

on to the bandwagon by virtue of their market savviness, particularly when they claim that they are small/occasional investors with limited awareness",,,,,,,,,,

and meagre funds.,,,,,,,,,,

The scrip of Mapro was not a miracle scrip, as reflecteded in its limited trading data given in the impugned order, for the Appellants to place their",,,,,,,,,,

orders in the early morning itself, mostly just after 9 a.m. at prices higher than LTP by 2 to 4% as if this scrip had to be bought at any cost.",,,,,,,,,,

Further, if any investor takes such a stand, and if he/she is so convinced of the performance of the scrip, he/she would buy at least a reasonable",,,,,,,,,,

quantity rather than placing a buy order for miniscule quantities of 1, 2, 5 or 10 shares etc as done by the appellants.",,,,,,,,,,

Therefore, in conclusion, we are of the considered view that the nature and pattern of trading of the Appellants are violative of the stated",,,,,,,,,,

provisions of PFTUP Regulations, 2003 but in the given facts and circumstances of the matter and in the absence of any effort in the impugned order",,,,,,,,,,

towards connecting the dots in terms of relationship/connection/money transfer/even some interaction between the Appellants and other suspected,,,,,,,,,,

entities or to the promoters of Mapro we are unable to uphold the penalty imposed on the two Appellants. A warning to the Appellants that repetition,,,,,,,,,,

of trading of similar nature/pattern as the impugned ones will lead to penal consequences is sufficient to meet the ends of justice.,,,,,,,,,,

Both the appeals are partly allowed with no order as to costs. Consequently Misc. Application no.144 of 2020 in Appeal No.159 of 2020, seeking",,,,,,,,,,

interim relief has become infructuous and is also disposed of as such.,,,,,,,,,,

The present matter was 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 Presiding Officer 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.,,,,,,,,,,