Sorabh Mahesh Gupta vs Securities And Exchange Board Of India

Tarun Agarwala, Presiding Officer

The present appeal has been filed challenging the order dated December 30, 2022 passed by the Adjudicating Officer (“AO”for short) of the Securities and Exchange Board of India (“SEBI”for short) imposing a penalty of Rs. 10 lakh for violation of Section 12A of the SEBI Act, 1992 read with Regulation 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (“PFUTP Regulations”for short).

Based on an investigation in the scrip of Radha Madhav Corporation Limited (“the Company” for convenience), a show cause notice was issued to the appellant to show cause as to why an enquiry should not be held and penalty should not be imposed for manipulating the price of the scrip and creating a misleading appearance of trading.

The appellant contested the matter and denied the charges contending that his trades were not meant to increase the price of the scrip nor was the appellant capable of influencing the price of the scrip.

The AO after considering the reply and the material evidence on record found that the appellant by placing miniscule quantities of buy orders was not a normal trading activity and the same was done deliberately in order to increase the price and create a false impression about the trades in the market. The AO came to the conclusion that the trades were manipulative and violative of Regulations 3 and 4 of the PFUTP Regulations.

We have heard Shri Kunal Katariya, the learned counsel for the appellant and Shri Vyom Shah, the learned counsel for the respondent.

From the material evidence on record we find that the appellant was amongst the top two contributors to the market positive LTP and his trades contributed to positive LTP. The record indicates that the appellant through 3466 trades on BSE platform and 4662 trades on NSE platform contributed to a positive LTP of Rs. 247.34 and Rs. 331.50 respectively.

The record also indicates that out these 3466 trades on the BSE platform the appellant had placed buy orders of miniscule quantity in the range of 1-10 shares in 2132 instances thereby contributing 22% to market positive LTP on BSE and similarly 4662 trades on the NSE. The appellant placed buy orders of miniscule quantity in 2850 instances thereby contributing 20.86% to market positive LTP.

The trading pattern of the appellant by placing buy orders in miniscule quantities is not an isolated case but is a consistent case whereby the appellant has executed 2132 and 2855 trades on the BSE and NSE platform. This execution of miniscule trades is not a normal trading activity when large numbers of sell orders were available. This peculiar pattern of trading adopted by the appellant were clearly manipulative in nature and were undertaken to cause upward price movement of the scrip.

From the above it is clear that appellant was executing large number of miniscule quantity of trades at a higher price than the LTP when large quantities sell orders were available in the order book. Such pattern of trading is not a normal trading activity inasmuch as it is common sense that a buyer would buy a scrip at the lowest possible price and, therefore, it does not stand to reason as to why the appellant was buying the shares at a higher price.

In similar circumstances in the same scrip, the AO had imposed a penalty on Sonal Vijay Mehta for trading in miniscule quantities. The said noticee filed Appeal no. 253 of 2023 which was dismissed by this Tribunal on March 16, 2023. This appeal is also squarely covered by the aforesaid decision of the Tribunal.

In view of the aforesaid, we do not find any error in the impugned order. The appeal fails and is dismissed with no order as to costs.

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. Certified copy of this order is also available from the Registry on payment of usual charges.