Appeal No. 332 of 2020 - SAT

BEFORE THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

Order Reserved on: 4.1.2021

Date of Decision:16.2.2021

Appeal No. 332 of 2020

1. Amaresh Pathak

258A, Parui Paka Road,

Near Netaji Sangha Club,

Kolkata – 700 061.

2. Samaresh Pathak



Kolkata – 700 061.

3. Susmita Pathak



Kolkata – 700 061.

...Appellants

Versus

Securities and Exchange Board of India

SEBI Bhavan, Plot No.C-4, “G” Block,

Bandra Kurla Complex,

Bandra (E), Mumbai 400051.

…Respondent

Mr. Saurabh Bachhawat, Advocate i/b. Harsh Kesharia,

Advocate for the Appellant.

Mr. Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.

Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b.

Vidhii Partners for the Respondent.

2

With


Pradip Basu

Vill Chauli Po Ghatal

Midnapore, West Bengal – 711 202.

...Appellant

Versus





…Respondent






With


Sonu

R/o H.No.Wz-G-42, Wz Block,

Naraina Villa, Delhi – 110028.

...Appellant

Versus





…Respondent

3

Mr. Amit Gupta, Advocate i/b. AGKM Corpus Juris LLP

for the Appellant.




With


Ramesh Baheti

R/o A-18, Dena Apartment,

Sector 13, Rohini,

New Delhi- 110085.

...Appellant

Versus





…Respondent


for the Appellant.




With


1. Kusum Devi Baid

Flat No.D-502, Ashoka

Vihar, 317, G T Road,

Belurmath, Howrah,

4

West Bengal-711 202.

2. Kamal Baid

Flat No.D-502, Ashoka

Vihar, 317, G T Road,

Belurmath, Howrah,

West Bengal-711 202.

...Appellants

Versus





…Respondent






With

Appeal No.353 of 2020

Dev Kishan Mal

R/o 266, Bharat Apartment,

Sector 13, Rohini,

Delhi-110085.

...Appellant

Versus





…Respondent

5


for the Appellant.




With


Kuldeep Singh

R/o House No.214,

Village Mangolpur,

New Delhi – 110083.

...Appellant

Versus





…Respondent


for the Appellant.




With


Narayan Dass Rathi

R/o 351, Maheshwar Mohalla,

Outside Jassusar Gate,

Banglanagar, Bikaner,

6

Rajasthan – 334004. ...Appellant

Versus





…Respondent


for the Appellant.




With


Davender Kumar

R/o 1240, Mangol Puri,

North West Delhi,

Delhi – 110083.

...Appellant

Versus





…Respondent


for the Appellant.




7

With


Vishnu Khaitan

A 502, Vidhi Apt. Opp.Powai,

Petrol Pump, Ulhasnagar,

Ulhasnagar, Maharashtra – 421004.

...Appellant

Versus





…Respondent

Mr. Jaikishan Lakhwani, Advocate i/b. J L Legal

Advisors for the Appellant.




With


Rachana Govind Attal

604, Devi Darshan Tower,

Gaon Devi Road,

Near Kasturi Hospital,

Mumbai – 401101.

...Appellant

Versus


8




…Respondent





Vidhii Partners

With


Debashis Sur Chowdhury

Block L/V, Flat No.3,

Govt. Housing Estate,

O D R C, Kolkata,

West Bengal – 700038.

...Appellant

Versus





…Respondent





Vidhii Partners

9

With


Benu Mimani Jeewanram Chetandas, H P Pump,

Burdwan Road, Siliguri, West,

Bengal – 734404.

...Appellant

Versus





…Respondent

Mr. Jaikishan Lakhwani, Advocate i/b J L Legal Advisors

for the Appellant.


Kinjal Bhatt and Mr. Hersh Choudhary, Advocates i/b

Vidhii Partners

With


Akhileshwar Kumar Mishra

R/o 5/3/16 3rd Floor,

Geeta Colony, Ajit Nagar,

East Delhi-110031.

...Appellant

Versus




10

Bandra (E), Mumbai 400051. …Respondent


for the Appellant.




With


Rupesh Kumar Srivastava

R/o C/o Daya Shankar,

Flat no.404, Tower 15,

Nirala Estate, Greater Noida,

Surajpur, Gautam Budh Nagar,

UP 201306.

...Appellant

Versus





…Respondent

Mr. Amit Gupta, Advocate i/b AGKM Corpus Juris LLP

for the Appellant.




With

Misc. Application No. 414 of 2020

11

(Exemption from filing

certified copy) And


1. Pawan Somani

2. Parinay Somani

Jai Hanuman Estate

2nd Floor, 4 Janata Sarani,

Hindi Motor,

Hooghly (W.B.) - 712 233.

...Appellant

Versus





…Respondent

Mr. Kunal Katariya, Advocate i/b Harsh Keshariya,





With


Sunil Singhal

Kumher Gate, Pratap Colony,

Bharatpur (Raj).

...Appellant

Versus



12



…Respondent

Mr. Bharat B. Merchant, Advocate with Mr. Nadeem

Shama, Advocate i/b. Thakordas & Madgavkar and Mr.

Hari Om Maheshwari, Authorised Representative for the

Appellant.




With


Shalini Agarwal

B-104, Chintamani Apartment,

RNP Park, Bhayander (st) 401 105.

...Appellant

Versus





…Respondent

Mr. Saurabh Bachhawat, Advocate i/b. Ms. Yashvi

Panchal, Advocate for the Appellant.




With


Janardan Rama Bhunesar

13

Room no.B-27, Nehru Nagar,

Station Road, Bhayander West -401 101

...Appellant

Versus





…Respondent

Mr. Saurabh Bachhawat, Advocate i/b Ms. Yashvi





With


1. Paras Vinod Jain

2. Ranju Devi Jain

3. Shilpa Jain

4. Vinodkumar Chotmal Jain

C-110 Anurag Apartment,

RNP Park, Bhayandar (East) – 401 105.

...Appellants

Versus





…Respondent

Mr. Saurabh Bachhawat, Advocate i/b. Ms. Yashvi


14




CORAM: Justice Tarun Agarwala, Presiding Officer

Dr. C.K.G. Nair, Member

Justice M.T. Joshi, Judicial Member

Per : Justice Tarun Agarwala, Presiding Officer

1. All the appeals are against a common order and

raises the same issue. Accordingly all the appeals are

being decided together. By an order dated 9th January,

2020 the Adjudicating Officer („AO‟ for short) has

passed an order against 29 entities imposing a

cumulative penalty of Rs.1,83,00,000 against the

appellants for violation of Regulations 3 and 4 of the

Securities and Exchange Board of India (Prohibition of

Fraudulent and Unfair Trade Practices Relating to

Securities Market) Regulations, 2003 (hereinafter

referred to as „PFUTP Regulations, 2003).

2. The facts leading to the filing of the present

appeal is, that the investigation in the scrip of

15

Dhanleela Investments and Trading Company Ltd. was

conducted for the period 26th February, 2013 to 2nd

March, 2015. It was found that the trading in the scrip

was suspended since 2006 but was revoked in April,

2012. Thereafter, the Company issued bonus shares in

February, 2013. At that time the prevailing price was

Rs.17.50 which rose to Rs.427.85 in October, 2013.

The show cause notice alleged that the appellants

traded on 82 days totaling 298 trades and that the

appellants held sizeable quantities of shares but sold

limited shares though large orders were pending on the

platform of the stock exchange. It was alleged that the

trading pattern was not genuine and the appellant was

instrumental in increasing the price of the scrip. It was

also alleged that the noticee no.29 had evolved a

scheme to jack up the price and sold certain number of

shares to other entities through off market transactions

who in turn sold the shares to the appellant.

16

3. The stand of the appellant is, that they traded in

miniscule quantities as a seller and that they have no

connection with the buyer. It was also contended that

there is no collusion with the counter party and that the

buy orders were already in existence when the

appellants placed their sell orders. It was contended

that most of the appellants had no connection with

noticee no.28 or notice no.29 and some of the

appellants had a limited connection of buying certain

shares through an off market transaction. Other than

that there was no connection.

4. The AO while passing the order of penalty found

that miniscule shares were being sold by the appellants

when there was a demand for more shares and that the

appellants had a substantive holding in the shares. The

AO further found that a prudent investor would have

sold the entire shares especially when the price quoted

was above the LTP and there was no reason for the off

market transfers to have taken place at a price much

17

lower than the LTP unless the motive was to increase

the price of the scrip. The AO thus came to the

conclusion that the appellants were not genuine sellers

and taking shelter of the decision of the Supreme Court

in SEBI vs. Kishore R. Ajmera (2016) 6 SCC 366 held

that the trading pattern created a misleading

appearance which amounted to manipulation in the

price of scrip and, therefore, violative of Regulations 3

and 4 of PFUTP Regulations. The AO also found that

the appellants failed to give any plausible explanation

as to why miniscule trades were being made.

5. We have heard Mr. Saurabh Bachhawat, Advocate

assisted by Mr. Amit Gupta and Mr. Jaikishan

Lakhwani, Advocates for the Appellants and Mr.

Vishal Kanade, Advocate with Ms. Nidhi Singh, Ms.



6. The grounds urged is, that there is an inordinate

delay in the issuance of the show cause notice. The

18

finding that the appellants had violated Regulations 3

and 4 of the PFUTP Regulations, 2003 is patently

erroneous since the appellant alone cannot be

penalized without there being collusion with the

alleged buyer. In the instant case, there is neither any

charge nor any finding that the appellant had colluded

with the buyer. It was further contended that miniscule

trades were executed. It was contended that in the case

of Amaresh Pathak only 12 trades were executed

wherein only 2 trades contributed to the positive LTP

and the remaining did not and whereas the appellant

has earned only a few thousands of rupees for which

the penalty has been imposed. The learned counsel has

relied on the decision of this Tribunal in Appeal no.97

of 2019 Nishith M. Shah HUF and Appeal no.222 of

2020 Rajesh Jivan Patel.

7. On the other hand the learned counsel for the

respondent laid stress that in the peculiar facts of the

present case the ratio of the decision of Nishith M.

19

Shah HUF and Rajesh Jivan Patel is distinguishable

and is therefore not applicable. The learned counsel

placed reliance on a decision in Jaiprakash Bohra

Appeal no.162 of 2019. It was contended that noticee

no.28 had planned a scheme by which certain shares

were transferred to these entities namely the appellants

who in turn sold miniscule quantities thereby

artificially increasing the price of the scrip.

8. Having heard the learned counsel for the parties at

some length we are of the opinion that the controversy

involved in this case is squarely covered in Nishith

Shah case and Rajesh Jivan Patel and, consequently,

the impugned order cannot be sustained. In Nishith

Shah the Tribunal held :-

“4. We have heard Shri Saurabh Bachhawat, the

learned counsel for the appellant and Shri Kumar

Desai, the learned counsel for the respondent SEBI

at some length. We are of the opinion that the

impugned order cannot be sustained for the

following reasons:-

“(a) The investigative reports nor the WTM or the

AO found any connection between the buyer and

the seller. We also find that neither in the

20

investigative report nor in the impugned order any

connection has been found between the appellant

with the promoters/directors of the Company. Thus,

no causal connection has been established.

(b) The investigative report finds that no adverse

inference can be drawn against the buyer merely

because the buyer had placed buy orders above

LTP. On this basis, the buyer was exonerated from

the charge of manipulation in the price of the scrip

when admittedly the buyer was placing buy orders

above the LTP.

(c) Buy orders were placed at 9.15 hrs and sell

orders were placed during the course of the day but

not immediately after the buy orders nor the sell

orders of the appellants were placed before the buy

orders.

(d) There is no finding that the appellant has

indulged in fraudulent or unfair trade practices in

securities.

(e) Selling miniscule amount of shares by itself is

not illegal nor manipulative nor violative of

Regulation 3 and 4 of the PFUTP Regulations

unless collusion with others is found.

(f) Allegation that the appellant has contributed to

the LTP cannot be upheld in the absence of any

collusion with the buyer or promoter/director of the

Company. One has to establish a connection

between a buyer and with the seller in order to

infer a manipulation in the price of the scrip.

(g) The authorities have misread and misapplied

the decision of the Supreme Court in Ajmera’s case

21

(supra). In this regard Paragraph 27 of the

judgment is extracted here under:-

“27. Let us apply the aforesaid test to the facts

of the present cases before us wherein

admittedly there is no direct evidence

forthcoming. The first relevant fact that has to

be taken note of is that the scrips in which

trading had been done were of illiquid scrips

meaning thereby that such scrips though listed

in the Bombay Stock Exchange were not a

matter of everyday buy and sell transactions.

While it is correct that trading in such illiquid

scrips is per se not impermissible, yet,

voluminous trading over a period of time in such

scrips is a fact that should attract the attention

of a vigilant trader engaged/engaging in such

trades. The above would stand fortified by the

note of caution issued by the Bombay Stock

Exchange in the form of a notice/memorandum

alerting its members with regard to the necessity

of exercising care and caution in case of high

volume of trading in illiquid scrips, as already

noted.”

In order to apply the aforesaid test, the facts of the

present case is, that there is no direct evidence of

collusion between the appellant as a seller with

that of the buyer. There is no finding that the

appellant was known to the directors or promoters

of the Company.

Since no direct evidence is forthcoming we have to

see the indirect connection which is that the

appellant was selling small quantities of scrips.

Trading in small quantities in scrips is per se not

impermissible as held in Ajmera’s case (supra). If

trading in miniscule amount leads to an increase in

22

the price of the scrips one can presume or infer that

the trading is manipulative but such trading cannot

happen unilaterally. There must be evidence to

show collusion between the buyer and the seller. In

the instant case there is none. The principle of

preponderance of probability cannot be exercised

in the absence of any connection between the seller

and the buyer.

(h) The charge that the appellant had contributed

to the LTP as a seller which resulted in the

manipulation in the price of the scrips cannot be

sustained in the light of the glaring fact that the

same charge against the buyer had been dropped.

9. In the instant case, we find that there is no

connection between the buyer and the seller. It is

settled law that the charge of raising the price

artificially has to be established without which the

charge of collusion between the buyer and the seller

cannot be proved.

10. In the absence of any finding of collusion between

the buyer and the seller the charge of collusion and/or

manipulation in the price of scrip cannot be sustained

since it has not been proved. We also find that the

buyer had placed the order above the LTP and,

therefore, was increasing the price. The buy orders

23

had been on the stock exchange platform for a period

of time and only matched when the appellants sold

their scrip. The appellant alone therefore cannot be

charged for manipulating the price especially when the

buyer have not been prosecuted by the respondent. We

find that there is no connection established between the

appellants with the shareholders and promoters of the

Company.

11. In addition to the above when a person enters into a

transaction in securities with the intention to artificially

raise the price, he thereby automatically induces the

innocent investors in the market to buy/sell the stocks.

The buyer or the seller is invariably influenced by the

price of the stocks and if that is manipulated the person

doing so is necessarily influencing the decision of the

buyer/seller thereby inducing him to buy or sell. This is

what Regulation 4 of the PFUTP Regulation speaks of.

Inducement to any person to buy or sell securities leads

to manipulation in the price of the scrip. If the factum

24

of inducement is established, it will necessarily follow

that a fraud has been played and there has been a

manipulation.

12. Taking the aforesaid as a consideration the

inducement in the instant case has been caused by the

buyer. The buyer has placed the buy order above the

LTP. The buyer is inducing the seller to sell at a higher

price. The buyer is thus manipulating the price and is

playing a fraud on the system.

13. There is no direct evidence of collusion between

the appellant and the buyer. The only indirect evidence

is that the appellants have sold miniscule quantities

leading to an increase in the price of the scrip. One can

infer manipulation but such trading cannot happen

unilaterally. There must be evidence to show collusion

between the buyer and the seller. The principle of

preponderance of probability cannot be exercised in

the absence of any connection between the seller and

25

the buyer. This is what the Supreme Court has held in

Ajmera‟s case.

14. In view of the aforesaid, the impugned order

cannot be sustained and is quashed in so far as the

appellants are concerned. All the appeals are allowed

with no order as to costs. Misc. Application no.414 of

2020 is accordingly disposed of.

Justice Tarun Agarwala

Presiding Officer

Dr. C.K.G. Nair

Member

16.2.2021 RHN

Per: Justice M.T. Joshi, Judicial Member

15. I have had the honour to peruse the draft of the

order prepared by the Hon‟ble Presiding Officer.

However with due respect, I am unable to agree with

26

the reasons recorded therein. I therefore propose to

deliver my separate judgment in the appeals.

16. The draft and more particularly Paragraph no 8 to

12 of it would show that relying on the reasons

recorded in the case of Nishit Shah HUF, appeal

no.97 of 2019 and Rajesh Jeevan Patel, appeal

no.222 of 2020, the appeals are allowed on two

grounds. Firstly no connection between the buyers

with the present appellants majority of whom are the

sellers is established. Secondly when a buyer put an

order for purchase of shares for high prices it is who

induces the sellers, but he is not prosecuted by the

respondent SEBI. It is further reasoned therein that no

connection between noticee no.28 i.e. appellant

Narayan Dass Rathi (who in off market transaction

sold shares to other notices either directly or indirectly)

either with other appellants or with the

promoter/company in question is found. It is held in

the draft order that in the absence of the material to

27

connect the appellant with the buyer the impugned

order of SEBI cannot be upheld.

17. It is trite to say that the standard to prove the

charge in the case is of preponderance of probabilities

and not of a proof beyond reasonable doubt. The real

test however lies in the application of the standard in a

given case. For that purpose this Tribunal which is

final fact finding forum is required to appreciate all the

relevant facts, probabilities and circumstances found

from the record. Upon examining this material, we

shall have to prepare rather a balance sheet of the

proved/admitted material and find on which side, the

probability lie more. This exercise is explained more

precisely by the then Hon‟ble Justice (later on Chief

Justice of India) Shri Y. V. Chandrachud in the case of

Narayan Ganesh Dastane ... Vrs .. Sucheta Narayan

Dastane (A.I.R. 1975 Supreme Court 1534) as

under :-

28

“The normal rule which governs civil proceedings

is that a fact is said to be established if it is proved by

preponderance of probabilities.

Under s.3 of the Evidence Act a act is said to be

proved when the court either believes it to exist or if

considers its existence so probable that prudent man

ought, in the circumstances, to act upon the

supposition that it exists. The first step in this process

is to fix the probabilities. the second to weigh them.

The impossible is weeded out in the first stage, the

improbable in the second. Within the wide range of

probabilities, the Court has often a difficult choice to

make but it is this choice which ultimately determines

where the preponderance of probabilities lies.”

While some judges try to formulize this exercise

as “of finding 51% probabilities”, to borrow the

inimitable Lord Denning‟s terminology from Miller

...Vrs... Minister of Pensions (1947) 2, ALL ER 372 it

would be simply as “more probable than not”.

https://indiankanoon.org/doc/1031309/

29

18. Given the above principle, in my view the

present appeal cannot be decided one way or the other

merely on the sole axis of presence or absence of

connection/nexus between the buyer and seller or

promoters/the Company, or non-prosecution of the

buyer, though no doubt, these facts would be of

considerable importance in weighing the probabilities.

While in the case of Nishit Shah (cited in the

judgment above) and many more, the factum of non-

connection was held fatal to the SEBI‟s case, in cases

like of Ms. Sunita Gupta ...Vrs.....SEBI, Appeal no.

269 of 2018, decided by this Tribunal on 19th

September 2019 and Mrs. Bharati Goyal

.....Vrs.......SEBI, Appeal no. 159 of 2020, decided by

this Tribunal on 25th August 2020, this Tribunal upon

weighing all the facts and probabilities on record ruled

that the absence of the connection/nexus would not be

fatal to the charges of manipulative/fraudulent trades

levelled by SEBI and the appeals were dismissed. In

30

those cases also either no connection between the

trading parties was established or the counter parties

were not prosecuted.

While the Hon‟ble Presiding officer in the draft

order has quoted the observations made by this

Tribunal in the case of Nishith Shah, respondent SEBI

pointed out that in the case of Nishith Shah the orders

of Whole Time Member restraining the appellants

from trading in securities as well the order of the

Adjudicating officer imposing the penalty both were

challenged, in the present cases however the order of

the Whole Time Member dated 18th March 2020 which

is on the same set of facts is not challenged. It was

submitted that since the finding of facts has now

attained the finality, the order of Adjudicating

Officer‟s order cannot be challenged.

Besides this Tribunal in the case of Mrs Bharati

Goyal & other appeals … Vrs…. SEBI Appeal no.

159 of 2020 decided on 25th August 2020 by this

31

Tribunal, observed that failure to establish connection

with the promoters/directors of the Company in

question or the counterparty to the trade would not

absolve the entity who traded in irrational manner in

miniscule quantity for higher price given the fact that

the share was not a miracle share.

We can burden this judgment with many more

cases of the like nature, but since all these cases either

this way or the other were decided on the facts of the

respective cases wherein the factum of presence or

absence of connection/nexus was highlighted, it is

unnecessary to put the list of those cases. The issue

therefore is not whether there is a legal requirement of

establishment of connection/nexus or prosecution of

the counterparty to the trades, but inter alia, whether in

a given case on facts these factors assumes greater

importance.

19. Though in view of the fact that the order of

Whole Time Member restraining the present appellants

32

from trading in the securities is not challenged and

therefore the findings therein has attained finality, in

view of the draft order of the Honble Presiding Officer

on merit I alternatively propose to deal with the case

on merit.

In view of the above proposition, it is necessary to

appreciate all the proved/admitted material on record

of the present case, to weed out firstly the impossible,

improbable secondly and peruse the material through

the lens of a prudent man. If this exercise brings us to

conclude that case of SEBI is more probable, the

charge should be sustained, else the appeals will have

to be allowed. To reiterate the present case poses

before us the task of appreciation of evidence

simplicter and no more, which I propose to undertake

hereinafter.

20. Admitted facts of the case are that the trading in

the scrip of Dhanleela Investment and Trading

Company Limited (hereinafter referred to as

33

„Dhanleela‟) was suspended for a period between 11th

September, 2006 to 15th April, 2012. The same was

revoked on 16th April, 2012. Thereafter except one

trade on 24th April, 2012 at a price of Rs.26 there was

no trade on the scrip till 26th February, 2013. On that

date the price of the scrip opened at Rs.17.50. Within

a period of 8 months i.e. till 9th October 2013 it rose to

Rs.427.85. This period is termed by respondent SEBI

as Patch I of investigation.

The second patch of investigation is from 10th

October 2013 to th of December 2013, upon split

declaration of shares in the ratio of 5:1. On 10th

October the price had nosedived to Rs. 87.25 but in

this period again soared to Rs. 213.95. In the last

patch it closed on Rs. 90.35 on 2nd March 2015.

So far as performance of Dhanleela is concerned it

had earned net profits of Rs.32 lakhs in the year 2012-

13, Rs.52 lakhs in 2013-14 and Rs.13 lakhs in 2014-15.

34

Thus, as against the dismal performance of the

company during both the patches, there remained

exponential upward swing in the price of the share.

21. Prior to this period except noticee no 28- appellant

Narayan Dass Rathi none of the appellants or other

noticees (Noticees Sanjay Kumar Shrivastav and

Tapan Kumar Dey are not before us) held a single

share of the company. On 25th February, 2013 he –

Appellant Narayan Das Rathi transferred in off market

transactions 25 shares each to the noticees/appellant

nos.12 (Appellant Ramesh Baheti), 16 (Appellant

Kuldeep Singh) and 19 (Appellant Dev Kishan Mal)

alongwith other noticees, and 2350 shares to

noticee/appellant no.29 (Appellant Devinder Kumar).

Appellant in appeal no.383 of 2020. He in turn

transferred shares to the appellants in appeal no.388 of

2020 and 382 of 2020 and others.

22. It is pertinent to note that in these off market

transaction the seller sold those shares to the above

35

noticees or the appellants for lower price though buy

orders for higher price were pending on the stock

exchange platform.

23. It is further pertinent to note that appellant Narayan

Dass Rathi i.e. noticee no.29 in his reply to the show

cause notice did not put forward any explanation as to

why the shares purchased by him at the rate of

Rs.55.60 per share were sold by him for Rs.50 each in

off market transaction. On the stock exchange

platform already a buy order at the rate of Rs.55.60

was pending. Regarding rest of the off market transfer

similar pattern is discerned.

24. The explanation of the transferors is that they were

required to sell the shares in off market in view of

urgency of fund. However on the stock exchange

platform already buy orders for a higher price were

pending.

25. So far as the appellant who had purchased shares at

a lower price from the above appellants, admittedly

36

they had later on put 1 to 10 shares for sale on the

stock exchange platform though buy orders for more

share for higher price were pending and further though

they had purchased the shares in off market transaction

as detailed above for a lower price. They could not

explain the reasons for the same.

26. The percentage of the trade of the appellant along

with the details are tabulated in summary manner

regarding these patches of investigation separately in

the impugned order as under:

Table 5: Summary of Sell Trades

( I Patch of Investigation)

Sl.

No.

Seller Name Total

No.of

trades

No. of

trades

(LTP>

0)

Total

no.of

order

s

Sell

order

qty

range

Trade

Quanti

ty

Positive

LTP

contributi

on (Rs.)

% of

positive

LTP to

Total

Market

positive

LTP

No.of

shares

held

before

these

trades.

1. Paras Vinod Jain 23 5 23 2.6 100 26.05 6.35% 100

2. Ranju Devi Jain 23 4 23 1-10 100 23.95 5.84% 1000

3. Rachana Govind

Attal

20 5 19 3-20 95 22.40 5.46% 100

4. Shilpa Jain 24 4 24 2-6 95 20.95 5.11% 100

5. Benu Mimani 16 3 15 5-10 95 15.10 3.68% 100

6. Shalini Agarwal 24 4 24 2-9 95 12.35 3.01% 100

7. Akhileshwar

Kumar Mishra

2 2 2 2-4 6 12.00 2.92% 25

8. Sonu 2 2 2 2-3 5 11.55 2.81% 25

9. Sanjay Kumar

Sharma

2 2 2 4-4 8 11.00 2.68% 25

10. Sunil Singhal 2 2 2 2-5 7 10.75 2.62% 25

11. Amaresh Pathak 11 2 10 7-11 95 10.55 2.57% 100

37

12. Ramesh Baheti 7 7 7 2-4 20 10.20 2.49% 25

13. Rupesh Kumar

Srivastava

2 2 2 3-5 8 10.15 2.47% 25

14. Vinodkumar

Chotamal Jain

19 3 19 3-8 95 9.70 2.36% 1000

15. Parinay Somani 6 2 5 8-29 95 9.30 2.27% 100

16. Kuldeep Singh 7 7 7 1-4 20 9.10 2.22% 25

17. Janardhan Rama

Bhunesar

11 2 11 6-13 95 8.35 2.03% 100

18. Pawan Somani 8 2 7 7-32 95 8.30 2.02% 25

19. Dev Kishan Mal 7 6 7 1-5 25 8.20 2.00% 100

20. Pradip Basu 5 1 5 7-25 95 5.85 1.43% 100

21. Debashis Sur

Chowdhury

10 2 10 7-10 95 5.70 1.39% 100

22. Tapan Kumar Dey 10 2 10 6-11 95 5.45 1.33% 100

23. Kamal Baid 6 2 6 7-25 95 5.20 1.27% 100

24. Susmita Pathak 10 2 10 7-10 95 4.90 1.19% 100

25. Vishnu Khaitan 25 2 25 3-5 95 4.90 1.19% 100

26. Samaresh Pathak 10 2 10 7-10 95 4.65 1.13% 100

27. Kusum Devi Baid 6 2 6 8-25 95 4.60 1.12%

Total 298 81 293 1911 291.20 70.96%

Table 8: Summary of Sell Trades of 11 Noticees

( II patch of Investigation )

Sl.

No.

Seller Name Total

No.of

trades

No. of

trades

(LTP>

0)

Total

no.of

order

s

Sell

order

qty

range

Trade

Quanti

ty

Positive

LTP

contributi

on (Rs.)

% of

positive

LTP to

Total

Market

positive

LTP

No.of

shares

held

before

these

trades.

1. Sanjay Kumar

Sharma

1 1 1 10 10 9.2 7.07% 85

2. Sonu 1 1 1 7 7 8.8 6.77% 100

3. Sunil Singhal 2 1 1 11 11 7.6 5..84% 90

4. Vishnu Khaitan 2 2 2 5 10 7.4 5.69% 25

5. Rachana Govind

Attal

1 1 1 5 5 6.95 5.34% 25

6. Susmita Pathak 1 1 1 5 5 6 4.61% 25

7. Samaresh Pathak 1 1 1 5 5 5.7 4.38% 25

8. Shalini Agarwal 3 2 3 5-14 25 3.7 2.85% 5

9. Benu Mimani 1 1 1 10 10 2.1 1.61% 25

10. Kamal Baid 1 1 1 10 10 1.95 1.50% 25

11. Vinodkumar

Chotamal Jain

3 1 3 6-11 25 1.75 1.35% 25

Total 17 13 36 121 61.15 47.82%

38

27. The pattern thus would reveal that while some

buyers had placed a buy order for a higher price on

larger scale, the relevant appellant/noticees who

purchased the shares in off market for lower price,

used to put sell orders on miniscule quantities between

1 to 10 which get matched with the buy orders. Some

buy orders remained pending on the system for many

hours but those got matched with the miniscule sell

orders after more than 3-4 hours when either of these

noticees/appellants placed their sell orders. To repeat

the share was highly illiquid as prior to the

investigation period for ten months not a single trade

for a single share occurred till Appellant Narayan Das

Rathi transferred the shares in off market transactions

for a lower price to the other noticees/appellants.

28. All the above facts would show that except

noticee/appellant Narayan Das Rathi nobody was

holding the shares prior to 26th February, 2013 and

thereafter the shares were transferred in off market

39

transactions to the 27 entities either directly from him

or through Appellant Devindar Kumar, for a price less

than the price offered through pending buy orders on

the exchange platform. Thereafter those shares were

sold on miniscule proportion on the platform of SEBI

for a higher price though buy orders for this higher

price used to be in existence and sufficient share were

available to sell, thus substantially contributing to the

Last Traded Price (LTP). Tables no. 3 and 4 of the

impugned order shows that they had contributed to

70.96 % of the total trades during the period in

question.

29. While some of the appellants like Kusum Devi

Baid, Kamal Baid, Dev Kishan Mal, Kuldeep Singh,

Devindar Kumar, Rachana Atal, Debashish

Chowdhary did not explain before the Adjudicating

Officer by failing to file reply to the show cause notice,

some of the appellant though filed reply were unable to

explain as to why they put sell order on miniscule

40

quantity when a comparatively large buy orders were

pending for the price which was more than price they

purchased. They simply defended their action by

replying that selling of shares in miniscule quantities is

not illegal.

30. It is true that no direct connection between the

seller and the buyer is established in the present case.

We do not have material to find out whether

respondent SEBI had investigated the said connection.

However, in my view the insistence solely on the

establishment of the connection or non-prosecution of

the buyers would be against the very principle that the

facts are to be established on preponderance of

probability and not on the requirement that the facts in

issue should be proved beyond reasonable doubt or to

the hilt.

The Tribunal has to consider all the probabilities

either favouring or against the premise and to repeat, if

majority of probabilities points toward the existence of

41

fact in issue , then the premise/ the charge will have to

be upheld.

31. To sum up, we find that trading in the scrip of

Dhanleela was suspended on the stock exchange

platform for a period of six years. After revocation of

the suspension there was no trade at all for a period of

10 months. It was thus a highly illiquid stock.

Thereafter the trade opened at Rs.17.50. During patch

one investigation period i.e. from 26th February, 2013

to 9th October, 2013 it reached to 427.85. The

appellant and the other noticees were the major

contributors to this fact through abnormal transactions.

Their sell on the exchange platform created a picture of

rosy picture of large scale trade quantities through

miniscule sale of shares. Thereafter in patch 2

investigation period i.e. from 10th October, 2013 to 5th

December, 2013 the price showed the same trend with

the same modus operandi. The fundamentals of the

company however did not match with this price swing.

42

These appellants had no shares with them before these

transactions. They had received shares in off market

transaction either directly or indirectly from the

Appellant Narayan Das Rathi for lower price than the

price available on exchange platform. No logical

explanation is forthcoming from the appellants for

these abnormal affairs. Therefore only conclusion that

can be drawn in my view is that all these transactions

were non genuine and were entered into only to

manipulate the price of the shares of Dhanleela.

32. It is true that a connection between buyer and seller

or between promoter/company and the buyer or seller

would be a strong indicator to conclude that there were

manipulative trades. In the absence of the same

however, this Tribunal is not handicapped in arriving

at the above conclusion as preponderance of

probabilities definitely lies in favour of the charge as

detailed above. In the circumstances in my view the

appeals deserve to be dismissed without any order as to

43

costs. The appeals are accordingly dismissed. Misc.

Application No. 414 of 2020 is also accordingly

disposed of.

Justice M.T. Joshi

Judicial Member

16.2.2021 RHN

33. In view of the majority opinion, the impugned

order cannot be sustained and is quashed in so far as

the appellants are concerned. All the appeals are

allowed with no order as to costs. Misc. Application

no.414 of 2020 is accordingly disposed of.

34. 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 Private Secretary on behalf of

44

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.

Justice Tarun Agarwala

Presiding Officer

Dr. C.K.G. Nair

Member

Justice M.T. Joshi

Judicial Member

16.2.2021 RHN

Appeal No. 332 of 2020 - SAT

Documents

Transcript of Appeal No. 332 of 2020 - SAT