BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI

Appeal No. 219 of 2011 
Date of Decision: 24.1.2012  

Anoop Aggarwal
B-193, 01st Floor,
Gujranwala Town, Part-1,
New Delhi – 110009.

            …… Appellant 

Versus

Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G Block,
Bandra Kurla Complex, Bandra (E),
Mumbai – 400 051.

            …… Respondent 

Mr. Dhawal Kant Singh, Company Secretar y with Mr. Vishal Lochan Aggarwal,
Company Secretary for the Appellant.

Mr. Prateek Seksaria, Advocate with Mr. Mobin Shaikh, Advocate for the Respondent.
CORAM : P. K. Malhotra, Member
S.S.N. Moorthy, Member

Per : S.S.N. Moorthy, Member
The appellant is the Managing Director and Chairman of Shreenath Commercial
& Finance Limited (for short the company). Challenge in this appeal is against
imposition of penalty of ` 10 lacs under section 15HA of Securities and Exchange Board
of India Act, 2002. The adjudicating officer found that the appellant had violated
regulations 3 and 4 of Securities and Exchange Board of India (Prohibition of Fraudulent
and Unfair Trade Practices relating to Securities Market) Regulations, 2003 and imposed
the above penalty for fraudulent and unfair trade practices.

2. Securities and Exchange Board of I ndia (for short th e Board) conducted
   investigation in the trading of the scrip of the company for the period May 9, 2008 to
   July 23, 2008. Investigation revealed that on almost all the days during which the scrip
   was traded, it touched the applicable upper circuit limit of five per cent. The price of the 2

scrip increased from 6.82 to 57.20 during the investigati on period. During the
relevant time the appellant, trading through the broker Shriam Financial Pvt. Ltd. (the
broker), placed huge buy orders and entered in to sale transaction for which he did not
meet the pay-in obligation. This was done , according to the Board, to manipulate the
price of the scrip and derive undue advantage on account of the increase in the value of
the scrip. A show cause notice was issued to the appellant on May 31, 2010 for which he
filed a detailed reply. In his reply, he denied the allegations. Afte r due consideration of
the reply filed by the appellant the adjudicatin g officer came to the conclusion that the
appellant was an active particip ant in fraudulent trades whic h resulted in jacking up the
value of the scrip. According to the adjudica ting officer, the appellant created artificial
buying pressure by way of artificial price mo vement creating a false and misleading
appearance of trading in securities when the shares lacked fundamentals.

3. In the grounds of appeal it is submitted that the appellant wanted to acquire some
   shares of the company to increase his holdi ng and so instruction was given to the broker
   to place buy orders. The stand taken by the appellant is that there was no intention to
   create artificial volumes or to indulge in fraudulent trade practices.
4. Confronted with the facts recorded in the adjudication orde r, the appellant’s
   learned representative fairly conceded that th e appellant had participated in the alleged
   trades which resulted in manipulation in the va lue of the shares. Th e main thrust of the
   argument during the hearing of the appeal was on the quant um of penalty and it was
   submitted that considering the gravity of the violation the quantum of penalty should be
   substantially reduced. It was also submitted that in the adjudication proceedings initiated
   against the broker, penalty imposed by the adjudicating officer was only 3 lacs and the penalty of 10 lacs imposed on the appellant is highly excessive and arbitrary.
5. The learned counsel for the Board defended the adjudicating officer’s order.
6. We have considered the rival contentions. We have gone through the facts of the
   case and the adjudication order in the case of the broker. In view of the conscious
   involvement of the appellant in the trading activ ities, it has to be held that the violation
   committed by the appellant is more serious than that of the broker. The broker could
   have acted only as per the directions of the appellant. On the other hand, the decision to 3

trade and thereby create artificial volumes was that of the appellant. It is to be noted that
the submissions made in the grounds of appeal that the appellant wanted to increase his
stake in the company is also factually not corre ct. It is noticed that the appellant exited
the company immediately afterwards and this shows that there wa s no intention to hold
on to the shares. It is an admitted fact that the appellant placed buy/sell orders during the
period when the scrip registered artificial increase. The ad judicating officer has brought
in several facts which establish the connection of the appellant with the broker. He has
concluded that “the clients Mr. Sunil G upta, Mr. Jaswant Kapoor, Ms. Santosh Kapoor,
Mr. Rajesh Bansal and Mr. Kamal Nailwal su bmitted before investigation that they had
not placed any order in the sc rip of SNCF. Further Mr. Ra jesh Bansal and Mr. Kamal
Nailwal submitted that they did not open any trading account with the broker Shriam. It
was observed that order instructions for a ll the aforementioned clients were placed
through the terminal no. 1100090008001, located at the brokers office at: 1992, Outram
Lines, Kingsway Camp, Delhi – 110 009 wh ich as per the broker was headed by the
Noticee and as observed from the Noticee’s re ply the premises belonged to him”. It was
also observed that the appellant had allowed th e broker to instal the trading terminal at
his premises. The appellant is not in a position to dislodge any of the facts other than just
stating that the connection has been denied. The adjudicating officer has extracted the
buy and sell details of the appellant’s transactions through broker. The appellant was the
major seller of the broker. He used to place a large quantity of buy orders and one sell
order which would establish higher value of the scrip. The pattern continued on several
days during the period of investigation. It was also noted by the adjudicating officer that
the company was a small cap company and there was no dramatic corporate performance
justifying increase of share value from 6.82 to 57.20.

7. The facts of the case would show that the appellant had, with full knowledge,
   indulged in manipulative trade practices. However, considering the gravity of the
   violation and the nature of the company, we are of the view that a penalty of 10 lac is excessive particularly when the broker has been let off with a penalty of 3 lacs only.
   At the same time, we can’t accept the submission of the appellant’s learned
   representative that the penalty should be on par with that imposed on the broker. As 4

already observed, the violation committed by the appellant is much more serious than that
of the broker. Having regard to the totality of the facts and circumstances of the case, we
hold that ends of justice would be met by imposing a penalty of 5 lacs. Accordingly penalty is reduced to 5 lacs. Appeal is decided as above with no order as to costs.

                Sd/-  
                  P.K. Malhotra 
                     Member 

                Sd/-  

S.S.N. Moorthy
Member
24.1.2012
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