BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI

 Appeal No. 204 of 2011 

      Date of decision: 23.04.2012    

Mr. Ravinder Arya
B-1/256, II Floor,
Janakpuri,
New Delhi – 110 058. … Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No.C-4A, ‘G’ Block,
Bandra Kurla Complex, Bandra (East),
Mumbai – 400 051. … Respondent
Mr. Ashok Mehta, Practicing Company Secretary for the Appellant.
Dr. Poornima Advani, Advocate with Mr. Ajay Khaire and Ms. Rachita Romani,
Advocates for the Respondent.
Coram : P. K. Malhotra, Member
S.S.N. Moorthy, Member
Per : P. K. Malhotra, Member

This order will dispose of three Appeals no. 204, 205 and 206 of 2011. Counsel
for the parties agree that they arise out of the same set of facts and identical orders
passed by the adjudicating officer. The appe llants are alleged to have traded among
themselves in the scrip of Ritesh Properties and Industries Ltd. (for short the company)
during the period April 21, 2008 to May 20, 2008. They have been found to be
connected entities and alleged to have executed reversal trades thereby creating artificial
volume resulting in increase in the price of the scrip. Th e appellants have been found
guilty of violating Regulations 3 and 4 of the Securities and Exchange Board of India
(Prohibition of Fraudulent and Unfair Tr ade Practices) Regulat ion, 2003 (for short
FUTP Regulations) read with Section 12A of the Securities and Exchange Board of
India Act, 1992 (for short the Act) . The adjudicating officer has imposed a penalty of

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15 lacs, 10 lacs and ` 2 lacs on each of the appellant in Appeals no. 204, 205 and
206 of 2011, respectively.

2. During the course of hearing, the lear ned authorized representative of the
   appellants admitted that the appellants are connected entities and they have entered into
   trades as alleged in the show cause not ice and discussed in the impugned order.
   However, it was submitted that these trades were entered into by their employees. At
   the relevant time, these two employees were authorized to operate the account and trade
   on their behalf and these employees, in breach of trust, dealt in the shares in a manner
   which has been found to be violative of th e FUTP Regulations by the Board. It was
   contended that FIR was lodged against the employees on 15.1.2011 which shows the
   bona fides of the appellants. We are not convinced with the ar gument of the learned
   authorized representative for the appellants. The authorization to the employees is not
   denied. The appellants are responsible for the acts of their agents. The investigation in
   the dealings of the scrips was undertake n by the Board in 2008 and as early as on
   November 11, 2008, the appellant was informed about these trades. A show cause
   notice for the alleged violation was also issued on July 15, 2010. We also observe from
   the record that in response to the show cau se notice, the appellants in the letter dated
   October 18, 2010, have denied any manipulation in the scrip. Filing of an FIR after two
   years of the initiation of proceedings by the Board is only an afterthought and cannot be
   accepted as a good ground to support the case of the appellants.
3. It was then argued that manipulation in the scrip has happened over a period of
   one year whereas trading of the appella nts was only for about a month. It was
   contended that main beneficiaries of the ma nipulation have been let off with a small
   penalty of 1 lacs and 2 lacs whereas the appellants have been visited with a total
   penalty of ` 27 lacs which cannot be justified. In support of his arguments, the learned
   authorized representative of the appellants has placed on record copies of the order
   passed by the Board in the case of Shree Atam Vallabh Poly Plastic Industries Pvt. Ltd.
   (Adjudication Order No. BM/ AO-88/2011), Vishal Concast Ltd. (Adjudication Order

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No. BM/Ao-87/2011), Bhagyanagar India Ltd. (Adjudication Order No. BM/AO-
123/2010). We have perused the orders passed by the Board in these cases. The charges
in the three cases referred to by the appell ants were different and penalty has been
imposed under Section 15A(b) of the Act wher eas in the case of the appellants, the
penalty has been imposed under Section 15HA of the Act. Therefore, the orders of the
Board in the three cases cited above are of no help to the appellants. The charge against
the appellants is that they traded among themselves for 5,27,849 shares contributing to
37.29% of the total traded volume. The appellants also entered into reversal trades with
one another for 2,52,299 shares on twenty trading days which account for 17.83% of the
total traded volume. The adjudicating officer was right in coming to the conclusion that
the same cannot be just a matter of coin cidence when there we re other buyers and
sellers also present in the market. Such tran sactions have not been executed on a single
day but have taken place over a long period of time. Section 15HA of the Act provides
that if any person indulges in any fraudul ent and unfair trade practices relating to
securities, he shall be liable to a penalty of twenty-five crore rupees or three times the
amount of profits made out of such practi ces, whichever is higher. The adjudicating
officer has imposed a penalty of 15 lacs, 10 lacs and ` 2 lacs on each of the
appellants in Appeals no.204, 205 and 206 of 2011, respectively which we do not
consider to be excessive in the facts and circumstances of the case.
We, therefore, do not find any merit in the appeals. All the appeals are dismissed
with no order as to costs.

Sd/-
P. K. Malhotra
Member
Sd/-
S.S.N. Moorthy
Member
23/4/2012
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