BEFORE THE
SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision : 20.08.2019
Appeal No. 426 of 2018
Jinesh Devendra Bhatt
1402, Divya Gunjan CHS,
Ganesh Chowk, Mahavir Nagar,
Kandivali (W),
Mumbai – 400 067.

….. 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. Akshit Jain, Advocate i/b R.V. Legal for the Appellant.
Mr. Anubhav Ghosh, Advocate with Ms. Rashi Dalmia,
Advocate i/b The Law Point for the Respondent.

CORAM : Justice Tarun Agarwala, Presiding Officer
Dr. C.K.G. Nair, Member
Justice M.T. Joshi, Judicial Member
Per : Dr. C.K.G. Nair, Member (Oral)
1.

By an order dated June 28, 2018 the Adjudicating
Officer (‘AO’ for short) of Securities and Exchange Board of
India (‘SEBI’ for short) has imposed a penalty of Rs. 3 lakh
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on the appellant under Section 15HA of the SEBI Act, 1992
for violation of the provisions of Regulations 3(a), 3(b), 3(c),
3(d), 4(1), 4(2)(a), 4(2)(b), 4(2)(e) and 4(2)(g) of SEBI
(Prohibition of Fraudulent and Unfair Trade Practices relating
to
Securities
Market)
Regulations,
2003
(‘PFUTP
Regulations’ for short). This appeal has been filed aggrieved
by the said order.

2.

The impugned order has been passed pursuant to an
investigation carried out by SEBI in the scrip of BGIL Films
and Technologies Limited (‘BGIL’ for short) during June 19,
2008 to March 20, 2009. The investigation revealed that
during the said period the share price of BGIL increased from
below par to Rs. 100 because of manipulative trading by a
group of 22 entities, including the appellant herein, by
executing self trades and by raising the Last Traded Price
(LTP). Following issue of a show cause notice dated February
20, 2017 and after providing an opportunity of personal
hearing, filing replies etc. the impugned order has been
issued.

3.

Shri Akshit Jain, learned counsel for the appellant
submits that the appellant incurred loss; one Shri Chetan
Dogra was instrumental in making the appellant trade; the
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contribution to the New High Price (NHP) was very
insignificant (75 paise only) and the appellant traded in the
scrip only in the normal course of business. While all these
factors were included in his reply dated May 10, 2018
submitted to the AO, none of these aspects has been
considered by the AO in the impugned order. Further, it was
contended that the net price increased on account of
appellant’s trade was only 75 paise which is miniscule and the
benefit of SEBI’s policy on self trades that some small
percentage of self trades automatically happens and where
there is no manipulative intent such self trades do not invite
any penalty was not granted to the appellant. In any case, not
considering the reply in totality, irrespective of whether reply
is beautiful or ugly, itself makes the impugned order liable to
be quashed.

4.

We also heard Shri Anubhav Ghosh, learned counsel
who appeared on behalf of the respondent and perused the
documents before us. The impugned order as well the show
cause notice quite clearly articulate the position relating to the
nature of appellant’s trades and how the same has violated the
provisions of the PFUTP Regulations. We note from the
impugned
order
that
apart
from
substantial
volume
4
manipulation and price manipulation in the scrip by all the
noticees together, the appellant herein himself has contributed
a positive LTP of Rs. 18.80 (Rs. 9.10 as buyer and Rs. 9.70 as
seller) in the scrip. Further, the appellant executed self trades
of 15239 shares in 19 trades. In these self trades also the
appellant contributed LTP of Rs. 0.75. It is also important to
note that the appellant was trading in the scrip as part of the
group and admittedly on the instruction of Shri Chetan Dogra
who is another notice in which the group contributed a
positive LTP contribution of Rs. 938.73 in 1784 trades.
Therefore, the entire effort of the group, including the
appellant, was in creating substantial artificial volume and
raising the price and misleading the market. The contention of
the appellant that his reply was not considered is also
incorrect, since para 11 of the impugned order and
specifically in sub-para 11(g) the gist of the appellant’s
contention has been captured. In a case of analyzing market
manipulation together by a number of entities each
individual’s role may not be explained in great detail because
it is the group behavior as a whole that becomes more
relevant.

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5.

The submission that the appellant’s role was miniscule
either in terms of the LTP contribution / NHP contribution or
in terms of the total volumes traded and hence the penalty
imposed is too high does not have any merit, since the penalty
imposed is Rs. 3 lakh only for a serious violation of PFUTP
Regulations. The penalty imposable for such violation under
Section 15HA of SEBI Act is Rs. 25 crore or three times the
profit made out of such practices, whichever is higher. Given
this while imposing a penalty of only Rs. 3 lakh the AO has
taken all possible mitigating factors, including the fact that
the appellant might have made losses. Accordingly, we find
no merit in the appeal.

6.

Appeal, therefore, fails and is dismissed with no orders
on costs.

Sd/Justice Tarun Agarwala
Presiding Officer
Sd/Dr. C.K.G. Nair
Member
Sd/Justice M.T. Joshi
Judicial Member
20.08.2019
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