BEFORE THE SECURITIES APPELLLATE TRIBUNAL

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI

Order Reserved on: 05.03.2018

Date of Decision : 25.04.2018

Appeal No. 456 of 2015

1. Mr. Bhavesh Patel

2. Ms. Hetal Patel

3. Ms. Pragna Patel

4. Ms. Jagruti Patel

5. Ms. Manjula Patel

6. Ms. Rasila Patel

7. Ms. Geeta Patel

Flat No. 1307, 13th Floor,

NR Aquaria Club, Devidas

Lane, Borivali West,

Mumbai – 400 103.

…..Appellants

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. Deepak Dhane, Advocate i/b Joby Mathew & Associates for

Appellants.

Mr. Gaurav Joshi, Senior Advocate with Mr. Mihir Mody and Mr. Nishant

Upadhyay, Advocates i/b K Ashar & Co. for the Respondent.

With


1. Mr. Ramesh D. Patel

E-104, Panchvati-1,

Raheja Township, Rani Sati Marg,

Malad (East),

Mumbai – 400 097.

2. Ramesh D. Patel HUF

E-104, Panchvati-1,


Malad (East),

Mumbai – 400 097.

3. M/s Shamo Investments Private Ltd.

204, Nutan Nishigandha CHS,

Sant Janabai Road,

Vile Parle (East),

Mumbai – 400 057.

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4. Ms. Dharmishtha R Patel

E-104, Panchvati-1,


Malad (East),

Mumbai – 400 097.

5. Ms. Reshma Patel

E-104, Panchvati-1,


Malad (East),

Mumbai – 400 097.

…..Appellants

Versus




Bandra (East),

Mumbai – 400 051.

……Respondent

Mr. Mustafa Doctor, Senior Advocate with Ms. Anuja Bhansali, Advocate

i/b Vertices Partners for Appellants.

Mr. Gaurav Joshi, Senior Advocate with Mr. Pulkit Sukhramani and

Ms. Vidhi Jhawar, Advocates i/b The Law Point for the Respondent.

With


1 Savjibhai D. Patel

H. No. 304, Parvati Apartment,

Gaushala Lane,

Malad (East),

Mumbai – 400 097.

2 Usha S Patel

H. No. 304, Parvati Apartment,

Gaushala Lane,

Malad (East),

Mumbai – 400 097.

…..Appellants

Versus




Bandra (East),

Mumbai – 400 051.

……Respondent

Mr. P.N. Modi, Senior Advocate with Mr. Vinay Chauhan, Mr. Neville

Lashkari and Mr. K.C. Jacob, Advocates i/b Corporate Law Chambers India

for the Appellant.



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With


1. Shantibhai M Chanchpara

2. Madhuben M. Chanchpara

ANP Chambers

9-A, Apollo House,

Mumbai Samachar Marg,

Fort,

Mumbai – 400 001.

…..Appellants

Versus




Bandra (East),

Mumbai – 400 051.

……Respondent

Ms. Ankita Singhania, Advocate with Mr. Anant Upadhyay, Advocate for

the Appellant.



With


Swarn Sarita Gems Ltd.

17/19, Ground Floor,

Dhanji Street,

Mumbai

…..Appellant

Versus




Bandra (East),

Mumbai – 400 051.

……Respondent

Mr. Vinay Chauhan, Advocate with Mr. K.C. Jacob, Advocate i/b Corporate

Law Chambers India for the Appellant.



4

With

Misc. Application No. 379 of 2015

And


Ms Urvashi J Patel

Emerald Sea, Bungalow 1,

Thakur Complex,

Opp. Bayleaf Hotel & Mah & Mah.,

Kandivli (East),

Mumbai – 400 101.

…..Appellant

Versus




Bandra (East),

Mumbai – 400 051.

……Respondent

Mr. Prakash Shah, Advocate for the Appellant.



With

Misc. Application No. 380 of 2015

And


Mr. Jayesh S Patel

Emerald Sea, Bungalow 1,

Thakur Complex,

Opp. Bayleaf Hotel & Mah & Mah.,

Kandivli (East),

Mumbai – 400 101.

…..Appellant

Versus




Bandra (East),

Mumbai – 400 051.

……Respondent

Mr. Prakash Shah, Advocate for the Appellant.



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CORAM : Justice J. P. Devadhar, Presiding Officer

Dr. C. K.G. Nair, Member

Per : Dr. C.K.G. Nair, Member

1. These seven appeals are filed to challenge the order of the

Adjudicating Officer (‘AO’ for short) of Securities and Exchange Board of

India (‘SEBI’ for short) dated August 26, 2015. It has been held in the said

order that various entities violated provisions of Section 12A(a) and 12A(c)

of the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’ for

short) and regulations 3(a), 3(c), 4(1), 4(2)(a), 4(2)(b) and 4(2)(e) of the

Securities and Exchange Board of India (Prohibition of Fraudulent and

Unfair Trade Practices Relating to Securities Market) Regulations, 2003

(‘PFUTP Regulations’ for short) by hoisting a fraudulent scheme of trading

in the scrip of M/s. S. J. Corporation Ltd. (‘SJC’ for convenience).

Accordingly, 13 entities have been directed to disgorge the illegal gains

made by them and all 19 entities who were held to be parties to the

fraudulent scheme during the investigation period have been directed to pay

penalty of Rs. 2.5 crore jointly and severally. Since the impugned order is

common and basic facts in all the appeals are similar, by consent of the

parties, all appeals are heard together and disposed of by this common

decision by taking Appeal No. 525 of 2015 as the lead case.

2. Facts relevant and common to all appeals are as follows :-

(i) SJC was originally an IT company listed on Bombay Stock

Exchange Ltd. (BSE). In 2007 it had negative net worth and

limited floating stock with a total capital of 2,00,000 shares.

(ii) Savjibhai Patel and Usha Patel (appellants in Appeal No. 525

of 2015) acquired control over SJC following a Share

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Purchase Agreement (SPA) jointly with a Jivani family

thereby purchasing 1,32,000 shares from the 12 promoters on

April 6, 2007.

(iii) The shares were purchased at the rate of Rs. 25/- per share.

(iv) Savjibhai Patel (Appellant No. 1 in Appeal no. 525 of 2015)

was appointed as a director of the company on July 31, 2007

and the business of the company was changed from IT to

diamond/jewellery trading.

(v) Appellant No. 2 in Appeal No. 525 of 2015 was never a

director of the company though she has been a promoter.

(vi) Since the acquisition of 1,32,000 shares triggered open offer,

an open offer was made during 21/6/2007 – 10/7/2007 at the

rate of Rs. 142/- per share. After this open offer the promoter

group held a total of 1,40,2000 (70.10%) shares out of the

total 2,00,000 shares of the company. On July 31, 2008, the

appellants in Appeal No. 525 of 2015 through another SPA

acquired 70,100 shares held by the Jivani family. Following

this another open offer was made during 24/09/2008 –

13/10/2008 at the rate of Rs. 447/- per share. After this open

offer the shares held by Appellants in Appeal No. 525 of 2015

increased to 1,48,000 shares (74%). On August 28, 2009 the

shares were split at 1:10 ratio.

3. SEBI conducted an investigation into trading in the scrip of SJC

during March 18, 2008 to October 1, 2009 and noticed several irregularities

and came to the conclusion that several entities together manipulated the

price of the shares of SJC. Accordingly, on February 5, 2010, the WTM of

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SEBI passed an ad-interim ex-parte order restraining 16 entities from

dealing in the securities market directly or indirectly till further directions.

This order was confirmed by the WTM on December 24, 2010. No appeal

has been filed challenging either the ad-interim ex-parte order or the

confirmatory order of the WTM. Later, an adjudication proceeding was

initiated and a show cause notice dated October 14, 2011 was issued to 19

entities (appellants herein) asking why an inquiry should not be held against

them and penalty imposed under Section 15HA of the SEBI Act for the

alleged violation of Section 12A(c) of the SEBI Act and various provisions

of PFUTP Regulations. Following due process like filing of reply and

providing opportunity of being heard etc. the AO of SEBI passed the

impugned order on 26th August, 2015. Further on 06.09.2017 final order was

passed by the WTM which held that neither further restraint nor

disgorgement was necessary in view of the AO order dated August 26,

2015.

4. It was observed that during the period of investigation the scrip of

SJC which was highly illiquid had registered substantial increase in price

and in volume. For instance, price rose from Rs. 392/- on March 18, 2008

to Rs. 3,464.60 on August 27, 2009 and post-split the price moved from

Rs. 363.75 on August 28, 2009 to Rs. 816/- on September 30, 2009.

Therefore, in total, during the period of investigation the increase in the

price of the scrip of SJC was about 2000%.

5. Investigation also revealed that the appellants in these Appeals had

been involved in manipulating the price of the scrip of SJC and these

entities were related either by blood or through law or by having financial

relationships.

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6. Though the overall price rise in the scrip of SJC during investigation

period was about 2000% for the sake of greater clarity and to understand the

scheme of manipulation more deeply the investigation period has been

divided into three phases. In phase I, i.e. during March 18, 2008 to January

27, 2009 the scrip continued to remain illiquid with a daily average volume

of only 29 shares and the overall price movement was only +25.77%. It was

so illiquid that after August 18, 2008 the next day on which the share was

traded was January 28, 2009, i.e. with a gap of more than five months.

7. In Phase-II i.e. between January 28, 2009 and August 27, 2009, the

average daily volume of trading was three shares and price movement was +

570% i.e. from Rs. 517/- on January 28, 2009 to Rs. 3,465/- on August 27,

2009.

8. In Phase-III, i.e. between August 28, 2009 to October 1, 2009, the

period after the stock split the average daily volume rose to 1133 shares and

price moved up by 114% i.e. from Rs. 363/- to Rs. 816/-.

9. In the letter of offer dated 07.08.2008 the acquirers confirmed that

they had adequate resources to make the public offer and got a certificate

from the Chartered Accountant to that effect. However, funds had been

obtained from Appellant No. 1’s mother, his HUF, his brother-in-law, his

sister and the company promoted by his brother-in-law and sister. On

22.10.2008 SJC made a corporate announcement showing Rs. 12.22 crore as

sales and Rs. 10.19 crore as purchase. Similarly, on 03.02.2009 it published

the unaudited quarterly financial results with sales on Rs. 6.83 crore and

purchases as Rs. 5.50 crore. The audited annual results declared on

29.05.2009 sales were shown as Rs. 22.28 crore and purchases at Rs. 18.62

crore.

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10. The sales were made only to two clients Spark Trading and Vee

Design (HK) Ltd. and purchases were made from Floral Impex which was

also supplier to Shyam Star Gems Ltd., a company promoted by Savjibhai.

11. Since SJC has also entered into diamonds and jewellery business and

Savjibhai’s other company Shyam Star Gems Ltd. was also in the same

business, a comparison has also been made about their market capitalization,

EPS, dividend declared return of capital etc. In all these variables the

performance of SJC improved while that of Shyam Star declined during the

investigation period.

12. While a corporate announcement was made on 14.05.2009 by SJC to

BSE that a board meeting to be held on 29.05.2009 would consider the issue

of splitting of shares, bonus issues and dividend issue of bonus was not

decided. Instead on 03.08.2009 SJC informed that the bonus issue been

dropped, though in April 2010 bonus was given.

13. On 11.08.2009, Sanjay V. Patel and Bhavik Patel were appointed as

Directors of SJC. The former is the cousin of Savjibhai Patel and the latter

the nephew of Usha Patel. However, as per Form 32, Sanjay Patel was

appointed as Director of SJC on 24.01.2009.

14. For the sake of convenience the details of relationship amongst the

parties (appellants) as given in the impugned order is reproduced as

follows:-

Sr.

No. Name of the Noticee Relationship

1. Sh. Savjibhai D. Patel Self (Promoter of SJCL)

2. Smt. Usha S. Patel Wife of Sh. Savjibhai D. Patel.

3.

M/s. Swarn Sarita Gems

Ltd. (Formerly Known as

“M/s. Shyam Star Gems

Ltd.”)

Promoted by Sh. Savjibhai D. Patel

4. Smt. Dharmishtha R. Patel Sister of Sh. Savjibhai D. Patel & wife of

Sh. Ramesh D. Patel

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5. Sh. Ramesh D. Patel Brother-in-Law of Sh. Savjibhai D. Patel

6. Ramesh D. Patel HUF HUF of Sh. Ramesh D. Patel

7. Ms. Reshma Patel Daughter of Sh. Ramesh D. Patel

8. Shamo Investments Pvt.

Ltd.

Promoted by Sh. Ramesh D. Patel

9. Sh. Jayesh Shamjibhai Patel

Financially linked with Sh. Ramesh Patel /

Linked with S. Savjibhai on the basis of call

records.

10. Smt. Urvashi Patel Wife of Sh. Jayesh Shamjibhai Patel

11. Sh. Shantibhai M.

Chanchpara

Brother-in-law of Sh. Sanjay V. Patel

(director of SJCL)

12. Smt. Madhuben M.

Chanchpara

Mother-in-law of Sh. Sanjay V.Patel

(director of SJCL)

13. Sh. Bhavesh Patel Brother of Ms. Pragna Patel

14. Smt. Rasila Patel Mother of Ms. Pragna Patel & Sh. Bhavesh

Patel

15. Ms. Pragna Patel Sister of Sh. Bhavesh Patel

16. Ms. Jagruti Ptel Daughter of Smt. Manjula Patel

17. Smt. Manjula Ptel Mother of Ms. Hetal Patel

18. Ms. Hetal Patel Daughter of Smt. Manjula Patel

19. Ms. Geeta Patel Sister-in-law of Smt. Manjula Patel

15. Accordingly, appellants were related to one another in the following

manner:-

(a) Savjibhai Patel and his wife Usha Patel are the promoters of

SJC.

(b) Sanjay Patel, appointed as a director of SJ Corporation on

24.01.2009, as per the Form 32, was the cousin brother of

Savjibhai Patel.

(c) Sanjay Patel is related to Rajesh Chanchpara, the proprietor of

Floral Impex located in Hong Kong.

(d) Ramesh Patel is the brother-in-law of Savjibhai. Dharmishtha

Patel is the wife of Ramesh Patel and Sister of Savjibhai.

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Reshma Patel is Ramesh and Dharmishtha Patel’s daughter

(Savjibhai’s niece).

(e) Shamo Investments is a company promoted by Ramesh and

Dharmishtha.

(f) Jayesh Patel, through his HUF, had lent money to Ramesh

Patel.

(g) On the basis of call records, Savjibhai is connected to

Jayeshbhai Samjibhai Patel, Harjibhai Parshottam Patel,

Shantibhai M. Chanchpara, Savjibhai T. Anghan and

Dhananjaya S. Desai.

(h) Shyam Star Gems (now known as Swarn Sarita Gems Ltd.) is a

company promoted by Savjibhai.

16. The role played by different entities are as follows:-

(a) Bhavesh Patel Group (Appeal No. 456 of 2015) have been

considered connected to the promoter entities of SJC in terms

of their common residential locality of Raheja Township at

Malad (East); trades of Bhavesh Patel entities had been

executed from the same location “4006020024001007”; call

records between the counter party (seller) Harjibhai Patel and

Savjibhai Patel who lived in the same building etc. Bhavesh

Patel Group, along with three entities in the Ramesh Patel

Group were the major buyers during Phase-I and Phase-II of

the investigation. Between 18.03.2008 to 27.01.2009 a total of

19 trades were executed for a total volume of 6151 shares out

of which 2890 shares were traded by Bhavesh Patel Group.

They purchased 47% of the shares traded during Phase-I. They

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did not sell any shares during the open offer. They sold the

shares during Phase-III; they were the top sellers in Phase - III

and the group as a whole earned a profit to the tune of Rs. 25

Lakh;

(b) In Appeal No. 513 of 2015, Mr. Ramesh Patel and Ramesh

Patel HUF put buy orders of huge quantity of shares (2500

shares on 18.07.2008, for 2000 shares on 30.07.2008).

Ramesh Patel bought 2500 shares at the rate of Rs. 447/-

which was at 5% or upper circuit and contributed 40.64 of

total market value. Similarly, Ramesh Patel and his HUF

placed buy orders for various quantities in Phase-II. All these

buy orders increased the price of shares considerably. In

Phase-III Ramesh Patel and his HUF placed only sell orders.

They could sell 185 shares in the price range of 511.55 to

685.35 (post split). Ramesh Patel made a profit of Rs. 2737/-,

his HUF made a profit of Rs. 72,497/-;

(c) Similarly, buy orders were placed by Shamo Investment

(Appellant No. 3 in Appeal No. 513 of 2015), promoted by

Ramesh Patel and his wife Dharmishtha Patel. In Phase-III

Shamo Investment did not place any buy orders but sold 459

shares and made a profit of Rs. 2,26,403/-. Dharmishtha Patel

(Appellant No. 4 in Appeal No. 513 of 2015) received 4450

shares on 09.04.2004 from one Sushilachandra Dhananjay

Desai and Surbhi Desai in off-market transaction. In Phase-II

she placed buy orders from 18.01.2009 onwards at the upper

circuit and bought 633 shares creating artificial buying

pressure. Appellant No. 5 in Appeal No. 513, Ms. Reshma

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Patel received only a gift of shares of SJC from her mother.

There is no trading done by her.

(d) Appellant in Appeal No. 526 of 2015 placed heavy buy orders

during Phase-II. Madhuben Chanchpara placed buy order for

4600 shares. Shantibhai Chanchpara executed 200 trades

amounting to 46.62% of the total volume during Phase-II. In

Phase-III Shantibhai sold 2418 shares and Madhuben sold

1981 shares and made a profit of Rs. 13,88,884/- and Rs.

11,93,772/- respectively.

(e) Swarn Sarita, Appellant in Appeal No. 531 of 2015 (earlier

Shyam Star) placed buy order for 100 shares on 28.01.2009 at

rate Rs. 517/- per share out of which order for only 10 shares

got executed. Ms. Urvashi and Jayesh Patel in Appeal Nos.

535 and 536 entered buy orders at the beginning of market

hours on alternate days during Phase-II. They together raised

price of scrip by Rs. 460.20, which is 15.49% of the total rise

in share price. Together they placed buy orders for 14132

shares amounting to 31.14% of the aggregate order book size

during Phase-II. During Phase-III Jayesh Patel sold 160 shares

and made a profit of Rs. 93,783/-.

17. Shri P. N. Modi, learned Senior counsel appearing on behalf of the

appellants in appeal no. 525 of 2015 submitted that the main charge against

the appellants is that during the investigation period of March 18, 2008 to

October 1, 2009, the price was manipulated and pushed up by the trading

done by parties who were allegedly connected to the Appellants who are the

promoters of the company. However, he argued that this contention in the

impugned order is devoid of any merit for the following reasons:-

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(a) Admittedly, the appellants did not trade in a single share even

though the prices had risen very substantially.

(b) Some parties are admittedly related, but that does not prevent

them from legitimately trading in the scrip. Further, admittedly

the “Bhavesh Patel” group was not connected to the Appellants.

(c) Just because some parties live in the same locality (Raheja

Township) cannot amount to being connected.

(d) Even as per the particulars in the Impugned order itself, the

price rose very substantially because the floating stock was very

limited and sellers were selling only at higher prices.

18. Shri. P.N. Modi, Learned Senior Counsel for the appellant further

argued that the charge in the impugned order that price / volume

manipulation was done so as to manipulate the open offer price to Rs. 447/-

as compared to Rs. 25/- which would have been the open offer price if there

had been no manipulation has no meaning because the appellants were

forced to make an open offer and had to buy shares offered therein at a

higher price. Obviously, their desire and intention would be to pay as low a

price as possible and it is impossible to conceive as to why they would be

complicit in jacking up the price from Rs. 25/- to Rs. 447/-. It is on record

that 7800 shares were offered in the Open Offer @ Rs. 447/- and the

Appellants had to pay a total of Rs. 34.86 lac. If the price had been Rs. 25/-,

they would have paid only Rs.1.95 lac and they would have saved Rs. 32.9

lac. In fact, no one would have offered shares because even at the rate of

Rs. 447/- per share only 7800 shares were tendered.

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19. The allegation in the impugned order is that the company’s accounts

were rigged by showing bogus transactions of sale and purchase so as to

show artificial increase in sales, which acted as a trigger for the share prices

to increase is factually false. The impugned order completely ignores the

appellants submissions by which it proved with documentary evidence that

the sales and purchases were genuine.

20. The charge that the company made false but favorable corporate

announcements of sub-division of shares, bonus shares and dividend to

mislead investors and create a positive impact on the scrip is factually false.

The impugned order completely ignores the appellants submissions by

which it proved that in fact sub-division of shares had taken place (which is

admitted even in the impugned order), bonus shares were in fact issued and

dividend was in fact paid.

21. Comparing share price, profit after tax, market capitalization,

earnings per share, dividends etc. of the company with that of Shyam Star

Gems Ltd. which is a another company of the same promoters, and

concluding that funds, clients and suppliers of Shyam Star Gems Ltd. were

diverted to the company to help manipulate the open offer price is untenable

since there were no such allegations in the SCN. The conclusion drawn in

the impugned order that appellants did not have sufficient funds for the open

offer and, therefore, included Shyam Star Gems Ltd. as a PAC so as to

divert shareholders funds from Shyam Star Gems Ltd. is factually false and

self contradictory. The impugned order itself holds that the source of funds

for the open offer, apart from the appellants own funds, was from the

mother of appellant no. 1, the HUF of appellant no. 1, the sister of appellant

no. 1 and her husband and their company Shamo Investments Pvt. Ltd.

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22. It is alleged that a false statement was made in the LOO that “the

financial obligations of the acquirers under the offer will be fulfilled through

internal resources of the Acquirers and no further borrowing from banks or

FI’s or NRI’s or otherwise is envisages…” since appellant no. 1 received

funds from his mother, his HUF, his sister and her husband and their

company Shamo Investments Pvt. Ltd. The LOO in fact states that the

appellants had already made sufficient financial arrangements and that no

further borrowing from banks or FI’s or NRI’s or otherwise is envisaged.

The arrangement of funds by appellant no. 1 from his HUF, his mother, his

sister and her husband and their company cannot be alleged to be any false

statement in the LOO. In any event, the same cannot amount to borrowing

from any banks or FI’s or NRI’s.

23. Neither the SCN nor the impugned order contains a single allegation

against Mrs. Usha Patel, except that she is a promoter of the company. She

is not even a director.

24. The allegation that Reshma Patel, a relative of the appellant no. 1,

played an important role in the manipulation, and earned huge profits is

factually false and baseless. The impugned order itself records that Reshma

Patel had only received some shares as a gift from her mother and had not

traded even a single share. In fact, the Impugned order purports to find fault

with her for choosing not to tender her shares in the open offer.

25. The impugned order levies a penalty of Rs. 2.5 crore on all 19

noticees “jointly and severally”. There are totally differing allegations

against different parties some of whom are not even related to each other in

a legal / meaningful manner. The appellants in appeal no. 525 of 2015

admittedly did not trade in a single share and made no profits. The

impugned order itself alleges that 13 of the parties made actual profits, and 3

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of the parties made “notional profits”. It is inconceivable as to how a “joint

and several” penalty could have been levied in such a context.

26. The Learned Senior Counsel also submitted that reliance placed by

Counsel for the respondent on the order of the Apex Court in the matter of

Rakhi Trading Pvt. Ltd. is distinguishable as the loss incurred by the

appellants therein is to take advantage of tax while in the instant matter it is

a case of normal trading in securities market and there was no intention to

make any loss.

27. In Appeal no. 456 of 2015, Learned Counsel Shri Deepak Dhane

submitted that appellants are investors in securities market and as an

investment purchased a total of 2890 shares of SJC on March 18, April 18

and April 25, 2008 at an average price of Rs. 395/-. Even as per the trade

logs relied upon by SEBI, appellants’ 1st trade on March 18, 2008 was at a

prevailing market price i.e. Rs. 392/- and the said trade did not result in any

change in price of the scrip. In fact, on SEBI’s own finding, out of the 9

trades executed by the appellants, 5 trades resulted in no change in price, 3

resulted in a downward movement of price/ negative last traded price (LTP)

and only 1 trade on April 25, 2008 resulted in an upward movement of

price/ positive LTP of Rs. 19.3. It is SEBI’s case that the appellants’ role in

the alleged scheme was to jack up the price of the scrip. It is submitted that

if the appellant was part of any scheme and if it was appellants’ intention to

jack up the price, then appellants would have not at all entered into any

trades which would result in no change in price and/or negative LTP.

28. It is SEBI’s case that these buy trades of the appellants matched with

counter party Mr. Harjibhai Patel / Mr. Gabani Bharat Harjibhai, promoter

related entities and the said counter party, Mr. Harjibhai was staying in the

same premises as that of Shri Savjibhai Patel (promoter of company) and

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also calls were exchanged between Mr. Harjibhai and Shri Savjibhai.

Though the appellants used to stay in the same locality, SEBI has not shown

any kind of connection between the appellants and Mr. Harjibhai / Mr.

Gabani Bharat Harjibhai and /or Shri. Savjibhai. Merely on the basis of

staying in the same location and /or some calls have been exchanged

between Mr. Harjibhai and Shri Savjibhai, a conclusion cannot be drawn

that appellants were part of the alleged deceptive scheme. Moreover, though

SEBI has alleged that the appellants’ buy trades matched with Mr. Harjibhai

and Mr. Bharat Gabani, SEBI has not taken any action against the said

counterparty Mr. Bharat Gabani. Further, appellants did not trade at all in

Phase-II (January 28, 2009 to August 27, 2009) when the price of the scrip

moved from Rs. 517.15 to Rs. 3463.60.

29. According to SEBI, appellants did not tender their shares inspite of

better price of Rs. 447/- offered in the open offer and, therefore, it is

assumed that appellants were part of the alleged scheme. Appellants

decided not to tender their shares in the open offer because appellants

believed that the price of the scrip was likely to move upward and it is

matter of record that post stock split (when the aforesaid 2890 shares held

by the appellants became 28900 shares) the price moved upwards and,

therefore, appellants sold a total of 4000 shares at a price between Rs.

511.55 to Rs. 800.5 in September 2009. It is important to note that even as

on date, appellants hold substantial number of shares of the company.

30. It is further submitted that a bare reading of the impugned order

makes it clear that SEBI has levelled several other serious

allegations/observations against the promoters of the company. For e.g., it is

held that promoters made wrong disclosures in the offer document,

borrowed funds from related / associated entities who played vital role in

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alleged manipulation during pre and post open offer period, diverted clients

/ suppliers of Shyam Star Gems Ltd. to artificially manipulate the financial

results, made series of favourable announcements including bonus, split etc.

However, appellants have no connection whatsoever with the said

allegations / observations levelled against the promoters and, therefore,

holding the appellants jointly and severally liable for a penalty of Rs. 2.50

crore is unfair and unwarranted.

31. Shri. Vinay Chauhan, Learned Counsel for the appellant in appeal no.

531 of 2015 submitted that the appellant company is in the business of

trading and manufacturing of Gold studded jewellery, and listed on Bombay

Stock Exchange (‘BSE’). Mr. Mahendra M. Chordia & Mr. Sunil G. Jain

are its promoters. In 2010, the current promoters had acquired control and

management of the appellant from Savjibhai Patel & Usha Patel, by buying

out their shareholding of 21.17% in the appellant and w. e. f. 10th August

2011 the name of the appellant company was changed from Shyam Star

Gems Ltd. to its current name Swarn Sarita Gems Ltd.

32. The findings qua the appellant company in the impugned order

pertain to the period March 18, 2008 to October 1, 2009. However, the

appellant had bought mere 10 shares of SJC on 28.01.2009 in the ordinary

course during the entire investigation period. The said 10 shares are still

held by the appellant as on date.

33. In the impugned order, the respondent has inter-alia recorded :

(i) That the appellant had entered a buy order for 100 shares, out of

which trade for 10 shares was executed and the order for the

remaining 90 shares was automatically deleted and that Ramesh

D. Patel HUF was the counter party to the said trade of the

20

appellant. It may be noted that there is no finding that the said

trade of 10 shares was synchronized or premeditated.

(ii) That the order was placed at the 5% upper circuit filter level. It

may be noted that due to absence of sellers, the order was

placed at upper circuit filter level. Admittedly, due to absence

of sellers, the remaining order of 90 shares was automatically

deleted.

(iii) That from 28.1.2009 the price of the scrip started moving up

significantly. Admittedly, post 28.1.2009 the appellant has not

bought or sold even a single share of SJC. In view of the

illiquidity of the scrip, the appellant did not buy any further

shares.

(iv) That the appellant had bought and sold more than 100 shares

each in various other scrips during the investigation period,

whereas the appellant had traded only in 10 shares in the scrip

of SJC, therefore, the trading pattern clearly indicates an

abnormal interest shown by the appellant in the scrip of SJC.

The said finding reveals complete non application of mind.

Buying of 10 shares of SJC cannot lead to a finding that the

appellant had abnormal interest in the scrip of SJC. It is not the

case that the quantum of trading of the appellant in the scrip of

SJC is far in excess of the quantum of trading in other scrips.

(v) That the appellant had deliberately misled the investors by

manipulating the order book and to create artificiality in the

market so as to serve its own purpose. There was no allegation

of manipulating the order book in the SCN. Further, by placing

21

one solitary order for 100 shares (out of which only 10 shares

got executed), during the entire investigation period it cannot be

concluded that appellant was trying to mislead the investors.

The trade of 10 shares was delivery based, wherein the appellant

had paid the purchase consideration and taken delivery of the 10

shares, therefore, the issue of creating artificiality cannot and

does not arise. Admittedly, the scrip was illiquid as found by

the respondent also. There were no sellers available. How, by

buying 10 shares and taking delivery of the same, can the

appellant manipulate the order book and create artificiality in

the market has not been spelled out by the respondent.

(vi) That the purpose of trading of 10 shares was not for

accumulating the shares but only to increase the price of SJCL.

In view of the illiquidity of the scrip, the appellant did not buy

further shares. Based on mere one purchase of 10 shares, it

cannot be concluded that the solitary purpose of appellant was

to increase the price as alleged. Had the purpose of appellant

been to increase the price, the appellant would have continued

purchasing the shares post January 28, 2009. The alleged

purpose is belied by the trading pattern of the appellant wherein

the appellant did not trade at all in the scrip post January 28,

2009.

(vii) That the respondent has further recorded that Savjibhai did not

have sufficient funds for the open offer and, therefore, included

appellant as a PAC so as to divert shareholders’ funds from

appellant. The finding is factually false and self-contradictory.

Further, the same is coming for the first time in the impugned

22

order. The allegations are baseless and reveal the predetermined

mindset of the respondent. Fact is that the whole consideration

amount towards open offer obligations was met by Savjibhai

Patel through his own sources and not even a penny was given

by appellant for the purpose. The impugned order itself holds

that the source of funds for the open offer, apart from

Savjibhai’s own funds, was from the mother of Savjibhai, the

HUF of Savjibhai, the sister of Savjibhai and her husband and

their company Shamo Investments Pvt. Ltd.

(viii) By the impugned order, the respondent has imposed a penalty of

Rs. 2.5 crore on all 19 noticees “jointly and severally”. There

are totally different allegations against the various different

parties. The appellant admittedly had bought 10 shares during

the investigation period and made no profits. The impugned

order itself alleges that 13 of the parties made profits, and 3 of

the parties made “notional profits”. Given these it is

inconceivable as to how a “joint and several” penalty could have

been levied.

34. Learned Senior Counsel Shri Mustafa doctor appearing on behalf of

the appellants made the following submissions in Appeal no. 513 of 2015:-

(a) Five appellants are regular investors in securities market.

(b) Shares splits are undertaken for increasing liquidity, therefore,

increase in volume / liquidity in Phase III is not abnormal.

(c) Turnover automatically increases price.

(d) Only 3 of the appellants (Ramesh Desai, Ramesh Desai HUF,

M/s. Shamo Investments Pvt. Ltd.) sold 644 shares in Phase-

III and still hold 10329 shares.

23

(e) Appellants no. 4 and 5 (Dharmishtha Patel and Reshma Patel)

did not buy or sell any shares. Shares bought by appellant no.

4 were before investigation period and she is holding whatever

she has already bought.

(f) Appellant no. 5 (Reshma Patel) had received shares as a gift

from her mother i.e. appellant no. 4 – Dharmishtha Patel and

not traded / sold any of them.

(g) Dharmishtha and Reshma are part of the total penalty of Rs.

2.5 crore jointly and severally, while on appellant nos. 1 to 3

disgorgement of Rs. 2,737, Rs. 72,429 and Rs. 2,26,403

respectively has been imposed.

(h) Appellant Nos. 1, 3, 4 had advanced loan to Mr. Savjibhai

Patel, which was a help to their relative.

(i) Buying 2500 shares was nothing special and same is apparent

from the investment of the appellant since 2007.

(j) No finding in the impugned order to link to the Desai family

who sold shares. Their statement was not provided; their

broker was not made party to the show cause notice.

(k) Jayesh Patel was an acquaintance who lent Rs. 4 lac to the

appellant. This has no connection with trading.

(l) The money lent to Savjibhai Patel was a general loan. They

had no connection with the open offer.

(m) Appellant no. 3 has no direct link with Savjibhai Patel; only

link is through Ramesh Patel who is promoter of appellant no.

3.

(n) Investment in SCJ scrip since 2007 and still holding 3101

shares; did not tender any shares in open offer because

appellant was considering long term investment.

24

(o) Appellant no. 4 had only a transfer of 4450 shares, return of

shares lent to the Desai family.

(p) Rs. 16.55 Lakh was given to Savjibhai Patel because of his

financial ill health.

(q) Appellant no. 5 received various quantities of shares on

different dates, totalling 9850 shares as a gift from her mother

(appellant no. 4) but not traded in any single share. No

financial arrangement with her uncle Savjibhai Patel.

35. The Learned Senior Counsel for the appellants Shri Mustafa Doctor

in Appeal No. 513 of 2015 has relied on the following judgments in support

of his arguments (a) Canara Bank and Others vs. Debasis Das and Others

(2003) 4 Supreme Court Cases 557; Vikas Ganeshmal Bengani vs. Whole

Time Member, SEBI (Appeal No. 225 of 2009 decided on February 25,

2010); Jagruti Securities Ltd. vs. SEBI (Appeal No. 143 of 2008 decided on

October 27, 2008); M/s. Dimensional Securities Pvt. Ltd. vs. SEBI (Appeal

No. 143 of 2008 decided on June 29, 2009); Sterlite Industries (India) Ltd.

vs. SEBI (Appeal No. 20 of 2001 decided on October 22, 2001) and

submitted that SCN should be unambiguous and in the SCN benefit gained

by the appellant was not clearly stated; prices may not be always based on

fundamentals, it could go down or up on technicalities and preponderance of

probabilities is not enough to hold one acting in connivance or being part of

a fraud.

36. Learned Counsel Ms. Ankita Singhania appearing on behalf of the

appellant in Appeal No. 526 of 2015 submitted that penalty imposed on all

the 19 appellants jointly and severally is not sustainable, there is no

disgorgement, the ingredients of fraud are not met, impugned trades were

neither manipulative nor induced by anybody, small quantity of trades had

25

not impacted volume or prices, no collusion between appellant and other

noticees / entities, all trades genuine, legal, delivery based and beneficial

ownership changed and section 15J not considered while imposing the huge

penalty.

37. Learned Counsel Shri Prakash Shah appearing on behalf of the

appellant in Appeal No. 535 submitted that appellant purchased only 5

shares on one day i.e. September 26, 2009 at Rs. 1185/- at market rate and

exchange closed out the trade crediting the difference to the appellants

account as the counter party did not meet the obligation; allegation of

creation of artificial volume is not correct and the counter party Sneha

Suresh Turkul maintaining account with broker Gunderia and Kaur but no

show cause notice was issued to Turkul. Appellant was already holding 400

shares (pre-split) of SJC and, therefore, the submission of having a long

term view was not considered.

38. Learned Counsel Shri Prakash Shah appearing on behalf of the

appellant in Appeal No. 536 of 2015 submitted that appellant bought just

146 shares and sold only 160 shares of SJC during the investigation period.

All trades were normal, genuine and on market rates. Six years’ restraint

from the market affected his livelihood. He was holding 250 shares of SJC

prior to the investigation period and hence having a long term view in the

scrip; no collusion with promoters of SJC, not party to any manipulation or

fraud. He had sufficiently explained the association between him and

Savjibhai Patel to the WTM of SEBI that it was because of their community

and their association started subsequent to his buying the shares of SJC.

Therefore, there was no connection between dealing in the scrip and his tele-

calls. Connection with Ramesh Patel was only with respect to some money

lent to the HUF of Ramesh Patel. He was not related / connected / linked

26

directly or indirectly to any of the noticees except Urvashi Patel who is his

wife. Admittedly, he made a profit of only Rs. 93,783/-. Despite that he has

been made joint and severally liable for Rs. 2.5 crore penalty.

39. Shri Gaurav Joshi, Learned Senior Counsel appearing for SEBI in all

these appeals submitted that the facts of the matter should be seen in its

totality to understand the fraudulent scheme hatched by the appellants. In

isolation, if the role of any one is examined, it is difficult to get full picture.

40. It is fact that SJC was a company with negative net worth having

only limited stock of 2 lac shares which was illiquid and being traded once

in a while in very small quantities of at an average of 3 to 29 shares per day

during Phase-I and Phase-II of the investigation period. In parallel with

multiple false/misleading corporate announcements, announcements relating

to stock split, bonuses and dividends and by transferring some business from

sister company to the appellant company, the price of these illiquid shares

was jacked up by trading in small quantities by entities related to the

promoters. While in phase I and II of the investigation period the volume of

trading remained subdued because of very limited floating stock available

(promoters holding was more than 70% and a considerable part of the

remaining stock was held by the related parties) but after the split of the

stock on August 28, 2009 the volume of trading increased during which

most of the appellants offloaded part of their holdings at abnormal prices.

In such a scheme, it is not easy to decipher the exact role played by each

entity and hence the need for looking at the schema in totality.

41. It is an unique case of market manipulation where the scheme

employed by the appellants involved hiking the price of the shares in which

the promoters had to make open offer. Therefore, the arguments of the

appellants have to be faced squarely in their own terms as to which

27

promoter would like to increase the price of the scrip which they have to

buy in an open offer at a higher price. Herein lies their ingenuity enabled by

the nature of the scrip; illiquidity, low floating stock, low price to start with

and the desire of a few groups of related entities to ensure that they exit by

making substantial profits at an opportune time. The promoters were aware

that there was only a limited quantity of floating stock available as such

even if the price of the scrip was raised artificially by placing a small buy

order it would not trigger a major offering by the public. Even during the

public offer period most of the appellants did not sell their shares despite the

fact that the offer price of the share was increased from Rs. 142 in the first

open offer to Rs. 447/- in the second open offer but they waited for Phase-

III by which time sufficient liquidity was created with daily average volume

crossing 1100 shares. However, all the appellants could not offload their

entire holding because soon after Phase - III was over interim order of the

WTM of SEBI dated February 5, 2010 was issued restraining the appellants

from dealing in the securities market. Hence, though many of the appellants

had started offloading their holdings the entire holdings could not be

offloaded within a few months even with increased liquidity. Therefore, the

appellants arguments that they are still holding sizeable part of the scrip of

SJC as a long term business strategy has no merit.

42. Learned Senior Counsel Shri Gaurav Joshi further elaborated the

violations committed by various appellants in these appeals in terms of their

detailed role as promoters and how they made corporate announcements and

disclosures which were not either fully or partially correct; nature of

relationship between entities; how different entities placed buy trades at 5%

above LTP in Phase-I and Phase-II of the investigation period when the

scrip was highly illiquid and trading was not more than 3 to 29 shares

(Phase-I and Phase-II respectively); financial transactions between some of

28

the appellants and the promoters; the relative performance of two companies

of the promoters and their association with companies based in Hong Kong

and how in Phase-III some of the appellants off-loaded the shares in SJC.

He also walked us through the detailed trade logs of the appellants, which is

on record.

43. In conclusion, Learned Senior Counsel Shri Gaurav Joshi reiterated

that the role of each individual /party in isolation does not clearly bring out

the scheme of fraud and manipulation perpetuated by the appellants

together. Therefore, in the impugned order those who made unlawful gains

by trading have been asked to disgorge the unlawful gains and those who

played any role in the fraudulent scheme have been asked to jointly and

severally pay the penalty of Rs. 2.5 crore. On a specific query from the

bench on the role of Reshma Patel in the entire scheme as to whether getting

some shares as a gift from her mother and keeping the shares without selling

make her a party to the fraudulent scheme the learned senior counsel fairly

stated that the role of Reshma Patel is not that clear.

44. Learned Counsel Shri. Gaurav Joshi relied on the following

judgments of the Supreme Court (a) Securities and Exchange Board of India

vs. Rakhi Trading Private Ltd. (Civil Appeal No. 1969 of 2011 decided on

February 08, 2018); (b) Securities and Exchange Board of India vs Shri

Kanaiyalal Baldevbhai Patel, 2017 SCC OnLine SC 1148 decided on

September 20, 2017 and (c) Securities and Exchange Board of India vs.

Kishore R. Ajmera, (2016) 6 Supreme Court Cases 368 decided on February

23, 2016 and submitted that in deciding on PFUTP violation, totality of facts

and preponderance of probabilities have to be resorted to as full evidence

may not be forthcoming and manipulative, fraudulent schemes also include

deliberately making losses as held in Rakhi Trading (supra).

29

45. We have heard the detailed submissions made by the Learned Senior

Counsel and Counsel appearing for all the parties and perused the records

placed before us. We have also noted the exact construction of Section

12A(a)(c) of SEBI Act and Regulations 3(a)(c) and Regulation

4(1)(2)(a)(b)(e) of PFUTP Regulations which reads thus:-

“SEBI Act

Section 12A. No person shall directly or indirectly—

(a) use or employ, in connection with the issue, purchase

or sale of any securities listed or proposed to be listed on a

recognised stock exchange, any manipulative or deceptive

device or contrivance in contravention of the provisions of

this Act or the rules or the regulations made thereunder;

(b) …………

(c) engage in any act, practice, course of business which

operates or would operate as fraud or deceit upon any

person, in connection with the issue, dealing in securities

which are listed or proposed to be listed on a recognised

stock exchange, in contravention of the provisions of this Act

or the rules or the regulations made thereunder;

PFUTP Regulations

Regulation 3. Prohibition of certain dealings in securities

No person shall directly or indirectly—

(a) buy, sell or otherwise deal in securities in a fraudulent

manner;

(b) …………..

(c) employ any device, scheme or artifice to defraud in

connection with dealing in or issue of securities which

are listed or proposed to be listed on a recognized

stock exchange;

Regulation 4. Prohibition of manipulative, fraudulent and

unfair trade practices

(1) Without prejudice to the provisions of regulation 3, no

person shall indulge in a fraudulent or an unfair trade

practice in securities.

(2) Dealing in securities shall be deemed to be a

fraudulent or an unfair trade practice if it involves fraud and

may include all or any of the following, namely:-

(a) indulging in an act which creates

false or misleading appearance of trading in the

securities market;

30

(b) dealing in a security not intended to effect

transfer of beneficial ownership but intended to

operate only as a device to inflate, depress or

cause fluctuations in the price of such security

for wrongful gain or avoidance of loss;

(c) …………

(d) …………

(e) any act or omission amounting to manipulation

of the price of a security;”

46. From the totality of the picture there is no ambiguity in our mind that

a scheme of fraud has been conceived and implemented by the appellants

herein, except appellant no. 5 in appeal 513 of 2015. We also hold that this

is a unique case of manipulation. A defunct company is taken over by a few

parties; peculiar interest is shown by a few others in buying the shares of

that company placing orders mostly at 5% above the LTP thereby gradually

raising its price to abnormal levels and creating artificial liquidity in the

scrip and thereafter most of the parties trying to off-load their holdings at a

substantially inflated price. If individual case is seen independently there is

nothing abnormal about it but when the picture is looked at in totality what

is unfolding is a fraud perpetuated on the market / investors.

47. The first SPA was signed by the appellants in Appeal No. 525 of

2015 on April 06, 2007. The price paid under this SPA was Rs. 25/- per

share. The open offer price given in June 2007 was Rs. 142/-; barely three

months after the first SPA. The second SPA was signed on July 31, 2008

and the consequent open offer made in September 2008 was at a price of Rs.

447/ - per share. The share split at the rate of 1:10 was done on August 28,

2009. The share price was Rs. 816/- on September 30, 2009. The post-split

price of Rs. 816/- is tantamount to Rs. 8160 pre-split, which is 326 times the

price at which the first SPA was entered into just 29 months earlier. Though

the investigation period is limited to only about 19 of this 29 months and

thereby shows an increase of about 2000% (20 times) in the price of the

31

share the fact that the share price actually hit 326 times since the first SPA

cannot be ignored. For a company which was inactive at the time of taking

over in April 2007 and which made a nominal profit of just Rs. 3.66 crore

(with total sale of Rs. 22.68 crore) in 2008-09 even by assuming that those

disputed sales and profits were correct, appreciation of the share price by

326 times and reaching the level of Rs. 8160/- per share cannot be treated a

normal development by any yardstick. In that context finding in the

impugned order that several of the appellants herein placing buy orders 5%

above the last traded price during Phase – I and Phase – II and thereafter off-

loaded or attempting to off-load those shares when the price had increased

dramatically and when liquidity had increased reasonably (around 1100

share per day) during Phase – III as a result of a fraudulent scheme hoisted

by the promoters and related entities cannot be faulted.

48. Some specific submissions have been made by some of the appellants

before us. These include that appellants are no related to the promoters; their

trade is in the normal course of business; only one order for a small quantity

has been placed; mere call records are not sufficient to prove the connection;

staying in the same locality is not an indicator of a connection; giving a

small amount of loan to a relative is not connected to manipulation in trade

etc.

49. We find no merit in these arguments given that the basic facts and the

available evidence is sufficient to prove existence of a fraudulent scheme. It

is not that the trade logs are disputed or the financial transactions are in

dispute. What is disputed is only the motive behind such trade and the

financial transactions. Even the argument of the promoters of SJC

(appellants in appeal no. 525 of 2015) that they did not trade is only legally

correct since another company (appellant in appeal 531 of 2015) wherein

32

they were promoters at the relevant time placed a buy order on 28.01.2009

(in Phase-II) for 100 shares at price 5% above the LTP, though only 10

shares got delivered. Similarly, appellant in Appeal No. 535 of 2015 placed

one buy order for just 5 shares at the rate of Rs. 1185/- per share on

26.09.2009. This was the highest reported price ever and it is equivalent to a

pre-split price of Rs. 11850/-. Since the counter party did not meet the

obligation the difference was credited to the appellant’s account. This

appellant was already holding 400 shares of SJC (pre-split) and her husband

(appellant in appeal no. 536 of 2015) had offloaded part of his holdings in

Phase-III. Therefore, each small buy or small role played by each appellant

needs to be juxtaposed with the motive of the appellant. Further, residing in

a location or telephone calls between people also in itself do not make one

party to a fraudulent scheme; but all associated factors together do make

them parties. Therefore, given the factual matrix perused by us we find no

merit in the submissions of the appellants.

50. Argument made by each of the appellant individually that each of

them played only a small trade in isolation or as per normal course of their

business or some of them did not trade at all or some small loan has been

given etc stand no merit when totality of the picture is looked at. All of them

together enabled launching this major fraud by using a dormant, low capital

base and low public float company. In this context, we also find that the

argument that many of the appellants did not off-load either full or major

chunk of their holding even in Phase-III or thereafter also has no merit since

with the still limited liquidity of about 1100 shares per day there was an

inbuilt absorptive limitation for the market and thereafter the ad-interim

restraint order of the WTM of SEBI came on their way on February 5, 2010.

As held by the Hon’ble Supreme Court in several orders such as SEBI vs

Rakhi Trading (supra), SEBI vs. Shri Kanaiyalal Baldevbhai (supra) and

33

SEBI vs. Kishore R. Ajmera (supra) complete evidence may not be

forthcoming in every such matter and what is needed is to prove that in a

factual matrix preponderance of probabilities indicate a fraud. In Rakhi

Trading (supra) it is held that in some cases parties may even incur willful

losses in the market to achieve some objectives.

51. It has been submitted before us that some of the parties allegedly

connected to the fraudulent scheme were not penalized by the impugned

order. We note that these parties were only sellers acting as counter parties

to the buy orders placed by some of the appellants herein. Selling in Phase-I

and Phase-II is not considered abetting the fraudulent scheme since charge

is that by placing buy orders volume and prices have been increased. In such

a context somebody offering the shares for sale is not abetting the fraudulent

scheme. Similarly, during the open offer period if anybody has offered the

shares for sale it was rightly not considered in abetting fraudulent scheme.

Therefore, no action taken against such entities cannot be held to be faulty.

52. All the appellants argued that a joint and several liability of a penalty

of Rs. 2.5 crore imposed on appellants is not sustainable or even practical

because the allegedly connected entities are not a homogenous group. In

fact, the connection itself is disputed though blood relationship between

some of them is not. However, we find no fault in imposing such a joint and

several penalty as it is now abundantly clear that the appellants were acting

together and together they inflated the notional value of their shares to more

than Rs. 132 crore. If they could be party to such a fraudulent scheme

whether they are a homogeneous group or otherwise they should find a way

to fulfill the consequences / obligation of paying the penalty jointly and

severally imposed upon them.

34

53. In view of the above reasons we find no merit in the appeals except

that of Ms. Reshma Patel, Appellant No. 5 in Appeal No. 513 of 2015. She

succeeds in her appeal. Since in the impugned order penalty of Rs. 2.5 crore

has been imposed under Section 15HA of SEBI Act on 19 appellants jointly

and severally and one of them succeeds in the appeal the penalty amount

also needs to be reduced. Accordingly, we reduce the joint and several

penalty from Rs. 2.5 crore to Rs. 2.3 crore to be paid by 18 of the appellants.

54. All appeals are disposed of in above terms with no order as to costs.

In view of the disposal of the appeals, Misc. Applications do not survive and

are also disposed of accordingly with no order on costs.

Sd/- Justice J.P. Devadhar

Presiding Officer

Sd/- Dr. C.K.G. Nair

Member

25.04.2018

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