- Bookmark
- Share
- CaseIQ
Vijay Kumar Agarwal
Factual and Procedural Background
Securities and Exchange Board of India (SEBI) initiated adjudication proceedings under section 15HA of the SEBI Act, 1992 against Vijay Kumar Agarwal HUF (Applicant) for alleged violations of multiple provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. The allegations involved repeated self-trades on the NSE by the Applicant and other entities, which created artificial volumes without any change in share ownership. A Show Cause Notice (SCN) dated August 7, 2017 was issued. During the pendency of the proceedings, the Applicant submitted a settlement application under the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2014, without admitting facts or legal conclusions. After review by SEBI’s Internal Committee and High Powered Advisory Committee, settlement terms were agreed upon, and the Applicant paid Rs. 2,00,000 as settlement charges. Consequently, SEBI disposed of the adjudication proceedings by this settlement order dated January 18, 2018.
Legal Issues Presented
- Whether the alleged repeated self-trades by the Applicant and associated entities violated specific provisions of SEBI’s regulations prohibiting fraudulent and unfair trade practices.
- Whether the adjudication proceedings could be disposed of by way of a settlement under the Settlement Regulations.
- Whether SEBI retains the right to reopen or initiate enforcement actions if representations made in the settlement are found untrue or settlement conditions are breached.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The adjudicating officer considered the facts of repeated self-trading creating artificial volumes and the absence of change in ownership as the basis for the SCN. The Applicant’s settlement application was processed in accordance with the SEBI Settlement Regulations, involving review by the Internal Committee and the High Powered Advisory Committee. Upon payment of the agreed settlement charges, the officer invoked Regulation 15(1) of the Settlement Regulations to dispose of the adjudication proceedings. The order expressly preserves SEBI’s right to take enforcement action if false representations are discovered or settlement conditions are breached, reflecting a balance between finality of settlement and regulatory oversight.
Holding and Implications
The adjudication proceedings against Vijay Kumar Agarwal HUF initiated by SEBI vide the Show Cause Notice dated August 7, 2017 are hereby disposed of by way of settlement.
The direct consequence of this order is the closure of the adjudication proceedings upon payment of settlement charges by the Applicant. However, the order does not set a precedent and preserves SEBI’s right to reopen proceedings or take enforcement action if settlement terms are violated or misrepresentations are found. Thus, while the Applicant benefits from the settlement, regulatory authority is maintained.
Prasanta Mahapatra, Adjudicating Officer:— Securities and Exchange Board of India (hereinafter referred as ‘SEBI’) initiated adjudication proceedings to inquire into and adjudge, under section 15HA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act, 1992’), the violation of Regulation 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(a) and 4(2)(g) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003) by Vijay Kumar Agarwal HUF (hereinafter referred to as ‘Applicant’).
2. In this regard, a Show Cause Notice No. A&E/EAD/PM-NK/18643/2017 dated August 7, 2017 (hereinafter referred to as ‘SCN’) was served on Applicant. In the SCN, it was alleged that the Noticees, namely, Vijay Kumar Aggarwal HUF, Chandarana Intermediaries Brokers Private Limited and AKG Securities and Consultancy Limited along with some other entities namely, Crosseas Capital Services Private Limited, GKN Securities, and RM Shares Trading Private Limited have repeatedly entered into self-trades on the exchange (NSE) on several occasions and in large quantities thereby creating artificial volumes in the scrip. Further, there was no change of ownership of the shares. In self-trades of the clients, the brokers on buy side and sell side were same.
3. It was observed that entities Crosseas Capital Services Private Limited, AKG Securities and Consultancy Limited, Chandarana Intermediaries Brokers Private Limited, RM Shares Trading Private Limited and GKN Securities have entered into self-trades on NSE on several occasions/large quantities thereby creating artificial volumes in the scrip. Further, there was no change of ownership of the shares. In self-trades of above mentioned clients the brokers on buy side and sell side were same.
4. Pending adjudication proceedings, the Applicant submitted an Application for Settlement dated September 12, 2017 and an undertaking in the format prescribed by SEBI in terms of SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2014 (hereinafter referred to as ‘Settlement Regulations’) without admission of facts and conclusions of law.
5. Pursuant to the said settlement application, the Authorized Representative of the Applicant attended a meeting with the Internal Committee (hereinafter referred to as ‘IC’) on November 21, 2017. The revised settlement terms as proposed by the Applicant were placed before the High Powered Advisory Committee (HPAC) in its meeting held on November 27, 2017. After considering the facts and circumstances of the case, the HPAC recommended that the case may be settled on payment of Rs. 2,00,000/- (Rupees Two Lacs only) towards settlement charges which were approved by the panel of the Whole Time Members, SEBI on January 03, 2018.
6. Accordingly, the Applicant has remitted a sum of Rs. 2,00,000/- (Rupees Two Lacs only) vide demand draft No. 104291 dated January 05, 2018, drawn on HDFC Bank, payable at Mumbai, towards the terms of settlement in the matter.
7. In view of the above, in terms of Regulation 15(1) of Settlement Regulations, it is hereby ordered that this settlement order disposes of the adjudication proceedings initiated against the Applicant vide the Show Cause Notice dated August 7, 2017.
8. This order is without prejudice to the right of SEBI to take enforcement actions including commencing/reopening of the pending proceedings against the Applicant, if SEBI finds that:
i. any representation made by the Applicant in the settlement proceedings are subsequently discovered to be untrue; or
ii. the Applicant breaches any of the clauses/conditions of undertakings/waivers filed during the current settlement proceedings.
9. This settlement order is passed on the 18 day of January, 2018 and shall come into force with immediate effect.
10. In terms of Regulation 17 of Settlement Regulations, a copy of this order is being sent to the Applicant and is published on the website of SEBI.
Alert