Citation Codes

Equivalent Citations

citation codes

Case Number

Appeal No. 164 of 2019, Appeal No. 165 of 2019, Misc. Application No. 224 of 2019 and Appeal No. 166 of 2019

Attorney(S)

Ms. Mugdha Modi, Advocate i/b Juris Link ;
Mr. Karan Bhosale, Advocate with Mr. Chirag Bhavsar, Ms. Eram Quraishi and Mr. Harshad Vyas, Advocates i/b MDP & Partners,

Judges

Tarun Agarwala, Presiding Officer
C.K.G. Nair, Member

Acts

provisions of Section 12A(a),(b),(c) of SEBI Act, 1992 read with Regulations 3(a),(b),(c),(d),4(1),4(2)(a) and (g) of PFUTP Regulations, 2003.

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Smart Summary

Securities Appellate Tribunal (SAT) — Order dated 07.02.2020

Factual and Procedural Background

These consolidated appeals (Appeal Nos. 164, 165 and 166 of 2019) challenge an order of the Adjudicating Officer (AO) of the Securities and Exchange Board of India (SEBI) dated 31 January 2019. The AO found the appellants to have violated provisions of the SEBI Act, 1992 and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations, 2003) in relation to trading in the scrip of M/s. Le Waterina Hotels and Resorts Ltd. (Le Waterina) during the period 1 October 2010 to 5 March 2012.

SEBI's investigation identified 16 related/connected entities alleged to have engaged in a scheme involving off-market and on-market transactions that manipulated trading volumes in Le Waterina. Following a share split (1:10) on 4 July 2011, the company's share count increased substantially. Although 16 entities were investigated, orders were framed against 12 entities (four of the 16 pursued settlement routes or had proceedings disposed by settlement).

The AO imposed penalties under Section 15HA of the SEBI Act: Rs. 20 lakh each on Devang Vyas (Appeal No. 165 of 2019) and Rajiv Gandhi (Appeal No. 166 of 2019), and Rs. 10 lakh on Shailesh Shah (Appeal No. 164 of 2019). The appeals were heard together with Appeal No. 165 as the lead matter. Miscellaneous Application No. 224 of 2019 sought condonation of delay in filing Appeal No. 166 of 2019 and was allowed.

Legal Issues Presented

Whether the appellants violated provisions of Section 12A of the SEBI Act, 1992 read with Regulations 3 and 4 (including Regulation 4(2)(a) and 4(2)(g)) of the PFUTP Regulations, 2003 by participating in circular trading and volume manipulation in the scrip of Le Waterina.
Whether the appellants were merely "pawns" or innocent investors acting under instructions (particularly from Kamal Kothari, Managing Director of M/s. Guiness Securities Ltd.), or whether they were active participants/enablers in the scheme.
Whether the quantum of penalty imposed by the AO — Rs. 20 lakh (on Devang Vyas and Rajiv Gandhi) and Rs. 10 lakh (on Shailesh Shah) under Section 15HA — was excessive or disproportionate in the facts of the case.
Whether the AO ought to have considered specific factual circumstances in determining penalty — notably (a) an arbitral award obtained by Devang Vyas against the broker for unauthorized trading, and (b) allegations that certain trading accounts were opened without the appellants' consent.
Whether selective settlement/consent by some noticees and absence of action against certain large-volume traders (e.g., Man Mohan Damani) affected the validity of the AO's findings against these appellants.

Arguments of the Parties

Appellants' Arguments (as presented in the opinion)

Devang Vyas: Claimed he was an employee of M/s. Guiness Securities Ltd., acted on instructions of the Managing Director Kamal Kothari, recommended the scrip at Kothari's instruction, and did not profit or intentionally violate securities laws.
Devang Vyas: Alleged that a trading account in his name was opened without his permission by Kamal Kothari; he complained to BSE and Mumbai Police and obtained an arbitration award against M/s. Guiness Securities Ltd. for unauthorized trading.
General appellants' contention: The impugned order is defective because although a common SCN was issued to 16 entities, orders were passed only against 12; some principal actors obtained settlements and yet the AO relied on their conduct to charge others.
Challenge to selectivity: Some entities with larger trading volumes (example given: Man Mohan Damani at 21.5% of alleged manipulative volume) were not found guilty, while appellants with smaller volume shares (e.g., 4.98%) were penalized.
Shailesh Shah: Claimed only 39 trades, matched with two counterparties (Paresh C. Doshi and Himmatlal Lakhani), asserted no connection to those counterparties and described himself as an individual investor who traded only on the exchange.
Rajiv Gandhi and others: Argued they acted as employees and on instructions of Kamal Kothari and had suffered losses when Kothari sold shares; appellants asserted penalties were harsh and disproportionate and AO failed to consider their explanations and the arbitral award.

Respondent's Arguments (SEBI)

SEBI submitted that the connections among the group of entities are detailed in the impugned order (referenced pages 16–18) and are well established.
SEBI accepted that Devang Vyas and Rajiv Gandhi were employees of M/s. Guiness Securities Ltd. but contended they actively traded in and recommended the scrip; Shailesh Shah received off-market transfers and traded on-market with counterparties who were part of the related group.
SEBI relied on statements given by the appellants to investigating authorities as establishing their role: e.g., admissions that Devang Vyas placed orders in accounts, and that Rajiv Gandhi was instructed by Devang Vyas to buy shares.
SEBI disputed post hoc defenses: Devang Vyas's claim that his account was opened without his knowledge was not taken before the AO and thus not accepted as a fresh defense.
On selectivity and other large traders (e.g., Man Mohan Damani), SEBI explained absence of action where no connection could be established between that trader and the suspected group, despite large volume.
On the question of price impact, SEBI emphasized that this was a case of volume manipulation rather than price manipulation and pointed to the SCN's price movement figures (pre-split and post-split) as indicative of the trading scheme's effect.
SEBI maintained that the penalties imposed under Section 15HA were within statutory limits and were not harsh or disproportionate in the circumstances.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Tribunal analyzed the evidence and submissions and reached the following conclusions and reasoning steps, as reflected in the opinion:

Nature of the episode: The Tribunal found the facts established a case of circular trading by a group of entities intended to manipulate the market in the scrip of Le Waterina. The group converted a lightly traded scrip into a highly traded one, imposing costs on ordinary investors.
Statutory framework: The Tribunal framed the legal standard by reproducing provisions of Section 12A of the SEBI Act (prohibiting manipulative, deceptive devices and schemes to defraud) and relevant provisions of the PFUTP Regulations (Regulations 3 and 4, including illustrative clauses such as Regulation 4(2)(a), (d) and (g)).
Volume manipulation as violation: The Tribunal held that the appellants' reliance on an absence of price analysis was without merit because volume manipulation itself constitutes a PFUTP violation, particularly under Regulation 4(2)(a) (indulging in an act that creates a false or misleading appearance of trading).
Role of the appellants: The Tribunal rejected the appellants' characterization as mere "pawns." It concluded the appellants were not innocent — they were senior employees or accomplices who acted as enablers, as evidenced by their trading activity, roles in recommending the scrip to others, and admissions recorded during investigation (specific dates of statements by Devang Vyas and Rajiv Gandhi were cited as corroborating participation).
On selectivity and settlements: The Tribunal accepted that certain noticees pursued settlement and some large-volume traders (e.g., Man Mohan Damani) were not proceeded against because SEBI could not establish a connection between them and the suspected group. The Tribunal did not find this selective treatment vitiated the findings against the appellants when their connections and roles were established.
Penalty assessment: While the Tribunal upheld the AO's finding on culpability and the applicability of Section 15HA (which prescribes minimum and maximum penalties), it scrutinized the AO's treatment of a specific mitigating circumstance — an arbitral award in favor of Devang Vyas against the broker for certain disputed trades. The Tribunal found that the AO had not adequately considered whether the arbitration award reduced the appellants' culpability or should have been credited in penalty calculation.
Remedial adjustment: Because the arbitral award in favor of Devang Vyas was not dealt with in the impugned order and it was unclear whether its effect was considered in calculating penalty, the Tribunal found it necessary in the interest of justice to reduce the penalty for Devang Vyas.

Holding and Implications

Holding:

The Tribunal upheld the impugned order on merits insofar as findings of participation in manipulative circular trading and violation of the SEBI Act and PFUTP Regulations were concerned. However, the Tribunal reduced the penalty imposed on Devang Vyas.

The operative disposition was:

Appeal No. 165 of 2019 (Devang Vyas) — partly allowed: penalty reduced from Rs. 20 lakh to Rs. 15 lakh.
Appeal No. 164 of 2019 (Shailesh Shah) — dismissed: penalty of Rs. 10 lakh retained.
Appeal No. 166 of 2019 (Rajiv Gandhi) — dismissed: penalty of Rs. 20 lakh retained.
No orders as to costs were made; appellants were directed to pay the amounts of penalty within four weeks from the date of the order.

Implications:

The Tribunal affirmed that volume manipulation (circular trading intended to create a misleading appearance of trading) falls within PFUTP prohibitions and is actionable even if extensive price-impact analysis is not central to the AO's order.
The Tribunal demonstrated judicial willingness to intervene on penalty quantum where a material mitigating circumstance (here, an arbitral award in favor of a noticee) appears not to have been considered by the AO; consequently, penalty quantum may be adjusted on appellate review when the AO's order does not transparently account for such factors.
No new legal precedent was articulated beyond application of existing statutory provisions; the decision primarily affirms factual findings of manipulation and adjusts penalty in light of an unaddressed arbitration award for one appellant. Therefore, the decision's direct legal effect is the confirmation of liability and the modification of penalty for Devang Vyas only in the specific facts of these appeals.

Order signed by: Justice Tarun Agarwala (Presiding Officer) and Dr. C.K.G. Nair (Member), dated 07.02.2020.

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Shailesh Shah v. Securities And Exchange Board Of India .

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Order Reserved on: 20.01.2020 Date of Decision : 07.02.2020 Appeal No. 164 of 2019 Shailesh Shah

701 Shaswat, 7th Floor, Vaibhav Building Compound, S.V. Road, Vile-Parle, Mumbai 400 056. 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 Ms. Mugdha Modi, Advocate i/b Juris Link for the Appellant. Mr. Karan Bhosale, Advocate with Mr. Chirag Bhavsar, Ms. Eram Quraishi and Mr. Harshad Vyas, Advocates i/b MDP & Partners for the Respondent. WITH Appeal No. 165 of 2019 Devang Vyas 17/16, Shastri Nagar, Linking Road, Santacruz West, Mumbai 400 054. 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 Ms. Mugdha Modi, Advocate i/b Juris Link for the Appellant. Mr. Karan Bhosale, Advocate with Mr. Chirag Bhavsar, Ms. Eram Quraishi and Mr. Harshad Vyas, Advocates i/b MDP & Partners for the Respondent. Misc. Application No. 224 of 2019 Appeal No. 166 of 2019 Rajiv Gandhi A/102, New Shivam CHS, Shripal Complex, Agashi Road, Virar (W), Thane 401 303. 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 Ms. Mugdha Modi, Advocate i/b Juris Link for the Appellant. Mr. Karan Bhosale, Advocate with Mr. Chirag Bhavsar, Ms. Eram Quraishi and Mr. Harshad Vyas, Advocates i/b MDP & Partners for the Respondent. CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Per : Dr. C.K.G. Nair, Member Misc. Application No. 224 of 2019:- For the reasons stated in the application, the delay in filing Appeal No. 166 of 2019 is condoned. The Misc. Application No.

224 of 2019 is allowed. Appeal Nos. 164 of 2019, 165 of 2019 and 166 of 2019:-

1. These three appeals have been filed to challenge the order of the Adjudicating Officer (AO for short) of Securities and Exchange Board of India (SEBI for short) dated January 31, 2019. By the said order the appellants have been held to have violated various provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations, 2003 for short) and therefore penalties of Rs. 20 lakh each on the appellant Devang Vyas in Appeal No. 165 of 2019 and Rajiv Gandhi in Appeal No.

166 of 2019 and Rs. 10 lakh on appellant Shailesh Shah in Appeal No. 164 of 2019 has been imposed. Since all three appeals challenge the same impugned order, with consent of the parties, these appeals are heard together taking Appeal No. 165 of 2019 as the lead matter and dispose of by a common decision.

2. Facts relevant to the appeals are the following. SEBI conducted an investigation relating to trading in the scrip of M/s. Le Waterina Hotels and Resorts Ltd. (Le Waterina for short), a Company listed at Bombay Stock Exchange Limited (BSE for short), for the period from October 1, 2010 to March 5, 2012. Consequently, a show cause notice dated September 28, 2017 was issued to 16 entities who were found to be connected / related entities for alleged violations of the provisions of Section 12A(a),(b),(c) of SEBI Act, 1992 read with Regulations 3(a),(b),(c),(d),4(1),4(2)(a) and (g) of PFUTP Regulations, 2003. Further, consequent to a share split in the ratio of 1:10 on July 4, 2011 the number of shares of the Company increased from 66,62,840 to 6,66,28,400. During the investigation, it was noted that 16 entities who are related / connected have indulged in a scheme of trading which involved certain off-market transactions as well as subsequent on-market transactions and indulged in large scale manipulation of the volumes in the scrip of Le Waterina and thereby violated the stated provisions of PFUTP Regulations 2003. For instance, it was observed that promoter related entities Anila Jalan (mother of Sanjay Jalan) and Rinku Jalan (wife of Sanjay Jalan) had transferred shares to various entities through off-market transactions. These entities as well as some other entities who received shares from Devang Vyas (appellant in Appeal No. 165 of 2019) and Farah Devang Vyas through off- market transfers traded in the scrip during the investigation period were connected entities as explained in paragraph 29 of the impugned order. Though 16 of these entities were found to be connected / related the impugned order is issued against only 12 of them since the other four, namely, Sanjay Jalan, Anila Jalan, Rinku Jalan and Kamal Kothari have filed settlement applications and in the case of Kamal Kothari by a settlement order dated March 28, 2018 the proceedings were disposed off. Therefore, though the impugned order gives the connection between all these entities directions have been passed only in respect of 12 entities specified therein.

3. Learned counsel Ms. Mugdha Modi appearing on behalf of the appellants submits that appellant in Appeal No. 165 of 2019, Devang Vyas, was only an employee of M/s. Guiness Securities Ltd., a brokerage, whose Managing Director was Kamal Kothari. He was on this job from August 2009 and sometime in August 2010 he discontinued the job informally. Further, though the appellant has made some trades in the scrip of Le Waterina and recommended the scrip for trading to some other clients he never made any money out of it nor violated any securities laws. Recommendation on the scrip was done on the instructions of his employer Kamal Kothari.

4. It was further contended by the learned counsel for the appellant that a trading account in the name of the appellant was unlawfully opened by Kamal Kothari without the appellants permission and large scale trading was done using this fabricated account. When the appellant came to know of this he made complaints to the BSE as well as to Mumbai Police. Moreover, appellant won an arbitration award against M/s. Guiness Securities Ltd. for the losses incurred on account of unauthorized trading.

5. It was further contended that the impugned order is defective in several ways. Despite the fact that a common Show Cause Notice (SCN) was issued to 16 entities, order has been passed only against 12 of them, and the brain behind the entire issue, Kamal Kothari was allowed to go lightly with a consent application and three other noticees also have been allowed the consent route. However, the impugned order continues to rely on the violations made by those parties inorder to press charges against the appellants. Similarly, out of several entities allegedly connected as given in the impugned order, orders have been passed only against 12 entities. For instance, an investor Man Mohan Damani whose trades constitutes 21.5% of the total volume of the alleged manipulative transactions has not been found guilty at all while the appellant with a volume of only 4.98% of the total transactions have been found guilty. It was also contended that though the impugned order has taken pains in elaborating on the volume of trades matched between the suspected entities how such volume manipulation has impacted prices has not been explained and if prices were not affected the allegation of volume manipulation cannot stand on its legs.

6. Further, it was contended that the impugned order does not deal with the issue of the appellant winning the arbitral award nor the fact that the appellant had complained against Kamal Kothari for the illegal trading in his unauthorized account and therefore while imposing a penalty of Rs. 20 lakh against the appellant no benefit of the said transactions, which was not the fault of the appellant, was given to him. Further, several entities who are in similar position in terms of the alleged violation have been imposed only lighter penalty of Rs. 5 lakh while the appellant has been charged with a heavy penalty of Rs. 20 lakh.

7. As regards Appeal No. 164 of 2019 it was contended by the learned counsel for the appellant that the appellant had only done

39 trades which was matched with two counterparties only; one Mr. Paresh C. Doshi and another Mr. Himmatlal Lakhani. The appellant is not connected to those entities. Further, the appellant is only an individual businessman who invests in the share market and executes trades only on the exchange system. Given this background of the appellant and despite giving detailed explanation to the SCN the AO has failed to take into account the submissions and passed the impugned order and imposed a heavy penalty of Rs. 10 lakh despite the fact that the appellant has lost heavily on account of the activities of Kamal Kothari.

8. As regards Appeal No. 166 of 2019 the learned counsel for the appellant submitted that the appellant was also an employee of M/s. Guiness Securities Ltd. and was acting on the instructions of Kamal Kothari and accordingly purchased the scrip as well as recommended the scrip to other investors. Accordingly, the appellant was only a pawn in the hands of Kamal Kothari. Further, when Kamal Kothari was selling the shares suddenly and thereby the prices were falling, appellant had incurred heavy losses. Accordingly, imposition of a heavy penalty of Rs. 20 lakh against the appellant mainly arising from the wrong doing of Kamal Kothari is too harsh and disproportionate punishment and without considering the submissions made by the appellant before the AO.

9. The learned counsel Shri Karan Bhosale appearing for the respondent SEBI submits that the connection between various parties is well established as detailed in the impugned order at pages 16 18. It is also an admitted position that the appellant Devang Vyas and Rajiv Gandhi were employees of M/s. Guiness Securities Ltd. and were actively trading in the scrip of Le Waterina as well as recommending the scrip to others. The third appellant Shailesh Shah was involved in the entire process as he received shares off-market from Farah Devang Vyas in addition to trading on-market on a number of occasions where the counter parties were also part of the related group entities even if the submission of Shailesh Shah that the counter parties were not directly connected to him is considered.

10. Further, it was contended that the statements made by the appellants before the investigating authorities have clearly established their role and connection in the entire manipulative episode in the scrip of Le Waterina. For instance, appellant Devang Vyas in his statement dated August 26, 2014 and September 1, 2014 stated that I have placed orders in my, Farah Vyas and Rajiv Gandhis account with M/s. Rikhav Securities and Kantilal Chaganlal Securities. Similarly, Rajiv Gandhi made the statement before the investigating authority on August 7, 2015 that Mr. Devang Vyas used to instruct me to buy shares. Therefore, though these appellants claim to be pawn in the hands of Kamal Kothari they are not innocent pawn but abetting participants in the scheme of manipulation.

11. The learned counsel for the SEBI further submitted that though appellant Devang Vyas now submits before this Appellate Tribunal that the trading account with M/s. Guiness Securities Ltd. was opened without his knowledge, such a stand was never taken before the AO. Further, regarding the submission that no action has been taken against Man Mohan Damani, learned counsel submitted that though Mr. Damani was the largest single trader in terms of volume during the pre-stock split period no connection could be established between him and other suspected entities and hence no action was taken against Mr. Damani. However, both Devang Vyas and Rajiv Gandhi were involved during pre-stock split as well as post-stock split period contributing substantial percentage to both gross volume of sell and buy. Shailesh Shah was an active trader in the scrip with substantial number of trades and many of them matching with suspected entities during the post-split period. In any case since Shailesh Shah was only party to the trades and therefore contributed to volume manipulation and not amongst those who induced others to trade in the scrip, a lower penalty of Rs. 10 lakh has been imposed against him while in respect of the other two appellants an amount of Rs. 20 lakh each has been imposed. As regards the contention that there was no analysis of price rise or price change on account of manipulative trading activities of the appellants and others it was submitted by the learned counsel for SEBI that it is more a case of volume manipulation than of price manipulation. However, even if the impugned order has not dealt with the price effect the same is given in the SCN which shows that prices moved from Rs. 35 to 144 during the pre-split period and between Rs. 5.33 to Rs. 15.45 during post-split period mostly on account of the increased trading activities and the scheme of manipulation implemented by the appellants and other noticees against whom orders have been passed.

12. Having heard the learned counsel for the parties and after perusing the records relating to all the three appeals, we are of the view that the entire episode is a case of circular trading caused by a group of entities in order to manipulate the market in the scrip of Le Waterina. There is sufficient evidence that this group of entities, including the appellants, converted the scrip of Le Waterina into a highly traded one from a lightly traded scrip and thereby imposing heavy cost on the unsuspecting investors in the market. Therefore, we have no doubt that it is a clear case of market manipulation as defined under the relevant provisions of SEBI Act and the PFUTP Regulations 2003, which we reproduce for convenience herein:- SEBI ACT, 1992 Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control. 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 recognized 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) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities which are listed or proposed to be listed on a recognised stock exchange; (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; (d) engage in insider trading; (e) deal in securities while in possession of material or non- public information or communicate such material or non-public information to any other person, in a manner which is in contravention of the provisions of this Act or the rules or the regulations made thereunder; (f) acquire control of any company or securities more than the percentage of equity share capital of a company whose securities are listed or proposed to be listed on a recognised stock exchange in contravention of the regulations made under this Act. Chapter II of PFUTP Regulations, 2003 PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO THE SECURITIES MARKET

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) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (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; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under.

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; (d) paying, offering or agreeing to pay or offer, directly or indirectly, to any person any money or moneys worth for inducing such person for dealing in any security with the object of inflating, depressing, maintaining or causing fluctuation in the price of such security; (g) entering into a transaction in securities without intention of performing it or without intention of change of ownership of such security;

13. The contention of the learned counsel for the appellants that there is no price manipulation nor even any analysis of the changes in price and therefore no violation of PFUTP Regulations has no merit since volume manipulation is also a PFUTP violation, particularly, as stated under Regulation 4(2)(a). Further, the contention that appellants were mere pawn in the hands of Kamal Kothari, the MD of the broker M/s. Guiness Securities Ltd. does not have any merit since they were not only senior officials and accomplices as evidenced from their roles and functions and/or in terms of the role in recommending the scrip to other entities. Therefore, the finding in the impugned order that they were enablers in perpetuating the violations cannot be faulted.

14. Penalty of Rs. 20 lakh each on two appellants (Devang Vyas and Rajiv Gandhi) and Rs. 10 lakh on Shailesh Shah have been imposed under Section 15HA of SEBI Act which provides for a penalty of not less than Rs. 5 lakh but which may extend to Rs. 25 crore or the three times an amount of profits made, whichever is higher. Accordingly, the penalty amount imposed cannot be considered as harsh or disproportionate. However, at the same time, we note that Devang Vyas appellant in Appeal No. 165 of 2019 had won an arbitral award on part of his alleged trades which has not been dealt with properly by the AO of SEBI. When the appellant had won an award against the broker for certain disputed trades and thereby compensated for the said fact had to be considered in the order. Since this fact has not been dealt with in the impugned order, we are not able to decipher whether this benefit was given to the appellant while calculating the amount of penalty. In the absence of which and in the interest of justice, the penalty amount imposed on Devang Vyas, appellant in Appeal No. 165 of 2019, needs to be reduced.

15. In the result, while upholding the impugned order on merits we reduce the amount of penalty imposed on Devang Vyas from Rs. 20 lakh to Rs. 15 lakh. The amounts of penalty imposed on the appellants Rajiv Gandhi and Shailesh Shah at Rs. 20 lakh and Rs. 10 lakh respectively is retained. Therefore, Appeal No. 165 of 2019 is partly allowed and Appeal Nos. 164 of 2019 and 166 of 2019 are dismissed, with no orders on costs. Appellants are directed to pay the amounts of penalty within four weeks from the date of this order. Sd/- Justice Tarun Agarwala Presiding Officer Sd/- Dr. C.K.G. Nair Member 07.02.2020 Prepared and compared by:msb

Shailesh Shah v. Securities And Exchange Board Of India .

Securities Appellate Tribunal (SAT) — Order dated 07.02.2020

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellants' Arguments (as presented in the opinion)

Respondent's Arguments (SEBI)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Shailesh Shah v. Securities And Exchange Board Of India .

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