Pooja Menghani vs Sebi

3. The gravamen of the allegations which can be culled out from the facts in Civil Appeal No.2595 of 2013 is that one Dipak Patel (respondent in Civil Appeal No.2596 of 2013), who was holding a position of trust and confidence in one M/s Passport India Investment (Mauritius) 4 Limited (hereinafter referred to as “M/s Passport India”), was privy to privileged/confidential information that M/s Passport India would be making substantial investments in particular scrips through the stock exchanges. Dipak Patel is alleged to have parted the said information to his cousins Kanaiyalal Baldevbhai Patel [respondent in Civil Appeal No.2595 of 2013] and Anandkumar Baldevbhai Patel [respondent in Civil Appeal No.2594 of 2013 (disposed of on 5th April, 2017)] who on various dates placed orders for purchase of scrips a few minutes before the bulk orders in respect of the same scrips were placed on behalf of M/s Passport India by Dipak Patel. The bulk order/orders, because of the sheer volume, naturally had the effect of pushing up the prices of the particular scrips and no sooner the prices had 5 increased, Kanaiyalal Baldevhai Patel and Anandkumar Baldevbhai Patel had traded the said scrips thereby earning substantial profits. The large volume of the shares traded in the above manner; the several number of days on which such trading took place; and the close proximity of time between the sale and purchase of the shares i.e. before and after the bulk purchases, were alleged by the appellant - Securities and Exchange Board of India (“SEBI” for short) to be amounting to fraudulent or unfair trade practice warranting imposition of penalty and visiting the offending individuals with other penal consequences.

1. I have had the privilege of going through the very erudite judgment of my learned brother Ramana, J. I can only 2 agree with the trend of reasoning that my learned brother has chosen to adopt to arrive at his ultimate conclusions. However, I am of the view that the present case is capable of resolution within a very narrow spectrum of law and on an interpretation of the relevant provisions of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations 2003 (hereinafter referred to as “2003 Regulations”). I, therefore, propose to record my own views in the matter.

2. The relevant provisions of the 2003 Regulations which would require consideration of this Court has been set out in extenso by my learned brother and, therefore, I need not burden this order with a repetition of the same. All that I 3 consider necessary to point out is that it is the provisions of Regulation 2(c),(3) and (4) of the 2003 Regulations which would require a consideration from the limited stand point of whether the actions attributable to the respondents in Appeal Nos.2595 of 2013, 2596 of 2013 and 2666 of 2013 and appellants in Appeal Nos.5829 of 2014 and 11195-11196 of 2014 come within the four corners of fraudulent or unfair trade practice as contemplated by the aforesaid provisions of the 2003 Regulations.

4. The adjudicating authority held the respondents liable. The Securities Appellate Tribunal (“Appellate Tribunal” for short) before whom appeals were filed 6 by the aggrieved persons (respondents herein) interfered with the orders passed by the adjudicating authority primarily on the ground that on a reading of Regulation 2(c),(3) and Regulation(4) of the 2003 Regulations it does not transpire that the acts attributable amount to fraudulent or unfair trade practice warranting the findings recorded by the Adjudicating authority and the imposition of penalty in question on that basis.

7. The dictionary meaning of the word “induced” may now be taken note of.

15. Consequently and in view of the 17 above Civil Appeal Nos. 5829 of 2014 and 11195-11196 of 2014 are dismissed and Civil Appeal Nos. 2595, 2596 and 2666 of 2013 are allowed.

(RANJAN GOGOI) NEW DELHI SEPTEMBER 20, 2017