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IN THE SECURITIES APPELLATE TRIBUNAL MUMBAI Appeal No.148 of 2005 ����������� ������� Date of Decision :26.10.2006
Shri Saleh Doctor, Sr. Advocate alongwith Shri Pesi
Modi, Advocate and Shri Vinay Chauhan, Advocate for the Appellant Shri Kumar Desai, Advocate alongwtih Ms. Daya Gupta,
Advocate for the Respondent CORAM ����������� Justice N.K. Sodhi, Presiding Officer ����������� R.N. Bhardwaj, Member Per:� R.N. Bhardwaj, Member This appeal
filed under section 15T of the Securities and Exchange Board of India Act, 1992
is directed against the order dated August 8, 2005 passed by the adjudicating
officer imposing a penalty of Rs.5 lacs on the appellant and Anjudi Property
and Investment P. Ltd. for trading in the shares of Tata Finance Ltd.
(hereinafter referred to as �TFL�) in March, 2001 in violation of the
Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 1992 (hereinafter referred to as �the Regulations�).� It is alleged that the appellant had sold 2.5
lac shares of TFL as per table given below on
It was
alleged that Dr. Anjali Beke was known to Shri Dilip Pendse, managing director
of TFL for the last more than ten years and Shri Pendse had also introduced
Anjudi Property and Investment Pvt. Ltd. (API) for opening its account with
Canara Bank and Citi bank. ����������� It is alleged that the price
sensitive information related to the loss of Rs.79.37 crores for the year
ending March, 2001 by Nishkalp Investment and Trading Company Ltd. (NITC) which
is wholly owned by TFL.� This information
of loss came to be known to the general public only on 30th April,
2001 when the results were published where as the appellant came to know of
this crucial price sensitive information from Shri Dilip Pendse earlier and she
alongwith API sold 2.5 lac shares of TFL on 28th March, 2001 at a
price of Rs.90/- whereas the price of the share had fallen to Rs.30/- after the
publication of the results.� They, thus,
made huge unjust profits by selling these shares. ����������� Based on this information, the
Securities and Exchange Board of India (for short �the Board�) issued a show
cause notice under Rule 4(1) of the Securities and Exchange Board of India
(Procedure for Holding Enquiry and Imposing Penalty by Adjudicating Officer)
Rules, 1995 to the appellant and asked her to submit her reply.� The appellant denied these allegations in her
reply to the show cause notice and submitted that the appellant did not trade
in these shares.� According to her she
did not benefit out of the trading of these shares, and that Shri Dilip Pendse
was only trading on her behalf and API.�
Dr. Beke submitted that she had known Shri Pendse for a long time as he
was her family friend and she only agreed to have the accounts opened in her
name for his sake which were solely operated by Shri Dilip Pendse.� The adjudicating officer on receipt of their
reply considered the material available with him, alongwith the statements made
by Dr. Anjali Beke on oath and the written submissions while adjudicating the
issue.� The operative part of the
impugned order dated 8th August, 2005 against which this appeal has
been filed reads as under:- �Having
regard to the nature and gravity of charges established, the factors contained
in Section 15 J of the SEBI Act, 1992 with particulars reference to the unjust
enrichment derived out of the impugned transactions and following the order of
Securities Appellate Tribunal in Appeal No.151/2004 dated 7.2.2005 cited above,
a penalty of Rs.5 Lakhs is imposed on Dr. Anjali Beke and Anjudi Property &
Investment Private Limited. ����������� Both Dr. Anjali Beke and Anjudi
property and Investment Private Limited are jointly and severally liable to pay
the penalty amount immediately on receipt of this order through a crossed
demand draft drawn in favour of �SEBI- Penalties remittable to the Government
of India� and payable at Mumbai which may be sent to Shri R.K. Nair, Executive
Director, Securities and Exchange Board of India, Mittal Court, B Wing, 224
Nariman Point, Mumbai � 400 021.� The learned
senior counsel for the appellant argued that Shri Pendse was a family friend
for the last 15 years and Shri Pendse wanted to form a private limited company
himself but he requested Dr. Anjali Beke and her husband to become directors of
API which was started with the initial subscribed capital of Rs.20,000/- only
some time in December, 1999.� She agreed
to be on the Board of API for the sake of her relationship with Shri
Pendse.� He contended that Shri Pendse
himself was administering the said company from his own residence which is
confirmed from various records.� The
records pertaining to API were brought to the house of Dr. Anjali Beke only in
July/August 2001.� Neither Dr. Anjali
Beke nor her husband received any remuneration as directors from the
company.� He pointed out that the
dividend cheques from companies were received at A 5, Seaface Park, 2nd
Floor, 50 Bhulabhai Desai Road, Mumbai -26, which was the address of Shri
Pendse.� He further submitted that the
receipts issued by the courier company Blue Dart in the name of API also
contained the same address of Shri Pendse.�
He strenuously urged that all this was a clear proof that the appellant,
Dr. Anjali Beke had nothing to do with the activities of the company of which
she and her husband were the directors and that they did not attend to any job
pertaining to this company.� In support
of this argument, the learned senior counsel mentioned that even the address of
depository participants, IIT Corporate Services contained the address of Shri
Dilip Pendse.� It was only on 8th
June, 2000 that the existing address of API got changed from A 5, Seaface Park,
2nd Floor, 50 Bhulabhai Desai Road, Mumbai -26, to Shivaji Park,
Dadar which is the residential address of Dr. Anjali Beke.� The learned
senior counsel contended that the subscribed capital of API was only
Rs.20,000/- and inter company deposits could not have been given to the company
without the active involvement of Shri Dilip Pendse.� Dr. Anjali Beke was not in a position to have
arranged huge amounts of loans and company deposits.� She had clearly stated that she did not know
Shri Manoj Tirodkar who gave loan of Rs. 1 crore on ����������� The learned counsel for the
respondent argued that it was clearly a case of insider trading in terms of
Regulation 2(e) of the Regulations.� He
referred to the statements made by the appellant before the Board on different
dates to contend that she had been carrying on the business herself and that it
could not be said that Shri Pendse was carrying on the business in her name.� He further contended that she was in the know
of unpublished price sensitive information and was, therefore, an insider and
since she traded in the shares of TFL, the charge against her is fully
established. ����������� We have heard the learned counsel
for the parties and before we deal with their contentions, it is necessary to
refer to the provisions of the Regulations 2(e) and 3. ����������� �2.�
In these regulations, unless the context otherwise requires:- (e)
�insider� means any person who, is or was connected with the company or is
deemed to have been connected with the company, and who is reasonably expected
to have access by virtue of such connection to unpublished price sensitive
information in respect of securities of the company, or who has received or
has had access to such unpublished price sensitive information; 3.� No insider shall- ��� (i) either on his
own behalf or on behalf of any other person, deal in securities of a company
listed on any stock exchange [when in possession of] any unpublished price
sensitive information; or � (ii)� communicate counsel or procure directly or
indirectly any unpublished price sensitive information to any person who while
in possession of such unpublished price sensitive information shall not deal on
securities: �������� Provided that
nothing contained above shall be applicable to any communication required in
the ordinary course of business [or profession or employment] or under any
law.� In view of
the above, when a person has received unpublished price sensitive information
or who has had access to such information, he becomes an insider.� He need not be a person connected with the
company.� It is an admitted fact that Dr.
Anjali Beke was well known to Shri Dilip Pendse for more than ten years and it
is her own case that he carried on business in her name.� Their closeness cannot, therefore, be in
doubt.� It is because of this closeness
that he passed on the unpublished price sensitive information to her on the
basis of which she traded in the shares of TFL.�
She is, therefore, an insider.�
Shri Pendse was the managing director of TFL of which NITC was a wholly owned subsidiary and,
therefore, by virtue of this connection he had access to the unpublished price
sensitive information in respect of the securities of TFL.� Unpublished price sensitive information was the
loss suffered by NITC which had a direct bearing on the price of the shares of
TFL.� The charge of insider trading is
complete when it is established that an insider traded in the scrips of the
company.� We have already held that the
appellant was an insider and it is on record that she and API had sold the
shares of TFL before the price sensitive information was made public on Statement
dated Q.� Have you placed any orders with the aforesaid
brokers for transactions in the scrip of TFL in the name of Anjudi properties
and Dr. Anjali Beke and others (AOP).� If
yes, how were the orders placed. A.� Yes.� I
have placed orders for purchase and sale of shares of TFL with the aforesaid
brokers for transactions in the name of Anjudi properties and Dr. Anjali Beke
and others (AOP).� The orders were placed
over telephone. Q.� Did any other person, ever, place orders on
behalf of Anjudi Properties, if yes. Please give the name of the persons? A.� As far as I remember no other person except I
gave any order for the transaction on behalf of Anjudi Properties. Statement
dated Q.� Who is looking after the management,
day-today operations of Anjudi. A.� Anjudi properties upto date has only dealt
with share transactions.� As far as
placing of orders is concerned, I am the one who looks into it.� There are no other operations apart from
share transactions in this company. Q.� Who has been authorized to sign cheques,
documents, consent letters for placement of orders with brokers,
acknowledgements for contract notes, vouchers in banks, consent letters given
to brokers for placement for orders. A.� The authorized signatories for the accounts
of Anjudi Property in banks are myself and Dr. Dilip Beke, the other
director.� Majority of the cheques were
signed by me.� Contract notes might have
been signed by myself or sometimes by my Accountant depending upon my
availability.� Mostly it might have been
signed by me or my accountant when I was not available. Q.� Who was looking after the deliveries to be
received or given for share transactions of Anjudi. A.� As far as I remember, I used to sign the
delivery instruction form blank and keep it with the accountants Ms. Mona, who
used to fill it forward it to the broker when asked for.� Sometimes brokers also used to fill the
signed demat delivery instructions forms forwarded to them. Q.� Whether the transactions for sale of 2,30,000
shares of Tata Finance was done on any stock exchange or it was an off-market
deal. A.� As far as I remember, the transactions was
not done on any stock exchange.� It was
an off-market transactions. ����������� Q.� How do you decide to purchase or sale certain
share.� What are the parameters used by
you in selecting scrips.� What analysis
is done before making any purchase or sell decision for any scrip. ����������� A.� There plenty of reading material, plenty of
material in the news items like CNBC, Moneymatters, plenty of magazines, plenty
of research reports carried out by big finance firms like Morgan Stanley, CSFB
etc of very good repute supplemented by tips circulating in the market on a day
to day basis and information from friends.�
Analysing all this helps one to conclude a decision of sell or purchase
in a particular share whether right or wrong. From the
answers to the various queries which she has voluntarily given on oath to the
Board, it becomes abundantly clear to us that not only was she herself dealing
in the shares and executing the transactions through select brokers but she was
quite knowledgeable about the market and its functioning.� She also seems to be in complete control of
the operations of the company registered in her name and also the transactions
done by her.� It could not, therefore, be
accepted that she was totally novice about the market and its functioning and
share transactions.� Her own recorded
statements confirm that she was taking keen interest in the affairs of the
company.� She uses familiar market
terminology and even abbreviations which go to show that she had acquired
sufficient operational knowledge of the share market.� Her later statements in which she has totally
denied having any thing to do with the trading of shares or with the affairs of
API could not be relied upon.� It could
be her second thoughts to wriggle out of this tangled situation which impelled
her to change the earlier statements.�
Admittedly, she had close proximity with Shri Dilip Pendse and it is
also a fact that Shri Pendse had access to unpublished price sensitive
information and the appellant also sold 2.5 lac TFL shares in the month of
March before the results were declared in April, 2001.� The appellant therefore made huge profits
from this transaction.� There are a
number of loan transactions between API and the companies of Shri Pendse.� It is quite understandable that Shri Pendse
would have helped her to get the loans arranged for API but this did not imply
that the appellant had noting to do with the affairs of the company of which
she and her husband were the directors. In the
result, we find no merit in the appeal and dismiss the same.� No order as to costs. ����������������������������������������������������������������������������������������������� ����������������������������������������������������������������������������������������������������������� Sd/- ����������������������������������������������������������������������������������������������� Justice N.K. Sodhi ����������������������������������������������������������������������������������������������� Presiding Officer ����������������������������������������������������������������������������������������������������������� Sd/- ����������������������������������������������������������������������������������������������� R. N. Bhardwaj ����������������������������������������������������������������������������������������������� Member RRN |
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