SAT Restrains Respondent from Trading; Orders Deposit of Gains in Escrow; SEBI to Probe in 2 Months Else Order Vacated

Case Details: Securities and Exchange Board of India v. Arshad Warsi - [2023] 156 taxmann.com 534 (SAT-Mumbai)

Judiciary and Counsel Details

• • Justice Tarun Agarwala, Presiding Officer & Ms Meera Swarup, Technical Member
  • Akshay Petkar, Adv., Vivek Punjabi, Ms Shweta Bhagchandani, Ms Kinnari Mehta & Ms Pranhita Singh, Advs. for the Appellant.
  • Pradeep Sancheti, Sr. Adv., Mihir Mody & Arnav Misra, Advs. for the Respondent.

Facts of the Case

In the instant case, the Respondent was involved in a case related to the stock of the company, through a pump and dump scheme and violated section 12A of SEBI and regulations 3 and 4 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995. The SEBI, therefore, by ex parte interim order barred respondent from accessing the securities market.

SAT Held

Consequently, an appeal was preferred with SAT. The SAT, however, by impugned interim order while setting aside SEBI’s direction, had issued directions including impounding of 50 per cent of alleged unlawful gains and further restraining the respondent from accessing the securities market during the pendency of the investigation.

Further, the SAT also directed SEBI to complete the investigation within six months and initiate appropriate proceedings, if any, against respondents. Subsequently, the respondent was also seeking modification of impugned directions.

It was noted that the investigation before SEBI was still going on and prima facie, no fresh material had come on record to show the involvement of the respondent. The Respondent had co-operated though co-accused were not co-operating and that was why it was quite possible that investigation was not being completed.

Considering aforesaid, in interest of justice, the SAT held that the application by respondent seeking modification of impugned directions was to be disposed of permitting the SEBI to complete the investigation within 2 months.

Also, in event investigation was not completed, the directions contained in impugned order would stand vacated and it would be open to respondent to trade in scrip in question and he would be permitted to withdraw amount that had been deposited pursuant to the impugned order.