BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision: 27.11.2019 Appeal No.404 of 2019 Naishadh Desai 3, Serenity, Nariman Road, Vile Parle (East), Mumbai – 400 057. … Appellant Versus Securities & Exchange Board of India SEBI Bhavan, Bandra Kurla Complex, Mumbai – 400 051. …Respondent Mr. Naishadh P. Desai, Advocate for the Appellant. Mr. Kumar Desai, Advocate with Mr. Mihir Mody, Advocate and Mr. Shehaab Roshan, Advocate i/b. K. Ashar & Co. for the Respondent. CORAM: Justice Tarun Agarwala, Presiding Officer Justice M.T. Joshi, Judicial Member Per : Justice M.T. Joshi (Oral)

1. Aggrieved by the imposition of penalty of Rs.12 lakhs

for the violation of the provisions of clause 3.3.1 of Model Code of Conduct for Prevention of Insider Trading for listed companies specified under Schedule I of Part A (hereinafter referred to as “Model Code of Conduct) read with Regulation 12(1) of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (hereinafter referred to as ‘PIT Regulations, 1992’) and Regulation 12 of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (hereinafter referred to as ‘PIT Regulations, 2015’) the present appeal is preferred.

2. Admitted facts of the case are that while the appellant

was working as Senior Vice President and Company Secretary of Financial Technologies (India) Limited (hereinafter called as the Company) he has in the month of June, 2012 and July, 2012 traded beyond threshold limit of 5000 shares of the Company without obtaining pre-clearance of the transactions as mandated by clause 9(b)(i) of the Code of Conduct. Those transactions are as under:- Date Buy Buy Value Sell Sell Value Quantity Quantity 22.06.2012 1,000 6,84,000 1,000 6,87,000 25.06.2012 1,000 7,11,000 1,000 7,12,747 26.06.2012 1,000 7,20,000 1,000 7,31,342 28.06.2012 1,000 7,20,000 1,000 7,26,000 29.06.2012 1,000 7,32,997 1,000 7,36,987 Total (June) 5,000 35,67,997 5,000 35,94,076 02.07.2012 1,000 7,45,000 1,000 7,55,020 03.07.2012 2,000 15,29,994 2,000 15,35,673 05.07.2012 1,000 7,56,000 1,000 7,48,650 06.07.2012 1,000 7,51,596 1,000 7,43,900 09.07.2012 1,000 7,52,941 1,000 7,45,900 11.07.2012 1,000 7,77,000 1,000 7,74,776 Total (July) 7,000 53,12,531 7,000 53,03,919 Grand Total 12,000 88,80,528 12,000 88,97,995 (June + July)

3. The appellant submitted that in his career of 28 years

for the first time inadvertently due to the communication gap between himself and his broker trading in the shares of the Company had occurred. He had already undergone multiple angioplasties in the recent past which had affected his earnings significantly. Therefore, he was not able to work full time and, therefore, the lapse may be condoned.

4. The Adjudicating Officer took into consideration the

provisions of Section 15HB of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’) which provides for maximum penalty of Rs.1 Crore where no separate penalty is provided. He also took into consideration the provisions of Section 15J of the SEBI Act which provides for taking into consideration three factors while adjudging the quantum of penalty. a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; b) the amount of loss caused to an investor or group of investors as a result of the default; c) the repetitive nature of default

5. The Adjudicating Officer after adverting to these

provisions underlined that the violation was repetitive in nature for two months. It was further observed that the amount of disproportionate gain or unfair advantage to the noticee or loss caused to the investor as a result of default cannot be quantified from the available material on record. In the circumstances, the penalty of Rs.12 lakhs as detailed supra came to be imposed. Hence the present appeal.

6. Mr. Somasekhar, learned counsel for the appellant

submits that the appellant does not deny that the violation of the provision has been committed. He however submitted that in the circumstances penalty imposed is too harsh. He pointed towards the fact that the total gain made by the appellant by alleged violation is Rs.88,97,995 – Rs.88,80,528 = Rs.17,467/-. He therefore submitted that under the provision of Section 15HA of the SEBI Act a penalty three times the amount of the profit i.e. Rs.55,000/- could be just and reasonable.

7. On the other hand, Mr. Kumar Desai, learned counsel

for the respondent submitted that taking into consideration the repetitive nature of the violation the penalty imposed by the Adjudicating Officer is just and proper.

8. Upon hearing both the sides, in our view, the penalty

imposed by the Adjudicating Officer is disproportionate to the violation in the circumstances, as detailed by the appellant. The appellant had a long career of 28 years prior to the violation. He had undergone multiple angioplasties. He explained that due to a communication gap between him and the broker the violation had occurred which resulted into a meager profit of Rs.17,467/-. Taking into consideration these factors in our opinion a penalty of Rs. 2 lakhs instead of Rs.12 lakhs as imposed by the Adjudicating Officer would be just and sufficient.

9. For the reasons stated aforesaid, the appeal is partly

allowed. The impugned order is affirmed except the penalty which is reduced from Rs.12 lakh to Rs.2 lakh which shall be paid within four weeks from today by the appellant to respondent SEBI. Sd/- Justice Tarun Agarwala Presiding Officer Sd/- Justice M.T. Joshi Judicial Member 27.11.2019 Prepared and compared by RHN