The adjudication proceedings against the noticee abated and the show cause notice disposed of – THE SECURITY AND EXCHANGE BOARD OF INDIA
The adjudication proceedings against the noticee abated and the show cause notice disposed of – THE SECURITY AND EXCHANGE BOARD OF INDIA The SEBI conducted an investigation into trading activity and found large scale reversal of trades in the stock options segment of the BSE and  Ms. Sulochana Devi Gadia (NOTICEE) was found for conducting reversal trades In the segment of the stock and was alleged to violating regulations 3(a), (b), (c), (d), 4(1) and 4(2) (a) of the Securities and Exchange Board of India Regulations, 2003. adjudication proceedings were conducted against the noticee by the appointed adjudication officer Mohamed Rahaz P. M in  (ADJUDICATION ORDER NO. Order/MR/VV/2021-22/14993) The results of the investigation showed that out of the total trades executed on the BSE stock options segment, around 81% were reversal / non-genuine and these trades led to the creation of artificial trades and the creation of the false identity of shares. The adjudication proceedings were initiated against the noticee and a show-cause notice under rule 4(1) of the Adjudication Rules to show cause as to why an inquiry should not be held and penalty not be imposed against the Noticee under section 15HA of the SEBI Act for the alleged violation of regulations 3(a),(b),(c),(d), 4(1) and 4(2)(a) of the PFUTP Regulations. The show-cause notice alleged that the noticee had indulged in reversal trades which allegedly created a false and misleading appearance of trading and noticee engaged in two (2) trades in one (1) unique contract and the trades were reversed with the same counterparty at a substantial price difference without any basis, which indicates that these trades were artificial and non-genuine. The grandson of the noticee through an authorized representative responded to the SCN that the proceedings against the noticee should be closed because of the death of the noticee and relied on the case of Alamelu Veerappan Vs. Income Tax Officer wherein it was held that notice issued in the name of dead person is unenforceable in the eye of law and view of the decision of  Chandravadan J Dalai Vs. SEBI the proceedings should be abated in the present matter. The officer considered the issues and pursued the charges leveled against the noticee and considering the facts and procedure of the case and the submitted death certificate submitted by the noticee representative and before deciding on the merit of the case finds that whether because of the demise of the Noticee, the present adjudication proceedings against the Noticee can be continued. The officer relied on the case of  Girija Nandini Vs Bijendra Narain and the case of Chandravadan J Dalal vs. SEBI and finds that that the cases in which the noticee dies during the pendency of the appeal and the appeal abates in the appeal. From the facts and documents submitted the officer passed the order that the instant adjudication proceedings against the Noticee are liable to be abated without going into the merits of the case. The officer disposed of the SCN issued against the noticee accordingly and under rule 6 of the Adjudication Rules, 1995 the copy of the order is sent to the noticee.
BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA ADJUDICATION ORDER NO. Order MR VV 2021 22 14993 UNDER SECTION 15 I OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT 1992 READ WITH RULE 5 OF THE SECURITIES AND EXCHANGE BOARD OF INDIARULES 1995. In respect of: Late Ms. Sulochana Devi Gadia PAN: ADSPG0278M In the matter of dealings in Illiquid Stock Options at the BSE BACKGROUND Securities and Exchange Board of Indiaconducted an investigation into the trading activity in illiquid stock options on BSE Limited for the period April 01 2014 to September 30 2015 after observing large scale reversal of trades in the stock options segment of the BSE. The investigation revealed that during the investigation period out of the total trades executed on the BSE stock options segment around 81% were reversal non genuine. It was observed that Ms. Sulochana Devi Gadiawas one among the various entities who had indulged in execution of reversal trades in stock options segment of BSE during the investigation period. The aforesaid reversal trades allegedly resulted into generation of artificial volumes leading to allegations that the Noticee had violated regulations 3(a) (c) d) 4(1) and 4(2) of the Securities and Exchange Board of India Regulations 2003 hereinafter referred to as the “PFUTP Regulations”). APPOINTMENT OF ADJUDICATING OFFICER SEBI initiated adjudication proceedings and appointed the undersigned as the adjudicating officer under section 15I of the Securities and Exchange Board of India Act 1992read with rule 3 of the Securities and Exchange Board of IndiaRules 1995 vide order dated September 20 2021 to inquire into and adjudge under section 15HA of the SEBI Act against the Noticee for the alleged violation of the provisions of regulations 3(a) c) 4(1) and 4(2) of the PFUTP Regulations. The said appointment was communicated vide communiqué dated September 27 2021. SHOW CAUSE NOTICE REPLY AND HEARING A show cause notice dated January 7 2022 bearing number “SEBI HO LAD1 LAD1_DOP3 P OW 2022 1015 1” was served upon the Noticee under rule 4(1) of the Adjudication Rules to show cause as to why an inquiry should not be held and penalty not be imposed against the Noticee under section 15HA of the SEBI Act for the alleged violation of regulations 3(a)(c)4(1) and 4(2)(a) of the PFUTP Regulations. The SCN was served to the Noticee vide an e mail dated January 10 2022. The SCN was duly served at the address of the Noticee vide Registered Post AD on January 13 2022. The SCN issued to the Noticee inter alia alleged the following: The Noticee was one of the entities which had indulged in reversal trades which allegedly created false and misleading appearance of trading generating artificial volumes in stock options segment of the BSE during the investigation period The Noticee had engaged in twotrades in oneunique contract which led to generation of artificial volume in the aforesaid unique contract In the said contract the trades entered by the Noticee were reversed with the same counterparty at a substantial price difference without any basis which indicates that these trades were artificial and non genuine in nature and The Noticee’s twotrades in the said contract during the investigation period had allegedly generated artificial volume of 88 000 units which made up 14.86% of total market volume in the said contract during the investigation period and 16.79% of total market volume in the said contract on March 10 2015 i.e. the day on which the Noticee traded. By indulging in execution of the aforesaid non genuine reversal trades the Noticee had allegedly violated regulations 3(a)(c)4(1) and 4(2)(a) of the PFUTP Regulations. Mr. Dhiraj Kumar the grandson of the Noticee through an authorized representative Mr. Ram Awatar Dhoot submitted the reply to the aforesaid SCNvide email dated January 21 2022 and speed post dated January 21 2022 which was received on January 31 2022 wherein it is inter alia submitted as follows: a. That the Noticee has passed away on December 24 2016 and therefore the adjudication proceedings should be closed b. That in view of the decision of the Hon’ble Madras High Court in Alamelu Veerappan Vs. Income Tax Officer wherein it was held that the notice issued in the name of the dead person is unenforceable in the eye of law the present proceedings shall be dropped and c. That in view of the decision of the Hon’ble Securities Appellate Tribunal in Chandravadan J Dalai Vs. SEBI also the present proceedings should be abated. CONSIDERATION OF ISSUES AND FINDINGS I have carefully perused the charges levelled against the Noticee in the SCN the reply dated January 21 2022 and the documents material available on record. The AR vide email dated January 21 2022 provided a copy of the notarized death certificate of the Noticee and the original of the same was received vide speed post on January 31 2022. The said death certificate dated April 25 2017 bearing registration no. D 2017: 20 9009 000047 has been issued by the Government of Jharkhand and as per the records the Noticee had passed away on December 24 12. After perusal of the documents available on record and before proceeding in the matter on its merit it would be in the fitness of things to first decide the preliminary issue as to whether in view of the demise of the Noticee the present adjudication proceedings against the Noticee can be continued. In Girija Nandini Vs Bijendra Narain1 the Hon’ble Supreme Court observed that in case of personal actions i.e. the actions where the relief sought is personal to the deceased the right to sue will not survive to or against the representatives and in such cases the maxim ‘actio personalis moritur cum persona’would apply. 1 Decided on August 11 1966. It is also relevant to refer to the decision of Hon’ble Securities Appellate Tribunal in Chandravadan J Dalal vs. SEBI2 wherein it is inter alia held that: “The appeal abates since the appellant during the pendency of the appeal died on 29th November 2004. The appeal accordingly abates. The penalty imposed on the original appellant being personal in nature also abates.” In view of the foregoing I am of the view that the instant adjudication proceedings against the Noticee are liable to be abated without going into the merits the case and the SCN dated January 7 2022 bearing number SEBI HO LAD1 LAD1_DoP3 OW 2022 1015 1 issued against the Noticee is disposed of accordingly. In terms of rule 6 of the Adjudication Rules 1995 copy of this order is sent to the Noticee’s last known address and also to SEBI. Date: February 16 2022 Mohamed Rahaz P. M. Place: Mumbai Adjudicating Officer 2 Decided on June 15 2005. 