P.S. Dinesh Kumar, Presiding Officer

This appeal is directed against order dated September 26, 2022, passed by the AO1, SEBI2 imposing a penalty of ₹8 Lakhs on the appellant for violation of the SEBI Act, 19923 and SEBI (PFUTP) Regulations, 20034.

2. We have heard Mr. Vinay Chauhan, learned Advocate for the appellant and Mr. Sumit Rai, learned Advocate for the SEBI.

3. Brief facts of the case are, SEBI conducted an investigation into the trading of the scrip of “Global Infratech Adjudicating Officer Securities and Exchange Board of India Securities and Exchange Board of India Act, 1992 Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 and Finance Limited‟ (“GIFL/Company‟ for short) between December 20, 2017 and February 15, 2018. It revealed that during the investigation period, the total traded volume was 99,92,494 shares. Appellant had bought 15,43,083 shares (15.44% of total market volume) and sold 15,34,675 shares (15.36% of total market volume) on the BSE platform. He had placed 1,597 orders (945 “buy‟ orders and 652 “sell‟ orders) for 88,86,824 shares. Out of 945 “buy‟ orders, he deleted 550 orders for 44,60,565 shares. Out of 652 “sell‟ orders, he deleted 176 orders for 11,00,893 shares.

4. In substance, SEBI‟s allegation is, appellant placed large orders and subsequently, deleted some of them to mislead investors. SEBI issued a show cause notice (“SCN‟ for short) dated January 29, 2021 calling upon the appellant to show cause as to why an enquiry should not be initiated and penalty be not imposed under Section 15HA of the SEBI Act for violation of Section 12A (a), (b), (c) of the SEBI Act, Regulation 3(a), (b), (c), (d) and 4(1) of PFUTP Regulations. After receiving reply and additional reply, SEBI has passed the impugned order.

5. Mr. Vinay Chauhan, learned Advocate for the appellant submitted that:

               i. Appellant is a frequent trader in the GIFL scrip. Prior to the investigation period, he was buying and selling GIFL shares in the ordinary course of trading and accumulated 2,74,137 shares.

               ii. During the investigation period, appellant bought 15,43,083 shares and sold 15,34,675 shares and retained the remaining. He also received 2,28,199 shares post investigation period on delivery of shares.

               iii. Appellant had deleted the orders in normal course of business and traded in the market legitimately. A utomatic order deletion is an integral aspect of electronic limit order books. The BSE Bolt system includes “order cancellation‟ as a standard feature.

               iv. During the investigation period, traders collectively deleted more than 1,92,31,246 shares in the market and the appellant has deleted only 55,61,458 shares.

               v. The adverse inference drawn by the SEBI against appellant for high deletion percentage exceeding the executed quantity is incorrect. SEBI has failed to consider auto-deletions, partial executions and other legitimate reasons for deletions. Total deleted shares are 55,61,458 shares out of which 25,92,677 shares were auto deleted and 12,52,552 shares were deleted after partial execution. Thus, actual deletion is of only 17,16,229 shares.

               vi. Appellant has traded in 30,77,758 shares and allowed 65 orders to be partially executed before deletion. This shows that orders were placed with legitimate trading purpose and deletion is attributable to shift in market conditions and such behaviour is recognized as lawful in trading. Further, there is no prohibition to delete orders and mere deletion cannot attract manipulative intent.

               vii. Orders were either manually deleted by the appellant or auto-deleted by the Exchange for following reasons:

               a) Partial non-execution,

               b) Prolonged non-execution or

               c) Factors such as market volatility or margin shortfall, etc. viii. SEBI has failed to substantiate the allegation of creation of artificial depth in the order book and misleading investors by generating a false appearance of demand by the appellant. There is nothing on record to point out that appellant‟s act has caused any abnormal price fluctuation.

               ix. Orders were placed at or near the Last Traded Price (“LTP‟ for short) which indicates intent to execute. The allegation of a pattern is based on SEBI‟s selection of “cherry-picked‟ trades conducted during particular five days5. The details regarding order placement on these five days and its analysis has surfaced for the first time in the impugned order.

6. With respect to orders which were deleted within a time gap of 4 seconds to 4 minutes, he submitted that none of them except one order can be construed as large order. Others were deleted in pre-market hours. Deleted orders were immediately placed again with better price. Orders deleted within micro-seconds were due to margin shortfall. He submitted that it is humanly impossible to place and delete orders in micro seconds.

7. With respect to the orders placed during pre-opening session, he submitted that such orders do not affect price discovery, if deleted before 09:07 AM and they are only useful in determining the opening price. Deleted orders were very small quantity of 1,385 shares.

8. With respect to deletion of 4 “buy‟ orders for 97,742 shares at 02:17 PM, he submitted that the same were deleted following a five-hour interval. The order was partially executed due to absence of counter-party.

9. With respect to placement on other dates6, he submitted that there is no specific identification of any large quantity which were allegedly deleted.

08.01.2018, 12.01.2018, 18.01.2018, 19.01.2018 and 20.01.2018

10. Certain orders were deleted following the activation of Risk Reduction Mode (“RRM‟ for short) by the broker. When a broker receives an “RRM‟ notification from the Exchange, all orders are automatically cancelled and the mass cancellation notification is also issued. RRM is not client specific. Further, the scrip is not categorised as an illiquid scrip, but it is not highly traded.

11. During the investigation period, investor interest and trading volume were primarily influenced by SMS dissemination and manipulative trading activities by related entities, rather than appellant‟s order placements or deletions.

12. Without prejudice to the above contentions, Mr. Chauhan submitted that the group of entities who were involved in manipulation by SMS circulation were penalized only with ₹5 Lakhs, whereas appellant has been penalized with a penalty of ₹8 Lakhs which amounts to gross discrimination.

13. In reply, Mr. Sumit Rai, learned Advocate for the SEBI submitted that:

               i. On January 08, 2018, appellant had placed 93 “buy‟ orders for 5,11,261 shares and 41 sell orders for 1,67,026 shares as fully disclosed quantity. Within a gap of 4 seconds to 4 minutes after placing orders, he 12.01.2018, 18.01.2018, 19.01.2018 and 22.01.2018 deleted 17 “buy‟ orders for 2,99,517 shares between 09:00 AM and 09:04 AM. The quantity of shares involved in the deleted orders (3,68,466 shares) constitutes 54.32% of the total quantity added by the appellant (6,78,287 shares). Therefore, the quantity of shares involved in the deleted orders was more than the traded quantity.

               ii. Appellant had deliberately punched large number of “buy‟ orders without any intention to execute them. As a result, the order book on the “buy‟ side did not reflect the true and correct picture of the shares in the market and provided a false picture to investors in respect of market demand and supply of the shares. This was done with an intention to induce investors to trade in an otherwise illiquid scrip.

               iii. Appellant also indulged in similar pattern on January 12, 19 and 22 of 2018. Appellant‟s explanation does not provide economic rationale behind the pattern of order placement and deletion.

               iv. In his reply to SCN, appellant contended that there were other traders who had also traded in the same scrip. This contention is untenable because the volume of trades executed by others is miniscule, whereas the appellant had traded 30,77,758 shares.

               v. Appellant had manually deleted 218 orders in respect of 34,88,302 shares, which is greater than the actual traded quantity of 30,77,758 shares. If the appellant had placed orders as a bona fide trader, he would have waited for the closing of the regular market trading hours for “auto-deletion‟ mechanism to take effect in respect of orders which remained pending.

               vi. Appellant had manually deleted large quantity of orders, which shows the manipulative intention to induce investors. Adding and deleting orders has an impact on market integrity and it amounts to violation of PFUTP Regulations.

               vii. Fraud is broadly defined in PFUTP and it is not confined to meaning as the term is normally understood. In support of this submission, he relied upon SEBI v. Terrascope Ventures Limited7.

14. We have carefully considered rival contentions and perused the records.

15. In view of the above, the point that arises for our consideration is whether appellant has placed large orders and deleted in an illiquid scrip rendering himself SEBI v. Terrascope Ventures Limited, decided by the Hon‟ble Supreme Court of India on 17.03.2026 in Civil Appeal Nos.5209 - 5211 of 2022, para 41 and 42.

liable for penal action under SEBI (PFUTP) Regulations, 2003?

16. The main allegation against the appellant is, he has placed orders of large quantity and deleted substantial number of orders. This has the effect of misleading other genuine traders in the market.

17. It is not in dispute that appellant had placed 1,597 orders in respect of 88,86,824 GIFL shares. According to SEBI, he has deleted 726 orders which accounted for 55,61,458 shares (62.58%). In his written submissions, appellant has provided a flow chart and argued that out of 1597, manually deleted orders accounted for only 153 orders for 17,16,229 shares. The said chart is as follows:

               Total Orders = 1597 Total Qty-88,86,824 shares Total Executed Orders=871 Total Deleted Orders=726 Total Executed Qty=30, 77,758 Total Deleted Qty= 55,61,458 shares shares Auto-Deleted Orders =508 Manually Deleted Orders= 218 Manually Auto-Deleted Qty= 25,92,677 shares Deleted Qty= 29,68,781 shares Deleted Orders=508 Orders Deleted due to Partial Other manually deleted Orders Execution = 65 (otherwise) Deleted Quantity = 12,52,552 shares 153 orders for 17,16,229 shares

18. Mr. Chauhan for the appellant vehemently contended that out of 88.86 Lakh shares, orders in respect of 30.77 Lakh shares were executed. He submitted that several orders were automatically deleted for various reasons. SEBI has not taken note of such automatic deletion and partial execution of the trades. Adverting to the above flow chart, he submitted that out of alleged 88.86 Lakh shares, the deleted orders account for only 17.16 Lakh shares.

19. He submitted that appellant is a genuine trader and during the very financial year (FY 2017-18), appellant had traded in 222 scrips with an overall turnover exceeding ₹8000 Crores across the segments. He submitted that appellant had placed the following relevant facts before the adjudicating authority, which were not considered.

               (a) "Started trading in GIFL scrip on 31.05.2017 - six months prior to the investigation period.

               (b) Prior to investigation period the Appellant was both buying and selling the shares in the ordinary course and was a Net buyer in the scrip and had accumulated 2,74,137 shares from 31.05.2017 to 19.12.17.

               (c) During investigation period (20.12.2017 to 15.02.2018), the Appellant had bought 15,43,083 shares and sold 15,34,675 shares and net acquired additional 8,408 shares.

               (d) Total holding post the Investigation period was: 2,28,199 shares on delivery basis

               (e) GIFL constituted only 4.62% of Appellant's total annual cash segment delivery-based trading of Rs 437.38 crores"

20. The AO has recorded8 the following specific allegation against the appellant:

               "e) In view of the above, it was alleged that the Noticee placed large orders and subsequently deleted these orders in an illiquid scrip, so as to mislead the investors. It was also alleged that the order book of the Noticee did not reflect the true picture of the market. In light of the same, it is alleged that the Noticee had violating Sections 12A(a), (b) and (c) of the SEBI Act, Regulations 3(a), (b), (c),(d) and 4(1) of PFUTP Regulations.

               f) The alleged foresaid violations of the PFUTP Regulations by the Noticee, if established, makes the Noticee liable for monetary penalty under the provisions of Section 15(HA) of the SEBI Act."

21. The figures mentioned in flow chart are not in dispute. In para 29 of the impugned order, the AO has recorded thus:

               "As noted earlier, during the IP, Noticee's actual traded quantity i.e. 30,77,758 shares was significantly lower than the Noticee's total order quantity in the 726 buy and sell orders placed by the Noticee during the IP which was 88,86,824 shares. I also note that during the I.P., a total of 508 trades of the Noticee for 25,92,677 shares were auto-deleted by the trading system after the close of regular market trading session at 15:30:00 hrs. However, Noticee manually deleted 218 orders for 34,88,302 shares during the IP which was far in excess of the order quantity involved in the 508 orders (25,92,677 shares) auto- deleted by the trading system and also in excess of Noticee's actual traded quantity i.e. 30,77,758 shares. From the aforesaid analysis, I find that during the IP, Noticee had adopted a deliberate strategy of repeatedly placing and deleting its large buy and sell orders which were disproportionate to In para 4(e) and (f) at page 3 of 45 of the impugned order their actual traded quantities, without any intention of executing such orders, and with the manipulative intention to create artificial depth in the order book and thereby mislead investors. I find that as a result of the aforesaid placement and deletion of orders, the order book on the buy side did not reflect the true and correct picture of the shares of GIFL in the market, and provided a false picture to investors in respect of market demand and supply pertaining to the scrip of GIFL, and this was intended to induce investors to trade in an otherwise illiquid scrip of GIFL during the IP."

               (Emphasis supplied)

22. The AO has recorded that 508 orders for 25,92,677 shares were auto deleted. If this figure is subtracted from the total admitted quantity of deleted shares, the remaining deleted shares work out to 29,68,7819 shares. Appellant has specifically pleaded this aspect both before the AO in his reply to the SCN and it is also annexed with the memorandum of this appeal as Annexure-V. We have perused the same. Appellant has specifically pleaded in his reply at para 3.40 that out of the alleged 218 manually deleted trades, 65 were partially executed. He has also annexed the trade log of the said 65 orders. All this has been pleaded in para 5(E)(4) of the memorandum of appeal10. In SEBI‟s reply, there is a general denial without adverting to these figures. The 65 deleted orders account for 12,52,552 shares. If these shares are subtracted from the admitted manually deleted quantity of 29,68,781 shares, the net Total deleted quantity i.e. 55,61,458 shares (minus) Auto deleted quantity i.e. 25,92,677 shares Page 24 of the memorandum of appeal manually deleted shares reduce to 17,16,229. This is a crucial aspect. This specific defence raised by the appellant has not been considered by the AO. On the other hand, in para 29 of the impugned order, the AO has recorded the manually deleted orders at 218 for 34,88,302 shares without recoding any finding qua appellant‟s contention with regard to 65 partially executed trades.

23. The AO has recorded appellant‟s submissions and his findings in para 31, 32 and 38 of the impugned order. A careful perusal of the same shows that AO has noted selected contentions made before him. We may record that AO‟s finding in para 31, that appellant had deleted large order quantity manually with manipulative intention is perverse because it is based on AO‟s assumption that manually deleted 218 orders were 34,88,302 shares. By the same measure, AO‟s finding that appellant‟s trades did not reflect true and correct picture to the investors is also perverse because the AO has based this finding on an incorrect assumption that the admitted 218 orders accounted for 34,88,302 shares. As noted above, the total number of manually deleted orders are 153, which accounted for 17,16,229 shares. This finding is based on incorrect facts and therefore, it is unsustainable to that extent.

24. The AO has held that GIFL is an “illiquid‟ scrip. Appellant has specifically contended in his reply to the SCN that the scrip was moved to normal category on November 22, 2017. His submission has been noted by the AO in para 8(a) of the impugned order. But no finding has been rendered by the AO on this contention. Appellant has pleaded this ground in the memorandum of this appeal also. SEBI‟s reply does not deal with this aspect. Without considering appellant‟s contention, nor recording a specific finding whether GIFL is a “liquid or illiquid‟ scrip, the AO has arrived at an incorrect conclusion that appellant‟s deletion of trades was intended to induce investors to trade in an “otherwise illiquid scrip of GIFL‟. Therefore, this finding recorded in para 32 is also perverse.

25. Appellant has also pleaded that 2,06,110 shares were deleted due to activation of RRM (Risk Reduction Mode), which fall within the category of manually deleted orders. In the table contained in para 17 of AO‟s order, there is reference to deletion of orders due to RRM.

26. Appellant has contended that during FY2017-18 (which includes the investigation period), he had traded in 222 scrips with a turnover exceeding ₹8000 Crores. Appellant has also urged11 this in the memorandum of appeal and it is not controverted.

Para 5[A](1.3) and (1.4) of the memorandum of appeal

27. On behalf of respondent, Mr. Sumit Rai has relied upon (i) SEBI v. Kanaiyalal Baldevbhai Patel12, (ii) SEBI v. Rakhi Trading Pvt. Ltd.13, (iii) SEBI v. Terrascope Ventures Limited14 (iv) Pan Asia Advisors Ltd. v. SEBI15, (v) M/s. Blue Peacock Securities Pvt. Ltd v. SEBI16 and (vi) Suresh Mehta v. SEBI17.

28. In Suresh Mehta v. SEBI18, the allegation was, he had indulged in self-trades. This Tribunal has recorded a finding of fact that deliberate attempt was made to place “sell‟ orders for higher price and then to buy the same to himself in large quantities and this activity had affected the settlement price in F&O segment. In contradistinction, there is no self-trade affecting the settlement in F&O segment in this case. Therefore, the ratio in Suresh Mehta has no application.

29. In M/s. Blue Peacock Securities Pvt. Ltd v. SEBI19, the specific allegation was, the appellant therein was selling shares (2017) 15 SCC 1 (2018) 13 SCC 753 SEBI v. Terrascope Ventures Limited, decided by the Hon‟ble Supreme Court of India on 17.03.2026 in Civil Appeal Nos.5209 - 5211 of 2022. Appeal No.126 of 2013, decided on 25.10.2016 by the Securities Appellate Tribunal, Mumbai Appeal No.253 of 2018, decided on 19.12.2019 by the Securities Appellate Tribunal, Mumbai Appeal No.321 of 2018, decided on 29.06.2021 by the Securities Appellate Tribunal, Mumbai Appeal No.321 of 2018, decided on 29.06.2021 by the Securities Appellate Tribunal, Mumbai Appeal No.253 of 2018, decided on 19.12.2019 by the Securities Appellate Tribunal, Mumbai in the market at the when large “buy‟ orders were below the market price and subsequently cancelling those “buy‟ order and thus, involved in “BAIT and SWITCH‟ activity, wherein a trader enters into a buy or sell order lower or higher than the market price, but actually transacts on the opposite side in the market across various scrips for several days. There is no such allegation of price manipulation against the appellant herein.

30. In SEBI v. Rakhi Trading Pvt. Ltd20, the specific question in that case was, whether synchronized and pre-arranged reversal trades in market constitutes fraud or can be considered as unfair trade practice. The appellant in that case had indulged in synchronized trading and reversal trades, thus, orchestrated a fraud under PFUTP Regulations. In this case, there are no reversal trades or synchronized trades, thus, this authority is not applicable.

31. In SEBI v. Kanaiyalal Baldevbhai Patel21, it was held that once a finding of fraud is confirmed then in such a case, even if particular provision of PFUTP is not identified, the finding that the fraud was committed cannot be refuted. In Pan Asia Advisors Ltd. v. SEBI22, it was urged by the respondents that if a person by his acts either directly or indirectly causes investors to believe (2018) 13 SCC 753 (2017) 15 SCC 1 Appeal No.126 of 2013, decided on 25.10.2016 by the Securities Appellate Tribunal, Mumbai in something which is not true and thereby induced them to deal in securities, then that person is said to have committed fraud on investors. In contradistinction, deletion of the orders is done in regular course of trading and in this case, there is no material to record a finding that deletion by the appellant had induced the investors. Thus, the two authorities cited do not lend any support to SEBI‟s case.

32. In SEBI v. Terrascope Ventures Limited23, it is held that SEBI Act and Regulations are intended to preempt manipulative trading and check all kinds of impermissible conduct resorted by parties, so that the innocent investor is not mislead. As noted hereinabove, placing and deletion of order per se does not constitute a violation unless it is established that deletion was for a fraudulent purpose. We have recorded detailed reasons for allowing this appeal based on the facts of this case.

33. In the light of above discussion, we are of the considered view that the findings recorded by the AO are based on incorrect facts and hence, unsustainable in law. Accordingly, we answer the point for consideration in the negative.

               SEBI v. Terrascope Ventures Limited, decided by the Hon‟ble Supreme Court of India on 17.03.2026 in Civil Appeal Nos.5209 - 5211 of 2022, para 36.

34. In the result, the following:

ORDER

               i. Appeal is allowed.

               ii. Order dated September 26, 2022 passed by the AO, SEBI is set aside.

                   iii. Pending interlocutory application(s), if any, stand disposed of.