SAT Stays SEBI Debarment of Unison Metals MD, Says Market Ban For Sharing Public Shareholder Data 'Harsh'

The Securities Appellate Tribunal (SAT) has stayed a SEBI order debarring the Managing Director of Unison Metals Ltd. and two others from accessing the securities market, holding that the only allegation against them was sharing shareholder data that is otherwise publicly accessible.

“We are of the prima facie opinion that in the interest of investors, the consequences of the impugned order can be deferred pending final hearing.”

A bench of Presiding Officer Justice P.S. Dinesh Kumar and Technical Members Meera Swarup and Dr. Dheeraj Bhatnagar granted interim relief, subject to deposit of 50% of the Rs.10 lakh penalty imposed on each of the appellants.

The case arises from SEBI's action in a “pump and dump” scheme involving Unison Metals Ltd, where the regulator alleged that certain entities manipulated the price and volume of the company's shares through stock tips circulated on Telegram channels and made unlawful gains of ₹3.87 crore.

Following adjudication, SEBI's Whole Time Member imposed penalties and market access restrictions on multiple noticees, including the present appellants.

The appellants, comprising the Managing Director, a promoter and a related party, were alleged to have aided the scheme by being in communication with intermediaries who disseminated stock recommendations, leading to artificial inflation in trading volumes and prices.

SEBI alleged that certain entities sold shares at inflated prices and made substantial profits, and that the appellants were linked to the scheme through sharing of BENPOS data, a statement showing weekly shareholding positions, with intermediaries.

According to SEBI, this data was used by operators to calculate commissions based on shares offloaded during the “dump” phase.

The appellants argued that they had neither traded in the shares nor derived any benefit. They submitted that BENPOS only contains a list of shareholders and their holdings at the end of each week and does not disclose sale price or transaction details.

The tribunal recorded that the allegation against the appellants was limited.

“The solitary allegation against the appellants is that they have shared the BENPOS.”

Referring to Section 94 of the Companies Act, the tribunal noted that such information can be accessed by any person.

“In our view, debarring a person from accessing the securities market, pending consideration of the main appeal, on the sole allegation of sharing the BENPOS, which can be obtained by 'any person' would be harsh.”

The tribunal also noted that the appellants had not traded in the shares and that the debarment could affect the company's ability to raise capital, which in turn may impact investors.

Observing that the balance of convenience lay in favour of the appellants, the tribunal stayed the operation of SEBI's order against them pending final hearing, subject to the deposit of 50% of the penalty.

For Appellant: Senior Advocate Pesi Modi and Advocates Neville Lashkari, Nirali Mehta and Naina Das

For Respondent: Senior Advocate Shiraz Rustomjee and Advocates Shreya Parikh, Manish Chhangani, Sumit Yadav, Abhay Chauhan and Atul Agrawal