SAT partly sets aside SEBI’s order in absence of proof against Arshad Warsi

SAT partly sets aside SEBI’s order in absence of proof against Arshad Warsi

The Bollywood actor and his wife Maria Goretti were accused of inducing investors and manipulating the price of a stock

The Securities and Appellate Tribunal (SAT) has partly set aside an interim order passed by the Securities and Exchange Board of India (SEBI) barring Bollywood actor Arshad Warsi and his wife Maria Goretti from accessing the securities market.

Warsi and other noticees were penalized for running a ‘pump and dump’ scheme. They were accused of manipulating the price of a stock through misleading information to lure investors into buying it and then quickly selling the shares at an inflated price.

A bench headed by SAT chairperson Justice Tarun Agarwala held that the SEBI Whole Time Member (WTM) had passed the interim order in haste, without considering the essential facts.

Justice Agarwala stated:

(i) The appellants (Warsi, his wife Maria, brother Iqbal and talent manager Aahuti Mistry) are not involved in the increase in the price of the scrip.

(ii) The appellants were not involved in the making/distribution or uploading of the videos on the YouTube channels nor do they feature in such videos.

(iii) There is no finding that the appellants are connected to the company, its shareholders or key managerial personnel.

(iv) The appellants are not connected with other volume creators or net sellers

(v) There is nothing to indicate that the appellants by their conduct had created any interest on any investor to trade in the scrip of Sadhna Broadcast Limited.

(vi) The appellants have not spread any false and misleading information regarding the scrip in question.

(vii) There is no evidence to indicate that the appellants had induced unsuspecting investors to buy the scrip in question.

The court added that merely because Warsi had a professional connection with Manish Mishra, the primary noticee in the case, it did not establish his link to it.

The order stated, "There is no iota of evidence against the appellants to show that they were engaged in a coordinated scheme to induce unsuspecting investors to acquire securities in the scrip in question."

Thus, the appellate tribunal set aside the directions in the SEBI order to Warsi and Goretti. However, it restrained them from trading in the scrip of Sadhna during the pendency of the investigation.

They were further directed to deposit 50 percent of their alleged unlawful gains in an escrow account. They will also have to give the undertaking to deposit the balance amount within 30 days from the date of the final order, if any, passed by the WTM.

SEBI had received information on price manipulation and offloading of shares by certain entities in the scrip of Sadhna Broadcast Limited.

It was alleged that YouTube videos with false content, backed by a paid marketing campaign worth crores of rupees, were being uploaded to lure people to invest in the company. Once the investors entered the scrip, the said entities offloaded their holdings at an inflated price.

Warsi and Goretti, classified as volume creators in the case, were accused of buying and selling shares of Sadhna during the examination period, hence contributing to a rise in trading volumes and interest in the scrip.

The two were allegedly known to have made profits of Rs.29,43,649 and Rs.37,56,816 from the buying and selling of shares.

A team of advocates from Regstreet Law Advisors represented Warsi and Goretti. The advocates included Amit Agrawal, Sumit Agrawal, Rushin Kapadia, Pratham Darad, Radhika Yadav, and Tarun Toprani.

SEBI was advised by senior advocate Gaurav Joshi, who was briefed by a team from Ashar & Co including advocates Feroze Patel, Mihir Mody, Arnav Misra, and Mayur Jaisingh.