SAT sets aside SEBI order against Arshad Warsi, his wife for lack of evidence pending investigations

Yet another order of market regulator SEBI was partly set aside by the Securities and Appellate Tribunal (SAT).

SEBI had accused Bollywood actor Arshad Warsi and his wife Maria Goretti of indulging in a pump-and-dump operation. But according to SAT, SEBI did not have convincing evidence to prove it.

SEBI had penalised and barred Warsi and few others from the market for running a ‘pump and dump’ scheme that involved manipulating the price of a stock through misleading information to lure investors and then quickly selling the shares at an inflated price. SEBI had classified Warsi and Goretti as volume creators (VCs) in the case and blamed them for contributing to a rise in trading volumes and interest in the scrip of Sadhna Broadcast. The duo were found to have made profits of ₹29,43,649 and ₹37,56,816 from the buying and selling of shares, respectively.

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

‘Bereft of evidence’

“Investigations are still going on and the possibility of the appellants being involved in the manipulative scheme cannot be ruled out. However, at this stage, the impugned order (of SEBI) is bereft of any evidence against the appellants requiring passing of such strong and harsh order. Balance of convenience is required to be considered at this stage,” SAT said.

SEBI order was passed by Whole Time Member Ananth Narayan G.

SAT concluded that Warsi, his wife Maria, brother Iqbal and talent manager Aahuti Mistry were not involved in rigging the price of Sadhna Broadcast. They were not involved in the making/distribution or uploading of the videos on the YouTube channels nor do they feature in such videos. There is no finding that the appellants are connected to the company, its shareholders or key managerial personnel or with other volume creators, sellers.

Further, there is nothing to indicate that the appellants by their conduct had created any interest on any investor to trade in Sadhna. The appellants have not spread any false and misleading information regarding the stock. There is no evidence to indicate that the appellants had induced unsuspecting investors to buy the scrip.

“Merely a reason of a professional connection, at best, may give rise to a suspicion against the appellants, but it cannot lead to any conclusion that the appellants were engaged in a coordinated scheme to induce investors to acquire securities in the company in question,” SAT said. “...there is no iota of evidence against the appellants,” it added.

Pending investigation

SAT thus set aside the directions in the SEBI order against Warsi and Goretti. They have been restrained from trading in Sadhna during the pendency of the investigation. Further, they are also directed to deposit 50 per cent of their alleged unlawful gains in an escrow account. For the balance amount, they are required to give an undertaking that they will deposit the balance amount within 30 days from the date of final order, if any, passed by the WTM.

SEBI was represented 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.