Professional Documents
Culture Documents
SUBMITTED TO FACULTY:
SHRIKANT AITHAL
FOR EVALUATION
SUBMITTED BY:
RIDDHI TULSHIAN (A056)
ADARSH HIMATSINGHKA (A032)
B.B.A LL.B. (HONS.)
Abstract
This paper aims to study the case of Gaurav Shah vs. Whole Time Member, Securities
and Exchange Board of India and analyze whether a director of a company can be
unaware of the stock trades of his company and that he was forced to be director of
the company in order to hide the manipulation of the stock prices.
Methodology
This research project has followed the doctrinal method of research, which requires
the researcher to acquire, arrange and then understand the data that is already
available in the public domain.1 Hence, this is a secondary method of data collection.
Introduction
Gaurav Shah vs. Whole Time Member, Securities and Exchange Board of India is a
case based on manipulation of stock prices by a company and the subsequent
debarment of the company and its’ Directors from the securities market by SEBI. This
case was filed in appeal against the order passed by the whole time member of SEBI
stating that the period of 5 years as punishment was not applicable to Mr. Gaurav
Shah as he had been forced by the other directors to sign documents and that he was
not aware of the market manipulation that was taking place. However, the Securities
Appellate Tribunal (SAT) did not agree with this contention of the appellant and
upheld the penalty imposed by SEBI on the appellant, thereby dismissing the appeal.
3
(2008) 2 Comp. LJ 205 (Delhi)
mode of investment know very well that stock market is sometimes in the grip of
bulls and sometimes in the grip of bears. Recent trend in the stock market has shown
that the stock prices do not reflect the real value of the share and hike and fall in the
price of the share takes place due to several factors like sudden interest of the foreign
investors into Indian stock market or sudden fall in the stock market world over. SEBI
is a specialized body constituted under the Act, which takes care of different
regulations meant for stock market. SEBI is supposed to know when and where the
investigation is to be done by it. This court on the prayer of individual shareholder
because of fall in price of his shares cannot give directions to SEBI to conduct
investigations either itself or through CBI. It was surprising that the petitioner had
come when share price of his share has fallen. He must be earning profits when share
price went up by the same process which the petitioner is alleging was responsible for
fall in the share price and petitioner did not approach the court at that time, although,
petitioner is stated to be dealing in shares for the last ten years. When you suffer
losses you suddenly feel that there is some manipulation and when you gain profits,
the same feeling is not there. For these reasons, the court found the petition not
maintainable and dismissed it.
CONCLUSION