SAT Dumps SEBI’S Pump-and-Dump Order in Bollywood Celebrity’s Case

BACKGROUND A Bollywood celebrity and his family/associate were widely in the news recently because of a judgment SEBI made against them. SEBI held, in an interim and ex parte order, that they were allegedly involved in a pump-and-dump stock scam and made illicit profits. While this celebrity, Arshad Warsi (AW) and family/associate (together ‘AWS’), were alleged to have made Rs. 76 lakhs, the total profits made by the whole ‘group’ were about Rs. 41 crores. The 21 parties including AWS were debarred from stock markets, directed to impound these allegedly illicit profits in an escrow account and their bank accounts, and assets frozen in the interim. This case is an example of how good intentions, and quick and extraordinary efforts can still result in serious injustice. While SEBI’s order shows quick action on all fronts including pursuing internet giants like YouTube for information and meticulously collating all information, it also shows how conclusions in law and facts ended up being flawed. The Securities Appellate Tribunal (‘SAT’) came down harshly on the order and even laid down several prerequisites for future orders. The parties, at least some of them, clearly suffered due to this order, for which SAT repeatedly said, it had no evidence whatsoever. However, hopefully, since SEBI will be required to follow the pre-requisites and prove the basic assertions, other parties may not suffer in the future and if the