Appeal No.100/2006
Date of Decision: 18/08/2006
1. Ask Holdings Private Limited
2. Shri Ashok Kumar Jain
Appellants
Versus
Securities & Exchange Board of India.
Mr Shrinivas Deshmukh, Advocate for the appellants.
Dr. Poornima Advani, Advocate for the respondent
CORAM
Justice N. K. Sodhi, Presiding Officer
R. N. Bhardwaj, Member
Per: Justice N. K. Sodhi, Presiding Officer (Oral)
Securities & Exchange Board of India (for short the Board) carried out investigations in the scrip of Rashel Agrotech Limited (hereinafter called the Company) in respect of transactions during the period from 24/9/2002 to 7/1/2003. It was revealed during the investigations that the price of the scrip varied from Rs.165/- to Rs.209.75 and that the shares of the company were traded in large volumes during the period in question. The appellants were amongst the major players who traded in the scrip of the company in large volumes. In view of the findings of the investigating authority, the Board initiated adjudication proceedings against the appellants. A notice was issued to them to show cause why monetary penalty be not imposed on them for indulging in fictitious transactions in the nature synchronised trades by placing buy orders and sell orders simultaneously. In the reply filed by the appellants they admitted the various violations alleged against them and requested for a lenient view be taken in the matter. Taking note of their admission and also the 29 transactions executed by them in which they were both the buyers and the sellers through two different brokers and that they dealt in 2.73 lac shares of the company without intending to transfer the beneficial ownership thereof, the adjudicating officer, by order dated May 25, 2006 has imposed, amongst others, on the appellants a penalty of Rs.10 lacs. It is against this order that the present appeal has been filed. It is not necessary for us to examine the merits of the impugned order because the learned counsel appearing for the appellants has admitted before us the violations committed by the appellants and has submitted that a lenient view be taken and that the quantum of penalty as levied by the adjudicating officer be reduced.
After hearing the learned counsel for the parties and having gone through the chart referred to by the adjudicating officer in the impugned order, we find that the appellants had indulged in fictitious trades in buying and selling the shares of the company. The buyer and the seller were the appellants themselves and these trades were executed primarily with a view to artificially increase the trading volumes in the scrip of the Company. Artificial increase in the volumes of a scrip has the adverse effect on the innocent investors of the market who get induced to buy the shares because they seldom have knowledge about the scrip and follow the herd mentality while trading. The adjudicating officer was, therefore, right in holding that the appellants had violated the provisions of Regulation 4 of the Securities & Exchange Board of India (Prevention of Fraudulent & Unfair Trade Practices relating to Securities Market) Regulations, 1995. The allegations are rather serious and the appellants by indulging in artificial trades had polluted the stock market. The penalty of Rs.10 lacs imposed appears to be reasonable in the circumstances of the present case and it does not call for any interference in appeal. The learned counsel for the appellants however, relied upon an order of this Tribunal in Alkan Projects Pvt. Ltd., vs. SEBI – Appeal no. 88/2004 decided on 9/8/2004 to contend that the financial condition of the appellants which is rather week should be taken into consideration and that the penalty imposed be reduced. We have perused the order in Alkan Projects case (supra) and find that the Tribunal therein referred to two judgements of the Supreme Court relating to criminal offences. We do not think that such considerations are relevant for the purpose of determining the quantum of penalty to be levied under the Act or the aforesaid Regulations.
In the result, we find no ground to reduce the penalty imposed by the adjudicating officer and dismiss the appeal with no order as to costs.
Sd/-
Justice N. K. Sodhi
Presiding Officer
R. N. Bhardwaj
Member
Mumbai,
Smn/18/08