IN THE SECURITIES APPELLATE TRIBUNAL MUMBAI
Appeal No. 84 of 2006
Date of decision: 8.8.2007
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Chirag Pujara
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…… Appellant
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Versus
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Adjudicating Officer, Securities and Exchange Board of India
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…… Respondent
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Mr.J.J. Bhatt Advocate for the Appellant.
Mr. Kumar Desai Advocate with Mr. Anant Upadhyay Advocate for the Respondent.
Coram : Justice N.K. Sodhi, Presiding Officer
Arun Bhargava, Member
Utpal Bhattacharya, Member
Per : Justice N.K. Sodhi, Presiding Officer (Oral)
Whether the appellant had executed circular trades resulting in the creation of artificial volumes while trading in the scrip of Kwality Dairy (India) Limited (for brevity the company) is the short question which arises for our consideration in this appeal filed under section 15T of the Securities and Exchange Board of India Act, 1992 (hereinafter called the Act) against the order dated March 31, 2006 passed by the adjudicating officer imposing a penalty of Rs. 3 lacs on the appellant under section 15HA of the Act.
The Securities and Exchange Board of India (for short the Board) investigated the trading in the scrip of the company and found that the appellant along with Laxmanbhai Patel and Sayyed Mustafa had executed circular trades when they traded in the scrip of the company and thereby created artificial volumes. Enquiry proceedings were initiated against the appellant and others and a show cause notice was issued to them asking them to explain why appropriate directions be not issued under sections 11 and 11B of the Act read with Regulations 11 and 13 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (for short the regulations). After conducting a regular inquiry and on a consideration of the material on the record, the Board by its order dated January 13, 2006 came to the conclusion that the appellant had executed circular trades thereby creating artificial volumes in the scrip of the company and that he had indulged in fraudulent and unfair trade practices relating to securities. The appellant, Sayyed Mustafa and Laxmanbhai Patel were restrained from accessing the securities market and prohibited from buying, selling and dealing with securities directly or indirectly for a period of six months. We are informed that Laxmanbhai Patel and Sayyed Mustafa did not challenge this order. The appellant, however, filed a belated appeal being Appeal no. 85 of 2006 before this Tribunal. When his appeal came up for preliminary hearing on 14.7.2006 the period of six months for which he had been debarred had expired and the learned counsel appearing on his behalf stated that the same had become infructuous and wanted it to be dismissed as such. Accordingly, the appeal was dismissed as infructuous.
Since the appellant had indulged in circular and synchronized trading thereby creating artificial volumes in the scrip of the company, the Board initiated adjudication proceedings against him under Chapter VI A of the Act. The adjudicating officer also conducted an inquiry in the matter after issuing a show cause notice to the appellant and considering his reply and the material on record, he too came to the conclusion that the appellant had indulged in fraudulent and unfair trade practices in as much as he executed circular trades in a synchronized manner resulting in the creation of artificial volumes. By his order dated March 31, 2006 he imposed a monetary penalty of Rs. 3 lacs on the appellant. Hence this appeal.
We have heard the learned counsel for the parties and have also perused the record. The fact that the appellant along with Sayyed Mustafa and Laxmanbhai Patel had traded in the securities of the company is not in dispute. Integrated trade and order logs showing the trades executed by the appellant, Sayyed Mustafa and Laxmanbhai Patel are on the record and we have perused the same. A mere look at this chart would indicate that matching buy and sell orders were placed by them and large number of trades were executed throughout the day when they traded in the scrip of the company. It is pertinent to mention here that the appellant is a day trader who trades during the course of the day and settles the trades at the end of the day. It is not necessary for us to examine these trade logs in any greater detail because on the basis of this very material the Board by its order dated January 13, 2006 referred to hereinabove has already recorded a finding holding the appellant and the other two guilty of executing circular and synchronized trades which order has become final. As observed earlier, the belated appeal filed by the appellant was dismissed as infructuous on the statement of his counsel. Since a finding of guilt had been recorded against the appellant in the inquiry proceedings and he had been restrained under section 11B from accessing the capital market, we are of the view that adjudicating officer could not have recorded a contradictory finding in the facts and circumstances of the present case. In this view of the matter, the impugned order holding the appellant guilty of the charge against him has to be upheld.
Now coming to the question of penalty. The adjudicating officer has levied a monetary penalty of Rs. 3 lacs having regard to the facts and circumstances of the case. Since the appellant had already been restrained under section 11B of the Act we are of the view that the amount of penalty imposed by the adjudicating officer is on the higher side and deserves to be reduced. In the circumstances, we reduce the same to Rs. 1 lac. The impugned order stands modified accordingly.
The appeal stands disposed of as above with no order as to the costs.
Sd/-
Justice N.K. Sodhi
Presiding Officer
Sd/-
Arun Bhargava
Member
Sd/-
Utpal Bhattacharya
Member