IN THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 282/2004
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Date of Hearing
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31.1.2005
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Date of Decision
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23.2. 2005
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In the matter of:
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Shrikant G. Mantri
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Appellant – Represented by
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Mr. Kamal Khatta & Mr. Sunil Gangan, Advocate
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Versus
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Securities & Exchange Board
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Respondent –Represented by
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of India
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Mr. Dipan Merchant, Advocate
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Coram:
Justice Kumar Rajaratnam, Presiding Officer
Per: Justice Kumar Rajaratnam, Presiding Officer
1. This appeal is taken up with consent of parties.
2. The appellant challenges the order passed by the respondent dated 6.10.2004. By the said impugned order, the appellant’s certificate of registration as a Member of BSE has been suspended for a period of 3 months. 3 weeks time was granted to the appellant to file the appeal.
3. The facts briefly are that the shares of Sawaca Business Machines Ltd. (Sawaca for short) were listed in the BSE and in the Ahmedabad Stock Exchange. It appears that the scrip of Sawaca took an unusual upward price movement from Rs. 8/- to Rs. 38/-. The volume of the trade also increased. The period was between October and December 1999. During the investigation several brokers had dealt with the scrip of Sawaca during the relevant period.
4. The appellant, who is a member of BSE, also traded in the scrip on behalf of one Rajesh N. Jhaveri. The case of the respondent was that the appellant while acting on behalf of the client had created false market of the scrip and was guilty of the violation of FUTP Regulation 1995. The appellant according to the respondent was also guilty of violating the code of conduct under 2nd schedule read with Regulation 17 of the SEBI (Stock Brokers and Sub-brokers) Regulation 1992.
5. It was the contention of the appellant that he acted on behalf of R.N. Jhaveri as a client and not as a sub-broker and they were bonafide transactions. The details of the order placed are dealt with in the impugned order at paragraph 19 and 20, which reads as follows:
“19. The details of trading done by SGM, on behalf of RNJ are as follows:
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Settlement date
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Purchases
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Sales
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Gross
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Net
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22.11.1999
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0
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43500
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43500
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-43500
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30.11.1999
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0
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28600
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28600
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-28600
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22.11.1999
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0
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30000
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30000
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-30000
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Total
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0
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102100
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102100
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-102100
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20. Details of orders placed by SGM are as under:
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Bro-ker
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Buy/
Sell
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Rate
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Qty
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Discl
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Date
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Time
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Ord No.
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Client
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738
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S
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19.4
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26500
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26500
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A
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22.11.99
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10:44:25
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738040014
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R0038
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738
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S
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19.4
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7000
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7000
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A
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22.11.99
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13:43:32
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738040026
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R0038
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738
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S
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19.4
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10000
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10000
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A
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22.11.99
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15:26:02
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738040053
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R0038
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738
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S
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27.15
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20000
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2000
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A
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30.11.99
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10:18:05
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738040101
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R0038
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738
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S
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27.15
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20000
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2000
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A
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30.11.99
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12:59:22
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738040142
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R0038
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738
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B
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24.5
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20000
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20000
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A
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01.12.99
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11:53:04
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738040219
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R0038
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738
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B
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24.55
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20000
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20000
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A
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01.12.99
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11:53:30
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738040220
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R0038
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738
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B
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24.8
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20000
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20000
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A
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01.12.99
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11:57:38
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738040223
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R0038
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738
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B
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24.9
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20000
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20000
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A
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01.12.99
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11:57:46
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738040224
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R0038
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738
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B
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24.95
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20000
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20000
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A
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01.12.99
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11:57:50
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738040225
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R0038
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738
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B
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25
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8900
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8900
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A
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01.12.99
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11:58:21
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738040226
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R0038
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738
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B
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24
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25000
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25000
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A
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02.12.99
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10:44:00
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738020076
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R0038
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738
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B
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24.25
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25000
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25000
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A
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02.12.99
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10:44:08
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738020077
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R0038
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738
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B
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24.5
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25000
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25000
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A
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02.12.99
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10:44:14
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738020078
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R0038
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738
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B
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0
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24800
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24800
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D
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02.12.99
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14:09:34
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738020078
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R0038
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738
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B
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22.7
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25000
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2500
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A
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03.12.99
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11:01:09
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738040406
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R0038”
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6. There is no finding that the transaction between appellant and his client was not bonafide. The finding is extremely cryptic at paragraph 25 of the impugned order.
7. It is said that since most of the orders were by Jhaveri and Jhaveri dealt with the appellant, the appellant should be penalised. We find that there should be a finding on nexus between Jhaveri and the appellant and that they acted in concert with the management of Sawaca. In the absence of such a finding it would be difficult to hold the appellant guilty of violating the provisions of FUTP Regulations which requires strong proof.
8. We however find that there may have been some negligence on the part of the appellant and such negligence would be in violation of the code of conduct under Regulation 1992. The appellant ought to have noticed that there was something strange in the high volumes that have been traded with respect to the Sawaca scrip. In that view of the matter, we confirm the order of the respondent only in so far as the violation of Regulation 7 of the SEBI (Stock Brokers and Sub-Brokers) Regulation 1992. However, taking into account the facts and circumstances of the case, we feel that the period of suspension be reduced from 3 months to one day as was done in the case of Kaynet Capital Ltd (Appeal No. 85/2003).
9. The impugned order is modified accordingly. No order as to costs.
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Justice Kumar Rajaratnam
Presiding Officer
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Place: Mumbai
Date: 23.2.2005
//sr20522