BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 2 of 2008
Date of decision : 22.2.2008
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Rajesh Ramanlal Shah
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…… Appellant
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Versus
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Securities and Exchange Board of India
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…… Respondent
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Mr. Joby Mathew Advocate with Syed Imran Advocate for Appellant.
Mr. Shiraj Rustomjee Advocate with Mr. Anant Upadhyay and Ms. Pranita Mehta Advocate for Respondent.
Coram : Justice N.K. Sodhi, Presiding Officer
Arun Bhargava, Member
Utpal Bhattacharya, Member
Per : Justice N.K. Sodhi, Presiding Officer (Oral)
It is not necessary to state the facts in detail as we propose to remand the case back to the Securities and Exchange Board of India (for short the Board). The appellant had been served with a show cause notice dated August 12, 2004 alleging therein that he and one Sarita Chowdhury had executed circular/fictitious trades between themselves through their respective brokers and that the transaction between Rajesh Shah and Sarita Chowdhury was off market though executed through G.R. Pandya as his broker. The reverse transaction is said to have been executed by Sarita Chowdhury through her husband Pawankumar Parmeshwarlal who acted as her broker and Rajesh Shah-the appellant as the purchaser acted through his broker G.R. Pandya. On receipt of the show cause notice, the appellant addressed a communication dated September 1, 2004 denying all the allegations made in the show cause notice which were described as false, frivolous and not true. He requested the Board to furnish him with the copies of the documents on the basis of which the Board alleged that the appellant had traded in the scrip of M/s. Prabhu Steel Industries Limited. The case of the appellant is that he did not receive any response from the Board thereafter and without responding to his letter of September 1, 2004 the whole time member of the Board passed an order on November 19, 2007 holding him guilty of the circular trades and debarred him from accessing the capital market for a period of three months. It is against this order that the present appeal has been filed.
At the outset we asked the learned counsel appearing for the Board as to why the appellant was not afforded an opportunity of hearing. He brought to our notice a letter dated February 7, 2007 which was sent to the appellant at his business address. The address is the same on which the show cause notice had been sent. This letter was sent by hand through a messenger. The official who carried the letter reported that the office of the appellant had shifted. On the basis of that report, the Board directed that a notice be pasted on the last known address of the appellant which was the same on which the show cause notice had been sent and served on him. The appellant states that the notice had not been pasted on the premises and that his office continues to remain at 10, Mehta House Nagindas Master Road, Fort, Mumbai 400 023 and it never shifted from there. The material on the record is not enough for us to hold that the appellant had been afforded sufficient opportunity of hearing. The Board in the impugned order has relied upon the statement of the broker while holding that the charge stands established against the appellant. The appellant seriously contends before us that he did not execute the trades in question and that there was no client registration agreement executed with the broker (G.R. Pandya). These are all issues which need to be decided on evidence and lest there is miscarriage of justice, we deem it proper to set aside the impugned order and remit the case back to the Board for a fresh decision in accordance with law. The appellant is directed to appear on March 17, 2008 before Mrs. Barnali Mukharjee, deputy general manager in the office of the Board at 11.00 am for further proceedings. Since the disputed transactions are alleged to have been executed in the year 2000-2001, the Board is directed to conclude the proceedings expeditiously. No costs.
Sd/-
Justice N.K. Sodhi
Presiding Officer
Sd/-
Arun Bhargava
Member
Sd/-
Utpal Bhattacharya
Member
22.02.2008
bk