IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

 

 

Appeal No.6/2006

 

Date of Hearing	16.01.2006
Date of Decision	16.01.2006

 

 

In the matter of:

 

M/s. Bhupendra Meghji Bheda	Appellant – Represented by Mr. Shyam Mehta, and Mr. Vinay Chauhan, Advocates,
Versus
Securities & Exchange Board of India	Respondent – Represented by Mr. Ravi Hegde, and Mr. Paras Parekh, Advocates.

 

Coram:

 

          Justice N. K. Sodhi, Presiding Officer

          C. Bhattacharya, Member

          R. N. Bhardwaj, Member

 

Per:   Justice N. K. Sodhi, Presiding Officer (Oral)

 

          M/s. Eonour Software Ltd., is a public limited company incorporated under the provisions of the Companies Act, 1956.  Its shares were being traded in the Stock Exchange at Mumbai and some other stock exchanges as well.  The Securities and Exchange Board of India (for short “the Board”) carried out investigations into the trading of the scrips of this  company.  During the course of investigations,  it transpired that the scrips were being traded through various brokers including the appellant herein.  The appellant had traded the shares for F. T. Traders which was buying and selling the shares of the company.  It further transpired from the records that the appellant had not collected any money from F. T. Traders towards initial margin.  The Board also found that the appellant which is a registered broker had handed over his trading terminal to his client for trading of scrips which was contrary to the provisions of the Securities & Exchange Board of India Act, 1992 (for short “the Act”) and also the circulars issued by the Board from time to time.  The Board got the matter enquired into by an enquiry officer who submitted his report on April 30, 2004 holding that the appellant had failed to charge the margin money from his client and that he had handed over the trading terminal as alleged.  On receipt of this report a show cause notice dated 6^th May, 2004 was issued to the appellant and a copy of the report dated 30^th April, 2004 was also sent along with the notice.  The appellant submitted his reply and also sought a personal hearing which was granted.  After taking into consideration the reply filed by the appellant, the Board by its order dated October 28, 2004 issued a warning to the appellant to be careful in future and exercise due care and diligence in the conduct of his affairs as a capital market intermediary.  This order was passed while exercising the powers under Regulation 13(4) of the Securities and Exchange Board of India (Procedure for Holding Enquiries by an Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter called “the Regulations”).  The  appellant’s client  F. T. Traders  while handling the trading terminal of his broker had traded in a number of scrips and some of those transactions have been found by the Board to be fictitious.  In regard to the transactions entered into in relation to some other scrips, the enquiry officer appears to have made another report to the Board in which also it had been found that the appellant had handed over the trading terminal to his client and that he had not charged the margin money.  On the basis of this report the Board issued a notice dated 13^th April, 2004 calling upon the appellant to show cause why action should not be taken against him for violating the Code of Conduct as specified in Schedule II of the Securities and Exchange Board of India (Stock Brokers and Sub Brokers) Regulations, 1992.  The  appellant submitted his reply on May 12, 2004.  The Board after considering this reply, has by the impugned order dated 27^th December, 2005 accepted the recommendations of the enquiry officer and  imposed a penalty of suspension of his (appellant’s) certificate of registration for a period of one month.  It is against this order that the present appeal has been filed under section 15T of the  Act.

          Notice of the  appeal was issued to the Respondent which has appeared through its counsel.

          We have heard the learned counsel for the parties at length.

          The first contention raised by the learned counsel for the appellant is that the Board having already taken cognizance of the charges leveled against the appellant and having warned the appellant by its order dated 28^th October, 2004 to be careful in future and exercise due care and diligence in the conduct of its affairs as a capital market intermediary could not impose the penalty again by suspending the certificate of registration of the appellant on the same charges.  It is urged that on the basis of the report dated 13^th April, the Board held that the charges were proved against the appellant and the latter was warned to be careful and thereafter again on the basis of yet another report the Board has by the impugned order suspended  the certificate of registration which could not be done.  We find merit in this contention.   The fact that the charges  leveled  against the appellant in the two show cause notices are the same and arise out of the same cause of action  that is, handing over the terminal to his client and not charging margin money is not disputed by the learned counsel appearing for the Board.   Since the charges in both the show cause notices are the same and the Board had already issued a warning to the appellant by its order dated October 28, 2004, we do not think that the Board could continue with the proceedings thereafter on the basis of an earlier show cause notice and impose the penalty of suspension of certificate of registration.  It is a well settled law that a person cannot be penalised more than once for the same charge(s).   It so happened that during the course of the investigations conducted by the Board the show cause notice which was issued on 6^th May, 2004 resulted in the order dated October 28, 2004 whereby a warning had been issued to the appellant and again in pursuance of an earlier show cause notice dated April 13, 2004 in which the same charges had been leveled, the certificate of registration of the appellant has been suspended.  Having been warned earlier, the certificate of registration could not be suspended thereafter on the same charges.  The only  explanation furnished by the learned counsel appearing for the respondent is that the client to whom the terminal had been given by the appellant, had traded in different scrips and, therefore two separate enquiries were conducted in  regard to two different  scrips and, therefore,  the Board had taken action on the basis of the two reports.  This explanation cannot be accepted.   It  is true that the client had traded in regard to a number of scrips when the terminal was handed over to it but the charge(s) remain the same and, therefore, the action could be taken only once.  Since the client  had traded in a number of scrips and even though the Board conducted two enquiries it does not mean that action is to be taken against him on the basis of both the enquiries when the charge(s) were the same.  As already  mentioned above the charge(s) were that the appellant had not claimed margin money from the client and that he had handed over his trading terminal to the client.  Once this charge is proved, no matter how many enquiries the Board may have conducted in regard to different scrips, the action could be taken against the appellant only once.  Since the Board had warned the appellant by its order dated October 28, 2004 it could not take any further action on the same charge(s).  In this  view of the matter the impugned order cannot be sustained.

          Since we are upholding the first contention raised on behalf of the appellant, it is not necessary to refer to the other submissions made  by his learned counsel.

          In the result, the appeal is allowed and the impugned order dated December 27, 2005 set aside.    There is no order as to costs.

 

Justice N. K. Sodhi                                          Presiding Officer
R. N. Bhardwaj Member	C. Bhattacharya               Member

 

Place: Mumbai

Date: January 16, 2006.