BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 118/2003
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Date of Hearing
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7.7.2004
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Date of Decision
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7.7.2004
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In the matter of:
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Ramesh Shah
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Appellant – Represented by
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Somasekhar Sundaresan, 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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Kumar Desai, Advocate
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Coram:
Justice Kumar Rajaratnam, Presiding Officer
Dr. B. Samal, Member
N.L. Lakhanpal, Member
Per: N.L. Lakhanpal, Member
1. M/s. Hitachi Jewellery Industries Ltd. (referred to HJIL) had come out with a public issue of 23,33,700 equity shares of Rs. 10/- each for cash at par. The issue opened on 12.4.1994 and closed on 23.4.1994. The trading in the shares of HJIL commenced at the National Stock Exchange (NSE) on October 18, 1995 at Rs. 174/- with thin and sporadic volumes. The average daily volume of the scrip till the first week of May 1996 was only 270 shares. However, during the period December 1996 to April 1997 a surge was noticed in the volumes as well as the price of this scrip. Investigation ordered by SEBI showed that a set of business entities had created artificial market in the scrip of HJIL and had artificially increased its price. It was further revealed that the appellant who was in the business of financing had dealt in this scrip through his related entities and that the trading was mainly transacted through the counters of KJMC, V-Care and Gazi Securities, all NSE members. On the basis of these findings, a show cause notice was issued to the appellant and his group entities namely Masitia Capital Services Ltd., Pina Steels Pvt. Ltd., Praj Finance Ltd., R.R. Investment, Deepal Corporation, Satuma Finvest and Krishna Steels and the impugned order was passed directing the appellant as well as all these entities not to access the capital markets or deal in securities for a period of two years.
2. The appeal was taken up with consent of parties for final disposal. During the hearing, it was noticed from the impugned order that no show cause notice had been received by the appellant. It is settled law that a person cannot be prosecuted for an alleged violation without issue of show cause notice, which has not been received by the appellant. In that limited view of the matter, we set aside the impugned order insofar as the appellant is concerned and remand it to the respondent for disposal in accordance with law. All contentions are kept open. The respondent shall dispose of the matter as expeditiously as possible.
Justice Kumar Rajaratnam
Presiding Officer
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N.L. Lakhanpal
Member
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B. Samal
Member
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Place: Mumbai
Date: 7.7.2004
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