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In the matter of U. S. Bengali

Jul 07, 2005
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Orders : Orders of SAT

IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

 

Appeal No.349/2004

 

Date of Hearing

29.06.2005

Date of Decision

07 .07.2005  

 

 

 

In the matter of:

 

U. S. Bengali

Appellant – Represented by Mr. Nitin Parikh

 

 

 

Versus

 

 

Securities & Exchange Board

of India

Respondent – Represented by Mrs. Deepa Kuruvilla, Advocate.

 

 

 

Coram:

            Justice Kumar Rajaratnam, Presiding Officer

            C. Bhattacharya, Member

            R. N. Bhardwaj, Member

 

Per:    C. Bhattacharya, Member

 

 

1.         Appeal is taken up for final disposal with consent of both parties.

2.         Heard the counsels from both the sides.  The fact of the case is that M/s. U. S. Bengali is a member of Vadodara Stock Exchange Limited and also registered as s Sub Broker of VSE Securities Ltd.,    The Respondent, Securities & Exchange Board of India (SEBI), carried out an inspection of the Books of Accounts and other records of the appellant  for the period 1/4/2001 to June, 2003.  The findings of the Inspection were communicated to the appellant and they replied vide their letter dated 14/7/2003.  Certain violations were alleged to have been observed during the inspection and after perusing the reply of the appellants, the Whole time Member, SEBI, in accordance with the power conferred upon him, appointed the Adjudicating Officer vide his order dated 15/3/2004 for conducting adjudication proceedings in the alleged violations.  A Show Cause Notice dated April 16, 2004 was issued by the  Adjudicating Officer to the appellant.   The appellant replied to the said show cause notice vide his letter dated 29th June, 2004.  A personal hearing was also granted on September 27, 2004.  Thereafter the Adjudicating Officer has passed the impugned order imposing a penalty of Rs.1,50,000/- upon the appellant.  Being aggrieved, the appellant filed this appeal.

3.         By an Interlocutory order of this Tribunal, stay of the impugned order was granted on 23/11/2004 on the condition that the appellant deposits Rs.50,000/- with the Respondent within four weeks from the receipt of the order.

4.         Some of the alleged violations related to Regulation 26 of SEBI (Stock Brokers and Sub Brokers) Regulations, 1992.  This regulation 26 was incorporated in the  SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 on 26/11/2003 which was effective from November 20, 2003 whereas the inspection was carried out in June 2003 for the period covering April 2001 to June, 2003.  Obviously, the Regulation 26 which was brought into being on 26/11/2003 with prospective effect can not cover this period.  It is also observed that in a number of other cases the Adjudicating Officers of SEBI have taken a similar view.  (Ref. in Case of M/s. M. P. Vora Shares & Securities Pvt. Ltd., the Adjudication order dated December 2, 2004, in the case of M/s. United Share Brokers Ltd.,, the Adjudication Order dated December 31, 2004, in the case of M/s. Thakkar Stock Broker Pvt. Ltd., sub broker V.S.E. Stock Broker Ltd., the Adjudication Order dated 11/11/2004.)

5.         Most of the violations alleged in this case are similar to those mentioned in the above cases.  Admittedly, there are also some additional violations like acceptance of cash, failure to maintain proper segregation of client securities and own securities in some cases and allowing terminals to unregistered sub brokers who later on get their registrations.

5.         While deciding the quantum of penalty regard must be had to the factors mentioned in section 15J of SEBI Act.  The violations have been mostly found to be of procedural nature and there is no allegation that the appellant had disproportionate gain or unfair advantage.  There is also no complaint from any investor that any loss was caused to them and steps have  been taken to rectify the deficiencies and comply with the regulatory requirements subsequently.

6.         Having regard to the above factors, a penalty of Rs.30,000/- only will meet the ends of justice.  The impugned order stands modified accordingly.    Out of Rs.50,000/- already deposited in compliance with the Interlocutory order of this Tribunal,  a sum of Rs.30,000/- may now be impounded by SEBI  as penalty imposed by virtue of this order and the balance amount is to be refunded to the appellant within 4 weeks from the date of receipt of this order.

7.       No order as to costs.          

                                                                               Sd/-

                            Justice Kumar Rajaratnam

                                      Presiding Officer

         

Sd/-

R. N.  Bhardwaj

Member

Sd/-

C. Bhattacharya

Member

 
 

Mumbai,

7th   July, 2005.