Jul 28, 2006
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Orders :
Orders of SAT
IN THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No.89 of 2006
Date of Decision 28.07.2006
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SS Kantilal Ishwarlal Securities P. Ltd.
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Appellant
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Versus
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Securities & Exchange Board of India
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Respondent
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Shri Ravi Kumar Varanasi, Advocate for the Appellant
Ms. Poornima Advani, Advocate with Ms. Daya Gupta, Advocate for the Respondent
CORAM:
Shri C. Bhattacharya, Member
Shri R.N. Bhardwaj, Member
Per : Shri C. Bhattacharya, Member (Oral)
The appeal in this case is against the order dated 27.12.2005 passed by the Whole Time Member of Securities and Exchange Board of India (for short “the Board) issuing a warning to the appellant to be more careful in future in its dealings in the securities market.
The facts of this case, in short, was that during the period 20th December, 1999 to 31st March, 2000 and again from 7th August, 2000 to 31st August, 2000 there was abnormal fluctuation in the price and volume of the scrips of one M/s. Malvika Engineering. The appellant as a broker had engaged in few transactions in this scrip during this period. The matter was investigated by the Bombay Stock Exchange (BSE) and on reference being made by BSE, the Board after preliminary investigation appointed an enquiry officer to enquire into the alleged manipulations in the scrips of M/s. Malvika Engineering. The enquiry officer in his report records that “on an overall assessment of the case and the dealings of the client and the risk containment measures in respect of the client implemented by the broker, I am of the view that it cannot be concluded that the member has failed in exercising due care and skill in the normal framework laid down by the broker.” However, he went to state that the broker should have been more careful while dealing with the illiquid stocks. The impugned order takes note of this conclusion of the enquiry officer and records no separate findings. The whole time member has merely agreed with the findings of the enquiry officer and has imposed a penalty of warning to the appellant in terms of Regulation 13(4) of Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulation, 2002. Being aggrieved by this order the present appeal has been filed under section 15T of the SEBI Act, 1992.
The learned counsel for the appellant urged that after concluding that there was no failure in exercising due care and skill as recorded by the enquiry officer and agreed to by the member, there is no justification for imposing even this minor penalty of warning since there is no finding of any short coming on behalf of the appellant. He also mentions that the appellant as a broker who mainly deals with institutional clients and this warning will damage his reputation immeasurably. The learned counsel for the respondent urged that the facts of the case revealed that during the period in question there was abnormal increase in the volumes of the scrip and also quite sharp price fluctuations had occurred. She argued that as there was no finding of apparent failure in exercising due care and skill, the Board as a regulator has not imposed any harsh penalty and has imposed a minor penalty of warning which would really help them to be more careful in future in dealing with the securities market.
We donot agree with this view of the Board that though no finding about failure to exercise due care and skill has been recorded even then a minor penalty can be or needs to be handed out. The impugned order suffers from lack of any findings being recorded by the whole time member which shows there was lack of application of mind. He has merely repeated what the enquiry officer has said and straightaway handed down the penalty on the same lines which the enquiry officer has mentioned. As no failure to exercise due care and skill as required of a broker has been recorded, we consider that even this warning is not warranted. In the above view, the appeal is allowed and the impugned order is set aside with no order as to costs.
Sd/-
Justice N. K. Sodhi
Presiding Officer
Sd/-
C. Bhattacharya
Member
Sd/-
R. N. Bhardwaj
Member
RRN