IN THE SECURITIES APPELLATE TRIBUNAL MUMBAI

 

 

 Appeal No. 15 of 2006

 

Date of Decision

25.7.2007

 

 

Pawankumar Parmeshwarlal	……	Appellant
Versus
Securities and Exchange Board of India	……	Respondent

 

Present : Mr.  J.J. Bhatt, Advocate for the appellant

Mr.  Cherag Balsara, Advocate with Mr. Anant Upadhyay, Advocate for the respondent

 

Coram:

 Justice N.K. Sodhi, Presiding Officer

 Arun Bhargava, Member

 Utpal Bhattacharya, Member

 

 

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

 

 

 We have heard the counsel for the parties at some length and since we are inclined to remit the case back to the Securities and Exchange Board of India (for short the Board) for passing a fresh order, it is not necessary to state the facts in detail.

   2.            The appellant before us is a stock broker and it is alleged that he executed artificial trades in the scrip of V.B. Desai Financial Services Ltd. (for short the Company). The case set up in the show cause notice is that Maxworth Finlease Pvt. Ltd. (for short Maxworth) was the direct client of the appellant and that the latter had fictitiously shown his family members as his clients in the off-market purchases made by them from Maxworth. We find from the show cause notice that the charges levelled against the appellant have not been clearly stated.  The modus operandi adopted by the appellant was that Maxworth wanting immediate cash would approach the appellant for the sale of shares of the company which would be put up for sale on the exchange mechanism and when the trade was completed on the screen and before it was settled, the shares were transferred to his family members through off-market transactions which were spot deals and which, according to the Board, had not been reported to the exchange. The family members would then provide instant cash to Maxworth after deducting the brokerage charged by the appellant and also the interest for making immediate payment. The family members in turn would receive the amount only at the time of settlement of the trade which was after seven or ten days depending upon the settlement cycle. Another charge levelled in the show cause notice is that in regard to the purchase of 15000 shares of the company from Maxworth, the appellant had not adhered to the norms of payment and delivery pertaining to spot transactions. During the course of the hearing it was sought to be argued that the shares of the Company which were sold by the appellant through the exchange mechanism had been purchased by Maxworth which resulted in artificial trades since those very shares had come from Maxworth through the family members of the appellant. Support in this regard was sought to be placed on the statement of Kamlesh Shroff who is the executive director of Maxworth. A copy of the statement was furnished to the appellant along with the show cause notice and he has denied the same in his own words though not as clearly as we may have liked it to be. The reply to the show cause notice was prepared by the appellant himself and was not filed through a counsel. We can therefore give him some laxity in this regard. We have also perused the impugned order in detail and find that the issues have not been properly discussed. There may be some lurking doubt as to the manner in which the appellant has conducted the business which he describes as broking business and “spot financing”, but we are unable to uphold the order on the basis of suspicion alone. We, therefore, set aside the impugned order and remand the case to the respondent board with a direction to issue a fresh show cause notice to the appellant and after obtaining his reply and affording him an opportunity to place whatever further material that he may like to rely upon in his defence, pass a fresh order in accordance with law. Let the needful be done expeditiously. In the circumstances, there is no order as to costs.