IN THE SECURITIES APPELLATE TRIBUNAL

MUMBAI

 

Appeal No.1/2006

Date of Decision

27.06.2006

 

 

J.G.A.Shah Share Brokers P.Ltd.	Appellant
Versus
Securities & Exchange Board of India.	Respondent

 

Mr. S. K. Talsania, Sr.  Advocate and Mr. Bharat Merchant, Advocate  for the appellant.

Mr. Kumar Desai, Advocate and Mr.Ravi Hegde, Advocate   for the Respondent

 

 CORAM

 

          Justice N. K. Sodhi, Presiding Officer

          C. Bhattacharya, Member

          R. N. Bhardwaj, Member

 

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

 

            This appeal filed under section 15T of the Securities and Exchange Board of India Act, 1992 (for short the Act) is directed against the order dated 23/12/2005 passed by the whole time member  of the Securities & Exchange Board of India (hereinafter called the Board) suspending the certificate of registration of the appellant as a broker for a period of 10 days.  The operation of the impugned order had been stayed by this Tribunal while admitting the appeal. 

          Vision Technologies India Ltd.(for short the company) is a public limited company and its shares are listed on the Bombay Stock Exchange (BSE) and also on some other stock exchanges in the country.   The Board received a complaint inter alia, alleging that the company had violated the provisions of the Companies Act and also the clauses of the listing  agreement.  On receipt of this complaint the Board required the stock exchanges to furnish details regarding the trading in the scrip of the company.  The Board got the matter investigated and it transpired that the price of the scrip had increased from Rs.4/- on 12/10/1999 to Rs.650/- on 7/3/2000 and thereafter there was a steep fall.  The investigations further revealed that M/s. Vivenasri  Financial Services Ltd., (for short VFSL) and M/s. Harsha Pranav Securities Pvt. Ltd.,(for short HPSL) were the  predominant traders  in the scrip of the company during the period under investigation.  They traded in the scrip of the company on the BSE through many brokers including the appellant herein.  It is not in dispute that M/s. Yash Stock Brokers Pvt. Ltd.,(fort short the sub broker) was the sub broker of the appellant and that it was operating the terminal of the appellant.   The transactions executed  by the sub broker on behalf of the appellant and the client VFSL were found to be in violation of the Securities & Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to securities market) Regulations, 1995 (hereinafter called the Regulations).  Since the appellant was the broker and the transactions were executed by its sub broker, they were both charged for violating the Regulations and also the code of conduct prescribed for brokers and sub brokers.

An enquiry was held against them.  The enquiry officer did not find the sub broker guilty of violating the Regulations though it was found to have violated the code of conduct prescribed for sub brokers.  Surprisingly, the same enquiry officer found the appellant guilty of having violated the Regulations and further found  that it was not guilty of violating the Code of Conduct.  As already observed, the transactions were the same.  On a consideration of the enquiry report, the whole time member of the Board accepted the recommendations of the enquiry officer and found the sub broker guilty of having violated the code of conduct and thereby suspended its certificate of registration for a period of two months.  The sub broker has not come up in appeal.  The whole time member also accepted the report of the enquiry officer qua the appellant and held that it was guilty of having violated the Regulations but not the code of conduct.  Accordingly the certificate of registration of the appellant as a broker was suspended for a period of 10 days.  Hence this appeal.

          We have heard the learned counsel for the parties and are clearly of the view that the impugned order can not be sustained as the findings recorded therein are contrary to the ones recorded in the case of the sub broker.  It is really amazing  to note that in regard to  the transactions executed by the appellant through the  sub broker wherein both are charged of having violated the Regulations and the code of conduct, the broker is found guilty of violating the Regulations and not the code of conduct  whereas the sub broker is found guilty of violating the code of conduct and not the Regulations.  The order passed in the case of the sub broker is on the record and we have perused the same.  The findings recorded by the whole time member of the Board in the case of the appellant and the sub broker are contradictory.  To say the least, he does not appear to have applied his mind to the facts of the case at all.  When the transaction was the same then either both were guilty of having violated the Regulations and/or code of conduct or not at all.  It cannot be said that one is guilty of violating the Regulations while the other is guilty of violating the code of conduct.  In this view of the matter, the impugned order suspending the certificate of registration of the appellant cannot be sustained.

          In the result, the appeal is allowed and the impugned order dated 23/12/2004 set aside leaving the parties to bear their own costs.

 

Sd/-

Justice N. K. Sodhi
Presiding Officer

Sd/-

C. Bhattacharya
Member

Sd/-

R. N. Bhardwaj
Member

 

27/06/2006.

Smn/27/6