Order against Shri Rajendra R.Mehta in the scrip of Sword & Shield Pharma Ltd

WTM/TCN/19 / IVD/06/07

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM : Dr. T.C. NAIR, WHOLE TIME MEMBER

ORDER

Under regulation 13(4) of Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 against Shri Rajendra R. Mehta, Sub broker of SKSE Securities Ltd. for the dealings in the scrip of Sword and  Shield Pharma Ltd.

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) had conducted investigation into the affairs relating to the trading of the scrip of Sword and Shield Pharma Ltd. (hereinafter referred to as “SSPL”) subsequent to the unusual increase in the price and volume of the scrip during the period - 3^rd May, 2001 to 6^th July, 2001. It was noticed in the investigation that a group of entities were acting in concert for executing circular and structured trades to affect the price of the scrip.

2. Rajendra R. Mehta, a sub-broker of SKSE Securities Ltd. was alleged to have executed transactions for Paragon Investments Pvt. Ltd. who is stated to be involved in the manipulation of the scrip.

3. In view of the findings of the investigation, an Enquiry Officer was appointed vide Order dated October 14, 2004 to enquire into the alleged violations committed by Rajendra R. Mehta (hereinafter referred to as “sub broker”).  On completion of enquiry, the Enquiry Officer submitted his report dated June 29, 2005 recommending no penalty on the sub broker.

4. In the said report, the Enquiry Officer found that the transactions were executed by the sub broker as a part of its normal broking activity. Though the manipulative role of the client, Paragon Investment was evident from the facts and circumstances of the case, from the submissions of the sub broker, it was noted that there was no default on the part of the sub broker in respect of the trades executed on behalf of the client and that the sub broker had no reason to suspect the intentions of the client. On the basis of facts and circumstances of the case and evidence available on record, the Enquiry Officer stated that it cannot be concluded that the sub broker played a manipulative role along with the client in the matter.  

5. After taking into consideration the facts and circumstances of the case, the findings of the Enquiry Officer and the relevant provisions of law governing the case, I have come to the conclusion that this matter is not a fit case to levy any penalty as the charges against the sub broker have not been established with reasonably good evidence. Further, from the legal point of view, I feel that there is no evidence on record to prove that the said sub broker failed to exercise due care, skill and diligence in the conduct of its business or has indulged into manipulative role with its client.

6. Having regard to what has been stated above, I find no reason to differ with the recommendations of the Enquiry Officer. Accordingly, in exercise of the powers conferred upon me in terms of Section 19 of the Securities and Exchange Board of India Act, 1992 read with Regulation 13(4) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002, I hereby dispose of the enquiry proceedings as above against the sub broker,  Rajendra R. Mehta.