BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 156/2003
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Date of Hearing
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11.5.2004
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Date of Decision
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18.5.2004
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In the matter of:
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Parklight Securities Ltd.
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Appellant – Represented by
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S.H. Doctor, Sr. Advocate with
Prarthana Awasthi & Vinod S. Parekh
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Versus
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Securities & Exchange Board
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Respondent – Represented by
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of India
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Cherag S. Balsara, Advocate
Daya Gupta, Advocate
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Coram:
Justice Shri Kumar Rajaratnam, Presiding Officer
Dr. B. Samal, Member
N.L. Lakhanpal, Member
Per: N.L. Lakhanpal, Member
1. The appellant, M/s. Parklight Securities Ltd. is a member of Ahmedabad Stock Exchange and registered with Securities & Exchange Board of India(SEBI) vide registration no. INB 021033259. SEBI had conducted an inspection of the books of accounts, documents and other records of the appellant on 16.1.2001. Since some irregularities were found during the inspection warranting further action, an enquiry officer was appointed to conduct an enquiry into the contravention alleged to have been committed by the appellant. The enquiry officer held the contravention of various administrative circulars issued by SEBI as proved against the appellant and recommended suspension of certificate of registration of the appellant for a period of 6 months. After a further show cause notice and personal hearing to the appellant, the penalty as recommended by the enquiry officer was imposed on the appellant. Being aggrieved the appellant has filed the present appeal.
2. As per the show cause notice, the appellant has been charged with the following contraventions.
i) The contract notes issued by the appellant broker not bearing pre-printed serial numbers
ii) Order execution time not mentioned in the contract notes.
iii) Client acknowledgements obtained.
iv) Off the floor transactions.
v) Non-maintenance of client agreements.
vi) Non-segregation of own funds and client funds.
3. During the proceedings before the respondent as well as in the memorandum of appeal and at the time of personal hearing, the appellant has admitted these omissions and violations but has pleaded that these were mere technical violations pertaining to maintenance of records which have since been rectified by him. His argument throughout has been that these were ordinary administrative lapses and that there had been no intention, nor had SEBI found any evidence, of any wrong doing on his part with a view to harming the interests of his investor clients or the stock market in general. At the time of the hearing of this appeal, we have gone into the details of these violations with the learned counsel on both sides. Since the lapses have been mostly admitted by the appellant, we find that what remains in the appeal is only the question of quantum of punishment imposed by the respondent. Regarding the gravity of the charges levelled against the appellant, we are inclined to view the charge of non-segregation of client funds and his own funds rather seriously because the client funds are held in trust by the market intermediaries. Four specific instances have been pointed out in this regard in the inquiry officer’s report as well as in the impugned order. Out of these 4 instances, we find, however, that the inquiry officer has himself ruled out any misuse of client funds in respect of subscription to the IPO of Sri Rama Multitech Ltd. and Geometric Software Ltd. In respect of the client account no. 29446, the enquiry officer has observed that “there is a preponderance of probability of using the client account to submit the above application in the IPO. As such the said application for IPO should not have been issued from the client’s account.” The enquiry officer’s suspicion seems to be based on the fact that the account had been opened with an amount of only Rs. 1000 on 25.3.2000 and there was a transfer credit of Rs. 9.5 lakhs into the account and a debit of Rs. 9,42,521 and another debit of Rs.4000/- of 29.3.2000 shown as transfer debit. At the time of the hearing of the appeal, the learned counsel for the appellant explained that he had obtained a loan of Rs. 80 lakhs for subscribing to the IPO of Sankhya and that for the purpose of obtaining this loan a new account with a minimum deposit of Rs. 1000 had to be opened with the Ahmedabad District Cooperative Bank Ltd. The enquiry officer has not accepted this explanation only on the ground that neither the loan application form nor the sanction letter from the bank had been furnished by the appellant. As against this the argument of the learned counsel for the appellant is that the entries in the bank statement showing that the money was paid towards share application of Sankhya was evidence enough to show his bonafides and that the whole problem arose because it had been wrongly shown as a client account. Similarly in respect of transaction with H. Nihalchand Finance Services Ltd., it has been satisfactorily explained by the learned counsel for the appellant that this was a mere temporary accommodation from his own sister concern and that the entries had been reversed on the same day.
4. On carefully going into the records as well as the arguments of the learned counsel on both sides, we find that although there have been various omissions and violations of SEBI circulars by the appellant, there is no evidence of any serious wrong doing on the part of the appellant with a view to harming the investors and disrupting the securities market. The appellant has already undergone suspension of more than 5 months. We find that the ends of justice shall be met if the balance period of suspension is waived.
5. impugned order is modified accordingly. The suspension of the appellant’s certificate of registration shall stand revoked from the date of passing of this order. No order as to costs.
Sd/-
Justice Kumar Rajaratnam
Presiding Officer
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Sd/-
N.L. Lakhanpal
Member
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Sd/-
B. Samal
Member
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Place: Mumbai
Date: 18th May, 2004
//sr04518