IN THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No: 79 of 2005
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Date of Hearing
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25/10/2005
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Date of Decision
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02/11/2005
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Appellant – Represented by:
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Indian Finance Guaranty Ltd.
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Mr. Ashok K. Sardana, Director
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Versus
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Securities & Exchange Board of India
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Respondent- Represented by
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Mr. Amitesh, Manager
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CORAM
Justice Kumar Rajaratnam, Presiding Officer
C. Bhattacharya, Member
R.N. Bhardwaj, Member
Per: R.N. Bhardwaj, Member
1. Appeal taken up for disposal with consent of both the parties.
2. M/s. Indian Finance Guaranty Limited, the appellant, is a member of OTC Exchange of India and was registered as a Stock Broker with the Securities Exchange Board of India. The appeal has been preferred against the order of SEBI dated 14th September, 2004, the operative portion of which reads as under:
“Therefore, I, in exercise of powers conferred upon me in terms of Section 4(3) of the SEBI Act and Regulation 16(5) of the Enquiry Regulations, I hereby cancel the certificate of registration hearing No. INB 200591231 granted to M/s. Indian Finance Guaranty Ltd as stock broker. This order shall come into force with immediate effect.”
3. SEBI cancelled the certificate of registration because the said broker ceased to be a member of OTCEI w.e.f. 08/05/2003. In terms of Regulation 27 of SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 inter alia, stock broker shall be liable for action including cancellation of certificate of registration as a stock broker if he ceases to be a member of stock exchange or has been declared defaulter by a stock exchange and has not re-admitted as a Member within a period of six months. As per summary procedure under Regulation 16 SEBI vide order dated 26/02/2004 read with order dated 27/02/2004 appointed an Enquiry Officer who submitted his report on 15/07/2004. The Enquiry Officer stated that the expulsion of the broker by OTCEI was not an issue of contention therefore he recommended cancellation of certificate of registration granted to the broker.
4. It has now been submitted by the appellant that Delhi High Court vide its order dated 21/07/2005 has set aside the expulsion order dated 08/05/2005. The Delhi High Court order states as under:
“Briefly state, that facts of the case are that Shri. Tulsi Dass Bhayana had been expelled by the Bhubaneswar Stock Exchange from its membership in 2003. Predicated on this expulsion, Respondent No.2 had expelled the Petitioner from its Membership, on the ground that one of its Directors, namely Shri. Bhayana, had been expelled by Bhubaneswar Stock Exchange. Learned counsel for the Petitioner submits that Shri. Bhayana had already resigned as a Director in the petitioner on 26/11/2002 and, therefore, there was no justification for visiting any punishment on the petitioner. However, these submission are not admitted by learned counsel for the respondents.
“Shri. Bhayana had challenged the Order of his expulsion before WP(C) No. 2595/2004 the Hon’ble Division Bench has, by its judgment dated 27/04/2005, struck down the action.
“The result is that the basis on which the action had been taken against the petitioner has now vanished. In these circumstances learned counsel for Respondent No.2 states that a fresh decisions shall be taken in respect of the decision which has been impugned in this petition. This decision should be taken within fifteen days from today. Learned counsel for the SEBI states that if no detrimental action is contemplated against the petitioner by Respondent No.2, there would be no impediment in the way of respondent No-1 returning to status quo ante. The remaining Respondents have no objection to this arrangement.
“This Writ Petition is disposed of by setting aside the impugned order in the circumstances narrated above. Respondent No-2 shall take a fresh decision within fifteen days on whether or not the expulsion of the petitioner is necessary or justified. As agreed by learned counsel for Respondent No-1 if the decision of Respondent NO-2 is in favour of the petitioner the latter’s registration shall be restored by Respondent No-2.”
5. In response to the High Court order OTCEI vide its letter dated 31/08/2005 has taken a decision for revocation of expulsion of Indian Finance Guaranty Limited, the appellant. The authorized signatory of OTCEI informed vide its letter under reference No. 1911/2005/CP/ MDD/801 dated 31/08/2005 addressed to the Director, Indian Finance Guaranty Limited, which reads as under:
“Sub: Revocation of Expulsion of Indian finance Guaranty Ltd. pursuant to the Order of Hon’ble High Court of Delhi.;
“Dear Sir,
“As the Hon’ble Delhi High Court has set aside the Expulsion order dated 8th May 2005 and directed the Exchange to take a fresh decision and accordingly the competent authority of the Exchange had reviewed your matter. The competent authority of the exchange comes to the conclusion that there is no reason to continue the expulsion of your dealership and revoked the Expulsion w.e.f 26th August 2005.
“We now request you to comply the all Exchange/SEBI requirements for continue as a Dealer of the Exchange.”
6. In view of the above decision of OTCEI and also the submission made by the learned counsel for SEBI before the Hon’ble High Court, Delhi that if no detrimental action is contemplated against the appellant by respondent No.2 i.e., OTCEI, there would be no impediment in the way of respondent No.1 i.e., SEBI, returning to status quo ante position, SEBI is directed to take appropriate action in terms of Delhi High Court order within two weeks from the date of receipt of this order.
7. No order as to costs.
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(Justice Kumar Rajaratnam)
Presiding Officer
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(R.N.Bhardwaj)
Member
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(C. Bhattacharya)
Member
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Place: Mumbai
Date: 02/11/2005
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