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IN THE SECURITIES APPELLATE TRIBUNAL MUMBAI
Appeal
No: 10 of 2005
CORAM ��������� Justice
Kumar Rajaratnam, Presiding Officer ��������� 1.
The
appeal was taken up for final disposal with the consent of both the parties. 2.
This
appeal is against the order of the Chairman, Securities and Exchange Board of
India, the operating part of the order of which states as under: �5.������ I note that the Enquiry Officer has
reported that the broker ceased to be a member of JSE, effective �6������� Therefore, in exercise of powers
conferred upon me under Section 4(3) of the SEBI Act read with Regulation1 6(5)
of the Enquiry Regulations, I hereby cancel the certificate of registration
bearing No. INB160186813 granted to Rakesh Nagar as stock broker� 3.
The
appellant, being aggrieved against the above impugned order dated 4.
The
brief facts of the case is that the appellant was a member of Jaipur Stock
Exchange Limited, (JSE) and Stock Broker registered with Securities and
Exchange Board of India (SEBI) with certificate of registration No.
INB160186813. The respondent came to know that the appellant has been declared
as defaulter by JSE on 5.
In
terms of Regulation 27 of SEBI (Stock Brokers and Sub-Brokers) Regulation,
1992, inter alia, a stock broker
shall be liable for action as specified in the SEBI (Procedure for Holding
Enquiry By Enquiring Officer and Imposing Penalty) Regulation, 2002
(hereinafter referred as Enquiry Regulations) which include cancellation of
certificate of registration as stock broker if he ceases to be a member of the
Stock Exchange or has been declared as defaulter by a Stock Exchange and not
re-admitted as a Member during the period of 6 months. 6.
Further
in terms of Regulation 15 of the Enquiry Regulations while a stock broker
ceases to be a member of a recognized stock exchange or has been or has been
declared as a defaulter in relation to the transaction at such exchange, as to
the summary procedure under Regulation 16 may be followed.� Accordingly as per summary procedure, an
enquiry officer was appointed by SEBI vide order dated 7.
On
the basis of the report of the enquiry officer a show cause notice was issued
to the appellant on 1. �That he did not know the Rules of
SEBI (Stock Brokers and Sub-Brokers) Rules, 1992 and other Rules and
Regulations in that regard and that after 12/09/1996, no correspondence was
sent by Jaipur Stock Exchange and SEBI in that regard. 2. �That he had also written to SEBI and
JSE to inform him about any outstanding dues from SEBI but SEBI did not respond
to him in this regard. 3. �That he was in process to revoke his
membership from JSE in the near future. 4. �That he did not have any dues for
clients and brokers of JSE except the annual subscription dues to be paid to
JSE. �The broker further requested that no
penalty be imposed on him and that he may be given 6 months time to clear his
dues so that he �may start work in the right earnest�.� 8.
The
appellant submitted that in the year 1996 the JSE declared the appellant as a
defaulter vide letter No. 298/1996 dated
9.
As
the defaulted amount was paid to JSE, the appellant requested JSE vide his
letter dated 10.
The
appellant submitted that in the meanwhile one member of the Stock Exchange
namely, Mr. Mahesh Sharma, (Code No. 16-J 281) lodged a false claim for a sum
of Rs. 62,250/- vide his Bill No. 5298 and 5299 dated 31/08/1996 wherein he had
shown delivery of 5200 shares of UTI Master Gain, 1992 to the appellant along
with Company�s bad delivery objection memo. 11.
The
appellant had submitted that he represented to the JSE that he had never
entered into any trading in these shares with the complainant i.e., Mr. Mahesh
Sharma. The appellant also stated that in the said statement that Mahesh Sharma
had not produced any document to establish that the appellant had any
transaction with him in JSEL clearing house for these shares. Although Mr.
Sharma had been directed by the President of the JSE to produce supporting
documents relating to the transaction, Mr. Sharma failed to produce any such
document.� 12.
Negotiations
between the JSE and the appellant continued regarding authenticity of the dues
claimed by Shri Mahesh Sharma. The appellant also explained the position before
the Default Committee and the Special Committee of JSE but the matter could not
be settled as a result of which the appellant could not be re-admitted as
Member of the Stock Exchange.� 13.
The
appellant had submitted that he was regularly paying the requisite fee to both
the respondents with the hope that there is no outstanding of the clearing
house against the appellant. 14.
The
appellant submitted that in the meanwhile all the records of the appellant
relating to JSEL and the documents relating to the share business correspondence
with the Stock Exchange were seized by the Income-Tax through their seizure
memo dated 15.
The
appellant also submitted that he had also paid a sum of Rs. 65,224/- through
demand draft No. 729688 dated 16.
With
regard to the claim of Mr. Mahesh Sharma the appellant submitted that the said
claim in respect of 5200 shares of UTI Mastergain 92 was not genuine since he
came to know from UTI that the units in respect of which the claim was made,
were not in circulation at the relevant time and that UTI had repurchased the
same before August, 1996, when the claim / complaint was made. The appellant
stated that he came to know from M/s. Datamatics Financial Services Ltd., that
the originals of the units in respect of which the claim was lodged were in
fact lying with them. 17.
The
appellant further submitted that Regulation 13(6) of the SEBI (Procedure for
Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002
provides one of the situations where a major penalty can be imposed is when the
intermediary had violated the conditions of registration.� Accordingly the appellant submitted that he
had not violated the conditions of registration since he is still a member of
JSEL and has not been expelled.� He has
only been declared as a defaulter. Therefore the impugned order canceling the
certificate of registration is in violation of the provisions of the said
regulations besides the provisions of law is violative of Article 21. 18.
I
have perused all the documents submitted by both the parties. Taking all the
facts and circumstances of the case into account, I am of the opinion that the
impugned order for cancellation of registration is too harsh punishment. It
will preclude the appellant forever from getting his license renewed. After
all, as on date, all the dues have been paid to JSEL with interest. Impugned
order speaks only about dues to JSEL and rightly so and does not refer to third
party alleged dues which is not the subject matter of the appeal. 19.
I
am therefore inclined to issue a warning to the appellant. This will not
preclude the appellant from approaching the JSEL for getting the license
renewed if all dues are paid with interest. With respect to dispute with third
parties it is open to the appellant and the third parties to sort out the
matter in accordance with law and is not a subject matter of the appeal.� The impugned order stands modified to the
extent mentioned above. 20.
No
order as to costs.
Place: Mumbai Date:�� */as |
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