M/S GRISHMA SECURITIES PVT. LTD. Vs. ADJUDICATING OFFICER,
SECURITIES APPELLATE TRIBUNAL
Click here to view full judgement.
N.K.Sodhi, Presiding Officer (Oral) -
(1.) THIS order will dispose of four Appeals no. 104,117,155 of 2006 and 29 of
2007 which involve identical questions of law and fact. Appeals no.117 and 155 of 2006 have been filed by the stock brokers who executed 327
trades between themselves and traded 14 lac shares of Radaan Mediaworks
India Limited on behalf of their clients during a short period from May
27, 2003 to July 7, 2003. Rajesh Jhaveri was the client of Grishma Securities Private Limited, the appellant in Appeal no. 117 of 2006 and
Nrupesh Shah was the client of the other broker. We have perused the
details of the structured/synchronized trades executed by the two
appellants and find that the orders put by them in the trading system
which eventually resulted in trades not only matched to the second but
even the price and quantity of the traded scrip was the same.
Synchronized trades per se are not illegal and they have been sanctified
by the respondent Board as per its circular dated September 14, 1999
provided the trades are executed in the manner specified therein.
Synchronized trades, however, can be executed with a view to manipulate
the price or the volumes of the traded scrip or both or with some other
ulterior purpose and whether a synchronized trade has been executed with
a manipulative intent or not will have to be gathered from the intention
of the parties for which there would seldom be any direct evidence. Their
intention will have to be gathered from the surrounding circumstances
including the pattern of trading, the frequency of the trades and their
volumes, the explanations furnished by the parties and brokers etc. In
the case before us, the only explanation furnished by the appellants is
that their clients were day traders/jobbers and that they were watching
the trades on the screen when the buy and sell orders were punched into
the system. They have denied any collusion either between themselves or
with their respective clients/parties and claim to be innocent. From the
details of the trades executed between the two appellants and having
regard to the trading system, we do not think that such large number of
trades could match between the same parties through the same brokers
unless the trading system was being abused. Even the day traders cannot
have the same counter party every time. It is also on record that the two
brokers were known to each other and so were the parties. This would
further lend credence to the fact that they executed manipulated trades.
In this view of the matter, the adjudicating officer was justified in
imposing a monetary penalty of Rs. 5 lacs on each of the two appellants.
No fault can, thus, be found with the impugned orders.
Appeal no. 104 of 2006 and 29 of 2007
The appellants in these two appeals who are registered stock brokers had
also executed similar type of structured deals with their counter party
brokers in the same scrip of Radaan Mediaworks India Limited. Haven
Financial Services Pvt. Ltd., the appellant in Appeal no. 29 of 2007
executed 243 structured/synchronized trades with Bonanza Portfolio
Limited, the counter party broker and they traded 5.5 lac shares between
themselves. Haven Financial Services Limited also executed another 298
structured/synchronized trades with Sanchay Finvest Ltd. which was a
broker for another counter party and they traded 6 lac shares of the same
scrip. Sanchay Finvest Limited, the appellant in Appeal no. 104 of 2006
also executed 277 structured/ synchronized trades with Bonanza Portfolio
Limited and they traded 5.7 lac shares between themselves. Their
explanation is also the same and they claim that their clients were day
traders/jobbers and that they were not aware of the manipulative trades.
This plea of the appellants cannot be accepted in view of the large
number of synchronized/matched trades executed by them.
(2.) THE learned counsel for the appellants have urged that the penalty imposed by the adjudicating officer in these cases is excessive and that
the same needs to be reduced. We find from the impugned orders that
Sanchay Finvest Limited has been imposed a monetary penalty of Rs. 10
lacs whereas all the other players in the synchronized trades were levied
a sum of Rs. 5 lacs each. There appears to be no apparent difference
between the trades executed by Sanchay Finvest Limited and the others and
with a view to maintain parity, we reduce the penalty imposed on Sanchay
Finvest Ltd. to Rs. 5 lacs. This amount, in our view, is reasonable and
would meet the ends of justice.
In the result, all the appeals fail and they stand dismissed. In Appeal
no. 104 of 2006 the amount of penalty will stand reduced as stated above.
Parties to bear their own costs.;
Copyright © Regent Computronics Pvt.Ltd.