(1.) THE Securities and Exchange Board of India (hereinafter referred to as 'SEBI') received a letter dated 16.3.2001 from M/s. Sheth Securities Pvt. Ltd, member, NSE alleging that one of their clients Shri Harinarayan G. Bajaj purchased shares of Amara Raja Batteries Ltd. (hereinafter referred to as "ARBL") and had defaulted in meeting payment obligation. On the same day another letter was received from Shri Harinarayan G. Bajaj alleging that there was heavy short selling in the scrip of ARBL causing the prices to fall because of which he had incurred huge losses. He also requested SEBI to stop pay out of Settlement No. 50, THE Stock Exchange, Mumbai (BSE) and Settlement No. 10 of National Stock Exchange (NSE).
1.2 On prima facie satisfying that there was a case for investigation, the then Chairman, vide his order dated 27.4.2001 directed that an investigation be conducted into the affairs relating to buying, selling or dealing in the shares of ARBL and violation of, interalia, provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 and SEBI (Stock Brokers and Sub Brokers) Regulations , 1992. THE said investigation was also to look into the role played by various persons including Shri Harinarayan Bajaj and his son, Rahul Bajaj (hereinafter collective called 'Bajajs') in connection with the price manipulation of the scrip of ARBL
1.3 While investigation was in progress Shri Harinaryan Bajaj filed a Writ Petition No. 845/2001 before the Hon'ble High Court of Bombay claiming following reliefs:
i. To mandatorily direct SEBI (Respondent No. 1) to exercise its powers under Section 11B of SEBI Act, 1992 and further direct it to give necessary orders / direction to (ED of BSE, Inspection & Investigation Dept. of BSE, ED of NSE and Investigation and Inspection Deptt. of NSE, Respondent No. 2 to 5 respectively) to complete the inquiries / investigations being carried on by Respondent No. 2 and 4.
ii. Pending the hearing and final disposal of the Writ Petition, the Respondent No. 1, 2 and 4 be directed to furnish the petitioner with the complete details of all the trades and / or transactions, relating to the shares of ARBL entered into by all the member brokers of BSE from March 5, 2001 to March 23, 2001 and the member brokers of NSE from March 7, 2001 till March 20, 2001 and the details of dematerialized accounts of all their constituents as on the date on which they entered into sale transactions for the aforesaid settlement of ARBL either at BSE or at NSE.
iii. Pending the hearing and final disposal of the Writ Petition, direct SEBI, BSE and NSE to grant the petitioner a proper hearing regarding the investigations being carried out by them.
iv. Pending the hearing and final disposal of Writ Petition, direct SEBI, BSE and NSE to furnish the details of trades of ARBL between the period March 5, 2001 to March 23, 2001 on BSE and NSE.
v. Pending the hearing and final disposal of the Writ Petition direct SEBI, BSE and NSE to furnish a copy of the Report of investigation in the matter of ARBL.
THE Hon'ble High Court vide its order dated April 9, 2001 dismissed the above Writ Petition and observed that as under:
"the matter is still at the stage of investigation and the question of supplying any information to the petitioner or any other complaint does not arise at this stage. THE petitioner, may, if so advised, apply to SEBI after the investigation is complete for copies of necessary documents and other information and if such an application is made, SEBI will consider the same in accordance with law and pass appropriate orders".
1.4 THE investigation revealed that the Bajajs had made huge purchases in the scrip of ARBL during Settlement No. 10 of NSE and Settlement No. 50 of BSE and also in other settlements through various trading members. It was observed that Bajajs were among the largest purchasers of scrip of ARBL. THEir trading accounted for 30% of the total trading on BSE and NSE. In the period between August 2000 and February 2001 they had taken delivery of approximately 3,76,260 shares of ARBL. Out of the above 3,76,260 shares of ARBL, Bajajs pledged 2,93,550 shares with banks and other individuals and availed loans which were used to fuel the stock prices further/ take further positions.
1.5 On prima facie satisfying that Bajajs' violated the provisions of SEBI Act and SEBI (Prohibition of Unfair Trade Practices Relating to Securities Market) Regulations (hereinafter referred to as ' FUTP Regulations') a Show Cause Notice dated 27.07.2001 was issued alleging that:
i. THE Bajajs had transacted in the scrip of ARBL through various brokers of BSE and NSE.
ii. During the period of trading in the scrip the price of the scrip at BSE was Rs.91/- in the first week of October 2000 and touched a high of Rs.320/- on March 08.2001.
iii. Bajajs were predominant traders in the scrip of ARBL. THEir trading accounted for approximately 30% of the total trading on NSE and BSE during the period August 2000 to March 2001.
iv. Bajajs had taken delivery of approximately 3.75 lac shares of ARBL. Of these approx. 2.95 lac shares were pledged with banks and loans were taken and the said funds were used to take further position in the scrip of ARBL.
v. Bajajs were making use of different trading cycles of BSE & NSE to shift their position from one exchange to another. Since they had 30% of gross trading position in the market, their act of selling on one exchange and simultaneous buying on the other exchange created a price differential, which prompted arbitrage activity.
vi. Bajajs were utilizing the arbitrage mechanism to carry forward open positions. THEy had not only carried forward purchase positions on the Badla mechanism of BSE but also shifted their positions from one exchange to another.
vii. Bajajs traded in the scrip without means as admittedly they do not have any other income and their family members reported carry forward losses since 1996.
viii. From the records, it was observed that in settlement No. 10 of NSE, their family members had a purchase position of approx. 10,50,000 shares. This position was not closed out on NSE and delivery was marked to the Bajajs and their family members.
ix. THE trading of Bajajs resulted in creation of false market in the scrip of ARBL and they are solely responsible for :
a) creating a false market in the scrip of ARBL
b) Artificially raising the price of the scrip of ARBL which is in violation of Regulations 4(b) of FUTP Regulations and Section 12 of SEBI Act, 1992.
c) Bajajs also defrauded the brokers of both the exchanges i.e. BSE and NSE and have therefore, violated Regulation 3 of the FUTP Regulations.
1.6 In view of the above, vide notice dated 27.07.2001, Bajajs were required to show cause as to why directions restraining them from further dealing in the securities and such other direction as deemed fit in the facts and circumstances of the case should not be passed against them under Regulation 11 read with Regulation 12(a) of FUTP Regulation.
(2.) 1 In reply to the said notice to SEBI, Bajajs' wrote a letter on 10.08.2001 denying all charges and stating that despite repeated requests by them and in spite of the order of the Hon'ble Bombay High Court in WP No. 845/2001, SEBI had not provided any detail regarding the aforesaid investigation or even copies of their statements recorded in the course of investigation. They also requested that they may be allowed to take inspection of all relevant documents upon which the show cause notice was based. Copies of statements were forwarded to Bajajs vide letter dated 14.8.2001. Thereupon vide letter dated 20.08.2001, Bajajs sought further details which according to them are necessary for replying to the show cause notice. The details were sought by them:
i. Purchase position actually held by brokers and sub brokers acting on behalf of Bajajs as on March 9, 2001 and March 12, 2001 and the amounts of margin monies lying with them as indicated by them to SEBI and shares of ARBL also lying with them as collateral securities.
ii. The entire trades in the scrip of ARBL during the period between March 5, 2001 and March 23, 2001 on BSE and during the period between March 7, 2001 to March 20, 2001 on NSE along with trade time and order numbers.
iii. Details of all market participants claiming to be arbitrageurs during the aforesaid period on BSE & NSE.
iv. Details of the dematerialized accounts of all the constituents who had sold the shares of ARBL as on March 8, 2001 since the ban on naked short sales was imposed.
v. Details of the pay-ins accepted by NSE for Settlement No. 10 and by the BSE for Settlement Nos. 50 & 51 from their respective brokers.
vi. Details of the pay-outs (including the dates when the same were (declared) enacted to various brokers for settlement No. 10 of NSE and Settlement No. 50 & 51 of BSE.
vii. Details of the actual number of shares of the defaulted brokers which are lying with the depositories of both the Exchanges.
viii. Copies of the interim reports of BSE & NSE as submitted to SEBI.
ix. SEBI's own interim report, if any.
x. Pattern of holding and in particular details of OCB Holdings in ARBL as on September 1, 2002, March 5, 2001 and April 7, 2001.
xi. Details of all trades in ARBL conducted by Bajajs brokers and sub brokers on either of the Exchanges since September 2000 or from the date of commencement of trade on their respective broking identities.
xii. List of short sellers on BSE in settlement Nos. 50 & 51 and Settlement No. 10 on NSE.
2.2 Subsequently, vide letter dated 1.9.2001, the Bajajs made a representation requesting SEBI to exercise powers under Section 11B of the SEBI Act and direct BSE & NSE to keep all arbitration references relating to the trading in the scrip of ARBL for settlement Nos. 50 & 51 on BSE and 10 on NSE pending till final hearing and disposal of the matter by SEBI. They also called upon SEBI to submit the details sought by them. Subsequently, a notice of hearing dated 17.09.2001 was issued to Bajajs directing them to appear for a personal hearing on 04.10.2001.
2.3 In their response, vide letter dated 25.9.2001, the Bajaj's stated that they have been requesting SEBI to furnish them with necessary details and materials keeping in view the principles of natural justice and in the light of the order passed by the Bombay High Court in WP No. 845/2001. They also stated they were entitled to inspect the documents, materials, papers etc and are also entitled to an extract of the investigation report which concerns them. They also submitted that they are concerned with the entire investigation and in spite of that neither the investigation reports nor other documents or materials have been provided to them.
2.4 Vide letter dated 9.10.2001; the Bajaj's were informed that an opportunity of personal hearing was being granted on 1.11.2001. In response vide letter dated 15.10.2001, the Bajaj's stated that they repeat and reiterate the entire contents of the letter dated 25.9.2001. They requested again that the details and materials sought by them vide letter dated 20.8.2001 may be furnished. The Bajaj's also addressed the letters dated 29.10.2001, 9.11.2001 and 20.11.2001 requesting for the documents and details.
2.5 The Bajajs filed another Writ Petition No. 2737/2001 (dated 03.11.2001) in the Hon'ble Bombay High Court praying, inter alia:
To direct SEBI, BSE and NSE (being respectively) respondent nos. 1, 2 and 3 to furnish complete details of all the trades and / or transactions entered into the shares of ARBL by all the member - brokers of respondent No. 2 on or after March 5, 2001 till March 23, 2001 (for settlement Nos. 50, 51 and 52) and the member-brokers of respondent No. 3 on and after March 7, 2001 till March 20, 2001 (for settlement nos. 10 and 11) and the details of dematerialized account of all their constituents as on the dates on which they entered into sale transactions for the dates on which they entered into sale transactions for the aforesaid settlement of the said ARBL either at BSE or at NSE and such detail / material which will be relevant in the aforesaid investigation to prove their case.
2.6 The said Writ Petition was disposed off by the Hon'ble Bombay High Court vide its order dated 19.12.2001 inter alia observing that "Mr. Kumar Desai, learned Counsel appearing for the SEBI stated that the petitioner's application for inspection of documents is under consideration of SEBI and SEBI has fixed hearing of the said application on 27.12.2001. Mr. Desai stated that the SEBI will hear and dispose of the said application within a period of one week after hearing is concluded".
2.7 SEBI vide letter dated 10.12.2001 advised Bajaj's to satisfactorily explain how the details sought for by them vide letter dated 20.8.2001 are relevant for the purpose of the present proceedings. They were also informed that no documents shall be relied upon by SEBI unless a copy of the same is given to them and an opportunity to explain the circumstances appearing against them is given. They were advised to appear before Chairman, SEBI on 27.12.2001 to establish the relevance of the documents.
2.8 The Bajaj's appeared for a personal hearing before the then Chairman on 27.12.2001 and also made written submissions regarding the relevance of the documents. Thereafter, vide letter dated Jan. 2, 2002, the following decision of the then, Chairman on the request for documents and information was conveyed to the Bajajs:
a) In respect of item No. 1, details of purchase positions held by brokers and sub brokers acting on their behalf as on 9.3.2001 and 12.3.2001 and the amounts of margin moneys and shares of ARBL lying with them as collateral securities, is information which should be within their knowledge.
b) Entire details of trades in the scrip of ARBL during the period 5.3.2001 to 23.3.2001 on BSE and 7.3.2001 to 20.3.2001 on NSE are not considered relevant in connection with the show cause notice.
c) Item Nos.3 to 8 and 10 to 12 seeking details of all market participants, dematerialized accounts of all constituents details of pay in at NSE of all members, reports of BSE and NSE and other details are not considered relevant in connection with the show cause notice.
d) The relevant portions of the investigation report in respect of the trading in ARBL is considered relevant.
Extracts of the investigation report which were considered to be relevant were forwarded to the Bajaj's along with the said letter.
2.9 Thereafter Bajajs filed two appeals No. 1 & 2 /2002 before the Hon'ble Securities Appellate Tribunal (SAT) against the finding/order of the Chairman, SEBI with regard to the furnishing of documents. The Securities Appellate Tribunal vide its common order dated 5.9.2002 dismissed the appeal filed by the Bajaj's, inter alia, with the following observations:
a. The appellants are more concerned to pursue a course of action which they feel necessary to recoup the loss stated to have been suffered by them as a result of the alleged short sale and for that purpose they require material and find SEBI as a source.
b. They need the said particulars to use in the arbitration claims filed against them.
c. The respondents i.e. SEBI made it very clear in the impugned order that no documents would be relied upon without giving the appellants a copy of the same and without giving them an opportunity to explain the contents thereof. This undertaking is very relevant and if the same is found to be flouted, consequences would follow.
d. It is surprising why the appellants are reluctant to present their case before the respondents and are shying away from answering the charges. They are in no way debarred from raising objections before the appellants in case they feel that relevant material has been held back from them.
e. The sub missions of the appellants gives an impression that they want the scope of the enquiry to be expanded and take up the enquiry by themselves.
Thereafter, the Bajaj's were informed that a personal hearing was to be held before me on 21.10.2002. In reply the Bajaj submitted that they have preferred an appeal against the order of the Securities Appellate Tribunal before the Hon'ble High Court, Mumbai and requested that all proceedings be held in abeyance. Bajajs filed appeal nos. 6 & 7 before the Hon'ble High Court.
3.1 The Hon'ble High Court vide its order dated 30.10.2002 dismissed the appeal holding that the appeal is not maintainable under Section 15Z of the SEBI Act, 1992. The Hon'ble Court had given four weeks time to file reply to the show cause notice and if the reply is not filed within the said period SEBI would be at liberty to proceed ex-parte. Subsequently, Bajajs had made an application for extension of time and the Hon'ble High Court was pleased to extend the time for the further period of four weeks.
3.2 Bajajs instead of replying the show cause notice in the said extended period filed an SLP No. 23816 and 23817/ 2002 before the Hon'ble Supreme Court of India. The Hon'ble Supreme Court of India was pleased to dismiss the SLP vide its order dated 06.01.2003
3.3 Thereafter, Bajajs filed a common reply to the show cause notice vide their letter dated 08.02.2003. In the said reply Shri Bajaj has contended as under:
3.3.1 That these written submissions were not their final pleadings in response to the show cause notice since SEBI did not give them various material documents that they demanded.
3.3.2 That the investigation by SEBI was started on the basis of a complaint. They also complained to SEBI on 13.03.2001 regarding violation of SEBI's directives on short sales by certain entities. SEBI instead of investigating into the said violations followed completely different and unrelated line of investigation to look into the price rise in the scrip of ARBL from Rs. 100/- to Rs. 300/- between Aug. 2000 to March 2001.
3.3.3 Referring to the details of trades mentioned in the show cause notice, Bajajs stated that, they had submitted information to SEBI and since SEBI had not reverted to them on the said information, it was proved that they never tried to conceal the information.
3.3.4 Referring to the volumes of the scrip of ARBL in the relevant period, they stated that they were not concerned with these volumes since they had no control over them. The trading data of NSE as given in the show cause notice was incorrect.
3.3.5 With regard to trading on BSE, they stated that the data given therein was wrong. The most striking dissimilarity was the carry forward position shown for Settlement No. 50 and 51, which also importantly formed the basis of the present show cause notice under reply. There was a difference of 9,48,444 shares in the two positions as shown by SEBI in both the charts for Settlement No. A-50 and a difference of 7,81,538 shares in the corresponding carry forward positions for Settlement No. A-51. The difference in the positions for the other Settlements from A-30 to A-49 range from a quantity of 1,00,000 to 4,00,000 shares which itself was completely unexplicable.
3.3.6 They contended that they were not aware whether their volumes in the scrip constituted 30% or not. They argued that if the figures shown in the aforementioned charts were correct, than various brokers were holding a position of 10,21,614 shares of ARBL on the NSE and a further position of 4,02,930 shares on their behalf on the BSE. The cumulative position attributed to them was thus 14,24,544 shares. If the position of 14, 24,544 shares corresponds to 30% of the entire trades in the shares of ARBL then the entire trade in the said shares on both the Exchanges cumulatively should be to the tune of 47,48,480 shares. They pointed out that the total number of shares in electronic mode of ARBL at the relevant time was 37,94,429 shares. Therefore, 30% volume as quoted by SEBI was wrong.
3.3.7 They argued that volumes being quoted in percentages was misleading and the charge framed on such assumption was frivolous.
3.3.8 They stated that they had a delivery position of Rs. 3.75 lacs at a relevant time and that they were the largest shareholders of the company next only to the promoters. They contended that availing overdraft facilities against shares was not illegal.
3.3.9 They denied the charge that there was shifting of positions from one exchange to the other exchange. They stated that they traded on an exchange as an individual entity. They contended that there is nothing illegal in such a transaction by shifting their position from one exchange to another. They denied that their transactions gave raise to any price differences or promoted arbitrage activities. They argued that such arbitrage activities if existent, were not illegal. They denied that they were absorbing any deliveries by shifting positions from one exchange to another.
3.3.10 They stated that the badla transactions were legal and deliveries being absorbed through arbitrage mechanism would also be legal. They demand strict proof of data relied in the show cause notice.
3.3.11 They denied that they traded through any broker without paying margins. They stated that they had deposited 9.6 crores as margin along with 22,000 shares of ARBL.
3.3.12 With regard to the balance sheet of the family they stated that in the year 1992, Harinarayan Bajaj was the fourth highest tax payer in the country. Their balance sheet turned negative since 1996 because of an order passed by SEBI in the matter of Sesa Goa. They argued that investing and redeploying any monies earned out of particular business back into the same business is not prohibited by any law and is a common practice deployed by businessmen all over. They also stated that, raising of any finances from banks or other private financiers against securities is also completely legal.
3.3.13 They submitted that SEBI had no right to look into the financial status of the client but can only look into whether sufficient margins were tendered or not. They denied that the purchase position of Bajajs and their family members in Settlement No. 10 was 10,50,000 shares. They demanded a cross examination of the investigating officer to disprove this.
3.3.14 They stated that they would always square off all their outstanding positions in the scrip of ARBL at NSE after marking the requisite number of shares which they intended to take delivery of. But in the settlement No. 10 the same could not be done due to locking of the price of ARBL at the lower end of the circuit on March 12 and March 13, 2001. They contended that if SEBI had argued of his highest purchases was correct the situation of shares being locked at the lower end of the circuit would not arise.
3.3.15 They contended that the prices of the said scrip was intentionally depressed by a group of short sellers in complete violation of the ban imposed by SEBI, or else, the said shares might have been sold some strategic shareholder of the said company.
3.3.16 They further stated that, after the promoters of ARBL, their family members were the largest shareholders of ARBL and no other shareholder was having such huge quantities of the said shares which could have precipitated a large fall in the share prices. It was again not anybody's case that either Bajaj or their family members or the promoters of the said company had pressed any sales and thus the only other alternative left is that the said situation was artificially created by certain concerned members of the trading community so as to reap huge and wrongful benefits even at the cost of violating SEBI mandates. Bajajs further stated that, SEBI, instead of investigating this angle, chose it fit to follow a completely different and irrational line of investigation so as to somehow falsely implicate them in the said investigation.
3.3.17 They denied that they were highly leveraged and were maintaining the shares prices of ARBL or that they did not have sufficient funds to take deliveries. They contended that they had deposited sufficient margins with all the brokers.
3.3.18 They stated that they were not supposed to make any payments for any transactions which were null and void. They demanded cross examination of the investigating officer to prove this. They denied that the prices of any shares should always be moving in a particular pattern.
3.3.19 They stated that ARBL had all the ingredients for its share price to rise such as that it had a most powerful balance sheet and had launched series of new products.
3.3.20 They stated that the charges of "Creating a false market in the scrip of ARBL" and " Artificially raising the price of ARBL are imaginary.
3.3.21 They contended that share prices in our markets were not decided by any benchmark set by any guidelines of SEBI and that the markets decide the price of any scrip discounting its future earnings.
3.3.22 They contended that SEBI was not an organization to decide whether the share price of a particular scrip has reached its zenith or nadir and that it had no qualification or power to decide the market value of any particular scrip.
3.3.23 They argued that that UTI, LIC, GIC and other Mutual funds also support scrips which had higher weightage in the portfolio and declare their NAVs. Hence it is not any artificial creation of false market.
3.3.24 They denied that they violated the FUTP Regulations.
(3.) A personal hearing was given to the said Bajajs on 12.02.2003 in which Shri Harinaryan Bajaj himself and Shri Sailesh H. Bajaj, authorized representative of Shri Rahul Bajaj, appeared and made oral submissions. They also filed their common written submissions on 27.02.2003. In their submissions they had reiterated the issues raised in the above reply and also stated as under:
4.1 The investigation by SEBI was started on the basis of a complaint. He also had sent a complaint to SEBI on 13.03.2001 complaining violation of SEBI's directives on short sales by certain entities. SEBI instead of investigating into the said violations, followed a completely different and unrelated line of investigation, wherein it investigated only rise in price of the scrip of ARBL from Rs. 100/- to Rs. 300/- between Aug. 2000 to March 2001.
4.2 The present show cause notice by SEBI failed to comply with its own guidelines which were the genesis of the present enquiry. The show cause notice was issued with a single point agenda to implicate them.
4.3 SEBI failed to give inspection of documents as demanded vide their letter dated 20.08.2001. They reiterated the relevance of each document and contended that these documents were available with SEBI.
4.4 The facts and figures containing in the show cause notice are concocted with an attempt to evade inspection. They cited instances where brokers who were supposed to be holding securities on their behalf, sold the same without their knowledge.
Following are the instances:
4.4.1 Sheth Securities had short sold 75,000 shares of ARBL and were not holding at the end of Settlement No. 10.
4.4.2 TJ Stock Broking Services Ltd. short sold in excess of 15,000 shares over and above 30,000 shares which had been sold against the position held by them.
4.4.3 SATCO Securities and Financial Services Ltd. short sold / squared off entire quantity of 65,000 shares without instructions.
4.4.4 LKP Securities sold 18,338 shares from the purchase position of 55,000 shares.
4.4.5 Rajesh Meghani who was supposed to be holding a purchase position of 1,61,000 shares stated in a deposition before SEBI that he purchased only 71,000 on behalf of Bajajs and rest on his own behalf.
4.4.6 Bid Securities, Seshanka Securities, Kanan Securities and Mangal Keshav Securities did not possess the quantity of shares which they were supposed to hold on their behalf.
4.5 In view of the above, Bajajs contended that they were never holding 1,88,338 shares out of 10,21,614 shares which constitute 18.5% of the entire purchase position. Therefore, SEBI did not rely upon credible information.
4.6 A summary of the table showing the differences as submitted by Bajaj is as under:
BSE Outstanding Position for H G Bajaj & his son Rahul H. Bajaj as shown by SEBI on 27.02.2001 and 21.01.2001 and as submitted by Bajajs
In view of the above, Shri Bajaj demanded cross examination of the investigating officer.
4.7 They denied that their trades amounted to 30% of the entire trades as 30% would far surpass the total number of shares which were dematerialized.
4.8 Pay-in and Pay-out details of the relevant brokers who were expected to deliver / receive shares, though demanded were not given by SEBI.
4.9 It was contended that the Exchanges had resorted to auction to meet the delivery obligations of brokers inspite of the fact that the pay-out was declared atleast four months after the pay in obligation. Referring to a order passed by the arbitral Tribunal of NSE in the case of Mangal Keshav Securities, he stated that the said broker received 8,179 shares as pay out instead of 9,000 shares.
4.10 He contended that both the Exchanges, in order to facilitate and complement each other, either on their own understanding or at the behest of SEBI officials, accepted letters from delivering brokers who were supposed to effect deliveries at the time of pay-ins thereby allowing the said brokers a waiver from depositing the said shares with the Exchange clearing houses, if at all the said brokers were supposed to receive the said shares as and by way of delivery from the contemporary Exchange. Thus each share which would have normally resulted into "one" effective delivery was good enough to cater to "two" or in some cases "three" effective deliveries since a process of duplication and triplication of one share was allowed by either of the Exchanges by adopting such a novel practice. Shri Bajaj thus stated that the position which has been attributed to him never ever existed and the said shares have traveled from one Exchange to the other more than once in order to affect the pay-outs. He further stated that this can be verified only on inspection of documents and only by cross examining the relevant investigating officers.
4.11 Relying upon a typed version of a news paper cutting (details of the news paper in which its is published not given), with a heading "BSE, NSE withholding pay-out on Amara Raja Shares" , that there were only 12,00,000 shares cumulative deliveries and 30% of which would come to around 3.6 lac shares and this volume could not have created a false market.
4.12 They stated that they were not instrumental in creating a false market. They contended that the price of scrip did not raise to such a level which could prompt SEBI to issues the show cause notice. They stated that in the relevant period there were other scrips which rose from Rs. 30/- to Rs. 3,000/-. They alleged that SEBI in an attempt to shield some influential trading participants, charged them. They cited the order of the Hon'ble Securities Appellate Tribunal in the case of Sterlite Industries  SCL 485 holding that " evidence merely probabilising and endeavoring to prove the fact on the basis of preponderance of probability is not sufficient to establish such a serious offense of market manipulation. Mere conjectures and surmises are not adequate to hold a person guilty of such a serious offense".
4.13 Bajajs alleged that SEBI resorted to the use of completely misconceived and concocted information so as to implicate them. They relied on the judgment passed by the Supreme Court in the case of Bank of India v/s Degala Suryanarayana as report in AIR 1999 SC2407 wherein it has been held as under:
"Strict rules of evidence are not applicable to departmental enquiry proceedings. The only requirement of law is that the allegation against the delinquent officer must be established by such evidence acting upon which a reasonable person acting reasonably and with objectively may arrive at a finding upholding the gravamen of the charges against the delinquent officer. Merely conjecture or surmise cannot sustain the finding of guilt even in departmental enquiry proceedings".
4.14 They further relied upon a reported judgment of the Hon'ble Supreme Court of India in the case of Nandkisore v/s State of Bihar as reported in  3 SCC 366 where the Hon'ble Court has held as under:
"Before dealing with the contentions canvassed, we may remind ourselves of the principles in point crystallized by judicial decisions. The first of these principles is that the disciplinary proceedings before a domestic tribunal are of a quasi judicial character; therefore, the minimum requirement of the rules of natural justice is that the tribunal should arrive at its conclusion on the basis of some evidence i.e. evidential material which with some degree of definiteness points to the guilt of the delinquent in respect of the charges against him. Suspicion cannot be allowed to take place of proof even in domestic inquires. As pointed out by this Court in the Union of India v/s H C Goel (AIR 1964 SC 364) "the principle that in punishing the guilty, scrupulous care must be taken to see that the innocent are not punished applies as such to regular criminal trials as to disciplinary inquiries held under the statutory rules".
4.15 He also further relied upon the judgment of Hon'ble Supreme Court in the case of L D Jainshingani v/s Naraindas N. Punjabi as reported in AIR 1976 SC373 wherein the Hon'ble Apex Court has held as under:
" We think that in case of this nature, involving possible disbarring of the advocate concerned, the evidence should be of a character which should leave no reasonable doubt about guilt. The disciplinary Committee not only found the Appellant guilty but had disbarred him permanently".
4.16 They therefore requested to exonerate them from the charges levied against them. They demanded for a inspection of documents and cross examination of investigating officer.;