SATCO SECURITIES FINANCIAL SERVICES LTD Vs. CHAIRMAN SECURITIES EXCHANGE BOARD OF INDIA
SECURITIES APPELLATE TRIBUNAL
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(1.) MARKET witnessed abnormal price and volume movement in the shares of Amara Raja Batteries Ltd (ARBL) traded on Bombay Stock exchange (BSE)and National Stock Exchange (NSE), in February - March, 2001. The Respondent received complaints alleging market manipulation/ irregularities in the trading of ARBL's shares. In that context the Respondent ordered investigation to ascertain the role played by various persons/intermediaries, and violations, if any, of the regulatory provisions by them. The investigation is stated to have revealed that Shri Harinarayan Bajaj and his son Shri Rahul Bajaj were the dominant traders in the ARBL's shares during the period August 2000 to March 2001, that some of the members of BSE and NSE had aided and abetted Shri Harinarayan Bajaj in creating a false market in ARBL's scrips and also that they had failed to exercise due care and skill in their dealings. The Appellant was one of the members whose involvement in the matter was subjected to investigation. In the light of the information collected during the course of investigation, the Respondent decided to conduct a detailed enquiry into the role and conduct of the Appellant in trading in the scrip. Accordingly an enquiry officer was appointed on 18.6.2001 to enquire into the affairs of the Appellant in its dealings in the scrip of ARBL and the possible violations of the rules, bye laws and regulations of the Stock Exchanges, provisions of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities MARKET) Regulations, 1995 (the FUTP Regulations) and the Securities and Exchange Board of India (Stock-brokers and Sub-brokers) Regulations, 1992 (the Stock Broker Regulations). The enquiry officer on concluding the enquiry came to the conclusion that the Appellant had failed to exercise due care and skill in its dealings with Shri Bajaj as required by clause A(2) of the code of conduct prescribed for the stock-brokers in the Stock Broker Regulations. He recommended seven days' suspension of the certificate of registration granted to the Appellant. The Respondent communicated the findings of the enquiry officer to the Appellant and asked to show cause as to why the penalty as recommended by the enquiry officer should not be imposed against it. The Appellant responded to the same by filing written explanation and also by making oral submissions before the Respondent.(the Chairman) The Chairman adjudicated the show cause notice. Vide his order dated 9.8. 2002 the certificate of registration granted to the Appellant was suspended for a period of seven days from 26.8.2002
(2.) Claiming to be aggrieved by the said order, the Appellant has preferred the present appeal praying to set aside the Respondent's order and also to stay the operation of the order pending disposal of the appeal. The prayer for stay of the order pending disposal of the appeal was allowed after hearing counsel for the parties.
Shri Pravin Samdhani, learned Counsel appearing for the Appellant briefly stated the facts leading to the filing of the present appeal. He submitted that the Appellant is a member of NSE and BSE that its clientele includes major Financial Institutions, Mutual Funds and high net worth individuals and retail investors. He submitted that NSE, of which the Appellant is a member for the last 8 years, had carried out inspections of the trades and books of account of the Appellant at periodical intervals and no irregularities of any nature were found in respect of any lapse or violation of the Bye-laws, Rules and Regulations of NSE, and there were no complaints against it. Learned Counsel further submitted that the Appellant enjoys an impeccable record of compliance and high reputation and standing in the capital market, that for no fault of the Appellant, and for no reason, its certificate of registration has been suspended.
(3.) LEARNED Counsel submitted that the Respondent has admitted in its order that Shri Harinarayan Bajaj and his son Shri Rajhul Bajaj were responsible for the abnormal price and volume movement in ARBL's scrip during the relevant period, that in fact the Respondent after investigation has concluded that the Appellant had not in any way indulged in any market manipulation, that what the Appellant did was normal broking transaction as a stock broker.;
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