SEBI Vs. RAJESH MEGHANI MEMBER NATIONAL STOCK EXCHANGE
LAWS(SB)-2003-7-12
SECURITIES APPELLATE TRIBUNAL
Decided on July 29,2003

Appellant
VERSUS
Respondents

JUDGEMENT

G.N.Bajpai, - (1.) M/s. Amara Raja Batteries Ltd. ( hereinafter referred to as 'ARBL' ) , came out with a public issue in the year 1991 and its shares are listed on the Stock Exchange, Mumbai ( BSE ), National Stock Exchange ( NSE ), Hyderabad Stock Exchange Ltd. ( HSE ) and Calcutta Stock Exchange Association Ltd. ( CSE ).
(2.) In the first week of October, 2000, the price of the scrip of 'ARBL' at BSE was Rs.91/- and same went up to Rs.205/- on January 1, 2001 .Thereafter the price touched a high of Rs.320/- on March 8, 2001. On March 9, 2001, BSE closed the normal trading at 2 p.m. to facilitate the Badla session and the price of the scrip of ARBL at that time was Rs.308.40/-. On that date, NSE was functioning till 4.30 p.m. and the price of the scrip of ARBL fell to Rs.266.75/- and therefore on March 12, 2001 ( the next trading day ), BSE adjusted the price of various scrips including 'ARBL' to that of NSE. The price of 'ARBL' further fell down and thereafter touched a low of Rs.78.50/- on March 19, 2001. 2.1 The volumes in the scrip of 'ARBL' were approximately 50,000-60,000 shares per day in October, 2000 and went up to around 8-15 lakhs shares per day in the month of February and first week of March, 2001 at both BSE and NSE . Securities and Exchange Board of India ( SEBI ) on receipt of certain complaints regarding the market manipulations / irregularities in the trading in the scrip of 'ARBL' , ordered detailed investigations in the matter to enquire into the alleged violations of the provisions of SEBI Act, 1992 , SEBI ( Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets ) Regulations, 1995 and SEBI ( Stock Brokers & Sub Brokers ) Regulations, 1992 and other Regulations and the role played by various persons / intermediaries including Shri Rajesh Meghani ( hereinafter referred to as "the broker member" ), Member, NSE. 3.1 The investigations prima facie revealed that some of the brokers and sub brokers of BSE & NSE had aided and abetted Shri Harinarayan Bajaj and his son, Shri Rahul Bajaj in creating a false market in the scrip of 'ARBL'. It was also revealed that the above intermediaries had failed to exercise due care and skill in their dealings in the scrip of ARBL. It was also found that Shri Harinarayan Bajaj and his son, Shri Rahul Bajaj were shifting positions of approximately 5.5 lakhs shares of 'ARBL' between BSE & NSE in settlement No.1 of NSE and the same was increased approximately to 11 lakhs shares in Settlement No. 9 of NSE. Further, it was found that Shri Bajaj was not having the requisite funds to pay for the deliveries and also for the margins. The investigation also found that when the price of the scrip of 'ARBL' fell down, Shri Bajaj could not purchase any further shares due to lack of funds.
(3.) THE broker member had started dealing in the scrip of 'ARBL' from the third week of January 2001 ( from Settlement No. 03 /2001 of NSE ), these transactions were done on behalf of his client Shri Harinarayan Bajaj. THE broker member had purchased 4,46,000 shares and sold 2,85,000 shares at NSE. THE broker member had also traded on behalf of Shri Harinarayan Bajaj through Opulent Securities, Member BSE . THE broker member had purchased and sold 1,65,000 shares of 'ARBL' through Opulent Securities Ltd. 4.1 SEBI, therefore, vide its order dated June 18, 2001 appointed an Enquiry Officer to enquire into the affairs of the broker member in his dealings in the scrip of 'ARBL' and for the possible violations of the provisions of SEBI Act, 1992, SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 and SEBI ( Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets ) Regulations, 1995 and the provisions of rules, Bye Laws & Regulations of NSE . 4.2 THE broker member attended and made his submissions before the Enquiry Officer . THE Enquiry Officer after perusing the documents and after considering the submissions made on behalf of the broker member submitted his report on August 23, 2002 . THE Enquiry Officer found that the broker member is guilty of violating Clause A (2) of Schedule II read with Regulation 7 of SEBI ( Stock Brokers and Sub Brokers ) , Regulations, 1992 . However, the Enquiry Officer recommended to take a lenient view on the charge under SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 1995. THE Enquiry Officer had also observed in his report that the broker member had acted as an unregistered sub broker to Opulent Securities ( Member , BSE ). Accordingly the Enquiry Officer in his report had recommended that the certificate of registration granted to the broker member be suspended for a period of 6 months .;


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