- (1.) THIS is an appeal under Section 15T of the Securities and Exchange Board of India Act, 1992 whereby the appellant is challenging the order dated 16-2-2000 made by the Respondent Adjudicating Officer imposing penalty of Rs. 3.98 lakhs on the appellant. The appellant is a member of Bombay Stock Exchange. He was carrying on stock broking business till January, 1995 and thereafter the disconti- ued that business as there was a massive fire in his office, causing heavy damage. The appellant while doing business of stock broking had done business for one Shri Anil Nahar, a non-resident Indian. It has been stated that the said Nahar complained to the stock exchange authorities and to the Respondents that the appellant was not paying the sum of money due to him from the transaction. Shri Nahar though started with a claim of Rs. 4,97,970 in July, 1995. Ultimately accepted Rs. 2 lakhs in a mutual settlement arrived at sometime in August, 1999. Full payment was made in September, 1999. In the meantime the respondent's initiated adjudica- tion proceedings against the appellant for the alleged violation of Section 15F(b) of the Act. The adjudication resulted in imposition of monetary penalty of Rs. 3.98 lakhs. The appellant is aggrieved by the order of the respondent, and hence this appeal.
(2.) Shri Prakash Ganwani, the leaned counsel for the appellant, submitted that since the contract for sale of shares was entered into the year 1994, Section 15F(b) has no application as the said section came into force with effect from 25-1-1995. Therefore, the penalty provided therein cannot be enforced against the appellant. He contended that Adjudicating Officer's version that Article 14 of the Limitation Act had no application to the case of the appellant. It was also urged that the respondent had initiated the inquiry on the basis of a complain from Shri Nahar and that during the currency of the inquiry itself the appellant had paid full amount to the satisfaction of the said Nahar. That being the case, the respondent should not have proceeded with the inquiry and issued the impugned order, imposing monetary penalty. While explaining the background and the factual position, the learned counsel had tried hard to establish that there was no intentional delay on the part of the appellant in making payment to Shri Nahar. He submitted that there was massive fire in his office on 2-8-1994 resulting in huge loss of property including important records relating to his trade transactions. Since the los was so huge and that most of the records were also destroyed, he had closed down the broking business from January, 1995. He admitted that Shri Nahar was one of the esteemed clients who had sold shares worth about Rs. 35 lakhs through the appellant. But coming to the claim made by Shri Nahar he submitted that the claimant was not sure of the precise sum of money due to him from the firm and was wavering. In January, 1995 he had made a claim of Rs. 4,97,970.50. Thereafter in April, 1996 he himself admitted that only an amount of Rs. 3,57,878 was due. Afterwards in August, 1999 he agreed to settle the claim for Rs. 2,38,922. Which was about 50 per cent less than the original claim put forth by him in January, 1995. Subsequently again by way of mutual settlement in August, 1999 he agreed for a sum of Rs. 2 lakhs, which the appellant paid in September, 1999. There was no complaint from him thereafter alleging any 'pressure' from the appellant as alleged by the respondent. It was also submitted that the appellant had to protect his interest against bad deliveries, as Shri Nahar was not easily accessible, being a non-resident. The learned counsel invited the Tribunal's attention to the appellants letter dated 28-11-1995 to the Investors Cell, BSE, Mumbai informing them in the context of Shri Nahar's complainant that out of shares amount- ing to Rs. 35 lakhs sold for the complainant most of them were standing either in his name or in the name of his family members that these shares were coming back as bad deliveries; that since the complainant was staying in Muscat, the bad delivery shares had to be sent to Muscat and the appellant had to shell out considerable amount on the complainant's behalf in various bad delivery sessions, leaving little security left with the appellant to recover the money from him. In the light of the bad deliveries and consequences thereof on the appellant, appropriate authorities were requested to suggest him a suitable solution. He cited another correspon- dence in this connection from BSE to the respondent (letter dated 15-1-1996), therein BSE had stated "it appears from the reply that the complainant had sold through the members shares worth Rs. 35 lakhs and now the shares are coming under objection and the member is required to make payment to broker parties in bad delivery. As the complainant is staying at Muscat, it is difficult for the member to hand over bad deliveries to the complainant and to collect rectified deliveries from him. Therefore, the member has retained the money as deposit and had requested the exchange to take action against the complainant. In view of this it is better the complainant should sort out the matter with the member mutually". According to the learned counsel, the cited letter of BSE endorsed the stand taken by the appellant. Further he pointed out that the appellant was never wanting in his efforts to sort out and resolve the dispute. He had readily agreed to submit to the exchange's Investor Grievances Committee's decision and also at great risk even issued a cheque for the settled amount of Rs. 2,38,922, which because of the income-tax attachment of his account, could not be encashed. Since the appellant was facing fund cris and at the same time eager to repay the amount to the complainant, the exchange was requested to dispose of certain shares standing in his name and to make payment from the sale proceeds. He submitted that there was absolutely no intentional delay on his part to meet with the requirements of making prompt payment to the complainant. Destruction of property and records was a matter unex- pected, which in effect had resulted in closing down his business. It was also submitted that he had at no point of time put any pressure on the complainant to settle for any amount, that the complainant had made complaint to BSE and the respondent only to pressurise the appellant and to take advantage out of the crisis the appellant was facing in the aftermath of fire in his office. He pointed out that the claimant, if he was so sure of his claim, did never seek recourse to arbitration, which is available under BSE bye-laws to settle disputes between a client and a broker. Further, he has not made any complaint even after getting the money back alleging any pressure, which he could have done, if there was any such pressure on him as alleged. In sup[port of the contention that the appellant was too willing to sort out the matter amicably, relied on several documents annexed to the Memorandum of Appeal. According to him, there was no justification to proceed against him and impose monetary penalty, which was almost 100 per cent of the amount claimed and settled in the dispute.
(3.) COUNTERING the argument that Section 15F(b) had no application to this case Ms. Poonam A Bamba, the learned representative of the respondent submitted that the default under the Act being a continuing one fresh cause of action arises under the said provisions for each day during which the failure continued. She submitted cases of continuous default wherein afresh cause of actin arises in each day, while the default continues is not hit by law of limitation. The subject=matter of the inquiry has been the default/failure by the appellant in making payment within the specified period, and that default/failure under the instant proceeding had been in the nature of continuous default. Therefore, Article 14 of the Limitation Act had no application to the adjudication and inquiry proceedings under Section 15F(b). She further submitted that payment of money to the complainant was belated made and this itself won't absolve the appeal- lant from the offence already committed. She cited the requirement of bye law 247 of BSE, which require the broker to make payment to the clients, within two working days of pay out unless the client has requested otherwise.;