- (1.) RESPONDENT made an order on 21.6.2001, debarring the Appellant and certain other entities stated to be belonging to Ketan Parekh Group, from undertaking any fresh business as stock brokers and merchant bankers till further orders. The said order is in continuation to the RESPONDENT's order dated 4.4.2001 therein it has been stated that " after taking into consideration the available material and evidence, I am of the prima-facie opinion that continuation of activities by the entities controlled by and connected with Mr.Ketan Parekh or Mr. Kartik Parekh is likely to erode investor confidence and integrity of the capital market" and based on the said view, directed that "Classic Shares and Stock Broking Service, Triumph Securities Ltd, Triumph International Finance Ltd, N. H. Securities Ltd, the entities controlled by and connected with Mr. Ketan Parekh, and their directors, Mr. Ketan Parekh and Mr. Kartik Parekh are debarred from undertaking any fresh business as a stock broker or merchant banker till further orders are passed by SEBI in this regard. Mr. Ketan Parekh, Mr. Kartik Parekh and/or any representatives of the concerned mentioned above are given an opportunity of post decision hearing on April 16, 2001. This order will come into force from April 4, 2001."
(2.) Identical directions were issued to two more entities viz. KNP Securities Ltd and VN Parekh Securities Ltd, also stated to be of Ketan Parekh group, on 10.4.2001, providing opportunity of post decisional hearing. Since the order was made without giving an opportunity of being heard, the persons affected by the said order were given an opportunity of post decisional hearing, and thereafter the impugned order was made by the Respondent on 21.6.2001. The gist of the conclusion arrived at by the Respondent and the order passed by him is as follows:- "The irregularities by these entities referred to earlier, are not isolated instances. Indeed they have been repeated and ostensibly in a well thought out and preconceived manner. Also they are of nature serious enough so as to warrant suitable action under law. The irregularities are a threat to the market integrity in as much as they are to the great detriment of a safe and transparent market besides hampering efficient price discovery resulting in adversely affecting investor interest. I have considered the documents and materials available on record, submissions of the representatives of the concerned parties. I hold that they have prima facie violated the provisions of SEBI Act read with SEBI(Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995, and SEBI (Brokers and Sub Brokers) Regulations, 1992. I am of the view that orders of SEBI dated 4.04.2001 and 10.04.2001 debarring them from undertaking any fresh business as stock broker and Merchant Bankers, till further orders, should be continued. An order appointing an Enquiry Officer to enquire into the violations by Triumph International Finance(India)Ltd, Triumph Securities Ltd. NH Securities Ltd., Classic Share and Stock brokers Ltd, KNP Securities Ltd and V.N Parekh Securities Ltd of the provisions of the SEBI Act, Rules and Regulations is passed. The Enquiry Officer after considering the material available on the basis of investigations conducted so far and the material, which may be further supplemented, will expeditiously complete the proceedings, after following the procedure as laid down in the regulations. On receipt of the enquiry officer's recommendations, further decision as to whether prohibition to carry out fresh broking activity on the entities should be continued for a further period or it should be withdrawn, will be taken."
(3.) THE circumstances leading to the investigation and the consequential order, having a bearing on the present appeal as narrated in the impugned order are as follows: "In the wake of excessive volatility in the index movements of stock exchanges during mid February to mid March, 2001 and apprehensions of possible attempts by certain entities to distort the true price discovery and manipulate the securities markets, investigations were undertaken by SEBI. In this connection, preliminary investigations were carried out to determine the role of entities including that of Triumph International Finance(India)Ltd., ( hereinafter called TIFIL), a Merchant banker and SEBI registered stock broker, Triumph Securities Ltd, NH Securities Ltd., Classic Share and Stock Brokers Ltd - SEBI registered stock brokers and other entities controlled by and/or connected with Ketan Parekh and Kartik Parekh. Investigations prima facie revealed that the above entities indulged in price manipulation in certain scrips to the detriment of the interests of investors and the market in general. Further the Central Bureau of Investigation had arrested Shri Ketan Parekh and his relative, Shri Kartik Parekh in connection with the alleged fraud in issue of pay orders involving the Madhavpura Mercantile Co.operative Bank and the Bank of India. It appeared that funds obtained from these pay orders have been used for stock market operations. After taking into consideration the material and evidence on record, vide order dated 4th April, 2001 , Triumph International Finance (India)Limited, Triumph Securities Ltd, NH Securities Ltd, Classic Share and Stock Brokers Ltd were ordered not to undertake any fresh business as a stock broker or merchant banker till further orders were passed by SEBI in this regard. THEy were given an opportunity of post -decisional hearing on April 16,2001. THE hearing was later rescheduled to be held on April 18, 2001.";