TMI Blog2008 (8) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... e Practices relating to Securities Market) Regulations, 2003 calling upon it to show cause why suitable directions under the Act and the Regulations be not issued to it. It is alleged that the appellant while trading in the scrip of Shonkh Technologies International Ltd. (for short STIL) had created artificial and misleading appearance of trading in the said scrip and thereby artificially raised the price of that scrip. It is further alleged that the appellant had acted as an unregistered broker, inter alia, violating the provisions of the Act. The show cause notice mentioned that the directions could include prohibiting the appellant from dealing in securities for a specific period or prohibiting it from accessing the capital market for a specified period and/or any other direction as deemed fit and proper. The show cause notice stated that the Board had conducted investigations into the trading of the scrip of STIL which was listed on the Bombay Stock Exchange (BSE) and the Delhi Stock Exchange (DSE) and whose shares underwent a sharp increase in price on both the exchanges from ₹ 70 on BSE and ₹ 300 on DSE to ₹ 460 during the period between August and September ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial Services Limited, Member, NSE alongwith Shri Vivek Nagpal and Mrs. Aarti Nagpal. Hence, it is alleged that you have acted as front entities to influence the price of the scrip of STIL by selling 50 shares on 3 days during the period from August 9, 2000 to September 20, 2000 and your director Shri Pawan Gupta sold 50 shares of the scrip STIL on 4 days (who sold these shares on Shri S.K. Gupta s name) during the period from August 22, 2000 to August 25, 2000. In view of the above charges, the appellant was alleged to have violated Rule 3 of the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Rules 1992 and Regulation 4(b) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations 1995 (for short the Regulations). Regulation 4(b) prohibits a person from indulging in any act which is calculated to create a false or misleading appearance of trading on the securities market. 3. The appellant filed on 29.4.2006 a detailed reply to the show cause notice in which it categorically denied every allegation made against it and pointed out that only three trades of fifty shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited which was already listed on BSE. After the merger, the merged company changed its name to STIL and got itself listed on DSE in August 2000. However, for reasons which are not clear, even after the change in name of the merged company to STIL and its listing on DSE under that name, the scrip continued to be traded on BSE under its old name of Shreejee Yatayat. This, according to Mr. Modi, could be the reason for the huge difference in the price of the scrip on the two exchanges viz. BSE and DSE. This factual clarification which was given by the learned counsel for the appellant was not controverted by the representatives of the Board who were present in court. There is nothing on the record to indicate as to when the name of the scrip of Shreejee Yatayat was changed to STIL on BSE. 5. The main charge of manipulation of the price of the scrip of STIL is sought to be established by the Board on the basis of only three trades executed by the appellant on 9.8.2000, 28.8.2000 and 20.9.2000 on BSE. Each of the trades was a sale of 50 shares and while the price on 9.8.2000 was ₹ 75.55 per share, it increased to ₹ 175.50 per share on 28.8.2000 and further to ₹ 366. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior counsel for the Board is that the sell orders on each of the three days were put in the system on behalf of the appellant at the fag end of the trading session at a price which was the upper circuit limit and the object was to conclude a trade so that the price of the scrip could be established. This, according to the learned senior counsel, would enable the manipulators to raise the price further on the following day by putting in orders at a still higher price within the circuit limit. He took us through the order logs and trade logs in support of his plea. We are unable to accept this contention. Since there were only three odd trades spread over a span of time, it cannot be said with certainty that there was a definite pattern resorted to by the appellant. Be that as it may, there is nothing on the record to show that the appellant had specified the time to its broker at which the sell order was to be fed into the system. Admittedly, the trades were executed through a broker. It is possible, as it usually happens, a trader tells his broker to sell the shares without specifying the time and it is upto the broker to feed the order in the system so as to procure the best avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not act as a sub-broker for them. It is obvious that the explanation has been accepted. What wrong the appellant has done when it sold 50 shares on three different days, is not clear from the notice. Similarly, the charge that the appellant acted as a front entity to influence the price of the scrip of STIL as levelled in para 2.3 is equally untenable and there appears to be no basis for such a charge. At this stage it would be relevant to refer to the oft quoted observations of the Supreme Court in Canara Bank v. Debasis Das 2003 (4) SCC 557. This is what the learned judges have observed in para 15 of the judgment: The adherence to principles of natural justice as recognized by all civilized States is of supreme importance when a quasi-judicial body embarks on determining disputes between the parties, or any administrative action involving civil consequences is in issue. These principles are well settled. The first and foremost principle is what is commonly known as audi alteram partem rule. It says that no one should be condemned unheard. Notice is the first limb of this principle. It must be precise and unambiguous. It should apprise the party determinatively of the case ..... 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