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TMI Blog2016 (7) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... make an effort to participate in the progress of our economy. So as to see that the Stock Exchanges of the country and the persons connected therewith do not indulge themselves into illegalities or irregularities, the Act has been enacted and the functionaries under the Act have to see that no financial scams take place in the matters relating to issue or transfer of shares, management of Stock Exchange etc. One of the important duties of the functionaries under the Act is to see that when there is an Initial Public Offerings (IPO), the shares are offered to public at large in a particular manner so that even small investors {who have been referred to hereinafter as 'Retail Individual Investors' (RII)}, also get fairly good chance to purchase shares of newly floated companies or shares of existing companies, as and when they are offered to the public at large. 3. As we are concerned with issue of shares in the nature of IPO (there is initial offering made by Jet Airways Limited and Infrastructure Development Finance Company Limited), without referring to much details about the transactions of sale or purchase of each company, we have referred to the nature of the transactions in g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket value of the said shares was much more than Rs. 1170/- per share. The said shares were thereafter sold by the said respondent at a higher price. Upon investigation, it was also found that most of those 553 demat account holders were not genuine persons though there is no specific finding to that effect but there is a specific finding by the Whole Time Member of the SEBI that:- "(e).There is no material on record that the 553 demat account holders were benami or fictitious. Investigation has not been able to substantiate this. There are name lenders, as alleged in the SCN. The conduct of these account holders substantiates this. All the 553 accounts behaved exactly in the same manner in terms of price and timing, that too, in off market, which is not transparent. However, the allegation that these were benami or fictitious does not make any material difference to the main charge that the noticees used 553 demat accounts to corner shares in the retail segment of the Jet IPO." 8. The finding by the Whole Time Member of the SEBI is clear to the effect that the said respondent had not acted as a share broker. It is an admitted fact that the said respondent purchased the shares a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were having same address and that too, care of someone else and this makes genuineness of the account holders and the transactions doubtful. 11. From all the transactions, which are in the nature of a scam, it is clear that the demat account holders were not genuine and either they were benami or fictitious and the shares were purchased on behalf of someone, who had financed these demat account holders and a show was made as if the shares were finally sold to the concerned respondents. The entire chain of the transactions of shares and doubtful nature of the demat holders, establishes the fact that all these transactions were nothing but a scam. If the respondents had acted as brokers, they ought to have been registered brokers, but they were not. By having the aforestated device, the respondents had done something which was against the interest of small investors because from their quota the shares were allotted to the demat account holders who were not genuine. 12. As a result of the aforestated transactions, the respondents got undue benefit. They got the shares transferred from the so called demat holders at a price which was less than the market price of the shares. Normall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in imposing penalty upon the respondents for the reasons recorded by them. 17. We do not find any substance in the submissions made on behalf of the respondents to the effect that the price of the shares of Jet Airways India Ltd. paid by the respondents to the demat account holders was reasonable. Even according to the submission made by the learned counsel, value of the said shares, during the said period varied from Rs. 1172/- to Rs. 1339/- and in such circumstances, nobody would believe that all the demat account holders would sell their shares at the same rate, viz. Rs. 1170/- per share to the respondents. These transactions are, therefore, definitely of fishy nature. 18. The submission to the effect that no Retail Individual Investor had made any complaint to the SEBI is not at all relevant because the SEBI need not act only on the basis of a complaint received. If from its independent sources, the SEBI, after due enquiry comes to know about some illegality or irregularity, the SEBI has to act in the manner as it acted in the instant case. The fact, however, remains that because of the undue advantage which the respondents got, some small investors or RII must have not got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice thereof either on the date of the contract or on the next day, excluding the time involved in dispatch of shares and remittance of money where parties do not reside in the same town/locality; (b) transfer of securities by depository from the account of one beneficial owner (demat account) to the account of other beneficial owner (demat account) were securities involved are in demat form." Section 2(i)(b) of the SCRA was introduced in the statute book with effect from September 20, 1995. It is clear from the aforestated definition of 'Spot Delivery Contract' that to enter into such a contract, the seller has to effect actual delivery of securities and the buyer has to pay the price therefor either on the same day or on the next day and further, the said transfer should be coupled with transfer of the Securities from one Beneficial Owner (BO) to another. Considering the scope of Spot Delivery Contract as defined in Section 2(i) of the SCRA in Bhagwati Developers Pvt. Ltd. v. Peerless General Finance and Investment Company Ltd. & Anr. (2013) 9 SCC 584, this Court has held as under :- "...... a contract providing for actual delivery of securities and the payment of price th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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